State Awards New Contract for Employee-Invested Retirement Funds

Jefferson City - The members of the Missouri Deferred Compensation Commission today announced new vendors for the state’s deferred compensation program.  The new contract will expand employees’ investment options and promises to increase the rate of return.         

            “Bidding the TPA and fixed annuity contracts gives the Commission a great opportunity to improve employee benefits,” said Representative Mark Bruns, Chair of the Commission.  “I feel employees will see significant improvements in the plan, and I encourage all employees to take advantage of them. I sincerely appreciate the hard work of the state employees and the Commission.”

            The commission awarded the third-party administrator (TPA) contract to CitiStreet and the Fixed Annuity contract to ING Life Insurance and Annuity Company. The commissioners are the trustees of the State employee’s deferred compensation plan, which as of Sept. 30, 2005 held more than $1.2 billion of employee-invested retirement funds.

            Bidding the TPA contract allowed the Commission to significantly improve the plan’s features. A Self-Directed Account will provide participants with access to more than 7,000 mutual funds and many stocks and bonds. For participants who prefer more guidance CitiStreet will offer specific investment advice as to which funds are most appropriate for each participant.
 
            The Fixed Annuity will be a hybrid of a fixed annuity and a separate account. The Plan will own the securities in the separate account and will receive 100 percent of the income from those securities except for a fixed fee of 0.9 percent. This arrangement will provide the participant with far greater diversification and should add approximately 0.10 – 0.60 percent to their yield.

            The fixed annuity contract will guarantee participants a yield of approximately 5.25 percent from June 1, 2006 to Sept. 30, 2006, and at least 5 percent from Oct. 1, 2006 to May 30, 2007 and at least 4.75 percent until May 31, 2008.

            Local representatives will continue to serve participants. The portfolio of mutual funds will not change without careful study.  The mutual funds will be removed from the variable annuity so they will “stand alone.”  This will eliminate the near duplicate Investment Performance Report required by regulators of variable annuities. Additionally, participants will play a role in the new plan and will be asked to complete surveys and join in focus groups.      
 
            CitiStreet is a joint venture between Citigroup and State Street Corporation and has become the fastest growing TPA in the government market, providing services to Texas, Michigan, South Carolina, Washington, Hawaii and their clients in the corporate sector include Anheuser-Busch and Boeing. 

            CitiStreet will replace PEBSCO, a division of Nationwide Retirement Systems. The State of Missouri competitively bids its contracts periodically to determine if the state is receiving competitive rates and to modernize the features of the Plan. The Commission was not unhappy with PEBSCO and feels they have provided very good service to Plan participants.

            Any employee receiving a paycheck has the option to participate in the deferred compensation plan.  They may choose to deduct a portion of their includable income (gross pay minus cafeteria plan). The State of Missouri provides an incentive match of $25 per month for qualified participants. Deduction and return on deferred compensation investments are sheltered from taxes until they are withdrawn from the Plan.

            The members of the Deferred Compensation Commission are: Representative Mark Bruns, Chair; Senator Michael Gibbons, Dick Hanson, Joyce Murphy and Douglas Morgan.

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