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FOR IMMEDIATE RELEASE
Contact: Creston Nelson-Morrill
25 February 2008
(850) 222-1996


Coalition of Florida Education Groups Unveils 'Model' Retirement Savings Plan for Educators
First-of-its-kind plan may save educators billions over next 20 years


Tallahassee, Fla. - A coalition of Florida's leading education associations today announced adoption of a 403b "Model Plan" for tax-sheltered accounts that, if adopted by the state's 67 school districts, could put billions of dollars into the tax-deferred investment accounts of educators over the next 20 years.


The announcement of the plan comes as school districts begin grappling with new IRS regulations that require them to have a new system in place for managing the tax-deferred plans they make available to the employees in their respective districts. The five companies selected to participate in the Model Plan guarantee that the investment products offered through the plan meet the IRS requirements, which take effect next Jan. 1.


"Come next Jan. 1, it will not be business as usual for the districts," said Bill Montford, CEO of the Florida Association of District School Superintendents (FADSS). "The new IRS rules completely change the rules of engagement in the 403b arena."


FADSS is one of Florida K-12 education's "Big Four" associations that developed the Model Plan. The four--the Florida Education Association (FEA), the Florida Association of School Administrators (FASA), the Florida School Boards Association (FSBA) and FADSS--came together under the umbrella of the Independent Benefits Council (IBC). Representatives of each of the groups worked with two highly regarded consultants in developing the request for proposal that was sent to all 90 of the companies currently doing business with the districts, and the criteria by which proposals were judged.


FEA President Andy Ford heralded the announcement, saying that while the Model Plan substantially reduces the number of companies competing for educators' investment dollars, teachers and education staff professionals still will have more than 600 investment options to choose from.


"Educators, and the school districts themselves, are oftentimes overwhelmed by the number of investment plans they have available to them and may not necessarily have the time or resources to discern which offer the best value," said IBC Chair Wayne Blanton, executive director of the FSBA. "The new IRS regulations present a golden opportunity for school districts to approach investment plans with a simpler, more cost-effective process that offers the highest quality investment plans."


FASA Executive Director Jim Warford said that the five companies selected for participation in the Model Plan signed letters of commitment with the IBC agreeing to:


  • Certify that the plan proposed for the IBC is the best it currently offers in any Florida K-12 district.
  • Offer favorable rates to all districts, regardless of size.
  • Automatically upgrade plans when newer, more enhanced products become available.
  • Ensure that its representatives will sell only the product bid for the Model Plan (no bait and switch).
  • Provide a detailed plan to convert its existing contracts to the Model Plan, thereby creating immediate benefits for their current participants.
  • Reduce its fees to all adopting school districts as statewide assets under the Model Plan grow.
  • Guarantee rates for three years.

He added that each of the five companies selected to participate in the Model Plan companies has agreed to pay the districts $12 per participant per year to offset additional administrative costs associated with compliance with the new IRS regulations.


Montford said that the criteria developed by IBC for selection of the investment companies evaluated the quality of the investment offered, price, service, the financial strength of the companies and their representatives' ability to effectively reach all 67 districts.


"The Model Plan not only levels the playing field for all teachers and education professional staff, but promises them value and security," he said. "The smaller school districts stand to benefit the most from this new approach, but, truly, everyone benefits."


The service platforms and the five companies selected to participate in the Model Plan are:


Annuities
AIG Retirement (VALIC)
AXA


Multi-product custodial accounts
PlanMember Investment Group


Mutual funds
American Century Investments
Waddell & Reed

Historically, school system employees across the U.S. have paid higher-than-average fees than any other sector of the marketplace to the companies that manage their tax-deferred investments, said IBC spokesperson Tom Herndon, former executive director of the Florida State Board of Administration.


"This is the first time in the nation that a plan as comprehensive and resourceful will be offered to educators, and Florida is the bellwether state," Herndon said. "More of educators dollars--perhaps billions more in Florida, alone--will be available to them when they retire."


Montford and Blanton pointed out that the decision to adopt the Model Plan will be made at the local level. "In some instances, a district may believe it needs to add one or more companies to the Model Plan," Montford said. "Every effort should be made to require that any companies they add to the Model Plan meet the higher standards--and fee reductions--agreed to by the companies selected by IBC to participate in the Model Plan."


All of the IBC leadership said they believe that the Model Plan has implications far beyond Florida. And, Ford said, it is significant that management and labor worked side by side to create a better option for educators. "There aren't many chances in life to be involved in something that will help this many people for such a long period of time," said Ford. "In promoting the Model Plan, we are looking out for the best interests of employees within the school system."


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