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(Op ed, March 4, 2008)
High praise is due Model Plan for teachers’ retirement benefits
By Tom Herndon
In these times of extreme budget shortfalls, a pay raise for those who are arguably Florida’s most deserving public servants – our teachers – will probably be hard to come by. But teachers could get the equivalent of a pay raise in the form of more money for retirement thanks to a unique, collaborative endeavor by Florida’s four leading education organizations.
All Florida school districts must change their tax-deferred retirement plans by January 1. That requirement created a window of opportunity to solve a longstanding problem and ensure that teachers get a far better deal on retirement funds than they are currently getting.
The next step is up to Florida’s 67 individual school districts, which each must decide whether to adopt the “Model Retirement Plan” recently negotiated by the “Big Four” – the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association and the Florida Association of District School Superintendents.
Up until now, school employees across the nation have paid unreasonably high fees for their tax-deferred retirement savings plans, also known as 403b and 457 plans. That’s due, in part, because educators have been faced with a daunting array of choices – more than 150 plans in all – and that the plans suffered from little oversight.
Now, for the first time, the collective purchasing power of the state’s 350,000 school workers has been brought to bear to drive down fees and get educators a better deal.
The four education groups, working in a historic and effective collaboration, created a competitive negotiation process through which companies offering these plans were invited to submit their best offer. The result is a deal that no individual teacher or even district could get on its own.
Educators would still have a choice, and that’s important, since a recent poll of educators found that three out of four say they would be willing to pay a little more in fees to get a higher level of service. Under the Model Plan, educators will have a choice of plans with varying levels of fees and service offered by five companies – in all cases a far better deal than they have had up until now.
If adopted by school districts, the Model Plan could save educators billions over the course of their careers, allowing them to save 30 percent more toward their retirements. Considering that nine of 10 educators polled say they are concerned about meeting their financial needs after retirement, the Model Plan could help educators close the gap and enjoy the kind of retirement they deserve.
Over the next few months, school districts will be deciding whether to offer the Model Plan or negotiate their own plans, but maintaining the status quo is not an option. When the new IRS regulations take effect next January 1, local school districts will be required to exercise greater oversight over the plans they offer. That means a much greater administrative workload for districts that go it on their own. For those that adopt the choices negotiated for them under the Model Plan, the additional costs and workload are covered.
While every state will be scrambling to figure out how to comply with the new IRS requirements, Florida exerted an unprecedented level of leadership to come up with a solution that truly benefits school employees and school districts. It just goes to show what’s possible when the leaders of Florida’s education community roll up their sleeves and work together.
Tom Herndon has served as chief of staff to one Florida governor and chief of staff and budget director to another. Prior to his retirement from the state, he served as executive director of the Florida State Board of Administration (FSBA), managing $125 billion dollars of investments including pension fund assets as part of the Florida Retirement System.
Serving in all three branches of Florida’s fiscal system, Herndon collected state revenues as director of the Department of Revenue, appropriated state revenues as staff director of the powerful House Appropriations Committee, and budgeted and expended state revenues during his six years as the state's director of planning and budget.
Herndon is the recipient of several state and national public service awards including the Florida Distinguished Service Medal for Exceptionally Meritorious Service to the State, presented in 1995. He currently serves on the board of directors of the Helios Education Foundation.
He also is the father of a teacher.
Banker & Tradesman
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Bolsamania
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Breitbart
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Daily Business Review
May 13, 2008
School districts consolidate investment plans
Financials.com
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Florida Today
March 3, 2008
Teacher accounts could see increase
Forbes.com
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Fort Myers News-Press
March 5, 2008
Plan to boost teacher nest egg
FOX Business
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough To Retire
Global Pensions
February 25, 2008
New plan for Florida teachers
Houston Chronicle
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Interest Alert
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Jacksonville Business Journal
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Los Angeles Times
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
MarketWatch - Weekend Edition from DowJones
April 11, 2008
Billions at Stake as Coalition of Educators and Administrators Shakes Up the 403(b) Retirement Marketplace
Mass High Tech: The Journal of New England Technology
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
The News & Observer
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Orlando Business Journal
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Pensions & Investments
February 25, 2008
Florida group creates 403(b) model plan
PlanAdviser
February 25, 2008
FL Associations Unveil Model 403(b) Plan
PR Newswire
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
RBC Dain Rauscher Inc.
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
RCR Wireless News
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Reuters
April 10, 2008
Billions at Stake as Coalition of Educators and Administrators Shakes Up the 403(b) Retirement Marketplace
South Florida Business Journal
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
SmartMoney.com
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
St. Petersburg Times
March 1, 2008
Fees to drop for teachers' savings
Street Insider
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Tallahassee Democrat
February 26, 2008
Investment plan could help educators
Tallahassee Democrat
April 2, 2008
Model Retirement Plan’ deserves praise
Tampa Bay Business Journal
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Tampa Tribune
April 7, 2008
Teachers Due Retirement Reform
WFAA - Dallas/Fort Worth TV8
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Yahoo! Finance
February 25, 2008
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Yahoo! Finance
April 11, 2008
Billions at Stake as Coalition of Educators and Administrators Shakes Up the 403(b) Retirement Marketplace
Banker & Tradesman
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Bolsamania
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Breitbart
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Financials.com
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Forbes.com
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
FOX Business
Poll: Florida Educators Worry They Haven't Saved Enough To Retire
Global Pensions
New plan for Florida teachers
Houston Chronicle
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Interest Alert
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Jacksonville Business Journal
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Los Angeles Times
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Mass High Tech: The Journal of New England Technology
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
The News & Observer
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Orlando Business Journal
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Pensions & Investments
Florida group creates 403(b) model plan
PlanAdviser
FL Associations Unveil Model 403(b) Plan
PR Newswire
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
RBC Dain Rauscher Inc.
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
RCR Wireless News
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
South Florida Business Journal
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Street Insider
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Tallahassee Democrat
Investment plan could help educators
Tampa Bay Business Journal
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
WFAA - Dallas/Fort Worth TV8
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Yahoo! Finance
Poll: Florida Educators Worry They Haven't Saved Enough to Retire
Listen to Florida Public Radio's Story (MP3)
FOR IMMEDIATE RELEASE
Contact: Creston Nelson-Morrill
10 April 2008 (850) 222-1996
Billions at stake as coalition of educators and administrators shakes up the 403(b) retirement marketplace -- Other states eye Model Plan as deadline for compliance with new IRS regulations nears --
TALLAHASSEE, Fla. – Billions of dollars may be at stake for the 90 or more investment companies that currently offer tax-sheltered 403(b) accounts to Florida educators, as a first-of-its-kind “preferred provider” program nears adoption in Florida’s 67 school districts.
The program is sending shockwaves through the investment marketplace, as school districts across the nation struggle to meet new IRS regulations that take effect next January 1. These new regulations not only require significantly greater oversight and monitoring by the districts, but invalidate all current plans not in compliance with the new regulations. The change potentially affects more than 1 million Florida educators and their families.
“It shouldn’t come as any surprise that Florida is the incubator for a change of this magnitude,” said Wayne Blanton, Executive Director of the Florida School Boards Association. “A plan of this caliber has been a long time coming for school employees. We’ve got the best vendors offering the best products at the best prices. In terms of shaking up the marketplace, on a scale of 1 to 10, I’d rank this a much-needed 11.”
Dubbed the “Model Plan,” the five investment companies selected by the state’s “Big Four” education associations -- the Florida Education Association, the Florida School Boards Association, the Florida Association of District School Superintendents and the Florida Association of School Administrators – were vetted by two independent consulting firms, the association representatives and a group of school district risk managers.
The state’s K-12 teachers and education staff professionals (ESPs) currently contribute about $380 million annually to their 403(b) retirement accounts. The balance in these accounts is said to be in the billions of dollars in Florida alone. District employees will not be permitted to make any new contributions to unauthorized plans after the January 1 deadline.
“Educators, and the school districts themselves, are sometimes overwhelmed by the sheer 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 Blanton. “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.”
Florida’s education associations were among the first in the nation to recognize the impact of the pending regulations. Coming together under the umbrella of the Independent Benefits Council (IBC), the associations set an ambitious agenda: Development of a Model Plan that would meet the IRS requirements and decrease or eliminate the cost of compliance to local school boards. Begin with a clean slate and select a handful of “Best in Class” investment companies that would be authorized to offer products to local school districts.
Negotiate favorable rates for teachers and ESPs, who have been paying markedly higher fees than other professionals. Ensure that the plans offered to teachers would offer a wide range of investment options. The school boards in Dade, Broward and Palm Beach counties soon will be deciding whether to adopt the Model Plan, to amend and adopt the Model Plan, or to go it alone. A great deal is at stake for educators, as the Model Plan is predicted to put billions of dollars into their investment accounts over the next 20-30 years that otherwise would have been paid in vendor fees.
While some of the larger districts may have had the clout to negotiate lower rates than smaller districts, no existing plan in any of Florida’s 67 districts offers teachers and ESPs anything comparable to the Model Plan.
All five of the Best in Class vendors, which include AIG Retirement, AXA, PlanMember Financial Corporation, American Century Investments, and Waddell & Reed, have signed Letters of Commitment, which adopting school districts can rely on and reference in executing individual agreements with Model Plan vendors. Commitments include:
- Providing the best plan available in Florida K-12.
- Upgrading all existing contracts to newer, enhanced products.
- Selling only the products they bid under the Model Plan (no bait and switch).
- Reduced fees to all adopting school districts as statewide plan assets grow.
- Guaranteed rates for three years.
Additionally, the Best in Class vendors demonstrated the ability to provide superior performance in the following categories: plan conversion and implementation, administrative services, account administration services, investment options, participant services and expense charges. They also were evaluated on company experience. During the evaluation process, each of the Best in Class vendors provided full fee disclosure broken down by proposed investment and were scored on their average total expense ratios.
“This is the first time in the nation that a plan this comprehensive and with such outstanding terms will be offered to educators,” said Tom Herndon, IBC spokesperson and former Executive Director of the State Board of Administration. “More of educators’ dollars – perhaps billions more in Florida, alone – will be available to them when they retire.”
Immediate Release Contact: Creston Nelson-Morrill
25 February 2008 (850) 222-1996
Poll: Florida educators worry they haven’t saved enough to retire
-- But new retirement plan could add 30 percent to Florida’s 350,000 educators’ retirement investment accounts --
TALLAHASSEE – Florida’s four leading education associations today announced a historic, new “Model Plan” for individual retirement accounts that could help educators close the gap in saving enough money to retire. That perceived gap was documented in a new poll showing that nine of 10 educators polled say they are concerned about meeting their financial needs after retirement.
The Model Plan, negotiated by the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association and the Florida Association of District School Superintendents, could put billions of dollars into teachers’ pockets over the next 20 years, if adopted by the state’s 67 school districts, financial experts say. Districts must change the way they oversee tax-sheltered accounts - also known as 403b plans - offered to their employees due to new IRS regulations that take effect next Jan. 1, creating an urgent need for the Model Plan.
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. For example, Florida’s K-12 employees pay three to 10 times as much in fees as do their counterparts in health care, government and universities. This plan could reverse that.
“This is the first time in the nation that a plan this comprehensive and with such outstanding terms will be offered to educators,” IBC spokesman Tom Herndon said. “More of educators’ dollars – perhaps billions more in Florida alone – will be available to them when they retire.”
Educators have a range of choices within the Model Plan, with fees varying with the level of service they choose. That’s important because three out of four educators polled said they would pay higher fees for more hands-on service.
Among the companies selected for inclusion within the Model Plan are:
AXA-Equitable Life Insurance Company, Waddell & Reed, PlanMember Financial Corporation, AIG Investment Services and American Century Investments.
Among the other poll findings:
6 in 10 say they do not have any idea whether the fees they are being assessed are fair and reasonable.
8 in 10 say they are not entirely satisfied with the financial results from their current tax-deferred investment plan;
8 in 10 say it would be very important for a plan like the Model Plan, which is endorsed by the state’s four largest education associations to be available to them in their respective districts.
The poll was conducted by Mason-Dixon Polling & Research, Inc. of Washington, D.C. The pollsters interviewed 625 Florida Education Association Members on Dec. 20-30, 2007. The margin of error is plus or minus 4%.
For more information on the Model Plan, visit www.themodelplan.com.
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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