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The Process

Currently, each of Florida’s 67 school districts offers a different “menu” of 403b plans. At last count, more than 90 companies offered some form of tax-deferred plan to school system employees. Because of the sheer number of companies competing for the limited pool of school system employees in any given district, there has been little incentive to these investment firms to limit their fees. As a result, employees in K-12 historically have paid among the highest fees charged to any segment of the workforce—as high as 5%. While the smaller districts have been at a particular disadvantage in attempting to negotiate more favorable rates, employees in all 67 districts have paid a price.

Working together, the IBC member associations sought to demystify the daunting array of retirement investment plans currently available to school system employees. To that end, we developed a simple strategy:

• Identify the characteristics of “model” plans and require that all plans meet these criteria.
• Require that all plans offered meet the requirements of the new IRS regulatory structure.
• Leverage IBC members’ collective buying power to secure the lowest possible fees commensurate with the services provided.
  

Since this is the first initiative of its kind in the nation, IBC retained highly regarded independent consultant Gallagher Benefit Services to develop the criteria by which plans would be evaluated and write a request for proposal (RFP). On October 18, 2007 IBC issued the RFP, posting it on DemandStar, an industry Web site, and e-mailing it to 90 vendors currently doing business in Florida K-12. Twenty-four companies submitted 30 proposals for consideration in one or more of three service levels:

• Annuities
• Multi-product Custodial Accounts
• Mutual Funds
  

After an initial review, 11 vendors were interviewed at length, not once, but twice, in meetings with the consultant. Once the interviews were complete, the consultant entered into negations with the vendors. Eight plans—four annuity, two mutual fund and two multi-product custodial accounts—made the final cut and were submitted to IBC in ranked order.

TSA Consulting Group, which currently provides independent administration and education services to 60 of the 67 districts, also reviewed the plans, and the criteria used in evaluating them, and concurred in the recommendation.

On January 28, 2008, IBC reviewed the recommendations of the consultant and selected five plans for exclusive membership in the Model Plan.

Neither IBC nor its member organizations have any financial stake in the development or implementation of the Model Plan.