Billions at Stake as Coalition of Educators and Administrators Shakes Up the 403(b)...

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.--(Business Wire)--
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."

For additional information, visit the Model Plan Web site,
www.themodelplan.com.

For Independent Benefits Council, Tallahassee
Creston Nelson-Morrill, 850-222-1996

Copyright Business Wire 2008