Below is my original request for information on 457 Deferred Comp - Pooling, and the responses I received. We are now in the process of getting 6 or so jurisdictions together, under the umbrella of ABAG (Assoc. of Bay Area Governments), to study the issue of pooling, solicit vendor interest, establish a pooled Plan, and then invite other ABAG members (over 40 jurisdictions) to join. Eventually this could be a multi-billion dollar asset pool. If you have a good RFP model please forward to me at: [EMAIL PROTECTED] <mailto:[EMAIL PROTECTED]> . Or call 650 802-4205. Has anyone joined with another agency(s) to get lower participant Admin Charges and/or better investment options? In meeting with one of our deferred comp reps, we were told that our account (a couple million dollars) was too small for us to get the best Admin Charge rates. We (employees who participate) get charged 90 to 100 basis points per year on our account balances. We can probably get that lowered to 50 to 60 b.p.'s, but the large accounts of $50M or more can get 0 to 35 basis points. Also, large accounts can participate in their new program of "self-directed brakerage accounts". This would enable participants to invest up to � of their account balance into Charles Schwab's stock and mutual fund selections (about 150 choices) and realize the full benefit (yield) of their selection. No "manage the manager" fees. No 457 Provider admin charges. Just a $50 annual Schwab charge, and any trading charges if you select commissionable (loaded) stocks or funds. Naturally, we want it all - low/no admin charge and self-directed brokerage accounts. And one way to get it would be to pool/JPA with other 457 agencies to reach that critical mass (about 800 pounds, I think) where we can bargain/RFP for the best deal. I would be interested to hear if someone has done this, or has achieved these results in another way. Please respond by the 24th, and I will post results. Richard Averett Finance Director (650) 802-4205 Responses: Makes sense for us to talk further on merging our 457 plans in a JPA (or some other vehicle). We have several million. Add in SCF and we probably have some change. I'm all in favor of cost reduction and I bet they can continue to separate the amounts in their reporting system. ---------------------------------------------------------------------------- -------------------- Yes, some cities are talking about this option, and there are several 457 administrators trying to get the business. It will be part of a future discussion here in re: a second plan (in addition to ICMA/RC. I am also part of a group that is planning an "area wide" meeting on 457 programs (Orange and LA counties)in December or January. This will probably be a topic. Incidentally, our ICMA/RC costs are $1 to $2 per month, regardless of $ investments; other plans we have talked to in the past charge between 35 and 60 basis points, and may require us to pay for the informational materials. It is a buyers market right now. ---------------------------------------------------------------------------- ---------- Our 457 account is with the ICMA which gives a very broad range of investment options. Admin fees are really low and you can invest in publically held securities. Penny Abbott is a Marketing Representative at 1-800-326-7272. I hear that PEBSCO is also a good organization. They used to only be in County's but have expanded to cities. They will also give a 5% premium for all funds rolled into their plan. I don't have a contact with them. ------------------------------------------------ Isnn't that what ICMA Retirement Corp is? ---------------------------------------------------------------------------- --- I am responding to your e-mail to _____________ regarding a pooling relationship with other agencies to lower administrative costs of 457 Plan providers. In response to your question, we do not pool with other agencies. Our assets are approximately $59 million. However, we have just gone through an RFP process to add providers as we currently with The Hartford and have a lot of concerns about their charges and costs. One thing we learned in going through the RFP process is that all charges and costs are negotiable. When we got down to the three finalists which were Aetna, Prudential and CalPERS 457, we negotiated with them in an atrtempt to get them to restructure and lower costs. When we conducted reference checks of other agencies, we discovered that the proposals we were being offered, particularly by Aetna, were significantly cheaper than charges currently in place in the cities of San Jose and Richmond, and Multnomah County. CalPERS has a fixed product but we were able to negotiate with them to add the ability to invest in individual stocks in addition to mutual funds. CalPERS tells me we are the first City to have this option. My conclusion is that size does matter and competition helps. We are going to add CalPERS and Prudential and I think we got a better deal than they originally proposed because we had competition and pressed the firms to make changes and adjustments.
