Got a Deferred Comp Account?

The transition for TriMet employees to ICMA-RC’s Deferred Compensation (457b) & Defined Contribution (401a) plans will take place in October, with on-site visits scheduled for the week of August 29, 2011. Here are some questions about the transition that have been heard most often:



How will this transition benefit me?

All participants will enjoy the following benefits as a result of the move to ICMA:

* Lower plan administration fees. When a formal search process was conducted, three of the four current vendors responded. Based on independent analysis, the three who did respond didn’t make it past the first round of cuts due to higher overall expenses, among other factors.

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Enhanced participant services, including:

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Asset Class Guidance. This service is free and helps to educate participants on how to invest among different fund choices. Advice is provided based on a number of things including age and risk tolerance. There are no fund-specific recommendations given.
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Fund Advice. This includes everything in the Asset Class Guidance but give fund specific recommendations. Participants are responsible for on-going adjustments and management of their portfolio.

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A consistent, focused participant counseling program. As a non-profit organization, ICMA-RC is a mission-based firm. Their mission statement is: “Building Retirement Security for Public Sector Employees.” ICMA-RC plan representatives are salaried, retirement planning professionals. Mark Becker and Joyce Olenick each hold the Certified Financial Planner (CFP) designation and together have almost five decades of experience in the financial services business. Mark is based locally in Damascus and will be servicing TriMet on a regular basis.

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Professionally selected plan investments – TriMet retained the Hyas Group, one of the leading defined contribution/deferred compensation plan consultants in the country, to assist in the search process and the selection and ongoing monitoring of plan investment options.

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Freedom of a Self-Directed Brokerage Account Option – TriMet employees will soon have access to a brokerage window inside their defined contribution plans. This will allow employees to access any publicly traded mutual fund investment. This includes investments such as exchange-traded funds (ETF’s), sector funds, as well as others. TD Ameritrade will be the brokerage program provider.


What is TriMet getting out of this?

TriMet is not getting any financial benefit. As the plan sponsor for the 457b and 401a plans, TriMet has a fiduciary responsibility to oversee the plans and be sure they are operated in the best interest of the employees (and retirees). TriMet staff worked with an independent consultant issuing a request for proposal (RFP) for the new provider. Three of the four existing providers responded with proposals, one did not. The selection of the new provider, ICMA-RC, was unanimously made by a committee of TriMet employees and a member of the ATU Executive Board. The decision was based on the lower fees and higher level of service offered by ICMA-RC. The current providers who responded all had higher fees for TriMet employees.

Can I leave my money with my current provider?

No. The 457b and 401a Plans are tax advantaged plans sponsored by the employer. TriMet has the responsibility for managing the plans in the best interests of all employees, including evaluation of the fees charged to the employees by the providers. Based on the extensive RFP process (described above), the selection team unanimously determined that ICMA-RC provides the lowest fees and best services for employees and all accounts will automatically move to ICMA-RC in October. However, TRI-MET employees will soon have access to a brokerage window inside their defined contribution/deferred compensation plans. This allows employees access to any publicly traded mutual fund investment - investments such as ETF's, sector funds, as well as others. TD Ameritrade will be the brokerage program provider. The plan provider (ICMA-RC) will be the conduit to these brokerage alternatives. If a mutual fund is open for new investments it will be available through the self directed brokerage option.

Is there an opt-out option?

No. The rules of the plans, including when funds can be withdrawn, are established by the IRS and are unchanged with the move to ICMA. Funds currently invested with Standard, Great West, VALIC and ING will be automatically transferred to ICMA and subject to the same IRS rules as before. As noted above, however, employees may opt for a self-directed brokerage account.

How can TriMet make me move my money?

Since TriMet sponsors the plan, the District is responsible for operating it in the best interest of employees/beneficiaries including assurance that employees are paying reasonable fees to the providers. Through a competitive RFP process, ICMA-RC was ranked the best among all firms responding. Employees may opt to invest in the self-directed brokerage account described above.

I am a retiree. What does this mean for me?

Retiree funds will also move to ICMA-RC. Your ability to withdraw funds will not change. Retirees will also have the option to invest in the self-directed brokerage account described above.

How does the recent market volatility affect me?

Market volatility and the cyclical nature of the stock market are normal, and unless you liquidate your investments, you have not experienced a realized loss. As a matter of fact, investors who are able to stay the course through volatile stretches in the markets have a much higher probability of achieving success in the long term. While you weather this financial storm, it’s important to keep in mind a couple of things:

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You can use periods of downward market volatility to gauge your true level of investment risk tolerance and adjust as necessary.

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While the market values of your funds are declining, your ability to purchase more shares (for less) of the same funds increases.

ICMA-RC representatives will be available to discuss this with you. They are salaried employees and not compensated based on how much you invest or by what you invest in.