Improving Plan Operation, Cost and Investment Structure in Public Plans

Challenge

Our client maintains one of the country's largest governmental public health plans. This client engaged Multnomah Group to assist them with a broad, in-depth assessment of their retirement plans. The primary objectives of the assessment were to assess the reasonableness of fees incurred by the plans, improve the aggregate investment performance of the investment menu, and support the plans' fiduciary needs on an ongoing basis. After assessing the status of their plans, the client was interested in additional support with a vendor search, in the event they determined it was necessary to take the plans into the marketplace.

Client Profile:

  • Governmental plan serving the healthcare needs of the county's low income residents
  • Two 401(a) plans and one 457(b) deferred compensation plan
  • Over 330 eligible employees
  • $58 million in plan assets
  • $273,209 in annual bundled retirement plan service fees

The Process

Multnomah Group conducted an audit and benchmarking of the plans' operations including a review of:

  • Plan Fees
  • Investment Performance
  • Fiduciary Plan Governance
  • Investment Policy Statement
  • Plan Communication / Education
  • Plan Document and Compliance

After reviewing the results of the plans' audit and assessment, our client was able to objectively evaluate the fees and structure of the plans. Based on this analysis, it was determined that the fees being charged by the recordkeeper could likely be reduced to a more appropriate range based on the size of assets, the number of participants and the average account balance.

In addition, Multnomah Group evaluated the performance and fees of the plans' investment menu. Multnomah Group was able to recommend an investment menu which offered both a better likelihood for future performance and a reduction in overall investment fees.

Furthermore, the assessment provided the client an opportunity to improve upon their current practices by implementing fiduciary and operational best practices.

Based on the results of the assessment, the client decided to take the plans out to bid.

The Process

The first step was to wholly understand the client's objectives for the vendor search. Multnomah Group assisted the client in developing an outline of how a strong vendor partnership might better support the client and its participants. Based on the accumulated feedback, Multnomah Group drafted a formal Request for Proposal (RFP) which focused on the client's specific needs. Responses were solicited from the current vendor along with a diverse selection of additional vendors. The result was a solution that significantly improved sponsor and participant service levels, while decreasing costs and enhancing the investment options available to participants.

Result

As a result of this process, the client achieved all of their initial goals, including:

Reduction in recordkeeping costs passed on to participants

  • 75% reduction in participant-paid plan operating costs.
  • Total annual savings exceeding $200,000.
  • Implementation of annual fee benchmarking process to ensure fee appropriateness.

Improvement in investment menu

  • Adoption of a new Investment Policy Statement governing the selection and review of investment options.
  • Investment menu reduction from 50 funds to less than 18 best-in-class investments.
  • Implementation of a new open architecture investment menu.
  • A change in the default investment alternative from a stable value product to an age appropriate target date investment series.

Development and delivery of a comprehensive employee communication program to improve the likelihood of successful retirement readiness

  • 100% increase in the number of employee education days.
  • Implementation of a comprehensive online education site dedicated to helping participants understand the concept of retirement readiness.
  • Implementation of a custom education marketing campaign.
  • Creation of an annual strategy meeting to review plan demographics that drive education campaign.
  • Development of a program to focus on retirement readiness and adequate income replacement in retirement.

Successful outsourcing of retirement plan administrative function

  • Negotiation of a service agreement with measurable service goals and fees "at-risk."
  • Migration to online enrollment, loan processing, distribution processing, and beneficiary designation.
  • Overall improvement in client service experience and enhanced partnership with recordkeeper.

At the conclusion of the project, all of the items above were achieved with no adverse reaction from participants. In aggregate, these changes served to significantly improve the participant experience, enhance the service at the institutional level, reduce the costs for administration of the plans, and dramatically improve the investment options offered to participants.

To find out how Multnomah Group can help your organization achieve its goals please feel free to contact one of our consultants.

Multnomah Group, Inc.
Phone: (888) 559-0159
Fax: (800) 997-3010
www.multnomahgroup.com