Delaware changes retirement plan vendor

DOVER — After not sending it out for bid in 15 years, the state has adopted a new retirement plan and vendor for its employees.

Delaware has switched from Fidelity Investments to Voya Financial, with the change officially going into effect in about a month. Voya will take over the state’s 457(b) deferred compensation, 401(a) match and 403(b) plans.

The switch does not affect pensions.

For current state government employees, the transition means there will be a new default fund rather than 330 different choices.

Investors with Fidelity can move their assets starting Monday. Anyone who does not do so will have his or her investments transferred to Voya on Sept. 13 and 14.

Informational meetings with state employees will be held at 9 a.m., 12:30 and 3 p.m. on Monday and again on Aug. 29 and Sept. 6 at the DNREC Auditorium at 89 Kings Highway.

Delaware State Treasurer Ken Simpler said most of the time went into selecting a default option, which can be utilized by employees who lack the knowledge or desire to study a large number of funds and then pick their preferred alternatives.

Ken Simpler

Ken Simpler

According to the state’s deferred compensation website, this first choice “is comprised of a family of target date retirement funds professionally managed by American Funds” and is set up so employees can select the fund that best corresponds with their anticipated year of retirement. Investments for younger individuals will be more aggressive, and they will grow more risk-free as the employee ages.

While the default option is the simplest, state workers could also select two more offerings. One, “designed for participants who are comfortable choosing investments and want to construct a custom portfolio at a potentially lower cost with risk-reward characteristics they are comfortable with,” according to the state’s website, consists of 14 funds.

The third option allows employees to choose among the thousands of funds on the market. It is the most appropriate choice, Mr. Simpler said, for “truly sophisticated investors” or someone “wedded” to the funds he or she currently has.

The decision to switch saves the state money, gives employees additional information about what they are investing in and lets workers move their investments around with greater ease, Mr. Simpler said.

Voya has set up an office in the state, and Delaware will be launching a new website Monday, which is when employees will be able to start making changes to their accounts.

The changes, Mr. Simpler admitted, may seem daunting, but he expressed confidence the conversion will be beneficial.

“There’s going to be a lot of education and a lot of people that don’t fully understand what’s going on until they’ve had a chance to talk over the phone or in person” to experts, he said.

Some employees are uneasy about the transition, however.

Mike Begatto, executive director of the American Federation of State, County and Municipal Employees Council 81, which represents about 4,000 state workers, said he needed to look closer at the details but some of his members are upset, especially because they feel they had little input.

The decision was made by the Deferred Compensation Council, which officially requested bids in August 2015. Nine applications were submitted.

According to a memo from the selection committee to the Deferred Compensation Council, Voya “was clearly superior in offering a long-term retirement readiness solution for the participant.”

The council unanimously voted to approve a three-year contract with the new vendor.

About 39,000 people are eligible to sign up for the plans, which held about $962 million in assets as of March, according to Voya.

Currently, about 70 percent of state workers do not participate in any plan, according to Mr. Simpler.

“Supplemental savings are a key part of retirement readiness and a lot of public sector states and municipalities struggle to get people to take advantage because they think their pension is going to take care of everything,” he said.

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