SACRAMENTO, Calif. -- The Western Farm Credit District's $109 million defined benefit and $103 million defined contribution plan both will be run by New York Life Benefit Services in August.
At that time, Western Farm will switch over the administration of the defined benefit plan and about 70% of the defined benefit assets to New York Life, and change some of the investment options in its 401(k)/money purchase plan, said Jim Cosce, senior benefit program planning analyst.
Now, 30% of the assets in the defined benefit plan are invested in active equities with DAL Investment Management, San Francisco; 40% is in stable value with New York Life; and 30% is in a Wilshire 5000 index fund through Charles Schwab & Co., Mr. Cosce said.
Eventually, Western Farm officials may rebalance the defined benefit plan's asset allocation to 50% equities and 50% stable funds, he said. The assets in the Wilshire 5000 index fund will be invested in a similar index account with New York Life's Mellon funds.
"Before, the Wilshire 5000 index fund charged 55 basis points. The Mellon fund is 30 basis points, and we're getting all the (other) services," Mr. Cosce said.
New York Life will retain the stable-value portfolio and DAL will continue running the active equity portfolio, he said.
New York Life will replace Hewitt Associates as plan administrator, Mr. Cosce said.
"Hewitt did a great job," Mr. Cosce said. "But they did not offer Internet and voice response for the defined benefit plan."
He said the Internet access and voice-response systems would increase the value of the defined benefit plan to participants by making the plan more visible.
Because Hewitt does not manage investments, it could not offer the other services at no cost to the plan, as does New York Life, he added.
With the new arrangement with New York Life, in exchange for managing a bit more of the assets, participants in the defined benefit plan will be able to do retirement age modeling and see their vested benefit, he said.
Under Western Farm's old system, employees received a statement of their vested interest in the defined benefit plan once a year and at age 65, Mr. Cosce said. And if they were thinking about retiring, they called human resources. "With the Internet, they can do some modeling themselves," he said.
"Over time we convinced them . . . it would be beneficial for them and their employees to have their entire retirement program on our system," said Tom Clough, president of New York Life Benefit Services. "It will enable participants to gain information easily through a single 800 number and through the Internet."
New York Life's service for defined benefit and defined contribution plans -- called DB Complete -- has been gaining in popularity, he said. Right now, New York Life has about 20 companies using the service, Mr. Clough said.
"Generally, we target defined benefit clients with $15 million in assets or greater," he said.
New York Life claims plan sponsors have a potential savings of up to 30% on plan fees.
Two years ago, Western Farm closed its defined benefit plan to new employees and gave existing employees the choice of switching their money to the 401(k) plan, or staying in the defined benefit plan, Mr. Cosce explained. Western Farm officials then added money purchase plan features to the defined contribution plan for those employees who opted out of the defined benefit plan. About $9 million in assets switched to the defined contribution plan from the defined benefit plan, he said.
In August, the defined contribution plan will increase to eight (from six) the number of investment options in the defined contribution plan, Mr. Cosce said.