COLUMBUS, Ohio - Nationwide Retirement Solutions Inc. has bowed out of the grades K-12 school 403(b) market and transferred its National Education Association endorsement to a subsidiary, Security Benefit Life.
Nationwide Retirement, Columbus, Ohio, and Security Benefit Group, Topeka, Kan., held the NEA's Valuebuilder endorsement from 1991 to 2000 for its 403(b) contracts serving K-12 education professionals. Both firms are subsidiaries of Nationwide Financial Services.
"In the last year we've made some changes," said Duane Meek, president of Nationwide Retirement Solutions. "We placed a greater emphasis on education, retirement options and choice.
And Nationwide now has the ability to reach more people, more often and more effectively, said Mr. Meek of the company that was formerly known as the Public Employees Benefit Services Corp.
When PEBSCO became Nationwide Retirement Solutions in November 1998, the company was providing 403(b) plan services. In January, however, Nationwide launched a new service model that de-emphasized the 403(b) business, and backed away from the K-12 plan market entirely, he explained. The strategy was to refocus on what Nationwide executives considered the company's core markets: 457, 401(a) and public 401(k) plans.
As of June 30, Nationwide administered $22.9 billion in 457 plan assets, $487 million in 401(a) assets, $729 million in 401(k) assets and $809 million in 403(b) assets, according to a Pensions & Investments survey of record keepers. In all, Nationwide and the companies it owns - 401k Co., Morley Capital Management and National Deferred Compensation - have $42.5 billion in assets under management and administration, according to figures released by the firm.
"We looked at 403(b) opportunities in various markets," said Mr. Meek, who was the founder of the NEA Valuebuilder Investor Services organization in 1991. (NEA Valuebuilder later combined with PEBSCO in 1994 to form Nationwide Retirement Solutions.)
But handling the K-12 403(b) plans was more like servicing individuals than a group plan, mainly involving sales to individuals, he explained. Now Nationwide is investigating institutional 403(b) plans in the health care and higher education sectors, Mr. Meek said.
"We're looking at how we might participate there," he said. "We're concentrating on segments based on services with the opportunity for more revenues; that is, the large institutional market, regardless of tax code."
At the same time, Nationwide is striving to provide services that are commonplace for private sector defined contribution plans to public sector defined contribution and deferred compensation plans. This year, Nationwide has increased its emphasis on education and 24-hour access to service through retirement specialists, voice-response technology and the Internet, he said. In July, Nationwide launched a new website to provide enhanced services to plan participants and plan sponsors such as online enrollment, online deferral changes and customized statements.
"We believe we are on the leading edge of technology in the marketplace," Mr. Meek said. "We're providing the opportunity to communicate with our customers on a more frequent basis and give them more access to information."
Increasing the services available to plan sponsors and participants and weeding out less profitable market sectors has been one way providers are competing in the growing public defined contribution marketplace, said Guy Patton, president of Boston-based Fidelity Investment's tax-exempt business.
"We've been moderately successful in the public sector which, historically, has been dominated by the defined benefit plan and really, just now, is coming to embrace the defined contribution plan," Mr. Patton said. "It is in the early stages of that kind of shift."
Moreover, providers that had not been interested in the 403(b) market in the past are starting to compete there because changes in the regulations, which had required insurance products to be part of the mix, have been loosened. For example, Columbia Management Co., Portland, has just begun to offer its Master Plan solution, which was previously a corporate small plan service to the institutional 403(b) plan market, said Robert W. Noack, vice president of Columbia Funds, which mainly services plans in the Western United States.
One way to survive is to serve up an alternative that is simpler and lower cost than older models, which favored many service providers giving participants numerous choices of plans, each with their own set of investment options, Mr. Patton said.
Right now Fidelity has more than $5 billion in assets in the K-12 market, said Tom Hughes, senior vice president of marketing. Participants who ask for certain providers and certain kinds of funds drive the K-12 market, he said. And these days, they are asking for Fidelity retail mutual funds because they are familiar with the brand name and are Fidelity customers outside of their retirement plan, Mr. Hughes added. Moreover, participants see the difference between mutual funds and the annuity offerings, mostly from insurance companies, which have dominated this market.
In the higher education market, Fidelity's approach is not only to encourage plan sponsors to adopt a single provider approach much like corporate 401(k) plans, but Fidelity also is concentrating efforts on capturing the hearts and minds of participants, Mr. Patton said.