BOISE, Idaho - Thanks to a surplus in its defined benefit plan, the Public Employee Retirement System of Idaho is preparing to launch a new 401(k) plan on May 1, said Alan Winkle, executive director.
The new "Choice" plan was created by the state Legislature last April, as part of Idaho's so-called "gain-sharing" program.
With gain sharing, employees receive money deposited into their 401(k) accounts when the state's $7.3 billion defined benefit plan is overfunded. On Feb. 1, active employees received some $60 million, or an average of about 4.56% of their defined benefit plan balances. Currently the gain-sharing money is being deposited in the Choice 401(k) plan's sole investment choice, the Total Return Fund.
Also as a part of the gain-sharing program, public employers received $77.7 million in credits toward their PERSI contributions, and retirees shared $18.6 million in distributions from the excess earnings in the defined benefit plan, equaling about 106% of their regular monthly benefit checks.
Meanwhile, the system board last week selected six actively managed funds and four indexed funds for the new 401(k) plan, which system officials expect to launch May 1.
The active investments are: a large-cap core equity fund from The Vanguard Group; mid-cap core equity from Dreyfus Founders Asset Management Inc.; small-cap core equity from Aetna Investment Services LLC; international equity core from Brandes International; core-plus fixed income from Dodge & Cox; and stable-value fixed income from SEI Investments.
The passively managed options are: Mellon EB Daily Liquidity Stock Index; State Street Global Advisors' Wilshire 5000 index and EAFE index funds; and Mellon's EB LB Aggregate Index.
Dreyfus Retirement Services is the plan's record keeper; Education Technologies Inc. is the financial education provider.
Mercer Investment Consulting Inc. assisted.
A bill that passed the Idaho House on Feb. 7 and is awaiting hearing in the Senate would expand the Choice 401(k) plan to allow all members of the retirement system to participate. Currently, those eligible must have 12 months of service and must be active members at the end of the fiscal year.
Should the bill pass, all PERSI members will be allowed to participate in and contribute to the new plan, regardless of whether they have received gain-sharing contributions, Mr. Winkle said.
The new Choice 401(k) also is made possible by a private-letter ruling the state obtained from the Internal Revenue Service last April, he explained. That ruling allowed state officials to take the Super Saver plan, a $20 million 401(k) plan that had been in existence when federal regulators discontinued states' abilities to implement 401(k) plans, and expand it to all public employees in the state, Mr. Winkle said.
Sometime in the third quarter, PERSI officials anticipate merging the Super Saver and Choice plans into a single unbundled plan.
"We have 638 separate employer units in the state, and we have to coordinate payrolls," Mr. Winkle said.
Before fund officials can determine how the two plans will be merged, they will have to "get all those systems up and running," he said.
