COLUMBIA, S.C. - The South Carolina Retirement System expanded its defined contribution program, opening it to all new state employees as an alternative to the $21 billion defined benefit plan.
All state employees hired after June 30 - except those working for municipalities or local government entities - were given the choice between the defined benefit plan and the $200 million 401(a) plan, said Peggy G. Boykin, director of the state's retirement system.
Participants who select the defined contribution plan and stay with it for five years will have a one-time choice of moving to the defined benefit plan, Ms. Boykin said.
The program's expansion comes just two years after it was started.
In 2000, the state Legislature formed a 401(a) plan for certain public school district employees. At the time, the state already had a defined contribution plan for employees working for higher education institutions and technical colleges. This year the new program, dubbed the State Optional Retirement Program, consolidated the existing plans and opened the system to all newly hired state employees.
One hurdle to using the 401(a) plan as an alternative is that South Carolina's defined benefit plan is underfunded, according to Ms. Boykin. To guard against further depleting the defined benefit plan, a portion of the employer's contribution to the defined contribution plan, 2.55 percentage points of the total 7.55%, is paid into the defined benefit plan. A new feature, this contribution is made even if the employee is part of the 401(a) plan.
The plan's four bundled providers are ING Aetna Financial Services Inc., AIG VALIC, TIAA-CREF and CitiStreet Associates LLC. Each firm will provide a full array of services including record keeping and investment for the plan.
The vendors have a diverse group of investment offerings, she said. ING Aetna's program offers 16 investment options; VALIC's investment menu has 17 options; TIAA-CREF's menu has 10 investment options; and CitiStreet's offering has 11.
State officials this year hired Ketchum Communications to run the education and communication campaign informing all employees of the new program and helping new employees make their choices, Ms. Boykin said.
The education program consists of meetings, plan details and a calculator comparing the plans on the Internet, and three videos - one for the employers, another explaining the differences between the plans for employees, and one on investment basics.
The defined benefit plan is the default for employees who fail to choose between the two plans.