TALLAHASSEE, Fla. - If the state officials who are running it are right, Florida's $1.6 billion 457 plan could be in line for millions of dollars from participants in a 5-year-old retirement program.
This would be good news for the firms hired or rehired Jan. 1 to provide investment options and services to plan participants. And it would be even better news for one provider in particular, Nationwide Retirement Solutions, which swooped in and finagled a side deal with MetLife for the participant accounts that had been with MetLife Investors USA, which was not rehired.
Here's what's happening. In 1998, the Florida Retirement System implemented the deferred retirement option program as an alternative method for paying retirement benefits. Under the program, employees who qualified for early retirement could have their pension benefits accumulate in the Florida Retirement System Trust Fund for five years, at which time those employees must terminate their employment.
When they retire, these DROP employees can either get a lump-sum payment, less 20% tax withholding, or roll over all or part of the benefits, explained Kandi Hicks Winters, director of the state's 457 program. The money can be rolled into an individual retirement account, an annuity plan, a 403(b) plan or a state or local government 457 plan.
Employees can roll their DROP benefits into the 457 plan even if they don't currently participate in it, she said. "It's a big investment pool and distribution."
To protect the new retirees from a barrage of sales people hoping to win over their retirement money, the state has kept their identities a closely held secret. Not even a spouse can get the information, she said.
At the beginning of the year, Florida's new Department of Financial Services, which runs the 457 plan, unveiled a new slate of seven investment providers and choices.
The incumbent investment providers are AIG VALIC, Houston; Great-West Benefit Services Inc., Denver; ING Financial Advisors LLC, Hartford, Conn.s; Nationwide Retirement Solutions, Columbus, Ohio; and T. Rowe Price Associates Inc., Baltimore. New to the program are Hartford Life Insurance Co., Simsbury, Conn., and SafecoShareBuilder, a division of Safeco Life & Investments, Redmond, Wash., which was hired to provide an online brokerage account. The new slate reflected renegotiated lower fees, said Florida Chief Financial Officer Tom Gallagher.
Under the side deal made between Nationwide and previous provider MetLife Investors USA - which was approved by Mr. Gallagher - participants who did not choose to redirect future contributions elsewhere were defaulted to Nationwide Retirement Solutions, Ms. Winters said.
"Unless you choose a different provider your new investment provider will be Nationwide Retirement Solutions," Mr. Gallagher wrote in a January letter to participants.
"MetLife was not renewed, and rather than mapping funds, we struck a deal to transition their plans into our program over time," explained Bethany McLeish, Nationwide public relations specialist. "MetLife is still maintaining their field representatives, who will be distributing and marketing the plans, but the record keeping and administration and everything else (for participants Nationwide services) will be by Nationwide."
At stake in the deal are more than $250 million in assets from more than 10,500 participants, confirmed Toni Griffin, a MetLife spokeswoman.
"Nationwide bought the book of business," Ms. Winters said, adding that even participants who default to Nationwide can later choose another provider. They have until Jan. 1.