Changing for the better

Since 1981, Multnomah County, Ore., has offered a deferred compensation plan to help employees save money for retirement, but last spring it retooled the plan to simplify their options. The changes increased the value of the plan’s assets by nearly 20 percent and garnered a national award.

Multnomah County’s plan initially offered six investment options through an insurance provider, Hartford, Conn.-based Aetna (now owned by Amsterdam-based ING), and a savings and loan institution. In 1990, the county cancelled the contract with the savings and loan and added two new providers: a second insurance provider, Hartford, Conn.-based The Hartford Financial Services Group, and the county’s credit union. Over the next several years, as new funds were added to each of the insurance providers’ menus, the plan grew to include nearly 120 options. Plan participation began to decline because employees were confused by the number of choices.

County officials surveyed the 4,000 employees in March 2003 to determine ways to streamline the plan and make it more attractive. Next, Los Altos, Calif.-based SST Benefits Consulting helped the county design plan enhancements. They developed an investment policy statement (IPS) that gave the retirement board and the investment providers objective criteria to determine which funds to keep and which investments to propose for the plan.

The county gave the IPS to ING and Hartford and asked them to specify all plan services, fees and investment performance. The county then requested proposals that included an investment lineup that would meet the IPS standards, provide enhanced education and lower fees. The two providers agreed to performance standards and financial penalties for not meeting the standards, and to reimburse the county’s daily plan administration expenses.

The companies reduced the number of investment options by 53 percent and fees by 28 percent, saving participants approximately $200,000 annually. In addition, the total number of high-quality investment options offered in the plan increased from 28 percent to 83 percent. The companies also added comprehensive retirement planning services; investment advice, both online and in person; an expanded educational program; and an annual independent review of investment performance, including a way to replace options that no longer meet the IPS requirements.

Plan enhancements began in April 2004. Monies invested in funds that were being eliminated were transferred to the most similar fund in the new lineup unless participants gave specific directions. Multnomah County’s plan assets grew approximately 18 percent between Dec. 31, 2003, and Dec. 31, 2004, from $98.6 million to more than $116 million, with participation remaining at about 3,100 employees. To increase participation, the county plans to offer seminars on budgeting, medical and long term care insurance, and reading and interpreting investment performance reports.

Multnomah County received an award for Leadership Recognition for its plan design and administration in 2004 from the Lexington, Ky.-based National Association of Government Defined Contribution Administrators (NAGDCA). NAGDCA presents the award annually to sponsors of 401(k), 403(b) and 457 plans to recognize outstanding achievements in effective communication or plan design and administration.

Mindy Harris is the deferred compensation plan administrator for Multnomah County, Ore.