Nationwide Continuation as Deferred Compensation Plan Provider
Good news! Since 2017, the County of SLO has used Nationwide Retirement Services to administer the Deferred Compensation Plan (“DC Plan”). The DC Plan Provider performs the participant recordkeeping, offers investment options approved by the County, provides quarterly statements, and provides enrollment and customer service to the DC Plan participants.
During 2022 the County issued a Request for Proposal (RFP) for DC Plan provider alternatives that the County should consider. Four very competitive RFP responses were received from the biggest DC Plan providers in the industry. It was decided to retain Nationwide for another 5-year contract. The evaluation of the RFP responses was done by the DC Plan Committee made up of SLO County employees. What does this mean for the DC Plan participants?
Uninterrupted Customer Service
Nationwide has provided a high level of customer service for employees of the County and the other agencies that participate in the DC Plan (SLO Court, APCD, LAFCO). Nationwide representatives are readily available to meet with employees at convenient times using a videoconference format and on-site meetings. Call Loren Farfan at Nationwide on (818) 642-8191 or email her at Fa[email protected] to set up a consultation about the DC Plan.
The Nationwide participant portal at SanLuisObispo457.com remains your doorway to your DC Plan account. It includes not only your account statements and investment options, but a highly useful Interactive Financial Planner for you to help plan out your retirement income needs.
Lower Fees for Recordkeeping
The operation of the DC Plan is paid for by the fees charged within the Plan for the various mutual fund investment options. All mutual funds charge an “expense ratio” as a percentage of the participant assets. Those fees pay for investment management and the Plan’s administration including Nationwide’s recordkeeping and customer service. The portion of the fees charged for Nationwide has gone down with the new contract:
- Average 2022 Nationwide recordkeeping fee = 0.0350% of assets = 3.50 basis points
- Average 2023 Nationwide recordkeeping fee = 0.0225% of assets = 2.25 basis points
This may seem like a small number but spread across the $220 million in participant accounts this will save DC Plan participants over $27,000/year.
Improved Interest Rate on the Fixed Account
The participants in the DC Plan can allocate their money to any of the 33 investment funds currently included. The funds cover a wide range of investment risk and return. The lowest risk fund is the Nationwide Fixed Account which pays a set rate of interest much like a bank account. The Fixed Account interest rate can change over time depending on market conditions. In mid-2022 the Fixed Account was paying a 1.88% interest rate. Nationwide as part of their very competitive proposal has pledged to pay a minimum of 2.40% on the Fixed Account investment option for the next two years.
Out of the $220 million in the DC Plan at present, participants are investing over $50 million in the Nationwide Fixed Account. The actual interest rate on the Fixed Account may increase above the 2.40% minimum, but just comparing the mid-2022 rate to the new 2.40% minimum rate may increase total returns by approximately $250,000 per year spread across the accounts of those participants who invest in the Fixed Account.
Lower Fees for Those Who Use the Pro Account Service
DC Plan participants who want to have the allocation of their DC plan investments done for them have two options. They can invest in several “Target Date Funds” that vary the level of investment risk based on the year selected as a likely retirement date. Or they can use the Nationwide Pro-Account service to allocate their investments. Over 700 DC Plan participants use the Pro-Account service.
The cost of the Pro-account service is charged as a percentage of assets. The 2022 Pro-Account fee schedule started at 0.65% and decreased for larger accounts. Nationwide has lowered the Pro-Account fee schedule and it now starts at 0.55% of assets and decreases for larger accounts.
Do you have to take any action?
No, these changes are taking place already since Nationwide is continuing as the Deferred Compensation Plan Provider. Your account and your customer service arrangements all continue uninterrupted. The reduced fees and the increased interest rate on the Fixed Account took effect on October 1, 2022.
If you have questions, you can contact the San Luis Obispo County Pension Trust which administers the DC Plan on behalf of SLO County – at (805) 781-5465.
Your best way to get information on the DC Plan is by calling Nationwide and their customer service team. You may call Loren Farfan at Nationwide on (818) 642-8191 or [email protected].