You asked (1) why the state is dropping TIAA-CREF as the state employee alternate retirement program (ARP) fund manager and (2) how, and under what authority, this decision was made.

SUMMARY

The state chose to attempt to (1) simplify its three defined-contribution retirement plans, one of which is the ARP, and (2) reduce their administrative costs. This process led to TIAA-CREF being replaced as the ARP plan administrator by ING Financial Advisors, LLC of Hartford, effective January 1, 2006. ING was also selected as the third-party administrator (TPA) for the other two defined-contribution plans, the Deferred Compensation Plan (457), and the 403(b) Plan.

The ARP was established for eligible non-civil service employees of the constituent units of the state higher education system (UConn, Connecticut State University, Community-Technical Colleges (i. e. professors and administrators) and the Board of State Academic Awards) and employees of the Department of Higher Education’s central office. The ARP, established in 1975, has approximately 8,500 employees making contributions and about $ 1 billion in assets.

The State Employee Retirement Commission, which is authorized under statute to make all policy and administrative decisions for the three defined-contribution plans, made the decision to place all three plans under one TPA (CGS § 5-155a). The Retirement Commission is housed in the Retirement and Benefit Services Division of the State Comptroller’s Office.

The comptroller is providing more detailed information on the changes to the plans through its web page: Defined Contribution Plans: Frequently Asked Questions.

PLAN RESTRUCTURING PROCESS

More than a year ago, a review committee made up labor and management members of the State Employees Retirement Commission was formed to evaluate the three defined-contribution plans with the goals of:

1. lowering administrative costs paid by plan participants,

2. simplifying the investment process and encouraging greater participation via an improved investment menu,

3. selecting a single TPA for the plans that is not selling its own funds in order to avoid any appearance of a conflict of interest, and

4. addressing other items including improved counseling and financial education and better compliance with IRS requirements.

The review committee, through the Comptroller’s Office, issued a request for proposals (RFP) for a TPA for all three plans. The proposals were due to the comptroller’s office by January 14, 2005. The committee and the Comptroller’s Office reviewed the 11 RFP responses from various firms.

The committee determined that ING submitted the best proposal and plan to implement the restructuring of the three plans, according to an April 19, 2005 memorandum from the comptroller to all state agency heads (link: Comptroller Memorandum No. 2005-11). ING was selected in part because of its experience with state employees in the Deferred Compensation (457) and the 403(b) plans and its experienced local service team.

STATE EMPLOYEE RETIREMENT COMMISSION MEMBERSHIP

In addition to the comptroller serving as the ex officio, nonvoting commission secretary, the other members are:

1. Peter R. Blum, Chairman

2. Robert Baus

3. Charles Casella

4. Stephen Caliendo

5. Robert Coffey

6. Richard Cosgrove

7. Thomas Culley

8. Paul Fortier

9. Stephen Greatorex

10. Mary Johnson

11. Salvatore Luciano

12. Steven Perruccio

13. Claude Poulin

14. Linda Yelmini

By statute, six trustees represent employees, six represent management, two are actuaries, and one is a neutral arbitrator, who is designated as commission chairman (CGS § 5-155a).

JM: ro