Deferred compensation plan change approved

At its May 11 meeting, the City Council approved a resolution to change the structure of the City’s deferred compensation plan. The City will move from three providers to a single provider plan: the Minnesota Deferred Compensation Plan (MNDCP). The MNDCP offers 11 standard investment options, 11 target retirement date funds and a brokerage window offering participants access to more than 13,000 different mutual funds.

The transition to the MNDCP reduces the City’s need to provide costly plan administration and investment oversight while providing City employees with lower investment fee options. Lower fees mean more money in participants’ accounts working for them over time. The proposal to change the City’s deferred compensation plan structure was reviewed with the Minneapolis Board of Business Agents, who concurred with the recommendation.

To facilitate the transition, employees who have ING and ICMA deferred compensation plan accounts will automatically transfer to the MNDCP this fall. ING funds and Vantagepoint funds (offered through ICMA) can be accessed through the brokerage window within the MNDCP.

Employees currently with ING or ICMA will find comparable investment options with the MNDCP. For example, a very large portion of assets in ING and ICMA are invested in the fixed/stable value options. MNDCP offers a similar fixed interest account. Historical average annual returns, as published by the providers, for the ING Fixed Account, the ICMA Vantage Trust PLUS Fund and the MNDCP Fixed Interest Account are shown in the table below.

 

Average Annual Returns for the period ending April 30, 2012

(net of fees and expenses)

1 year

3 years

5 years

10 years

MNDCP

SIF Fixed Interest Account

 

3.21%

 

3.88%

 

4.22%

 

4.42%

ING

Fixed  Account

 

3.01%

 

3.00%

 

3.05%

 

3.37%

ICMA-RC

Vantage Trust PLUS Fund (stable value)

 

2.77%

 

3.12%

 

3.70%

 

4.04%

About the Minnesota Deferred Compensation Plan

The MNDCP is administered by the Minnesota State Retirement System.   The MNDCP has been in existence for more than 35 years, has more than $4 billion in assets and serves more than 600 Minnesota public employers. The MNDCP has been a part of the City of Minneapolis’ deferred compensation plan since 1975.

Although it can be difficult for investors to understand the fees charged for their ING and ICMA investments, the MNDCP fully discloses all its fees to participants. Additionally, the MNDCP’s plan administrators are public employees who receive no commission or incentives for selling additional products. The administrators of the MNDCP have a strong reputation for consistently demonstrating a high level of quality and service to Minnesota public employees.

About the transition

Employees with ICMA or ING accounts do not have to take any action unless they choose to. Employees’ ICMA and ING accounts will automatically transfer to similar investments offered by the MNDCP in the fall of 2012. Once that transfer is complete, employees will have the opportunity to change their investment allocations.

Opportunities to learn more

 

Published May. 23, 2012