Each one of Florida’s 67 school districts offers a supplementary retirement plan for employees. The options available for investing retirement savings vary across these districts.
In 2007, the IRS established new requirements for school boards and other public employers operating 403(b) plans for their employees. These stricter regulations, which took effect in 2009, ultimately led to school districts selecting long lists of investment options from more than 90 companies doing business in the state. School employees faced the difficult task of choosing among dozens of investment options for their 403(b) savings, many of which had high fees and low investment returns.
At the same time, because the school districts operate independently, they had no collective buying power. Public school employees were paying some of the highest fees charged to any segment of the workforce eligible for 403(b) investment — as high as 5%. Smaller districts may have been at a particular disadvantage in negotiating better rates, but all employees paid the price.
To improve these investment options for school employees, four statewide organizations came together in 2007 to establish the Independent Benefits Council and develop a new plan. The Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association and the Florida Association of District School Superintendents set out to create a new “Model Plan” that would:
The Model Plan was truly a groundbreaking initiative. Florida was the first state to pursue this kind of collective effort for supplemental retirement savings.
Of the 90 investment companies operating in the state, 24 companies submitted detailed proposals in order to be considered for the Model Plan. These proposals included the two types of investments that are allowed within 403(b) plans: annuities and mutual funds.
Review of the proposals reduced these 24 companies down to a list of 11 companies. After in-depth interviews, the IBC’s independent investment consultant overseeing the search process presented a short list of eight companies to the IBC for final consideration.
At the beginning of 2008, the IBC selected five plans from this short list for exclusive membership in the Model Plan: American Century Investments, Equitable, PlanMember Services, VALIC and Waddell & Reed received the IBC’s seal of approval for Florida 403(b) plans.
Today, 53 of the 67 Florida school districts have adopted the Model Plan as part of their overall supplementary retirement program.
Since it was introduced in 2008, the Model Plan has undergone changes to maintain its standard of quality and refine the number of available products.
In 2011, Waddell & Reed exited the Model Plan and was replaced by TIAA-CREF. In 2014, TIAA-CREF voluntarily exited the Model Plan while Security Benefit submitted an application to join the Model Plan as a provider for mutual funds and annuities. The application was reviewed and authorized by the IBC and independent consultants.
The IBC renewed Letters of Commitment with the Model Plan companies in 2014 and reviewed all the partner companies again in 2018. Keeping with the Model Plan mission of offering top-value supplemental retirement investment products, the letters of commitment were updated to include additional requirements for disclosures on fees and costs, as well as a new pricing system.
In 2021, AIG voluntarily exited the Model Plan. Just three months later, Suncoast Credit Union submitted an application to join the Model Plan. By July 2022, all approvals and agreements had been completed, and the IBC announced that Suncoast Credit Union would join the program. Subsequently, American Century voluntarily exited the program. Today, the Model Plan offers retirement planning to Florida’s educators through four authorized provider companies: Equitable, Security Benefit, PlanMember and Suncoast Credit Union.
The IBC is committed to helping Florida’s public school employees save more for their retirement. If any additional changes to the Model Plan are required to ensure school employees continue to receive the best value for their retirement savings, the IBC will follow the same in-depth and comprehensive review process in making enhancements.
The Model Plan was designed to give school districts an all-in-one solution for their 403(b) plans. Adopting the Model Plan exclusively gives school district administrators the confidence that their employees have access to Florida’s top supplementary retirement investment options.
NOTE: Neither the IBC nor its member organizations have any financial stake in the development or implementation of the Model Plan.