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Move from Annual Valuated Professionally Managed Plan to Participant D

Guest Jhagan

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We currently administer about 75 local government 401a plans (2500 participants). The assets of all plans are invested in a professionally managed portfolio with no participant direction. We do annual valuations with the recordkeeping in-house using Quantech. We have several problems: 1) Quantech is an ERISA based system for private industry plans, which makes the valuation processing difficult. 2) The plan documents we are using need to be rewritten (see previous message posting) 3) We are at risk of losing our plans to more up-to-date participant directed plans. The state system is converting to this format, which local governments tend to follow and 4) We do not have the current staff to handle this type of administration.

I am currently researching the possibility of using a mutual fund company and/or a third-party TPA to all or some of the following: 1) Participant Directed investments and recordkeeping 2) Participant eduction 3) Provide a plan document that we could offer as a restatement that is either an ERISA document or a document that is tailored for governments taking out the unapplicable ERISA language and providng for amendments. 4) Possibility of using a 401(a) and 457 product together - so looking for someone that can help with the 457 product also.

We may consider doing all in a two-step process 1) fix the plans then 2) start participant direction - so does not have to be all in the same.

Our firm has programs that creates economies of scale by pooling small government together to offer products that they would not normally be able to access or afford on their own. We would like to maintain all client contact and handle parts of the administration where appropriate.

Interested in comments on what other small governments are doing. Suggestions on direct mutual fund companies vs. TPA. Are most governmental 401(a)participant directed? When coverting to participant direction - do most plans change their plan document?? Are there any statistics on the DB / DC split in LOCAL governments?

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