Gain Sharing

1
Gain Sharing

• Background Information
• Implementation - PERSI
• Implementation Service Partners

2
Gain Sharing Service PartnersWe didnt do it
alone!

• Mellon Bank Record Keeping and
  Custodian/Trustee Bill Kincaid and Dave Marconi
• ETI Educational Mark Benson

3
Background Information

• Legislative Activity
• Legislation from the committee
• Three Groups
• Why,When and How much?
• PERSI Environment
• The new PERSI

4
1999 Legislative Debates

• Excess Funding
• Debate on Defined Benefit (DB) versus Defined
  Contributions(DC)
• Push by Employee Groups
• Employer Concerns

5
Legislative Study Committee

• In the 1999 Legislature an interim Committee was
  established
• Charged to review PERSI
• Studied The Range of Possibilities
• Attempt To Meet Needs of All Groups

6
The Legislation From Committee Mandated

• Protection of The Fund If It Went Up It Can Go
  Down.
• Method Of Sharing One Time Excess Returns
• Make A Hybrid DB/DC Plan
• Voluntary Contributions Allowed/Encouraged

7
Three Groups

• Employers wanted to Cut Costs
• Employees Wanted Additional Benefits
• Retirees Wanted Their Share

8
Things we did before Gain Sharing!

• Reduced EE Contribution Rates from 6.77 to 5.86
  permanently
• Doubled the Death Benefit
• Increased the Multiplier to 2(2.3P/FRF )
• Interest on EEs PERSI
• contributions at Market Rate

9
Why we did Gain Sharing??

• House Bill 510 passed on 3/28/2000
• DB Plan was more than 112 funded

10
When and How Much

• Possibly an Annual Event
• Decided by Board every October
• Always dependent on June 30th financial status
• 155,381,000.00 in Gain Sharing funds in 2000

11
Gain Sharing Allocations

• Employers 50 77,590,500.00
• Retirees 12 18,645,720.00
• Members 38 59,044,780.00

12
Gain Sharing Distributions

• Employer - Credit Against Future Contributions
• Retiree - a 13th Check
• Members - received a DC Account 401K

13
PERSI Environment

• PERSI Board Establishes The Contribution Rate For
  ER
• By Law, EE Contribution Rate Is Tied To ER Rate -
  Both Share Risk
• Board Sets COLA and Funding Policy
• We already had a 401(k) Plan

14
The New PERSI

• The Hybrid Plan is DB and DC based
• Allows a Choice in Building Retirement Benefits
• Education Program Key To EE Satisfaction
• New Benefit Improvements are Now Compared Against
  the Effect On Gain Sharing Among Other Things

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Gain Sharing Idaho Style

• IT Implementation - PERSI

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Gain Sharing Implementation

• Project Plan
• Project Team
• Resources
• Issues
• Timeframes
• Multi Phased Project

17
Project Plan

• Business Rule Document
• Business Design Document
• Detail Programming Design
• Programming
• Implementations

18
Project Team Structure

• Director/Executive Staff
• Project Manager
• Legal Advice
• Communications Manager
• Educational Trainers
• IT Manager and Automation Support
• Service Partners Mellon and ETI

19
PERSIs IT Automation Team

• Manager
• Contract Business Analyst/Designer
• Contract Programmers(2 1/2)
• DBA Support

20
Resources/Products

• MS Project Project Plan
• Windows NT 4.0
• MS SQL Server 7.0
• SQL Scripts/Stored Procedures
• VB 6
• FTP
• PGP Encryption

21
Time Frames

• JAD Session June 2000
• Business Rule Definition August 2000
• Detail Design October 2000
• Programming November to January 2001
• 3 Implementations first phase

22
Employers

• Credit for 44 of previous years Contributions
• Active Employer on June 30, 2000
• State Agencies received 20 of credit
• Schools and Counties Gave a lot back to EE
• 635 Employer Units
• 77,590,500.00 GS amount

23
Retirees

• 13th Check 108 of monthly retirement benefit
• Retired on June 30, 2000
• Very Appreciative Lots of thank you letters
• 22,317 retirees
• 18,645,720.00 GS amount

24
Active Members

• Active Member on June 30, 2000
• 12 months of Service
• 4.51 of members life to-date contributions went
  into 401K account
• Average 401k -1,100.00
• Minimum - 38.00
• 52,969 eligible members
• 59,044,780.00 GS amount

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Implementations

• Employer Credits December 15, 2000
• Retiree 13th Checks with letters January 19,
  2001
• Member - 401K accounts February 1, 2001

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IT Issues

• New Payroll System Implementation was same time
  as Gain Sharing Implementations
• 6 Months to Implement
• New IT Manager
• Contract Staff unfamiliar with System Data
• Data Integrity Issues

27
Business User Issues

• Coordination
• New Business Processes possibly one time
• Cheat Sheet for questions and answers
• Educational Campaign 600 Workshops in 18 months

28
Phone Call Routing Tree

• Employers Payroll procedures for Credits
• Retirees Extra Check causes confusion
• Members Money Management Education

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Communication is Critical

• Publish Allocation and Distribution Rules
• Use NewsLetters and Web Sites
• Weekly Meetings
• Regular Conference Calls with Service Partners

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Lessons Learned

• Free Money causes problems
• Communication and coordination is Critical
• Stay Flexible
• Follow up

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Remaining Phases

• Sending Changes to Record Keeper Phase II
• ER and EE Voluntary Contributions Phase II
• Address Changes Phase II
• Loans Phase III
• Hardships Phase III

32
.. To Mellon
33
Leveraging our Trust Capabilities to Meet the
Gain Sharing Goals

• Challenge Making Assets Available for the Plan
• How we helped as a service partner
• Allocation of existing assets
• Daily valuation
• Integration with recordkeeping systems
• Quality control and reporting

34
Integrating the Participant Interfaces

• Challenge Making On-Demand Information Available
  for Plan Participants
• How we helped as a service partner
• Determining the optimal control flow
• Getting the right look and feel
• Internet
• Voice response
• Call center

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Delivering the Message

• Challenge Making Gain Sharing Required
  Documentation Available to Plan Participants
• How we helped as a service partner
• Leveraging our creative resources
• Production of materials
• Fulfillment processing
• Continuing commitment

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Going Forward

• Challenge Successful Completion of the Future
  Project Phases
• How we will help as a service partner
• Integration of additional investments
• Voluntary contributions
• Existing plan conversion
• Introduction of additional plan features

37
.. To ETI
38
PERSI Member Education Educational Technologies,
Inc.

• Independent Educational Provider
• No Product/Service Affiliation
• For Benefit of all Members
• In Partnership with PERSI and Mellon Providing
• Consistent Messages
• Seamless Integration of Services and Technical
  Interfaces
• Cooperation in Phases and Timing

39
PERSI Member Education Program Goals

• Provide all members (approx. 60,000) an
  opportunity for unbiased information/education
  regarding the Base and Choice Plans
• Encourage members to become active participants
  in planning their financial future
• Establish a foundation and process for initial
  and on-going education
• Increase EE understanding of and satisfaction
  with PERSI financial retirement benefits

40
PERSI Member Education Design Challenges

• Create awareness and excitement
• Incorporate a variety of delivery tools
• Build upon previous information with each tool
• Communicate the process, set expectations
  regarding whats next?

• Create program name and Icon

41
PERSI Member Education Design Challenges

• Minimize communication obsolescence
• Create a process that coordinates with and
  incorporates available information as it becomes
  available
• Investment Selection
• Voluntary Contributions

42
PERSI Member Education Design Challenges

• Bring the educational opportunity to as many
  members as possible
• Engage employers (635) and treat them as
  strategic partners
• Effectively utilize multi-media tools
• Distribute materials to every member at home or
  work address

43
PERSI Member Education Design Challenges

• Provide consistent personal information
• Development in cooperation with strategic
  partners
• Financial modeling software interfaces with
  native sources for timely and accurate
  information
• GALENA
• Mellon Account Information

44
PERSI Member EducationTodays Choices for a
Better Tomorrow
February 2001 Receive/Review Remote Video
Bookpack
July 2001 Interactive Software Posted
August 2000 Phase 1 Employer Workshops
December 2000 Web Site Available
Understand Personal Opportunity
Education Process
November 2000 Checklist in Newsletter
January 2001 Phone Support Line Activated
April 2001 August 2002 Attend Large Group
Workshops
45
PERSI Member EducationTodays Choices for a
Better Tomorrow

• Educational Video Sample

46
Gain Sharing

• Questions??