Cost-saving package combines a traditional pension with individual accounts
Santa Ana, CA and New York, March 31, 2011
The County of Orange today announced its selection of TIAA-CREF, one of America’s largest private retirement systems, to be the sole provider for the defined-contribution part of the county’s hybrid pension plan. TIAA-CREF has provided investment and administrative services to the plan since its inception in 2010.
The plan, which lowers the county’s cost of providing retirement benefits for employees and offers workers a meaningful path to retirement security, combines a defined-benefit pension with a defined-contribution plan, but reduces the requisite contribution for both the county and its employees and redirects a portion of that money into the defined-contribution plan with up to 2% of base pay matched by the county.
“We are pleased to select TIAA-CREF to administer the defined-contribution portion of the county’s hybrid retirement plan, which is a win for both taxpayers and employees,” said Bill Campbell, chairman of the Board of Supervisors. “This innovative plan promises cost savings for the county, helps provide retirement security for our workers, and shows what’s possible when everyone comes to together to tackle the retirement funding challenge.”
“TIAA-CREF’s financial strength and leadership in providing tools to defined-contribution plan sponsors persuaded us that they’re the right provider to help meet the needs of the county and its workforce,” Mr. Campbell added.
“We commend the Board of Supervisors for selecting TIAA-CREF to administer the defined-contribution part of the county’s new hybrid pension plan,” said Nick Berardino, general manager of the Orange County Employees Association, an AFL-CIO affiliate. “The plan offers our members a quality pension that emphasizes lifetime income and can play a significant role in helping them achieve a financially secure retirement.”
All county employees hired after May 7, 2010 have the hybrid option. Depending on how the Internal Revenue Services rules on a pending request, employees hired before that day may be able to choose the hybrid plan as well.
An emphasis on retirement income
Unlike a typical 401(k), the defined contribution part of Orange County’s hybrid plan emphasizes retirement income as a goal. Participants in the defined-contribution part of the plan have a choice of investment options from TIAA-CREF and other financial companies, including affordable deferred annuity options that can deliver income in retirement that compares favorably with what workers can expect from the traditional pension plan alone. Workers who select the hybrid plan also increase their take-home pay because their contributions are lower than in the defined-benefit plan.
“We commend Orange County and the Orange County Employees Association for constructing a pension offering that recognizes the importance of both fiscal discipline and lifetime retirement income,” said Richard Hiller, TIAA-CREF’s vice president of public sector retirement plans. “We’re honored to be selected to administer the defined-contribution part of the plan, which is a testament to the ability of the county and its largest independent employee labor union to encourage sustainable retirement benefits over the long term.”
TIAA-CREF (www.tiaa-cref.org) is a national financial services organization with $453 billion in combined assets under management (as of 12/31/10) and provides retirement services to the academic, research, medical, governmental and cultural fields.
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