Reason for 401(k) change is fee simple.
Author | Speizer, Irwin |
Position | Tar Heel Tattler - Prudential Retirement wins contract |
It was an offer the state couldn't refuse. Prudential Retirement, part of Newark, N.J.-based Prudential Financial, promised to increase staffing, eliminate some fees and lower others if it got to manage the $2.3 billion 401(k) plan for 180,000 state employees.
That enabled Prudential to win the contract from Winston-Salem-based BB&T, which started the program in 1985 and has run it since. The loss left BB&T scrambling to find places for 42 workers who will lose their jobs when Prudential takes over the contract in September.
State officials say BB&T came in third among seven bidders. But Prudential blew away the competition. For starters, there was the issue of fees. BB&T had been charging participants 0.25% on the first $50,000 of assets in the plan. It offered to lower that to 0.15% in increments over the five-year contract. Prudential's fees: zip, which the state figured would save participants $22.3 million over five years. Next came staffing. Prudential promised to increase it to 63. Finally, there were the mutual funds. Those offered by BB&T charged higher fees to participants than Prudential's. Not only that, Prudential's choices had better performance records. All told, fee savings totaled about 25%.
Prudential's low cost and high level of service...
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