19-13.004. Role and Responsibilities of Third Party Vendors

(1) The Investment Plan Administrator (Administrator) provides administrative services in the operation of the Florida Retirement System (FRS) Investment Plan other than those provided by the Division of Retirement within the Department of Management Services (Division) as set forth in Rule 19-13.002, F.A.C. The Administrator also provides enrollment processing for the FRS. Other administrative services are provided by the Division. Those services are described in Rule 19-13.002, F.A.C. The Administrator’s primary duties and responsibilities are to:

(a) Maintain the Investment Plan database;

(b) Process new enrollments into the Pension Plan or Investment Plan and to process existing enrollments of the employees’ 2nd Election into either FRS plan, pursuant to Section 121.4501(4), F.S.;

(c) Transmit election information to the Division;

(d) Maintain a database of Investment Plan beneficiary designations;

(e) Transfer Investment Plan employer and employee contributions to the investment product providers, after contributions have been received from the Division;

(f) Provide aggregate accumulated benefit obligation data segregated by investment product provider to the State Board of Administration (SBA);

(g) Maintain Investment Plan member account data and such data as is sufficient to process 2nd Elections by existing members;

(h) Implement account transfers at the request of members;

(i) Implement withdrawals from account by electronic means;

(j) Implement distribution of Investment Plan benefits to Investment Plan members or beneficiaries;

(k) Provide quarterly or annual statements to Investment Plan members;

(l) Distribute written material;

(m) Provide phone response service on a toll-free line to assist members and employers to accomplish any required responsibility;

(n) Provide recordkeeping for all Investment Plan data within its responsibilities, including monitoring of monetary limits imposed by the federal Internal Revenue Code; and,

(o) Administer Qualified Domestic Relations Orders (QDROs).

(p) Provide a Self-Directed Brokerage Account (“SDBA”) to eligible Investment Plan members.

(2) Multiple providers furnish educational services.

(a) Financial information and guideance will be provided by a vendor via internet. More specifically, this provider posts technical education content and provides the following services digitally:

1. A defined benefit/defined contribution benefits projections calculator;

2. A variety of other analytical financial and retirement planning tools;

3. Investment guidance, which includes communicating general investment and financial information and risk and return modeling of investment options and optimized combinations or asset allocations, within a single member directed tax-exempt retirement account, under the following requirements:

(I) Online modeling services will be based on generally-accepted investment theories that take into account historic returns of different generic asset classes over defined periods of time;

(II) All material facts and assumptions that may affect a member’s assessment of the different asset allocations shall either be specified in the online modeling service or entered into the online modeling services by the member;

(III) To the extent that an asset allocation generated by the online modeling service identifies any specific investment option available under a member directed and tax-exempt retirement account, the online service will have fully incorporated and considered all investment options available within that retirement plan, as well as all household assets, except that the member must enter into the online modeling service non-FRS retirement account investment universes and household assets;

(IV) Any asset allocation, or specific combinations of investment options, communicated to members will be accompanied by a disclaimer that it is based on the information provided and is not individualized to reflect all of the particular needs of the member that may be relevant to his or her investment decisions, and that in applying the asset allocation to his or her individual situation, the member should consider his or her other assets, income and investments (including, for example, equity in a home, IRA investments, savings accounts and interest in other retirement plans) as well as his or her investments within the account for which the guidance is provided; and,

(V) There will be an objective correlation between the asset allocations and other information generated by the online modeling service and data supplied by the member;

4. Investment advice, which consists of communicating optimized combinations of specific investment options across multiple member directed tax-deferred or taxable accounts, under the requirements that the advice is rendered on a regular basis to the member, pursuant to a mutual agreement with the member that the advice will serve as a primary basis for the member’s investment decisions with respect to the member’s multiple member directed account assets and is individualized based on the particular needs of the member. Use of the terms “recommended” or “advice” or forms thereof, in an online modeling service does not constitute the rendering of advice in the absence of requirements set out in the preceding sentence.

(b) An education provider will furnish one-on-one employee and employer education and counseling. More specifically, the provider:

1. Conducts seminars and workshops for employees and employers;

2. Provides one-on-one, face-to-face, employee financial counseling, when requested;

3. Provides telephone support of education and guidance regarding:

(I) The defined contribution plan design and the investment options;

(II) Defined benefit/defined contribution choice information;

(III) Retirement planning;

(IV) Financial planning; and,

(V) Support of the online modeling service through which investment guidance or investment advice is rendered.

(c) Other education providers focus on printed educational material. More specifically, the providers:

1. Create the education campaign and the overall deployment strategy;

2. Research, monitor, and measure the education campaign;

3. Create the look, theme, and branding for the education campaign;

4. Determine message positioning and delivery; and,

5. Assist in graphic design and the content of the website.

(d) An education provider will focus on the MyFRS.com website. This provider coordinates software application integration and the design and content of the MyFRS.com website among the other educational service providers, the Administrator, the Division, and the SBA.

(3) Multiple providers hired by the SBA furnish the investment options for Investment Plan members. Section 121.4501, F.S., is generally constructed as an unbundled architecture, meaning that neither the Administrator nor the education providers are permitted to offer investment products, and as a consequence, the SBA has hired multiple institutional investment managers and providers of mutual funds. Some of the providers are unbundled institutional investment managers, which manage assets in a particular asset class and in a particular style, and which are responsible solely for money management, either as a separate account or collective trusts. Other providers are bundled providers which provide mutual funds or investment options in collective trusts which are their own funds or funds contracted for or from another money management group. Each investment manager:

(a) Has authority and discretion, delegated by each manager’s contract, to invest employee payroll contributions deposited with the custodian and recorded by the Administrator for individual Investment Plan accounts;

(b) Transmits product values and performance data to the custodian; and

(c) Is monitored by manager monitoring guidelines incorporated in each of their contracts.

(4) An annuity provider has been hired by the SBA to offer annuities to retiring members.

(5) The custodian, hired by the SBA pursuant to Section 121.4501(8), F.S., is required to do the following:

(a) Hold cash, non-cash and all securities delivered to it or which are held in accounts established by it, or in the Federal Reserve book-entry system;

(b) Invest contributions that it receives, transfer amounts among investment funds, or liquidate securities, after receipt of proper instructions from the SBA, Administrator, or Investment Managers;

(c) Release and deliver securities held as directed by the SBA;

(d) Maintain a database of securities registered in the name of the Investment Plan;

(e) Remit or credit income;

(f) Communicate with the SBA regarding registered investment company shares and fund securities;

(g) Lend securities;

(h) Determine the value of assets;

(i) Calculate rates of return of investment products;

(j) Automatically re-balance the retirement date funds and multi-manger funds as directed by the SBA; and

(k) Provide a read-only website for Investment Plan members to access check advices and print copies of their 1099R forms.

(6) Miscellaneous consultants have been hired by the SBA to assist the SBA in the operations of the Investment Plan. Their responsibilities may include, but are not limited to, the following:

(a) Assisting in the selection process for the Administrator, the educational vendors, and the investment product providers;

(b) Assisting in all general investment product reviews;

(c) Assisting in the evaluation and selection of annuity product providers;

(d) Consulting on the educational program and general Investment Plan matters;

(e) Consulting on unbundled investment fund design;

(f) Assisting in the selection and evaluation of all investment product providers;

(g) Assisting in developing and implementing investment product manager monitoring guidelines;

(h) Making recommendations for retention and termination of investment product providers; and

(i) Provide breach response services to the Investment Plan.

Rulemaking Authority 121.4501(8) FS. Law Implemented 121.4501(4), (8)(b), (e)1., (9)(a), (10) FS. History–New 10-21-04, Amended 7-12-12, 12-16-12, 12-30-15, 1-18-17, 5-11-22.