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Gallagher Announces New Investment Options and Lower Fees through Florida’s Deferred Compensation Plan


CONTACT: Tami Torres
(850) 413-2842

TALLAHASSEE—Florida's Chief Financial Officer Tom Gallagher announced today that expanded investment options, lower fees and an easier-to-use Web site are available through the state's Deferred Compensation Program to help state employees better plan for their golden years.

"Florida has created what we believe to be the most innovative state retirement program in the country," he said. "It's a great opportunity for state employees to secure their retirement by mapping out their future finances. It's also a great opportunity for state employees to improve their standard of living during retirement while reducing their tax burden today."

This year, the program has attracted slightly more than 2,000 new enrollees. Of the 190,000 eligible state and university workers, about 66,500 — or less than half — are currently participating.

The Deferred Compensation Program, administered by the Florida Department of Financial Services, is an employee-funded retirement program similar to a 401(k). It is designed to help state workers supplement traditional retirement income sources, such as pensions and Social Security. The program allows enrollees to defer up to 50 percent of year-to-date gross taxable income or $12,000, whichever is less, in amounts as little as $10 bi-weekly.
The program offers investment choices from six companies: AIG Valic, ING, Great West Retirement Services, Nationwide Retirement Solutions, Safeco ShareBuilder and T. Rowe Price. A new vendor, Safeco ShareBuilder, is a self-directed brokerage service, which allows employees to select from up to 600 mutual funds and 4,000 individual stocks.

According to Gallagher, all renewed companies have lowered their fees, some by 50 percent or more, and changed the minimum and maximum deductions required to invest. To help employees get started, has been redesigned to make education, enrollment and account maintenance easier. Important and positive changes include:

· Higher deferral limits — The current deferral limit will jump from $12,000 to $13,000 in 2004, to $14,000 in 2005, and to $15,000 in 2006.

· Two new "catch-up" provisions — Employees who are within three years of retirement may put away up to $26,000 in 2004. That dollar amount increases by $2,000 per year and grows to $30,000 by 2006. In 2007 and beyond, there will be an additional cost-of-living increase of $1,000 per year.

Participants who are 50-plus years old may make an additional deferral of $2,000 in 2003, and that dollar amount increases by $1,000 per year through 2006. In 2007 and beyond, there will be an additional cost-of-living increase of $500 per year.

· Full participation — Eligible employees may continue to participate in and max out other retirement plans, including other 457 deferred compensation plans, 403(b) plans, 401(k) plans, and IRA plans (Roth or traditional).

· More portability — At retirement or separation, employees may now roll money into or from IRAs, 403(b)s, 401(k)s and other 457s.

Gallagher hopes these enhancements will encourage more state workers to save for their retirement years.

"More people need to realize that pension plans and Social Security will only provide 50 to 75 percent of their pre-retirement income," said Gallagher.

For example, a person who works for the state for 30 years, who earns an average annual income of $30,000 during those 30 years, will receive about $14,400 annual in benefits from the Florida Retirement System (FRS). The majority of employees do not reach the 30-year mark, so for many, the amount will be even less.

By putting aside even a small amount of money each month, Gallagher said employees can make a big difference in retirement income. "Just $20 a week could eventually grow to more than $50,000 in 25 years at even a modest 5 percent rate of return," he said.

Saving for retirement can also have a positive impact on the employee's paycheck. At, investors can see a simple example of the nominal effect contributing to a tax-deferred plan has on take-home pay. If the employee's gross monthly income is $2,000, and she contributes $200 to a qualified plan, she's only taxed on $1,800. If she put $200 into an after-tax investment she would be paying out about $40 more per month. Plus, the $200 goes into a nest egg that grows tax free, benefiting from interest earned and capital appreciation.

For more information, visit the website or call 1 (877) 299-8002 toll-free.