New Jersey State Employees Deferred Compensation Plan

Questions & Answers for State Employers and Employees

GENERAL OVERVIEW

Q.  What did the Division of Pensions and Benefits announce?

A.  The Division of Pensions and Benefits announced that Prudential Retirement has been selected by the State of New Jersey as third-party administrator for the New Jersey State Employees Deferred Compensation Plan (NJSEDCP or Plan). The Plan is expected to transition select plan administration functions to Prudential on January 1, 2006.

Q.  Why was this change made?

A.  As you may know, we continually monitor our benefits programs to ensure we offer you a competitively superior benefits package. With that in mind, and with the help of independent consulting firms (Mercer Investment Consulting and Segal Advisors), we conducted an extensive review and selection process at the request of the State Treasurer and the Plan's Board to modernize and enhance your deferred compensation plan and to enrich the Plan's product-and-service offerings to take full advantage of developments in the marketplace. As a result, Prudential Retirement, a business of Prudential Financial, was selected as the third-party administrator of our Plan after a review of six proposals.

Q.  Why did the State choose Prudential?

A.  Prudential Retirement, was awarded the contract after a review of proposals as part of a competitive bid process managed by the Purchase Bureau, Division of Purchase and Property, on behalf of the Division of Pensions and Benefits and the Division of Investment. This vendor’s proposal received the highest ranking among all bids received for offering the widest array of services and the best value to state employees, while keeping administrative costs to a minimum.

In addition, the third party administrator:

• Offers a diverse and broad array of brand-name institutional investment options;
  
  
• Provides state-of-the-art services and tools to support your retirement-planning needs; and
  
  
• Delivers a compelling stable-value investment product.

Q.  What is the New Jersey State Employees Deferred Compensation Plan?

A.  The New Jersey State Employees Deferred Compensation Plan (NJSEDCP) is a benefit designed to help employees of the State or an eligible agency, authority, commission or instrumentality save for retirement. In other words, this is the State program that provides an opportunity for you to save for retirement through pre-tax contributions and
tax-deferred savings — all funded through automatic payroll deductions. Participation in the NJSEDCP is voluntary and is designed to supplement your retirement income from other sources (i.e. Social Security, Public Employees’ Retirement System).

Q.  What is going to happen with our current deferred compensation plan?

A.  The deferred compensation plan continues to operate with different investment choices and improved services. The NJSEDCP has been internally administered by the Division of Pensions and Benefits since 1986, and the Plan’s investments have been managed by the Division of Investment since the Plan’s inception in 1982. NJSEDCP will allow you to maintain your existing investments in the Plan's current options, if you choose. Once administration of the Plan transitions to Prudential, which is expected to occur on January 1, 2006:

• All new contributions into the Plan will be invested in the new investment options, which will be offered through Prudential and managed by top-performing, brand-name institutional investment managers. Please note that — once the plan transitions — new contributions will not go into any of the four current investment funds, nor will you be able to transfer assets into any of the current funds from sources outside of those four options.

• You may either specify the Prudential-offered fund choices you would like your new contributions to go into, or your new contributions will automatically be mapped to the new funds that most closely match the investment objectives of your current choices.

You will also have the choice to transfer assets from the current fund offerings to the new Plan options on or after January 31, 2006. Over the coming months, we will work to ensure administration of your deferred compensation plan is transitioned safely and effectively.

We will keep you fully informed of decisions we make and any actions you may need to take.

ABOUT PRUDENTIAL

Q.  Can you tell me about Prudential?

A.  Headquartered in Newark, New Jersey, Prudential Financial is one of the largest financial-services institutions in the United States. The company provides a range of investment management, insurance, and other financial products and services to more than 15 million individual and institutional customers in the United States and more than 30 foreign countries.

Prudential Retirement, which will be our third-party administrator, is a unit of Prudential Financial’s Investments division. Prudential Retirement delivers retirement-plan solutions for public, private, and non-profit organizations and their employees. Services include:

• State-of-the-art Recordkeeping
  
  
• Plan Administration
  
  
• Investment Management
  
  
• Advisory Services
  
  
• Comprehensive Employee Investment Education and Communications
  
  
• Trustee Services

WHAT DOES THIS MEAN FOR PARTICIPANTS?

Q.  How do I benefit from this change?

A.  With the changes to the NJSEDCP, you can expect:

• Comprehensive, targeted education at your worksite on retirement-planning issues, topics and strategies, including support from four dedicated education and enrollment specialists working across New Jersey to offer financial education;
  
  
• A broad array of top-performing, brand-name investment choices from leading institutional investment managers;
  
  
• A highly competitive Stable Value Fund, which offers a guaranteed rate-of-return — declared in advance — for a fixed period of time;
  
  
• Account access and retirement-planning support 24-hour a day, seven days a week through interactive online tools and an automated phone system. In addition, Call Center professionals will be available Monday through Friday — 8:00 a.m. to 9:00 p.m. Eastern Time — to answer your questions;
  
  
• Access to asset allocation and rebalancing tools to help you meet your retirement-planning goals; and
  
  
• Quarterly statements that provide clear, personalized information about your program, the performance of your funds, and your progress toward a secure retirement.

While the existing four investment funds will continue to be valued as of the end of each calendar month, you will benefit from "daily valuations" for the new fund offerings. This means the performance of your new investment choices will be updated daily, at the close of the market each day. This will allow you to see your account’s total value and specific investment values as of the close of business of the prior day. The shift to a "daily valuation" environment means: up-to-date information about your investment performance; more control of your investment allocations; and quicker benefit payments — at current market values.

Q.  Will the NJSEDCP provide local education support?

A.  Yes. A 42-person team, with four dedicated education and enrollment specialists, will be working across New Jersey to offer financial education to members in the Plan. The investment and financial education will be personalized to provide support and guidance based on individual life-stage, risk tolerance, and financial circumstances.

Prudential and the Division of Pensions and Benefits are committed to reaching out to all employees. The Education Consultants are regionally assigned and are meeting with every employer throughout the State to schedule employee meetings. Therefore, the list of meetings is growing continually. We are committed to reaching as many employees in group settings as possible both before the implementation and ongoing. These meetings will help ensure that all employees are well informed about Plan enhancements and any steps they need to take. The meetings are directed both to current participants as well as those employees who have not yet decided to enroll, regardless of salary level, rank, shift, or location. The meetings begin in November, but will continue through the New Year and ongoing.

Schedules will be posted by region on the Web site, www.prudential.com/njsedcp in addition to being posted at individual employer locations. In addition, the backgrounds and contact information for each of the regionally-based Education Consultants will be listed on the Web site.

Q.  Can you tell me more about the NJSEDCP’s new investment offerings?

A.  The NJSEDCP will offer a broad array of investment choices that span all asset classes and investment styles and features Prudential Retirement's institutional Manager-of-Managers fund lineup.

• Fixed Income Funds
  o Core Bond Enhanced Index / PIM Fund
  o Core Plus Bond/PIMCO Fund
  
  
• Large Cap Stock Funds
  o Turner Investment Partners Fund
  o LSV Asset Management Fund
  o Victory Fund
  o Large Cap Blend Enhanced Index/QM Fund
  o Vanguard Institutional Index Fund
  o Fidelity Contrafund
  o Growth Fund of America R3
  o Merrill Lynch Large Cap Core I
  
  
• Small and Mid-Cap Stock Funds
  o Mid Cap Blend Enhanced Index/QM Fund
  o Granahan Fund
  o CRM Fund
  o Munder Capital Fund
  o Alger MidCap Growth Fund Institutional I
  o Hotchkis and Wiley Large Cap Value Fund A
  o Third Avenue Value Fund
  
  
• International Stock Funds
  o Dodge & Cox International Stock Fund
  o EuroPacific Growth Fund R3
  o Julius Baer Fund
  
  
• Socially Responsible Fund
  o Calvert Social Investment Fund (CSIF) Equity Portfolio
  
  
• Balanced Fund
  o Vanguard Wellesley Income Fund

The institutional funds in the Plan's lineup, which are not usually available to individual investors, are top-performing investment portfolios from brand-name institutional investment managers. They will be available to you through our Plan. Moreover, the funds are continually monitored to ensure they maintain superior performance relative to other funds with similar investment objectives.

Participants will also be offered a chance to invest in a highly competitive Stable Value Fund, the DCP Stable Value Fund (a fixed-income fund that offers a guaranteed rate-of-return — declared in advance — for a fixed period of time).

And — if you're satisfied with the Plan's current investment offerings — NJSEDCP provides for continuation of the Plan's four existing low-cost options, as you choose, for your current assets. However, you will not be permitted to add contributions to the Plan's current investment funds after December 31, 2005.

Q.  What resources will be available to help me manage my account?

A.  In addition to four dedicated financial and deferred compensation planning education professionals, the NJSEDCP will provide account access and retirement-planning support 24-hour a day, seven days a week through interactive online tools and an automated phone system. Call Center professionals will be available Monday through Friday, 8:00AM to 9:00PM, to answer your questions.

The NJSEDCP will also offer an asset allocation and rebalancing tool through Prudential, called "GoalMaker^SM," to help you meet your retirement-planning goals. And your quarterly statements from the Plan will provide clear, personalized information on the performance of your funds and your progress toward a secure retirement.

Q.  What is "GoalMaker^SM"?

A.  “GoalMaker^SM," is a free and easy-to-use asset-allocation program that takes the hard work and guesswork out of choosing the right investment mix to help you meet your retirement-planning goals. By taking advantage of this simple tool, you can realize the benefits of asset allocation — which is simply the process of spreading your money across a variety of stocks, bonds and stable value (guaranteed rate-of-return) investments to minimize your reliance on the performance on any one investment and reduce your overall investment risk.

If you elect to use GoalMaker^SM, you'll be asked to follow three simple steps to determine a model investment portfolio. Step 1 will determine your "risk tolerance" (conservative, moderate or aggressive). Step 2 will establish your time horizon — how long before you will use your investments for retirement. And Step 3 will enroll you in GoalMaker, with future contributions invested in the model portfolio you've created.

GoalMaker^SM will do the rest — including automatically rebalancing your portfolio to make sure it continues to match your retirement-savings goals.

Remember, GoalMaker^SM is not mandatory. It's an optional alternative for people who want help in selecting their retirement-planning investment mix.

If you're comfortable making your own investment decisions, that's fine.

Q.  Will my money be safe during the transition?

A.  Yes. The transition of administration of the Plan’s records will have no effect on the security or value of your account. Prudential and the Division of Pensions and Benefits will ensure that data about your account is accurate and secure, and representatives from the Division of Pensions and Benefits will closely monitor the transition and continually monitor the Plan’s administration. Also, your money will never be “out of the market;” it will remain invested in the funds that you have requested throughout the transition.

Q.  Do I need to take any action during the transition, between now and December 31, 2005?

A.  Yes, you will need to select a new investment allocation using the new investment funds that become available to you after December 31, 2005. You may do this by taking advantage of Prudential’s GoalMaker^SM asset allocation product or any combination of the new investment fund offerings. If you do not make a new investment allocation election by December 31, 2005, your current allocation will be used and your payroll deferrals after December 31, 2005 will be directed to a comparable new investment fund or funds; this is commonly referred to as “mapping”.

Q.  Where can I get information about my deferred compensation plan account?

A.  Until the Plan’s administration is transitioned to Prudential, which we expect will occur January 1, 2006, please continue to use the current deferred compensation plan resources by calling 609-292-3605 or visiting the Plan’s Web site, www.state.nj.us/treasury/pensions/fact32.htm

Q.  Once the transition occurs, will I be able to transfer funds from the existing investment options to the new investment options?

A.  Yes. You will be receiving more information over the coming months.

Q.  If I am currently receiving payouts from the Plan, can I transfer my remaining balance to the new investment options?

A.  Yes. You will be receiving more information over the coming months.

Q.  Will there be additional administration charges with the current investment options?

A.  There are no additional charges contemplated as a result of the transition. However, the Division of Pensions and Benefits will continue to monitor the costs associated with the administration of the current investment funds. If an adjustment of the current administrative fee is needed, it will be fully disclosed.

A comprehensive comparison of the expense ratios and investment performance will be posted on the Plan's new Web site, www.prudential.com/njsedcp which will be available no later than mid-November 2005.

The Plan's existing four investment options have consistently maintained a low fee structure; however, these fees limited the services the State could provide to our participants. As part of our comprehensive review, the decision was made to modernize the plan. Although the new investment options have higher expense ratios, there are other enhanced features to the Plan that you must consider — including daily access to your account, improved educational services, investment performance and the increased ability to diversify your investment.

Please note that historical performance is not available on the stable value fund; however, contributions made to the fund in the first quarter 2006 are guaranteed a rate of return no lower than 4.48%.

Q.  Will there be additional charges with the new investment options?

A.  There will be no additional charges as a result of the transition. However, there will be expense ratios associated with the new investment options, which may be higher than the current investment funds. All expenses will be fully disclosed.

Q.  Will there be a "freeze" on our accounts during this transition?

A.  No. There will be no blackout period during the transition. Your money will never be “out of the market;” it will remain invested in the funds that you have requested throughout the transition.

Q.  If I decide to stay in the existing funds, will I be able to make new contributions to those funds after December 31, 2005?

A.  NJSEDCP will not allow contributions to be added to the Plan's current investment funds after December 31, 2005. You must direct your future contributions to one or more of the new investment funds or utilize Prudential’s GoalMaker^SM asset allocation product. If you do not specify an investment allocation with the fund choices offered by the third-party administrator prior to December 31, 2005, your new contributions will automatically be mapped to the new funds that most closely match the investment objectives of your current investment choices.

Q.  If I decide to stay in the existing funds, will I be able to transfer assets into those funds after December 31, 2005?

A.  NJSEDCP will allow you to maintain existing investments in the Plan's current investment funds after December 31, 2005.  You will also be permitted to rebalance your assets held in one or more of the current investment funds between those four funds after December 31, 2005. However, you will be required to direct your future contributions to one or more of the new investment funds or utilize Prudential’s GoalMaker^SM asset allocation product.

Q.  If I decide to stay in the existing funds, what will I be permitted to do with those funds after December 31, 2005?

A.  NJSEDCP will allow you to maintain existing investments in the Plan's current options; however, once the Plan transitions on January 1, 2006:

• You will be able to transfer, or “re-balance,” your assets between the four existing investment funds.
  
  
• You will not be able to transfer assets into any of the four existing investment funds from any of the new investment funds or from sources outside of the NJSEDCP.
  
  
• You will have the choice to transfer you current deferred compensation assets to the new funds on January 31, 2006, or at the end of any calendar month thereafter.

Q.  Are you planning to make any other changes to our deferred compensation plan?

A.  Yes. We plan to enhance and upgrade the Plan l, with the goal of providing the resources to help you build a better financial future. You will be receiving more information about the Plan improvements over the coming months.

Q.  Where can I get more information about the transition of our deferred compensation plan?

A.  You can read more about the transition in the news release at www.state.nj.us/treasury/pensions/njsedcp_press_release.pdf

In addition, we will keep you informed of details and actions you may need to take as we move forward with the transition process.

You may also contact either the Division of Pensions and Benefits or Prudential Retirement. The telephone number for the Division of Pensions and Benefits is (609) 292-3605. The toll-free telephone number for Prudential Retirement is 1-866-NJSEDCP (1-866-657-3327).

Q.  Are you planning any changes to my other state-provided benefits?

A.  At this time, there are no plans to change any of the other benefits you receive as an employee of the State of New Jersey.

Q. How do I cancel or suspend my contributions to the NJSEDCP?

A. To change contribution rates prior to December 1, 2005, employees should complete a Change Request Form. Forms received in the Division's offices by 4:00 p.m. on Wednesday, November 30, 2005 will be processed to take effect on the second payroll period in December 2005 (for employees paid through the State's Centralized Payroll the suspension will take effect on the payroll dated December 16, 2005). Please note that changes in contribution deferrals must be made in whole percentages. The 2006 limit on employee contributions is $15,000.

After November 30, 2005, employees may request a Salary Deferral Change form through Human Resources, a Prudential Education Consultant, or it will be available online. Requests will be implemented as soon as is administratively possible. However, change requests submitted after 4:00 p.m. December 15, 2005, will take effect after the first payroll in January 2006.

Salary Deferral Change forms received by 4:00 p.m. on December 15, 2005, authorizing a suspension of deferrals will be effective prior to contributions being redirected to the new investments. Any requests received after that date will be made as soon as administratively possible. The decision to cancel or suspend contributions should not be made lightly as it may have a significant impact on current taxes as well as your long-term retirement savings.

Q. Are Change Request Forms going to be provided to all state employees as a result of the Plan's transition to Prudential Retirement?

A. The Change Request Form is available to all State employees online at,
www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/fd0085.pdf or by contacting the Plan's call center at (609) 292-3605 and requesting a form be mailed to the individual's home. These forms must be completed and returned to the Division of Pensions and Benefits by 4:00 p.m. on November 30, 2005. After that date, Salary Deferral Change forms will be available through Human Resource offices, a Prudential Education Consultant, or it will be available online. In addition, all current participants will receive a comprehensive retirement planning guide that provides further details regarding the benefits and features of the enhanced Plan, and any forms necessary to change the direction of their accounts (both deferral rates and investment allocations).

Q. Will distribution options be publicized so members know their distribution options for their existing account balances?

A. All information regarding the Plan will be publicized through our Web site, and the new Web site for the Plan, www.prudential.com/njsedcp which will be available in mid-November 2005, including the distribution options which will be expanded beginning January 2, 2006. This information is also included in the retirement planning guide that is being sent to all participants.

There are limited distribution options currently available to those still employed. While still employed, participants have access to their funds if they qualify for an unforeseen emergency withdrawal and through voluntary in-service distributions if a participant's account is less than $5,000 and contributions have been suspended for at least 24 months. Both of these options have some restrictions that are explained in more detail in the retirement planning guide. In addition, assets in the deferred compensation plan can be used to purchase service credit in the State's defined benefit retirement programs.

Finally, assets that have been rolled over into the plan may be withdrawn from the plan while in service. Once separated from service, participants may leave their assets in the plan, take a systematic or a lump sum withdrawal (full or partial), purchase an annuity, or transfer their account to an eligible retirement plan or IRA.

WHAT DOES THIS MEAN FOR EMPLOYERS?

Q.  How will my employees benefit from this change?

A.  After the NJSEDCP’s partnership with Prudential Retirement, your employees can expect:

• Comprehensive, targeted education at the worksite on retirement-planning issues, topics and strategies, including support from four dedicated education and enrollment specialists working across New Jersey to offer financial education to members of the Plan;
  
  
• A broad array of top-performing, brand-name investment choices from leading institutional investment managers;
  
  
• A highly competitive Stable Value Fund, which offers a guaranteed rate-of-return — declared in advance — for a fixed period of time;
  
  
• Account access and retirement-planning support 24-hour a day, seven days a week through interactive online tools and an automated phone system. In addition, Call Center professionals will be available Monday through Friday — 8:00 a.m. to 9:00 p.m. Eastern Time — to answer your questions;
  
  
• Access to asset allocation and rebalancing tools to help them meet their retirement-planning goals; and
  
  
• Award-winning quarterly statements that provide clear, personalized information about their program, the performance of their funds, and their progress toward a secure retirement.

In addition, your employees will benefit from "daily valuations" of their accounts, which will allow them to execute transactions and other activities each business day. The shift to a "daily valuations" environment will provide up-to-date information about their investment performance, allow them more control of their investment allocations, and enable quicker benefit payments — at current value.

Q.  How will the Division of Pensions and Benefits communicate changes to employees?

A.  The Division of Pensions and Benefits will announce the change in a note to all employees and will work with Prudential Retirement to ensure you and your employees are fully informed about the Plan details and any actions that may need to be taken as we progress through the transition. We plan to take advantage of our normal communication tools and resources, including newsletters and call center messaging.

In addition, the Division and Prudential will provide on-site meetings with you and your employees to discuss employer responsibilities and enhanced plan features available to both you and your employees. You will be contacted to schedule these meetings in the near future.

Q.  What should I do if my employees have questions?

A.  For the time being, employees should be directed to the current retirement information resource, including the NJSEDCP’s Web site, www.state.nj.us/treasury/pensions/fact32.htm  or counseling center at (609) 292-3605.

Q.  What benefits should I expect as an employer as a result of this decision?

A.  Improving the administration and competitiveness of our Plan will help satisfy the retirement-planning needs of our employees. And we feel confident that the new structure provides the tools, support and expertise to help employees more effectively prepare for retirement.

On a purely practical level, as an employer, you will receive:

• An Interactive Internet with plan-management tools and resources;
  
  
• Call Center support; and
  
  
• Comprehensive statements and enhanced reporting capabilities to help you better manage your deferred compensation plan obligations.

In addition, Prudential Retirement will support existing payroll feeds or facilitate a conversion to a more efficient data transfer procedure.

Q.  Will the NJSEDCP provide local education support for my employees?

A.  Yes. A 42-person team, with four dedicated education and enrollment specialists, will be working across New Jersey to offer financial education to members in the Plan. The investment and financial education will be personalized to provide support and guidance and we will work closely with all employers to determine the best dates and times to accommodate your work schedules and demands.

Q.  Are you planning to make any other changes to the deferred compensation plan?

A.  Yes. We plan to enhance and upgrade the Plan as part of these modifications to the NJSEDCP, with the goal of providing the resources to help your employees build a better financial future. You and your employees will be receiving more information about the Plan improvements over the coming months.

Q.  Where can I get more information about this decision?

A.  You can read more about the decision in the news release at: www.state.nj.us/treasury/pensions/njsedcp_press_release.pdf

In addition, Prudential will be holding employer meetings over the next several months. And we will keep you informed of details and actions you may need to take as we move forward with the transition process.

You may also contact either the Division of Pensions and Benefits or Prudential Retirement. The telephone number for the Division of Pensions and Benefits is (609) 292-3605. The toll-free telephone number for Prudential Retirement is 1-866-NJSEDCP (1-866-657-3327).