CitiStreet Execs Look Into Industry Future at Consultant Forum.

Company Leaders, EBRI President Say Change Has Only Just Begun

QUINCY, Mass. -- The benefits industry is undergoing historic shifts that have only just begun to unfold, but the future clearly belongs to the service providers who can adapt without sacrificing quality of service. That was the theme of the day among CitiStreet executives at a forum for benefit plan consultants hosted by the firm.

"This is a very dynamic time in our business. We are at the tip of the iceberg for changes to retirement plans and health and welfare plans," Phil Lussier, CitiStreet chairman and CEO, told the consultants.

He cited the trend away from pension plans toward 401(k)-type plans; recent passage of the Pension Protection Act; an increasing client interest in multiple domain service across defined contribution, defined benefit and health and welfare plans; increasing consumerism in health benefits; demand for more fee transparency; and the outsourcing of human resources and business processes.

He said that in many areas, the differences among competitors has been "narrowed to centimeters" in terms of offerings, and that the real distinguishing mark is in the execution and delivery of those services.

Those who continue to expend money on the best technology, the best people and the best service delivery to benefit plan sponsors and participants will prosper.

Jim Murphy, president of CitiStreet and head of Total Benefits Outsourcing, noted that future excellence will not derive from trying to be all things to all people. He said CitiStreet is meeting and exceeding its clients' needs with a strategy focused on core benefit service strengths, investment in technology and services in support of these strengths, and the formation of partnerships with complementary HR service providers.

Gary Jenkins, CitiStreet general counsel, walked the group through key provisions of the massive overhaul of benefit plans known as the Pension Protection Act (PPA) of 2006, noting that the 900 pages left many questions yet to be answered.

"Many of the statute requirements have been left open to interpretation by the Department of Labor down the road. So, the full impact is yet to be known," Jenkins said.

He said however, that just the PPA provisions on automatic enrollment, investment advice and Roth 401(k)s are going to have a tremendous impact.

The keynote speaker, Dallas Salisbury, president and CEO of the Employee Benefits Research Institute (EBRI), used recent EBRI data to paint a statistical picture of health and retirement trends as well as the impact of the pension act. Among numerous dramatic projections was one that showed the impact on benefit participation rates before and after automatic enrollment. The participation rates of those with 3-5 years of experience went from 32 percent before automatic enrollment to 87 percent after automatic enrollment, on up to workers with 24-26 years of service, for whom the participation percentage rose from 53 percent to 88 percent with automatic enrollment.

Executives also pointed to the freezing of pension plans and the ever-pressing need to educate and inform benefit plan participants.

Jenkins said: "Even before the PPA, many large companies had already been reviewing their pension plans with a view to freezing or reducing benefits or converting to a cash balance type plan. The PPA will accelerate this trend. As a result, a large portion of an individual's future retirement income is going to be in his or her own hands through their 401(k) plan. We have to keep communicating and educating participants along these new lines."

Sandy McCarthy, president of retirement services, said CitiStreet's guiding themes will continue to be personalized participant services in line with CitiStreet's philosophy of providing Direction-for-Life, enabling technology and informed risk management. She noted that CitiStreet has been a leader in many of these areas, citing, among other examples, its front-running role in participant investment advice, fee disclosure and Total Retirement Outsourcing across all markets.

Ray Martin, CEO and president of CitiStreet Advisors, noted that about a decade ago no one could have imagined providing advice to participants because of fiduciary liabilities, much less seeing the issue evolve into the now widely held opinion that it is safer to offer advice than not offer it.

The forum was attended by leading benefit consultants, who are key players in the retirement services industry and advise plan sponsors on selecting firms to provide human resources, defined benefit, defined contribution and health and welfare administration services.

About CitiStreet

CitiStreet, one of the largest global benefits delivery firms in the United States, is headquartered in Quincy, Mass. CitiStreet, with 3,000 employees, has offices in Somerset, N.J., Jacksonville, Fla., Lewiston, Maine, Boston and field offices around the nation. It also has a division, CitiStreet Australia, with offices in Sydney, Brisbane and Melbourne. CitiStreet serves more than 11 million participants and administers $200 billion in assets in the United States for defined contribution, defined benefit and health and welfare plans of corporate, government, health care, Taft-Hartley and not-for-profit organizations. It also serves more than 1 million participants and administers about $15 billion in assets outside the United States. CitiStreet is a 50/50 joint venture between State Street Corp. (NYSE:STT) and Citigroup (NYSE:C). For more CitiStreet information, visit the Web site at www.citistreetonline.com.