Employee Choice Arrangement: six-to-eight-week transfers of accrued savings only

This article is a rewrite of a report from August 2012.

The November 2012 Employee Choice Arrangement gave employees one chance a year to move personal mandatory accrued contributions and returns to a chosen fund company and scheme. But employer mandatory contributions and subsequent personal contributions stayed with the employer’s fund company; moving again meant waiting for year two.

How did transfers work?

An MPFA senior manager estimated about one in ten of the three million accounts would move. The whole process took six to eight weeks; the MPFA added an electronic platform to speed client-data handoffs between trustees, hoping to shorten waits over time.

What to consider before switching?

The MPFA’s executive director (supervision) advised:

• Don’t switch for its own sake. Understand your needs, products, services and fees first.
• Accounts will multiply. Two per person on average, some over a dozen; the authority would write early next year urging consolidation.
• Splitting doesn’t raise fees. Management fees scale with total principal — smaller balances per account mean proportionally smaller fees each.

The arrangement, she believed, would push employees to manage MPF investments actively, spur competition among fund companies, and perhaps cut fees. The MPFA set up a 200-line hotline and a publicity drive.