City Council Evaluates 457 Plan Fees and Seeks Competitive Benefits for Employees

On August 25, 2025, city officials in McKinney, Texas, convened to discuss significant changes to the city's 457(b) retirement plan, emphasizing the need for competitive benefits and cost efficiency. The meeting highlighted the city's commitment to ensuring that employees receive quality retirement options while keeping fees in check.

The discussion began with an acknowledgment of the long-standing relationship with the current plan providers, Mission Square and Nationwide, which have been in place since 1984 and 2008, respectively. City officials recognized that it had been some time since a thorough review of the plan was conducted, prompting the decision to issue a Request for Proposal (RFP) to explore best practices in the market.

A key aspect of the meeting was the formation of a 457 committee, which included 11 members, tasked with evaluating the plan's performance against benchmarks from other cities. This committee, supported by a consultant from Mariner, discovered that the fees associated with the current plan were significantly higher than those of comparable cities. This finding is crucial as the fees directly impact employees' investment returns, which are solely funded by employee contributions.

The committee's efforts led to a comprehensive review of the investment options available within the plan. It was revealed that some funds were underperforming compared to industry standards, prompting the need for a more robust fund menu. The committee is now empowered to make adjustments to the investment options based on performance metrics, a capability that was previously lacking.

In February, the city issued an RFP that attracted several respondents, ultimately narrowing down to four finalists for interviews. The committee rigorously evaluated these candidates based on their customer service, asset value, and overall processes. The recommendations from this committee will be presented to the city manager, who will then forward them to the city council for approval, with a meeting scheduled for September 2.

This review process not only aims to enhance the retirement benefits for city employees but also reflects a broader commitment to fiscal responsibility and transparency in managing public funds. As the city moves forward with these changes, the anticipated outcomes could lead to improved retirement options for employees, aligning with best practices observed in other municipalities.