New firm will run government retiree plan
By Johnny Brannon
Advertiser Staff Writer
A month after the state voided a controversial contract with a new administrator for its employee deferred compensation plan, officials awarded a new contract for the services to the same firm.
The decision means the plan, through which state and Neighbor Island county employees invest money for retirement, will be run by a new company for the first time in 20 years.
The plan's board of trustees admitted last month it inadvertently had broken the state's "Sunshine" open meetings law when it first chose CitiStreet LLC over current contractor Hawaii Benefits Inc. in November.
The board had met improperly behind closed doors to discuss changing its selection method before making the decision.
Hawaii Benefits and another unsuccessful bidder challenged the award, and the contract was rescinded. On Thursday, the state chose CitiStreet again.
About 43,000 workers participate in the plan. Many have grown uneasy about the tension surrounding the selection process, partly because CitiStreet is half owned by Citigroup, a top lender to collapsed energy giant Enron and a target of a major federal fraud investigation.
CitiStreet says it operates independently of Citigroup and would not be affected by the outcome of the fraud probe. The plan administrator manages enrollment and record keeping but does not select investments or handle money directly.
In a notice to participants, the state said "confidential information about the board's selection of CitiStreet and the procurement process was prematurely leaked" after the first award. "Much of this unauthorized information was inaccurate, incomplete, or misleading and may have confused and angered participants."
Hawaii Benefits had no immediate comment on the decision. The company's contract is to expire June 30.
Four companies bid on the contract. State Department of Human Resources Development director Kathleen Watanabe, chairwoman of the plan board of trustees, said she was pleased with the choice.
"It's a very attractive package for the plan participants," she said. "I know a lot of the participants were concerned about whether the services provided would be adequate for their needs. We believe the services will be at least as good, if not better."
She said the board wanted to make sure the selection was made properly and that its members appreciated participants' patience while the controversy was sorted out.
"This is in line with Gov. (Linda) Lingle's efforts for everything to be on the up and up, and for mistakes to be corrected," Watanabe said.
The state does not pay for the contract, which is financed through transaction fees charged to participants. The current contract is worth at least $3.3 million to Hawaii Benefits. The state says participants will save $865,000 in the first year under CitiStreet.
CitiStreet will have 28 employees working on its Hawai'i plan, six of them based in Honolulu, according to the state's notice. Hawaii Benefits has 16 employees, the state says.
Hawai'i Benefits challenged the first award because of the sunshine law violation and because the change to the evaluation process allegedly violated the terms of the state's request for proposals.
The original scoring process favored Hawai'i Benefits, but the change to a "ranking" system did not, according to the company's written protest.
The state's notice says one trustee gave unreasonably low scores to two bidders during the first process and skewed the results.
Watanabe said she had no indication as to whether the new award would be challenged. A protest could delay the change.
The state's notice can be viewed at www.hawaii.gov/hrd/eab/defcomp.html.
