District Court Judge Mary Leahy took under advisement union claims that the district should be forced to arbitrate over whether officials were within their rights in July 2008 when they narrowed the list of 403(b) vendors from 23 to five, the Winona Post reported. Unions representing teachers and paraprofessionals have insisted they should be allowed to choose from anyone who offered such services.

District lawyers told Leahy that it was within district authority to make the changes and that since the retirement plan vendors were not a party to its contract with the unionized employees, contract provisions would not stand in the way of a change. Not only that, the district lawyers contended, the changes were in response to the latest Internal Revenue Service (IRS) 403(b) rules and Minnesota law allows the district to create a management process allowing them to better comply with the new rules.

According to the newspaper account, the district created a committee that included representation from each union. That committee met for months to outline a new procedure for 403(b) accounts, including how it would determine which vendors could participate.

Union officials argued that the matter should be negotiated with unions’ bargaining teams, not a committee of volunteers, and in October 2008 served the district with an unfair labor practices complaint. When the district denied a union grievance over the matter, the union took the issue to court (see “Teachers Union Takes County to Court over Vendor Reduction“).

The Post said the district’s provider review committee asked for information such as breadth of investment offerings, investment expenses, surrender charges should a client change plans, current level of employee participation, quality of investment offerings, and the level of support offered by the company. Thirteen of the 23 prior service providers participated in the bidding process; some companies preferred to not reveal their fees in a bidding process.

The school district claims the change was beneficial for employees since vendors were asked to give complete disclosure of fees for an apples-to-apples comparison with other retirement accounts.

Participants were allowed to keep their accounts in place at existing providers, but new contributions must be made to one of the five approved vendors under the new policy.