[11570]
February 7, 2000
TO: OPERATIONS COMMITTEE No. 3-00
TRANSFER AGENT ADVISORY COMMITTEE No. 6-00
BANK AND TRUST ADVISORY COMMITTEE No. 3-00
BROKER/DEALER ADVISORY COMMITTEE No. 1-00
PENSION COMMITTEE No. 7-00
PENSION OPERATIONS ADVISORY COMMITTEE No. 4-00
RE: NSCC RETIREMENT SERVICES
______________________________________________________________________________
Over the past several years many Institute members have contributed considerable time and
effort on industry initiatives to improve retirement plan processing. These initiatives include automating
the transfer of Individual Retirement Accounts and standardizing transaction processing between and
among 401(k) third party administrators (TPAs), trust companies and mutual funds. Institute member
leadership was instrumental in meeting these goals and resulted in the National Securities Clearing
Corporation (NSCC) expanding Fund/SERV and Networking to create two new services, the Transfer
of Retirement Assets Service (ToRA) and the Defined Contribution Clearance and Settlement Service
(DCC&S). These clearance and settlement facilities were designed to reduce costs and improve service
for the industry and its shareholders by eliminating or reducing paperwork, decreasing the amount of
manual intervention and reducing transaction processing timeframes.
For the past year or more, the intense focus on Y2K preparations slowed progress toward
greater industry adoption of these new services. With the successful transition to the year 2000 now
virtually complete, the Institute is joining with the NSCC in a renewed effort to recruit users and address
any impediments to increased usage.
Workshops and Presentations
In an effort to encourage Institute members and their business partners to participate in these
industry-created services, the Institute will make increased efforts during 2000 to work with industry
members and the NSCC to promote wider use of these services. Our plans include developing a series
of regional workshops and offering presentations to individual organizations. If your company is
interested in a presentation on any of the NSCC services, particularly ToRA and DCC&S (or wishes to
suggest another organization for us to contact about a visit), please contact Justine Phoenix at 202-326-
5850, or James DeRubertis of NSCC at 212-412-8442.
Products such as ToRA and DCC&S were developed with substantial industry input to help
ensure their wide acceptance. The Institute encourages its members to evaluate these services, consider
them for use in their own organizations, and help promote interest among others. For those less
familiar with ToRA and DCC&S, brief descriptions follow with directions for obtaining more
information.
Transfer of Retirement Assets Service
The Transfer of Retirement Assets (ToRA) service became available for use in 1996. Currently,
77 ICI member firms participate in this service. A function of Fund/SERV, ToRA enables mutual fund
companies to initiate, acknowledge, confirm and settle its asset transfers. In addition to traditional
IRAs, ROTH, SEP, SIMPLE, SARSEP and Education IRAs as well as 403b accounts can also be
transferred. Participants in the service sign a Standard Agreement developed by an ICI task force. This
agreement facilitated the reduction of paperwork by allowing the sender to maintain shareholder asset
transfer requests on behalf of the receiver. The ToRA service is currently available only for transfers
among mutual funds. This year, the Institute and the NSCC will begin work to expand the service to
banks, brokers, and insurance companies.
One of the main goals of this service is to reduce the amount of time involved in transferring
IRA assets from one mutual fund company to another. By eliminating the movement of paper and
automating trade settlement, an asset transfer takes place in less than three days. This is a significant
improvement over paper based transfers.
A ToRA product sheet prepared by the NSCC has been attached. Further information is
available on NSCC’s website www.nscc.com or by calling the NSCC’s Mutual Fund Hotline at 212/412-
8893. A copy of the Standard Agreement is available on the Institute’s website- www.members.ici.org.
Defined Contribution Clearance and Settlement Service
The Defined Contribution Clearance and Settlement Service, implemented in 1997, was
developed to centralize and automate the processing of mutual fund transactions for defined
contribution retirement plans (predominantly 401(k) plans). DCC&S utilizes capabilities of the
Fund/SERV, Networking and Mutual Fund Profile systems. Currently over 80 mutual fund companies
are capable of receiving defined contribution plan trades via NSCC. There are over 50 banks, trusts,
brokers and third party administrators (TPAs) utilizing the service. While initially designed as a tri-party
service for communication and trade settlement between TPAs, funds, and plan trustees, it has been
used almost exclusively as a two party system for a variety of reasons, including industry mergers
between trustees and TPAs. DCC&S is capable of accommodating either arrangement.
In order to assist new participants to implement and use this service, a task force of the
Institute’s Bank and Trust Advisory Committee prepared a reference document “Defined Contribution
Guidelines,” which is available on www.members.ici.org. Institute members should feel free to share
this information with those trading partners that do not have access to the ICI website. An NSCC
product sheet has been attached. Additional information on DCC&S is available on www.nssc.com or by
calling James DeRubertis at 212-412-8442.
This month, the NSCC held a user forum for current DCC&S participants. This was an
opportunity for the user community to discuss the service and offer suggestions for operational and
systematic improvements. If you would like to discuss any issues with the ToRA or DCC&S facilities,
including impediments to utilizing the service or modifications that you believe would benefit the
industry, please do not hesitate to contact Justine Phoenix at 202/326-5850 or the undersigned at
202/326-5845.
Benefits of Utilizing These Services
These services help fund groups and their business partners process transactions in a more
timely fashion with fewer delays and errors. The clear advantages are reductions in costs and increased
efficiencies for all parties, with the most important benefit being improved service for mutual fund
shareholders. With DCC&S, plan administrators eliminate the need to maintain separate links with
multiple providers and plan trustees eliminate the need for multiple daily wire transfers in favor of a
single, daily, consolidated net settlement.
Another important benefit to participation is the creation of capacity to better accommodate
future growth. Adoption of solutions created by industry members for the benefit of the entire industry
frees resources engaged in inefficient, manual and non-standard processes. Moreover, as the securities
industry increasingly embraces “straight through processing” to meet the demands of rising volumes and
achieve the goal of T+1 settlement by 2002, use of industry utilities becomes increasingly more
important from both a competitive and a regulatory perspective.
As with any of the NSCC mutual fund services, as usage increases, participant fees are
commonly adjusted downward to better match NSCC’s rate of operating cost recovery. Along with cost
reductions, mechanisms are available for users to participate in the continued development of the
services. NSCC supports user forums as needed and the Institute coordinates ongoing enhancement
advisory groups within the Broker/Dealer and Bank and Trust Advisory Committees.
* * * * * * * * * *
Our thanks to everyone who has worked so hard over the years to help develop ToRA, DCC&S,
and the other NSCC industry utilities and for your continued diligent efforts. We look forward to
hearing from you and working with you in the months ahead.
Donald J. Boteler
Vice President
Operations & Training
Attachments