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Home My WebLink About08.a. Approve recommendation of Deferred Compensation Committee to consolidate management of assetsCentral Contra Costa Sanitary District 1 BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: July 5, 2012 Subject: CONSOLIDATION OF 457 AND 401(A) DEFERRED COMPENSATION PLAN INTO ICMA -RC AS SINGLE PROVIDER. Submitted By. Initiating Dept. /Div.: Thea Vassallo, Administrative /Finance & Accounting Provisional Finance Manager REVIEWED ECOMMENDED FOR BOARD ACTION- ' ( i T. Vassallo K. Alm �W Ann Farrell, General Manager ISSUE: The majority of assets in the District's Deferred Compensation Plan (Plan) are managed and held by ICMA -RC. The other providers are Hartford and Nationwide. ICMA -RC has submitted a five -year proposal to the Deferred Compensation Advisory Committee (Committee) that would consolidate the 457 and 401(a) assets under ICMA - RC. The Hartford recently announced its intent to leave the Retirement Plans business. Participants within Hartford will eventually have to transition to either ICMA -RC or Nationwide due to The Hartford Retirement Plans either being sold or shut down. RECOMMENDATION: Review the proposal from ICMA -RC, consider and approve the consolidation of all 457 and 401(a) plan assets under ICMA -RC as a single provider. FINANCIAL IMPACTS: None to the District. The transition of participants will be done by ICMA -RC staff. The ICMA -RC proposal includes an annual administrative allowance of $90,000 that would be rebated back to the participants to offset fund fees. The total administrative allowance or fund fee rebate for the five -year period is $450,000. ALTERNATIVES /CONSIDERATIONS: The Board can request additional information from ICMA -RC on how the District and the participants would be better served by consolidating. The Board can make no changes to the plan; however, participants within Hartford will have to decide whether to transition to ICMA -RC or Nationwide. BACKGROUND: In 1997 the District's legal counsel for benefit plan matters, Trucker Huss, provided a written legal opinion that the District and the Board have principal fiduciary authority for selecting and monitoring the investment providers and are the administrators of the Plan (i.e.: Hartford, ICMA -RC and Nationwide). Shortly thereafter, the Board approved staff's recommendation to allow future changes to the investment options and other administrative matters to be approved by the Deferred Compensation Committee. The Committee is comprised of the Controller (now Finance Manager) as Chair of the Committee and one representative from each of the four District departments. Of the $75.5M in total plan assets as of June 19, 2012, approximately 85% of the current funds are held with ICMA -RC, 9% with Nationwide, and 6% Hartford N:\ADMINSUP\ADMIN \FINANCE MANAGER \Position Papers\2012 \DCAC to go with 1 provder ICMA.doc POSITION PAPER Board Meeting Date: subject CONSOLIDATION OF 457 AND 401(A) DEFERRED COMPENSATION PLAN INTO ICMA -RC AS SINGLE PROVIDER. (Attachment 1). As stated above, Hartford participants will have to transition to a new carrier in the near future due to the Hartford's decision to leave the retirement business. Over the last couple of years ICMA -RC has expressed to the Committee their interest in being the sole provider. They gave a proposal to the Committee at a meeting held on June 1, 2012. The Committee unanimously voted at the meeting that the District and the participants would be best served by consolidating plan assets under one carrier. The decision to consolidate the plan was based on the following: • Reduced fee structure for all District employees by eliminating annual and administrative fees charged by other providers • Creation of an administrative allowance account to be distributed to plan participants annually over the subsequent five -year period ($90,000 per year) • Reduction in the District's administration of the plans by outsourcing administrative functions to ICMA -RC • Providing plan enhancements with online enrollment and withdrawals • Elimination of fund duplication while continuing to provide a diverse selection of investment options • Access to 5,000 additional mutual funds • Simplified process of enrolling, educating and assisting employees and retirees in the 457 and 401(a) plan • Providing additional on -site individual meetings, educational seminars, and financial planning seminars for employees • Developing and implementing custom education and counseling program See Attachment 2 for a complete summary of the ICMA -RC proposal. The completion of transitions is estimated to take place by January 1, 2013. COMMITTEE RECOMMENDATION: The Deferred Compensation Advisory Committee unanimously voted that the District and the participants would be better served by consolidating the three carriers of the Defined Contribution Plan 457 and 401(a) with ICMA -RC. This matter was reviewed by the Budget and Finance Committee at its July 2, 2012 meeting. RECOMMENDED BOARD ACTION: Approve the Committee's recommendation to move forward on consolidating the three deferred compensation carriers into one with ICMA -RC. NAADMINSUM MIN \FINANCE MANAGER \Position Papers\2012 \DCAC to go with 1 provder ICMA.doc ATTACHMENT CENTRAL CONTRA COSTA SANITARY DISTRICT Summary of Deferred Comp 457 & 401(a) Accounts Plan Assets Approx. Carrier @ 6/19/12 % # Participants ICMA -RC 457 $38,644,052 294 ICMA -RC 401(a) 25,201,341 382 63,845,393 85% 676 Nationwide 457 6,538,045 64 Nationwide PST 166,704 89 6,704,749 9% 153 Hartford 4,984,127 6% 38 Total $75,534,269 100% 867 ATTACHMENT 2 Assumptions • $87M in assets • Approx. 450 participants /retirees • All assets transferring on the transition date • No surrender charges • 5 year exclusive agreement • Reduce fee structure for all District employees by eliminating administrative fees charged by other providers • Create an administrative allowance account to be distributed to plan participants annually • Reduce the District's administration of the plans by outsourcing admin functions to ICMA -RC • Eliminate fund duplication while continuing to provide a diverse selection of investment options • Simplify the process of enrolling, educating and assisting employees and retirees in the 457 and 401(a) plans • 5 days on -site transition meetings • Up to 30 days /year — Kim Hammond: individual meetings and educational seminars • Up to 6 days /year — Bill Eagan, CFPTM: individual meetings and Financial Planning Seminars • Up to 6 days /year — Dennis Duarte, Territory Manager • Complimentary Snapshot Financial Plans for all emplovees • Online Withdrawals • Online Enrollment • Vantagebroker - Access to 5,000 additional mutual funds. Individual securities and ETFs may also be made available • Online appointment scheduling • Develop and implement custom education and counseling program • Automatic Rebalancing • Participant Plan Admin fee: 0.00% • Participant Annual Fee: $0 • Annual Administrative Allowance: $90,000 ➢ Annual credit back to participants • Retain Current ICMA -RC Lineup r � �l.l &UM AW1,MWW Srcx n • Minimum Required Distributions • QDRO Support and Processing • Emergency Withdrawal /Hardship Support and Processing • Online Loans /Loans by Telephone • Loan Delinquency Monitoring • De Minimus Account Distribution and Processing • ICMA -RC 401 Plan Document Maintenance • ICMA -RC 457 Plan Document Maintenance • Legal Support • Premier Services Program offering access to a salaried, local Certified Financial Planner'"' and financial planner services on a reduced or no -cost basis • Monthly Employer Bulletin with plan administration information and regulatory updates • Quarterly Participant newsletters with age- appropriate information icmA