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HomeMy WebLinkAbout25L - DEFERRED COMPENSATION SERVICESREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: DECEMBER 6, 2010 TITLE: AGREEMENT WITH ICMA-RC FOR DEFERRED COMPENSATION SERVICES CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 1st Reading ? Ordinance on 2nd Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Authorize the City Manager and the Clerk of the Council to execute the attached agreement with ICMA-RC for deferred compensation services for a period of 5 years with provisions for two one-year extensions, subject to non-substantive changes approved by the City Manager and City Attorney. DISCUSSION The City of Santa Ana's full-time employee 457 Deferred Compensation Plan (Plan) was established in 1973, with the adoption of City Resolution 73-21. The 457 Plan is a voluntary deferral program that is separate and distinct from the CalPERS pension system. The establishment of this deferred compensation plan, pursuant to regulations in §457 of the Internal Revenue Code, provides participants the opportunity of supplementing their CalPERS retirement by allowing them to defer a portion of their current earnings and associated taxes until retirement or separation. The Plan is administered through the Finance & Management Services Agency. Currently, the Plan has approximately $95.7 million in participant assets, with 1,388 participants. The Plan fund portfolio maintains 30 different investment options including mutual fund, bond fund and fixed asset funds. In 2005, the City retained the services of Benefit Funding Services Group (BFSG), to assist in the review of the plan structure including investments and service levels. BFSG is an independent public and private sector retirement plan fiduciary consulting firm. In 2006-07, with the assistance of BFSG, a Request for Information (RFI), was released to assess the competitiveness of the City's existing Plan. Based on the survey, the City determined that there could be a potential gain for the participants as well as operational savings from a new deferred compensation plan agreement. On February 9, 2010, the City issued a Request for Proposal (RFP) for administrative, recordkeeping, communication, and investment management services of the City's 457 Deferred Compensation Plan to 13 firms. Seven proposals were received. Each vendor's response was evaluated based on the committee's criteria of vendor's proven commitment to the 457 plan marketplace, state-of-the-art technology and premium recordkeeping platform, investment flexibility and performance, strong compliance support, maintain or reduce 25L-1 Agreement with ICMA-RD For Deferred Comp Services December 6, 2010 Page 2 participant's current costs, and ability to offer personalized educational and financial services. After extensive review, the four top rated firms were interviewed including Great-West Life, ICMA-RC, Nationwide, and The Hartford. Of these, ICMA-RC and Great-West were asked to return for final interviews. ICMA-RC has been selected as the recommended vendor for recordkeeping, administration, and retirement financial planning services. ICMA-RC, established since 1972, provides retirement plans, products and services to state and local government employers and their employees. ICMA-RC offers significant overall improvements including a reduction in expense fees for participants and administrative costs. The City's Plan will not be charged for legal, loan servicing, or domestic relations order processing. The City will have its own custom website designed. Included within the pricing are individualized financial planning services; all participants will automatically receive a financial needs assessment plan at no additional charge, greater account balances qualify for goal specific or comprehensive financial plans. Upon Council authorization, a comprehensive transition plan will take place for the 457 Plan over the next 120 days. The conversions will consist of comprehensive communications, multi-site meetings, and individual participant and retiree appointments to insure employees are informed and updated on all the new plan improvements and enhancements. FISCAL IMPACT There is no fiscal impact associated with this action. Francisco Gutierrez Executive Director Finance & Management Services Agency V FG/ed/tmr Exhibit: 1. Agreement 25L-2 ADMINISTRATIVE SERVICES AGREEMENT Between ICMA Retirement Corporation and City of Santa Ana Type: 457 Account #: 306741 25L-3 Plan number 306741 ADMINISTRATIVE SERVICES AGREEMENT This Administrative Services Agreement ("Agreement"), made as of the day of , 2010 (herein referred to as the "Inception Date"), between the International City/County Management Association Retirement Corporation ("ICMA-RC"), a nonprofit corporation organized and existing under the laws of the State of Delaware, and the City of Santa Ana ("Employer"), a City organized and existing under the laws of the State of California with an office at 20 Civic Center Drive, Santa Ana, California 92702 RECITALS Employer acts as a public plan sponsor for a retirement plan ("Plan") with responsibility to obtain investment alternatives and services for employees participating in that Plan; VantageTrust (the "Trust") is a common law trust governed by an elected Board of Trustees for the commingled investment of retirement funds held by various state and local governmental units for their employees; ICMA-RC acts as investment adviser to the Trust; ICMA-RC has designed, and the Trust offers, a series of separate funds (the "Funds") for the investment of plan assets as referenced in the Trust's principal disclosure document, "Making Sound Investment Decisions: A Retirement Investment Guide." ("Retirement Investment Guide"). The Funds are available only to public employers and only through the Trust and ICMA-RC. In addition to serving as investment adviser to the Trust, ICMA-RC provides a complete offering of services to public employers for the operation of employee retirement plans including, but not limited to, communications concerning investment alternatives, account maintenance, account record-keeping, investment and tax reporting, transaction processing, benefit disbursement, and asset management. AGREEMENTS 1. Appointment of ICMA-RC Employer hereby appoints ICMA-RC as Administrator of the Plan to perform all nondiscretionary functions necessary for the administration of the Plan with respect to assets in the Plan deposited with the Trust. The functions to be performed by ICMA-RC shall be those set forth in Exhibit A to this Agreement. 2 25L-4 Plan number 306741 2. Adoption of Trust Employer has adopted the Declaration of Trust of VantageTrust and agrees to the commingled investment of assets of the Plan within the Trust. Employer agrees that operation of the Plan and the investment, management, and distribution of amounts deposited in the Trust shall be subject to the Declaration of Trust, as it may be amended from time to time and shall also be subject to terms and conditions set forth in disclosure documents (such as the Retirement Investment Guide or Employer Bulletins) as those terms and conditions may be adjusted from time to time. It is understood that the term "Employer Trust" as it is used in the Declaration of Trust shall mean this Administrative Services Agreement. Exclusivily Agreement Employer agrees that for the initial or succeeding term of this Agreement specified in Section 10, so long as ICMA-RC continues to perform in all material respects the services to be performed by it under this Agreement. Employer shall not obtain plan administration for the 457 Deferred Compensation from any other provider than ICMA- RC. Employer acknowledges that ICMA-RC has agreed to the compensation to be paid to ICMA-RC under this Agreement in the expectation that ICMA-RC will be able to offset costs allocable to performing this Agreement with revenues arising from Employer's exclusive use of ICMA-RC at the rates provided herein throughout the initial or succeeding term. 4. Employer Duty to Furnish Information Employer agrees to furnish to ICMA-RC on a timely basis such information as is necessary for ICMA-RC to carry out its responsibilities as Administrator of the Plan, including information needed to allocate individual participant accounts to Funds in the Trust, and information as to the employment status of participants, and participant ages, addresses, and other identifying information (including tax identification numbers). ICMA-RC shall be entitled to rely upon the accuracy of any information that is furnished to it by a designee of the Employer or any information relating to an individual participant or beneficiary that is furnished by such participant or beneficiary, and ICMA- RC shall not be responsible for any error arising from its reliance on such information. ICMA-RC will provide account information in reports, statements or accountings. Employer is required to send in contributions through EZLink, the online plan administration tool provided by ICMA-RC. Alternative electronic methods may be allowed, but must be approved by ICMA-RC for use. Contributions may not be sent through paper submittal documents. 5. Certain Representations and Warranties ICMA-RC represents and warrants to Employer that: 25L-5 Plan number 306741 (a) ICMA-RC is a non-profit corporation with full power and authority to enter into this Agreement and to perform its obligations under this Agreement. The ability of ICMA-RC to serve as investment adviser to the Trust is dependent upon the continued willingness of the Trust for ICMA- RC to serve in that capacity. (b) ICMA-RC is an investment adviser registered as such with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended. ICMA-RC Services, LLC (a wholly owned subsidiary of ICMA-RC) is registered as a broker-dealer with the U.S. Securities and Exchange Commission ("SEC") and is a member in good standing with Financial Industry Regulatory Authority ("FINRA") and the Securities Investor Protection Corporation ("SIPC"). (c) ICMA-RC shall maintain and administer the Plan in compliance with the requirements for eligible deferred compensation plans under Section 457 of the Internal Revenue Code and other applicable federal law; provided, however, that ICMA-RC shall not be responsible for the eligible status of the Plan in the event that the Employer directs ICMA-RC to administer the Plan or disburse assets in a manner inconsistent with the requirements of Section 457 or otherwise causes the Plan not to be carried out in accordance with its terms. Further, in the event that the Employer uses its own customized plan document, ICMA-RC shall not be responsible for the eligible status of the Plan to the extent affected by terms in the Employer's plan document that differ from those in ICMA-RC's standard plan document. ICMA-RC shall not perform any service that ICMA-RC, in its sole judgment, considers might cause ICMA-RC to be treated as a "fiduciary" of the Plan under applicable law. Employer represents and warrants to ICMA-RC that: (d) Employer is organized in the form and manner recited in the opening paragraph of this Agreement with full power and authority to enter into and perform its obligations under this Agreement and to act for the Plan and participants in the manner contemplated in this Agreement. Execution, delivery, and performance of this Agreement will not conflict with any law, rule, regulation or contract by which the Employer is bound or to which it is a party. (e) Employer understands and agrees that ICMA-RC's sole function under this Agreement is to act as recordkeeper and to provide administrative, investment or other services at the direction of Plan participants, the Employer, its agents or designees in accordance with the terms of this Agreement. Under the terms of this Agreement, ICMA-RC does not render investment advice, is not the Plan Administrator or Plan Sponsor as those terms are defined under applicable federal, state, or local law, and 4 25L-6 Plan number 306741 does not provide legal, tax or accounting advice with respect to the creation, adoption or operation of the Plan and the Trust. (f) Employer acknowledges that certain such services to be performed by ICMA-RC under this Agreement may be performed by an affiliate or agent of ICMA-RC pursuant to one or more other contractual arrangements or relationships, and that ICMA-RC reserves the right to change vendors with which it has contracted to provide services in connection with this Agreement without prior notice to Employer. 6. Participation in Certain Proceedings The Employer hereby authorizes ICMA-RC to act as agent, to appear on its behalf, and to join the Employer as a necessary party in all legal proceedings involving the garnishment of benefits or the transfer of benefits pursuant to the divorce or separation of participants in the Employer Plan. Unless Employer notifies ICMA-RC otherwise, Employer consents to the disbursement by ICMA-RC of benefits that have been garnished or transferred to a former spouse, current spouse, or child pursuant to a domestic relations order or child support order. 7. Compensation and Payment (a) There shall be no asset-based or per-participant fees charged under this Agreement. This includes no Contingent Deferred Sales Charges ("CDSC's"), Market Value Adjustments ("MVA's"), and front and/or back end loaded funds. ICMA-RC's compensation under this Agreement shall be as set forth in subsection (b) below. (b) Compensation for Management Services to the Trust, Compensation for Advisory and other Services to The Vantagepoint Funds and Payments from Third-Party Mutual Funds. Employer acknowledges that in addition to amounts payable under this Agreement, ICMA-RC receives fees from the Trust for investment management services furnished to the Trust. Employer further acknowledges that certain wholly owned subsidiaries of ICMA-RC receive compensation for advisory and other services furnished to The Vantagepoint Funds, which serve as the underlying portfolios of a number of Funds offered through the Trust. The fees referred to in this subsection are disclosed in the Retirement Investment Guide. These fees are not assessed against assets invested in the Trust's Mutual Fund Series. In addition, to the extent that third party mutual funds are included in the investment line-up for the Plans, ICMA-RC may receive payments from such third party mutual funds or their service providers, which may be in the form of 12b-1 fees, service fees, or compensation for sub-accounting or other services provided by ICMA-RC on behalf of the funds. 25L-7 Plan number 306741 (c) ICMA-RC shall receive total annual aggregate revenue of no less than 0.10% from funds offered by the Plan. ICMA-RC shall pay an administrative allowance quarterly to the Employer or to the Plan in an amount equal to any revenue in excess of the revenue requirement. In the event that revenue received by ICMA-RC from funds offered by the Plan falls below the revenue requirement, ICMA-RC and the Employer shall mutually agree upon a method to make up the shortfall necessary to meet the revenue requirement. Employer understands that the Plan administrative allowance is to be used as allowable under the IRS code. Payment of the administrative allowance shall be remitted as directed by the Employer. (d) Redemption Fees. Redemption fees imposed by outside mutual funds in which Plan assets are invested are collected and paid to the mutual fund by ICMA-RC. ICMA-RC remits 100% of redemption fees back to the specific mutual fund to which redemption fees apply. These redemption fees and the individual mutual fund's policy with respect to redemption fees are specified in the prospectus for the individual mutual fund and referenced in the Retirement Investment Guide. (e) Payment Procedures. All payments to ICMA-RC pursuant to this Section 7 shall be paid out of the Plan assets held by the Trust and shall be paid by the Trust, to the extent not paid by the Employer. The amount of Plan assets held in the Trust shall be adjusted by the Trust as required to reflect such payments. In the event that the Employer agrees to pay amounts owed pursuant to this Section 7 directly, any amounts unpaid and outstanding after 30 days of invoice to the Employer shall be withdrawn from Plan assets held by the Trust. The compensation and payment set forth in this Section 7 is contingent upon the Employer's use of ICMA-RC's EZLink system for contribution processing and submitting contribution funds by ACH or wire transfer on a consistent basis over the term of this Agreement. The compensation and payment set forth in this section 7 is further contingent upon the transfer of all assets of the Plan(s) from the prior recordkeeper for the Plan(s) to ICMA-RC's administration. If all assets do not transfer immediately, ICMA-RC will recalculate the total annual aggregate revenue requirement with consideration of the assets that do not transfer on the transition date. 8. Custody Employer understands that amounts invested in the Trust are to be remitted directly to the Trust in accordance with instructions provided to Employer by ICMA-RC and are not to 6 25L-8 Plan number 306741 be remitted to ICMA-RC. In the event that any check or wire transfer is incorrectly labeled or transferred to ICMA-RC, ICMA-RC may return it to Employer with proper instructions. 9. Indemnification ICMA-RC shall not be responsible for any acts or omissions of any person with respect to the Plan or related Trust, other than ICMA-RC in connection with the administration or operation of the Plan. Employer shall indemnify ICMA-RC against, and hold ICMA- RC harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorney's fees, that may be incurred by, imposed upon, or asserted against ICMA-RC by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or related Trust, excepting only any and all loss, damage, penalty, liability, cost or expense resulting from ICMA-RC's negligence, bad faith, or willful misconduct. 10. Term This Agreement shall be in effect and commence on the date all parties have signed and executed this Agreement ("Inception Date"). The term of this Agreement will commence on the Inception Date and extend five years from the date of completion and reconciliation of the transition of assets of the Plan from the prior record keeper to ICMA-RC as outlined in Section 7. This Agreement will be renewed automatically for each succeeding year unless written notice of termination is provided by either party to the other no less than 60 days before the end of such Agreement year. 11. Amendments and Adjustments (a) This Agreement may not be amended except by written instrument signed by the parties. (b) No failure to exercise and no delay in exercising any right, remedy, power or privilege hereunder shall operate as a waiver of such right, remedy, power or privilege. (c) The parties agree that enhancements may be made to administrative and operations services under this Agreement. The Employer will be notified of enhancements through the Employer Bulletin, quarterly statements, electronic messages or special mailings. Likewise, if there are any reductions in fees, these will be announced through the Employer Bulletin, quarterly statement, electronic or special mailing. 7 25L-9 Plan number 306741 12. Notices All notices required to be delivered under Section 11 of this Agreement shall be delivered personally or by registered or certified mail, postage prepaid, return receipt requested, to (i) Legal Department, ICMA Retirement Corporation, 777 North Capitol Street, N.E., Suite 600, Washington, D.C., 20002-4240; (ii) Employer at the office set forth in the first paragraph hereof, or to any other address designated by the party to receive the same by written notice similarly given. 13. Complete Agreement This Agreement shall constitute the complete and full understanding and sole agreement between ICMA-RC and Employer relating to the object of this Agreement and correctly sets forth the complete rights, duties and obligations of each party to the other as of its date. This Agreement supersedes all written and oral agreements, communications or negotiations among the parties. Any prior agreements, promises, negotiations or representations, verbal or otherwise, not expressly set forth in this Agreement are of no force and effect. 14. Titles The headings of Sections of this Agreement and the headings for each of the attached schedules are for convenience only and do not define or limit the contents thereof. 15. Incorporation of Schedules All Schedules (and any subsequent amendments thereto), attached hereto, and referenced herein, are hereby incorporated within this Agreement as if set forth fully herein. 16. Governin Law This Agreement shall be governed by and construed in accordance with the laws of the State of California, applicable to contracts made in that jurisdiction without reference to its conflicts of laws provisions. 25L-10 Plan number 306741 In Witness Whereof, the parties hereto certify that they have read and understand this Agreement and all Schedules attached hereto and have caused this Agreement to be executed by their duly authorized officers as of the Inception Date first above written. CITY OF SANTA ANA By Signature Date Name and Title (Please Print) INTERNATIONAL CITY/COUNTY MANAGEMENT ASSOCIATION RETIREMENT CORPORATION By Angela C. Montez Assistant Corporate Secretary Please return fully executed contract to: New Business Unit ICMA-RC 777 North Capitol Street NE Suite 600 Washington DC 20002-4240 25L-11 Plan number 306741 Exhibit A Administrative Services The administrative services to be performed by ICMA-RC under this Agreement shall be as follows: (a) Provide custom participant enrollment services, including providing a welcome package and enrollment kit containing instructions and notices necessary to implement the Plan's administration. (b) Establishment of participant accounts for each employee participating in the Plan for whom ICMA-RC receives appropriate enrollment forms and records. ICMA-RC is not responsible for determining if such Plan participants are eligible under the terms of the Plan. (c) Allocation in accordance with participant directions received in good order of individual participant accounts to investment funds offered under the Trust. (d) Maintenance of individual accounts for participants reflecting amounts deferred, income, gain or loss credited, and amounts distributed as benefits. (e) Maintenance of records for all participants for whom participant accounts have been established in paper or electronic format. These files shall include enrollment instructions, beneficiary designation instructions (to the extent provided to ICMA-RC) and all other written correspondence and documents concerning each participant's account, and if applicable, records of any transaction conducted through the Voice Response Unit ("VRU"), the Internet or other electronic means. (f) Provision of periodic reports to the Employer and participants of the status of Plan investments and individual accounts. This includes but is not limited to regular, monthly, quarterly and annual reporting. (g) Communication to participants of information regarding their rights and elections under the Plan. (h) Making available Investor Services Representatives through a toll-free telephone number from 5:30 a.m. to 6:00 p.m. Pacific Time, Monday through Friday (excluding holidays and days on which the securities markets or ICMA-RC are closed for business (including emergency closings), to assist participants. (i) Making available a toll-free number and access to VantageLine, ICMA- RC's interactive VRU, and ICMA-RC's web site, to allow participants to access certain account information and initiate plan transactions at any time. (j) Distribution of benefits as agent for the Employer in accordance with terms of the Plan. 10 25L-12 Plan number 306741 (k) Upon approval by the Employer that a domestic relations order is an acceptable qualified domestic relations order under the terms of the Plan, ICMA-RC will establish a separate account record for the alternate payee and provide for the investment and distribution of assets held thereunder. ICMA-RC will review domestic relations order information when appropriate. There is no additional cost for this service. (1) Loans may be made available through payroll deduction or ACH on the terms specified in the Loan Guidelines, if loans are adopted by the Employer. There is no additional cost to the Employer for this service. (m) Online Advice may be made available through a third party vendor on the terms specified on ICMA-RC's website. (n) Financial Planning services will be offered directly by ICMA-RC. Employees delivering Financial Planning services will be ICMA-RC employees. This service will include but are not limited to educational workshops and individual appointments. (o) Financial Needs Assessments will be offered FREE to all City of Santa Ana plan participants regardless of account balance. Goal Specific Financial Plans will be offered FREE to participants with balances greater than $100,000. If the participant balance is less than $100,000 Goal Specific Plan fees will not exceed $175 per plan. Comprehensive Financial Plans will be offered FREE to participants with balances greater than $200,000. If the participant balance is less than $200,000, Comprehensive Plan fees will not exceed $450 per plan. (p) Any additional service fees not set forth in this Agreement or not described in the Request for Proposal dated February 10, 2010 must be approved by the Employer. (q) Employer will utilize EZ Link for Plan level access (r) Employees and retirees will receive access to the web site and its features including social media and future enhancements. (s) ICMA-RC will work with the Employer and its designee as necessary to maintain and update the most current participant beneficiary information. Beneficiary may be made available online. There is no additional cost for this service. (t) ICMA-RC's legal services will be available to the Employer as needed related to the 457 Deferred Compensation Plan. There is no additional cost for this service. 11 25L-13 25L-14