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Consent-General Government # 15.
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| Board of Supervisors |
Financial Services |
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| Subject |
| Approve two agreements with ICMA-RC to provide 457 deferred compensation and retirement health savings account services recordkeeping to the County from April 25, 2018 through April 25, 2025. (No general fund impact) (Newens/Pistochini) |
| Recommended Action |
- Approve agreement with ICMA-RC to provide 457 deferred compensation recordkeeping services to the County from April 25, 2018 through April 25, 2025; and
- Approve agreement with ICMA-RC to provide retirement health savings account recordkeeping services to the County from April 25, 2018 through April 25, 2025.
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| Strategic Plan Goal(s) |
| Operational Excellence |
| Reason for Recommended Action/Background |
The County offers a 457 deferred compensation plan for employees to make voluntary pre-tax contributions for retirement savings. The County's plan contains approximately $50 million in assets, managed almost evenly by two plan administrators, ICMA-RC and MassMutual. Plan administrators, also called record keepers, are responsible for managing the assets of the plan, offering an investment menu lineup, and interacting with employees.
The County conducted a formal Request for Proposals in late 2017 to consolidate the number of plan administrators, foster competition in an effort to lower the recordkeeping fee, enhance services, and look for administrative outsourcing of tasks. Recordkeepers receive payment for their services through an administrative fee taken off plan assets. Currently, the recordkeeper fee is approximately 0.34% of the value of managed assets. The proposed fee under this agreement is 0.078% for the first two years of the agreement and lowering to 0.075% in the next five years of the agreement. This reduction results in an $110,000 annual savings for participants.
As part of the new agreement, the County, through its newly-formed Deferred Compensation Committee, will exert more control over its investment menu lineup. Additionally, the proposed contract contains service-level performance guarantees that ICMA-RC must adhere to.
Upon approval of this Agreement, the County, ICMA-RC and MassMutual will begin planning the transition of assets from MassMutual to ICMA-RC. This transition planning process will occur over four months, with the actual transfer occurring in August 2018.
As part of this process, the County requested the proposers to offer a retirement health savings (RHS) plan. RHS are a tax-advantaged savings mechanism that can be used to reimburse retirees for qualifying healthcare costs. The contributions into the RHS plan are pre-tax and distributions for qualifying medical expenses are tax-free. Approving the accompanying RHS contract provides the County flexibility to offer employees an RHS account as part of labor negotiations. |
| Collaborations (including Board advisory groups and external partner agencies) |
| The Yolo County Deferred Compensation Committee, consisting of a representative of the Department of Financial Services, a representative of the Human Resources Department, six County employees and one retiree, reviewed and scored the proposals. County Counsel reviewed the agreement as to form. The County's deferred compensation plan advisor, Hyas Group, provided support throughout this process. |
| Competitive Bid Process |
Request for Proposals (RFP) Service Requested: 457 Deferred Compensation Recordkeeping Services
Evaluation Criteria Included in RFP
- Firm Strength Experience and Qualifications (100 points)
- Recordkeeping, Data Security and Custody (150 points)
- Participant Services (250 points)
- Plan Sponsor Services (150 points)
- Investment Flexibility (100 points)
- Transition (50 points)
- Fees and Expenses Proposal (200 points)
Proposals Received
The County received nine responses to the Request for Proposals. The County's Deferred Compensation Committee evaluated the proposals. Based on the strength of the proposals, four respondents (ICMA-RC, Empower, MassMutual and Nationwide) were invited for an interview. ICMA-RC was selected as the best evaluated proposer by the Committee.
| Proposer |
Recordkeeper fee (based on a 7-year contract and using proprietary funds) |
| ICMA-RC |
0.078% for the first two years and 0.075% for the next five years |
| Empower Retirement |
0.110% for seven years |
| Lincoln |
0.150% for seven years |
| MassMutual |
0.160% for seven years |
| Nationwide |
0.100% for seven years |
| OneAmerica |
0.120% for seven years |
| Prudential |
0.120% for seven years |
| VALIC |
0.100% for seven years |
| Voya |
0.090% for seven years |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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Explanation (Expenditure and/or Revenue) |
| Further explanation as needed: |
| There is no fiscal impact to the County. Upon adopting this agreement, the amount of the new recordkeeper fee will be approximately $39,900 annually. All costs associated with paying the recordkeeper fee are borne by the participating employees and former employees. |
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