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Home My WebLink About25B - AGMT - DEFERRED COMP SRVSREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: OCTOBER 4, 2016 TITLE: AGREEMENT FOR 457 DEFERRED COMPENSATION SERVICES AND AUTHORIZATION TO ISSUE A REQUEST FOR PROPOSAL (STRATEGIC PLAN NO. 7,4) CITY MANAGE t RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: 0=160210, ❑ As Recommended ❑ As Amended ❑ Ordinance onIs`Reading ❑ Ordinance on 2n'Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER 1. Authorize the City Manager and Clerk of the Council to execute an agreement with Empower, formerly known as Great -West Financial, for deferred compensation services for an initial 10 -month period expiring July 31, 2017, with a provision for a two -month extension expiring September 30, 2017, exercisable by the City Manager and the City Attorney, subject to non - substantive changes approved by the City Manager and City Attorney. 2. Authorize staff to issue a Request for Proposal for Deferred Compensation Services. 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 7 -21, along with a corresponding US Internal Revenue Service approval. The Plan is a voluntary deferral program that is separate and distinct from the CalPERS pension system. Specifically, the establishment of this Plan, pursuant to regulations in §457 of the Internal Revenue Code, provides participants an opportunity to supplement their CalPERS retirement by allowing them to defer a portion of their current earnings and associated taxes until retirement or separation. The Plan currently is administered through the Finance & Management Services Agency and maintains plan assets approximating $100.3 million with 1,176 participants. Empower, the Plan Sponsor, has been engaged to provide administrative, recordkeeping and communication services for the Plan. The Plan offers employees 36 highly diversified investment options including, but not limited to: mutual funds, bond funds and fixed asset funds. During 2014, the City, in order to enhance employees' investment experience and in conjunction with its deferred compensation consultant Benefit Financial Services Group, LLC [BFSG], negotiated with Empower to change the plan structure which enabled participants greater fund transparency, better access, and varied investment options. The negotiated agreement allowed for greater expansion of fund selection and flexibility than provided under the former annuity - 2513-1 Agreement with Empower for 457 Deferred Compensation and Authorization to Issue Request For Proposal October 4, 2016 Page 2 based contract. As a result of these efforts, employees participating in the Plan experienced significantly reduced management, fund and participant fees. Below are some of the key Plan and employee benefits: Plan Item ... Past ....... Updated ...... Significance ...... ...... Reduction in Plan 35 Basis Points 10 Basis Points Significantly lower service fees Provider Fees to employees .... Allows Plan to provide greater j Portfolio Structure Annuity - Based ': Open Architecture diversification of investment options Index, No -Load Not Contractually Provides greater participant and Target Funds Available Available j choices, reduced fees, and Plan portfolio flexibility ......... ............... ........ .......... "City of Santa Ana ....... ............ Website design and Website Generic Branded Portal communications under the purview of the City...... Beneficiary Paper Driven Digital Process via 1 Participant can directly enroll Designation, and Processing eb Access and update changes via Enrollment I.......... branded portal Website 24/7 The terms, conditions and services that were negotiated by the City in 2014 will remain in full effect and the current plan and fee structure will remain unchanged within the new agreement. During the term of this agreement and in compliance with a core fiduciary best practice (issuance of a Request for Proposal (RFP) every five to seven years), staff is recommending the issuance RFP in order to gauge what the 457 plan provider market can offer to employees in additional Plan benefits and quality of services. The 457 plan provider is a dynamic marketplace and is constantly changing as new plan providers enter the market, which may result in employees obtaining an even more cost - effective Plan. As such, BFSG will evaluate the market and assist staff in the development of the RFP and subsequent selection process. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City to meet Goal #7 - Team Santa Ana, Objective #4 (Establish employee compensation that attracts and retains a highly qualified workforce). 25B -2 Agreement with Empower for 457 Deferred Compensation and Authorization to Issue Request For Proposal October 4, 2016 Page 3 FISCAL IMPACT There is no fiscal impact associated with this action. All administrative fees pertaining to the services will be borne by the Plan participants. Internal Revenue Code permits administrative reimbursement from plan assets, which will be utilized to offset fiduciary advisory, participant education and staffing costs related to the management of the 457 Plan. Francisco Gutierrez Executive Director Finance and Management Services Agency AC EXHIBIT: 1. Agreement with Empower 25B -3 25B -4 Important Note: Service Agreement Amendments, Pricing Change Agreements, and other contractual documents must be duly executed by both parties prior to the effective date of the changes. Backdating contracts or funding agreements is in violation of our corporate governance and regulatory requirements. Changes cannot be implemented prior to the date all documents are fully executed, even if that requires the effective date to be postponed. There are no exceptions to the rule that the effective date must follow the date all documents are executed. EXHIBIT 1 25B -5 Amendment No. 2 Attached to and Forming part of AGREEMENT FOR RECORDKEEPING AND COMMUNICATION SERVICES §457 Deferred Compensation Plan GROUP #98280 -01 THIS AMENDMENT NO. 2 is entered into by and between Great -West Life & Annuity Insurance Company ( "Great- West "), and/or any successor, assign or affiliate, and the City of Santa Ana ( "Plan Sponsor ") with respect to the services to be provided by Great -West to the City of Santa Ana 457 Deferred Compensation Plan ( the "Plan "). RECITALS Effective September 3, 2014, Great -West and the Plan Sponsor entered into the Agreement for Recordkeeping and Communication Services ( "Agreement "), under which Great -West provides certain recordkeeping and communication services for the Plan Sponsor with respect to the Plan; and The Agreement was for a term of one year with an option for one additional year. Following the expiration of the original term, Great -West, with the Plan Sponsor's consent, continued to provide services under the Agreement to the Plan Sponsor; and For administrative efficiencies, Great -West and the Plan Sponsor agreed that it would be mutually beneficial to amend the Agreement for the purpose of exercising the above option and continuing the Agreement through September 30, 2016. For this purpose, the parties executed Amendment No. 1, # A- 2014 - 208 -01, dated December S, 2015; and The parties now wish to again extend the term of the Agreement by mutual agreement as provided below, NOW THEREFORE, in consideration of the covenants and conditions herein contained, and other good and valuable consideration as herein provided, the parties agree to amend the Agreement as follows: Section IX Agreement Term and Termination is amended to extend the term of the Agreement up to and including July 31, 2017, with an option exercisable by Plan Sponsor to further extend the Agreement up to and including September 30, 2017. 2. Except as modified by this Amendment No. 2, and all prior amendments, all terms and conditions of the Agreement shall remain in full force and effect. 3. This Amendment No. 2 will take effect upon the date executed by both the Plan Sponsor and Great -West. City of Santa Ana 9 -19.16 25B -6 IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to the Agreement to be executed, in duplicate, by their respective officers and agents thereunto duly authorized. For The City of Santa Ana Signature: Name: David Cavazos Title: City Manager For Great -West Life & Annuity Insurance Company Signature: Name: Title: Attest Signature: Name: Maria D. Huizar Title: Clerk of Council Approved as to Form Signature: Name: John M. Funk Title: Assistant City Attorney Date City of Santa Ana 9 -19 -16 2 25B -7 r -oo