HomeMy WebLinkAbout02 - CC-4 - Award Contract for Deferred Comp Plan - 8/4/2015CITY COUNCIL AGENDA REPORT
MEETING DATE: AUGUST 4, 2015 ITEM NUMBER: CC -4
SUBJECT: AWARD CONTRACT FOR DEFERRED COMPENSATION PLAN MONITORING
SERVICES
DATE: JULY 14, 2015
FROM: FINANCE DEPARTMENT
PRESENTATION BY: COLLEEN O'DONOGHUE, ASSISTANT FINANCE DIRECTOR
FOR FURTHER INFORMATION CONTACT: COLLEEN O'DONOGHUE (714) 754-5219
RECOMMENDATION
1) Award a contract for Deferred Compensation Plan monitoring services for one
year to Benefit Funding Service Group ("BFSG"), in the total amount of $25,000,
with an option to extend the contract in four one-year periods.
2) Authorize the City Chief Executive Officer to sign and execute a professional
services agreement with the selected firm. As approved by City Attorney's office.
BACKGROUND
The City has maintained Section 457 Deferred Compensation Plans since 1972, when
the Executive Plan was adopted. In 1983, the City adopted a separate plan for non-
executive staff. In 1991, the two plans were consolidated to streamline plan
administrative activities and to obtain greater leverage when negotiating with vendors.
In 1998, the plan was amended to comply with provisions of the Small Business Job
Protection Act of 1996 ("Act"). This amendment primarily set plan assets aside for the
exclusive benefit of participants. Prior to the Act, assets in the plan were considered to
be assets of the City and could be utilized to satisfy claims of creditors upon
bankruptcy.
Part of the Act required employers to set up a trust, custodial account, or annuity
contract for plan assets. In 2013, the plan was amended to set up a trust and
designate the Administrative Committee ("Committee") as trustee. The amendment
also included changes to comply with Federal and State legislation subsequent to the
Act and other ministerial and administrative changes. The City engaged a consultant,
Christopher Rowey of Benefit Funding Services Group, to assist the City with the
amendment of the plan. The resolution approving the amendment can be found in
Attachment 1.
1
ANALYSIS
As is noted above, a trust was created and the trustee is the Committee. The
Committee consists of five members appointed by the City comprised of the following:
• Finance Director, Chairman
• Assistant Finance Director, Vice Chairman
• Human Resources Manager
• Two full-time employees participating in the plan who are appointed by the
Chairman.
Trustees have a fiduciary responsibility which includes the selection of investments
offered, monitoring the performance of investments, eliminating underperforming or
risky investments, review of the reasonableness of plan costs, etc. Recent court rulings
have expanded protections for participants in deferred compensation plans pursuant to
lawsuits filed by plan participants. Since ongoing monitoring requires expertise and a
sizable investment of time, staff recommends that the City obtain assistance from a firm
that specializes in the area of monitoring Section 457 Deferred Compensation Plans. In
addition, cost savings could be realized by participants from negotiating costs with the
existing deferred compensation providers, Nationwide and California 457 Benefits.
Finance Department staff conducted an informal bid process and Requests for
Quotation were sent to three firms. The City received annual quotes from two firms:
Benefit Funding Services Group $25,000 and SST Benefits Consulting $47,500
(subsequent years $41,000). After review of the proposals and quotes, the Finance
Department recommends awarding the contract to Benefit Funding Services Group
("BFSG") based on qualifications and the lower cost. In addition, this firm assisted the
City with the 2013 amendment and provided high quality services.
On June 30, 2015, the Committee approved the selection of BFSG.
ALTERNATIVES CONSIDERED
The City Council could choose to select SST Benefits Consulting instead of BFSG or to
forgo hiring a consultant to monitor the plan. If a consultant is not hired, risk could
increase in regard to internal management of the plan's investment options,
performance, and plan costs.
FISCAL REVIEW
There is no net fiscal impact associated with these services, since costs incurred by the
City will be reimbursed through anticipated cost savings in the plan. A budget
adjustment is not proposed, since payments and receipts will be recorded in an Agency
Fund liability account with all other financial activity related to the City's deferred
compensation plan.
LEGAL REVIEW
The attached professional services agreement (Attachment 2) has been reviewed and
approved as to form.
1►
RECOMMENDATION
We are recommending that BFSG be awarded the deferred compensation plan
monitoring contract based on the Finance Department review and approval by the
Committee. The firm has a solid understanding of Section 457 deferred compensation
plans and experience with other local governments.
STEPHEN DUNIVENT
Interim Finance Director
THOMAS DUARTE
City Attorney
Attachments: 1. Resolution 13-14 adopting the amended and restated plan
2. Professional Services Aareement
3