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February 20, 2024
ITEM TITLE
Agreement: Approve Renegotiated Agreement with Nationwide Retirement Solutions, Inc. for Administration of City’s 457(b) Deferred Comp and 401(a) Money Purchase Plans, Delegate Role of Plan Sponsor, and Authorize Establishing an Oversight Committee Report Number: 24-0053
Location: No specific geographic location
Department: Finance
G.C. § 84308: Yes
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines. Therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution approving an agreement with Nationwide Retirement Solutions, Inc. to provide administrative services of the City’s 457(b) Deferred Compensation Plan and 401(a) Money Purchase Plan ; delegating to the Director of Finance/Treasurer the role of Plan Sponsor of 457(b) and 401(a) plans to carry out the fiduciary responsibilities of the plans; and authorizing the Director of Finance/Treasurer to establish a Deferred Compensation Plan Oversight Committee.
SUMMARY
The City sponsors a 457(b) Deferred Compensation Plan and 401(a) Money Purchase Plan (the “Plans”) for plan participants. Nationwide Retirement Solutions Inc. is the current plan administrator for the City’s deferred compensation plans. As the fiduciary for the Plans, the City reached out to Fiduciary Experts, LLC, the City’s fiduciary retirement plan consulting firm, to conduct a blind request for information (RFI) in late 2023 from 457(b) and 401(a) plan administrators to primarily evaluate the administrative fees of the Plans.
After an evaluation of information provided from multiple deferred compensation plan administrators, staff recommends approving a renegotiated agreement with Nationwide Retirement Solutions, Inc. to provide administrative services with lower administrative fees and other new terms and conditions that benefit plan participants. Additionally, staff recommends that the City Council delegate to the Director of Finance/Treasurer the role of Plan Sponsor of 457(b) and 401(a) plans to carry out the fiduciary P a g e | 2
responsibilities of the plan . Lastly, staff recommends that the City Council authorize the Director of Finance/Treasurer to establish a Deferred Compensation Plan Oversight Committee (the “Committee”) to delegate some or all of his or her adminis trative and fiduciary oversight duties and authority to the Committee.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment . T herefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
Renegotiated Agreement:
The City sponsors a 457(b) Deferred Compensation Plan and 401(a) Money Purchase Plan for Plan participants. The City requires a plan administrator for the City’ Plans. Under the California State Constitution, Article X VI Section 17, government entities that sponsor a 457(b) and or 401(a) plan s have fiduciary responsibilities as Plan Sponsor to ensure the operation and investment of the public retirement plan is for the exclusive purpose of providing benefits to participants and beneficiaries. The fiduciary responsibilities include investing the assets of the p lan, administering the plan, and engaging in a prudent process for making all decisions related to the operation of the plan, including decisions related to the plan’s investments and related services.
To perform its due diligence as the fiduciary of the Plans and confirm competitive pricing, the City reached out to Fiduciary Experts, LLC, the City's fiduciary retirement plan consulting firm, to conduct a blind request for information (RFI) in late 2023 primarily to evaluate the administrative fees of the Plans but also to review all the terms and conditions , including but not limited to investment options, asset values, fixed account interest rates, and additional fees that may be charged by the plan administrators.
After evaluating the information provided by multiple plan administrators through the RFI , staff is recommending the City approve a renegotiated agreement with Nationwide Retirement Solutions, Inc., the City’s current plan administrator since 2005, to continue to provide administrative services with lower administrative fees and other new terms and conditions that benefit plan participants. With the approval of this agreement, the City will obtain lower plan fees, higher competitive fixed interest rate s, and enhanced investment options for plan participants, and a lifetime income product for those who wish to include this into their retirement income planning. The administrative fee for the plan will go from 0.05% to 0.035% of the Plan’s account value held by Nationwide, resulting in lower costs for all plan participants.
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Delegation to Director of Finance/Treasurer:
Due to the complexity of providing employer sponsored 457(b) and 401(a) plans and associated responsibilities, this item seeks to delegate fiduciary responsibilities as Plan Sponsor to the Director of Finance/Treasurer, as the subject matter expert, and authorizes the Director of Finance /Treasurer to establish a Deferred Compensation Plan Oversight Committee to delegate some or all of his or her administrative and fiduciary oversight duties and authority to the Committee.
At a minimum, Committee membership will include the Director of Finance /Treasurer and Director of Human Resources/Risk Management. The Committee will provide oversight through regular meetings to review plan performance, compliance, and fees.
City Council’s adoption of the resolution approves the delegation of fiduciary responsibilities of Plan Sponsor to the Director of Finance /Treasurer, approves the Nationwide Administrative Services Agreement for Director of Finance/Treasurer to sign as Plan Sponsor, and authorizes the Director of Finance/Treasurer to establish a Deferred Compensation Plan Oversight Committee.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current-year fiscal impact as a result of accepting this administrative services agreement with Nationwide Retirement Solutions, Inc. All costs related to these services are paid by plan participants.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact as a result of accepting this administrative services agreement with Nationwide Retirement Solutions, Inc. All costs related to these services are paid by plan participants.
ATTACHMENTS
1. Nationwide Retirement Solutions, Inc. Administrative Services Agreement 2024 Staff Contact: Sarah Schoen, Director of Finance/Treasurer Hanna Ecijan, Principal Accountant, Finance Department