TO:
VIA:
FROM:
DATE:
CITY COUNCIL
CITY ADMINISTRATOR
DIRECTOR OF FINANCE
SEPTEMBER 19, 2023
Placentia City Council
AGENDA REPORT
SUBJECT: RESOLUTION APPROVING THE TRANSITION OF THE CITY'S DEFINED
CONTRIBUTION PLAN FOR ELIGIBLE EMPLOYEES FROM PUBLIC AGENCY
RETIREMENT SERVICES (PARS) TO THE ICMA RETIREMENT CORPORATION
GOVERNMENTAL PROFIT-SHARING PLAN & TRUST
FISCAL
IMPACT: NONE
SUMMARY:
The City of Placentia believes that providing employees with a competitive salary and benefits package enables us to attract and retain highly competent employees. Accordingly, the City provides a select group of employees with a 401(a) defined contribution plan for employer contributions toward their retirement savings. The current plan is offered through PARS and provides a limited investment menu as well as a lower level of service for this group of key employees. Last year, the City, with the assistance of Shuster Advisory Group, LLC ("Shuster"), renegotiated a significant reduction in fees charged by ICMA-RC (d/b/a "MissionSquare") for the City's 457(b) Deferred Compensation Plan, as well as another 401(a) defined contribution plan the City currently maintains. Along with the fee reduction, an improved investment menu was installed providing participants with a comprehensive institutional class portfolio of investments to select from. Staff is recommending the consolidation of the 401(a) plan with PARS into the plan record kept by MissionSquare, thereby significantly reducing fees and improving the investments and services available to the select group of employees. The consolidation will also improve efficiency and simplify the retirement plan administration for staff via the consolidation to a single provider.
RECOMMENDATION:
It is recommended that the City Council take the following action:
1. Staff recommends City Council adopt Resolution R-2023-79 approving the transition of the City's Defined Contribution Plan for Eligible Employees from PARS to ICMA Retirement Corporation Governmental Profit -Sharing Plan and the discontinuance of the City's participation in the Public Agency Retirement System (PARS) Defined Contribution Plan and related services of PARS as Trust Administrator, U.S. Bank N.A. as Trustee, and John Hancock Retirement Services as Custodian/Record Keeper; and
2. Authorize the City Administrator to execute all necessary documents.
STRATEGIC PLAN STATEMENT:
This item is consistent with the City Council approved 5 -Year Strategic Goal to Enhance Employee Development, specifically objective 7.1 Bolster ranks of city employees.
1.i.
Sept. 19, 2023
City Council Agenda
September 5, 2023
DISCUSSION:
The City is not obligated to stay in the current arrangement with PARS, or any provider for that matter. To the extent that cost savings for administering the Plan can be achieved, as well as the improvements in the investments available, this will generate additional money that will stay in the plan participants' accounts towards their retirement savings.
ANALYSIS:
In March of 2022, the City was introduced to Shuster Advisory Group, LLC and chose to engage Shuster as the retirement plan consultant and investment fiduciary for our 457(b) and 401(a) plans with MissionSquare in July 2022. Shuster issued a Request for Information (RFI) to our incumbent record - keeper and completed a comprehensive review, identifying that the fees for record-keeping and administration were high and not transparent, and the quality of the investment menu needed improvement. Based on the information obtained through the RFI, Shuster subsequently conducted a Request for Proposal (RFP) for administration and recordkeeping services for the Plans. The results of the RFP proved that our administration and record-keeping fees could significantly be reduced, and the city could implement an open architecture investment menu and fee transparent platform, benefiting participants. The City decided to remain with the incumbent recordkeeper, MissionSquare, at an 88% negotiated reduction in record keeping costs. Also, Shuster negotiated a higher crediting rate for the safety of principal investment option, implemented an improved investment menu for plan participants and implemented a comprehensive fiduciary oversight process.
At the time of RFP, the positive impact to participants due to the combination of the fee reduction and increased interest rate was estimated to be approximately $63,563 over a one-year period. The projected fee savings due to the fee reduction alone are estimated to be $991,000 over 10 -Years, $2.1 million over 20 -Years, and $4.2 million over 30 -Years. These projected savings do not consider any financial gains from improved investments.
The goal of this resolution is to consolidate the existing PARS 401(a) Plan into the improved MissionSquare 401(a) Plan.
The PARS option for the 401(a) Plan is a structure that involves PARS providing services as the Trust Administrator, U.S. Bank N.A. serving as Trustee, and John Hancock Retirement Services providing custodial services and plan and participant record keeping services. This structure is more complex than is required for a 401(a) plan and results in additional embedded costs to plan participants. The structure provided by MissionSquare for the plan is less complex and will also afford the existing group of select employees the benefits of scale and allow this group to experience the significantly reduced fees and improved investment choice and services. The consolidation will also allow uniform services to be provided to employees including single sign on access to their retirement savings plans via the MissionSquare website and dedicated local service provided by the MissionSquare representative. Lastly, this consolidation with provide efficiency for staff that support the retirement plans.
FISCAL IMPACT:
There is no fiscal impact to the City to consolidate the 401(a) plan to MissionSquare since fees are paid by plan assets.
City Council Agenda
September 5, 2023
Prepared by: Reviewed and Approved by:
Jennifer Lampman
Director of Finance
Damien R. Arrula
City Administrator
Attachment:
Resolution R-2023-79— Authorizing the transition of the City's defined contribution plan for eligible employees from Public Agency Retirement Services (PARS) to the ICMA Retirement Corporation governmental profit sharing plan & trust