City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00876 7/25/2023 Consent Item 17.
Agreement: Amendment to Professional Services Agreement with Nationwide Retirement Solutions for Retirement Plan Administrative and Recordkeeping Services File ID: 2023-00876
Location: Citywide
Recommendation: Pass a Motion authorizing the City Manager, or the City Manager’s designee, to execute an amendment to Professional Services Agreement C2016-1425 with Nationwide Retirement Solutions to: 1) extend the term of the Agreement to September 30, 2028; 2) reduce the explicit asset management fee; 3) increase services to plan participants; and 4) increase the minimum credit rating on the Nationwide Fixed annuity contract for two years.
Contact: Samantha Hardy, HR Manager, (916) 808-7657, [email protected], Department of Human Resources
Presenter: None
Attachments:
1-Description/Analysis
2-Supplemental Agreement
Description/Analysis
Issue Detail: The City’s Professional Services Agreement (agreement) with Nationwide Retirement Solutions (Nationwide) provides administrative and recordkeeping services in support of the City’s 401(a) money purchase plans and 457(b) defined contribution plan (Plans). The agreement was approved by Council in November 2016. On November 17, 2020, Council approved the first amendment to the Agreement to add a 401(a)plan for certain classifications in Sacramento-Sierra’s Building and Construction Trades Council. On January 5, 2021, Council approved a second amendment to the Agreement to add a plan expense fee, paid solely by 457(b) plan participants, and the fee collected is used in accordance with the Fee and Expense Policy Statement approved by Council on July 31, 2018.
The City desires to extend its agreement with Nationwide to provide administrative and recordkeeping services as the City has been consistently satisfied with the quality of service provided by Nationwide to the City and Plan participants. In addition, continuing with the same provider helps
File ID: 2023-00876 7/25/2023 Consent Item 17.
provide consistency to Plan participants and limits disruptions to the understanding of how the Plans work and are administered. The City and its investment consultant, Hyas Group, negotiated with Nationwide for enhanced terms to the existing agreement with a desire to lower fees charged to Plan participants and increase services to participants. As a result of these negotiations, if the City extends the agreement for a five (5) year period, Nationwide agrees to reduce their explicit asset management from .03 percent (3.0 basis points) to .0125 percent (1.25 basis points), reducing fees paid by Plan participants. Nationwide also agrees to offer enhanced services to participants such as a guaranteed minimum credit rating of 2.3 percent for a two (2) year period on the Nationwide Fixed Fund, dedicated financial planning services, and increased marketing services. Nationwide also agrees to the addition of a clause that the cost of ProAccount services will be provided at a rate consistent with, and no higher than, the cost of ProAccount services to other public agencies with similar plan demographics. At this time the cost of ProAccount services for the Plans are already at the lowest cost offered by Nationwide.
The terms offered by Nationwide for an extension of the agreement for a five (5) year period were reviewed by the Defined Contribution Plans Committee at their March 15, 2023 meeting. The committee passed a unanimous motion recommending the City extend the agreement with Nationwide for an additional five (5) year term.
Policy Considerations: This recommendation is in accordance with the Professional Services procurement policy.
Economic Impacts: None.
Environmental Considerations:
California Environmental Quality Act (CEQA): This report concerns administrative activities and government fiscal activities that do not constitute a “project” as defined by CEQA Guidelines sections 15378(b)(2) and 15378(b)(4) and are not subject to the provisions of CEQA. (CEQA Guidelines, section 15060(c)(3).)
Sustainability: Not applicable.
Commission/Committee Action: The Defined Contribution Plans Committee passed a unanimous motion on March 15, 2023, recommending the City extend the agreement with Nationwide for an additional five (5) year term.
Rationale for Recommendation: The Human Resources department is consistently satisfied with the Nationwide’s service for administrative and recordkeeping services of the Plans and services provided to Plan participants and wishes to maintain consistency for participants at this time. Through benchmarking of fifteen other public employer plans held with Nationwide, with the assistance of Hyas Group, the reduced explicit asset management fee offered by Nationwide for an extension of
File ID: 2023-00876 7/25/2023 Consent Item 17.
the agreement with the City was lower than any other agency in the benchmarking.
Financial Considerations: The explicit asset management fee and the cost of ProAccount services are paid by Plan participants and not by the City. Service enhancements included in the agreement amendment do not result in any fees paid by the City to Nationwide.
Local Business Enterprise (LBE): Not applicable.
[1]
PROJECT #: 2016-01425-3PROJECT NAME: 401/457 ADMINISTRATIVE SERVICES DEPARTMENT: HUMAN RESOURCES DIVISION: BENEFITS ADMINISTRATION CITY OF SACRAMENTO THIRD AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT THIS THIRD AMENDMENT TO THE AGREEMENT is made at Sacramento, California, as of July 25, 2023, by and between the CITY OF SACRAMENTO, a municipal corporation (“CITY”) and, NATIONWIDE RETIREMENT SOLUTIONS, INC. 10 W. Nationwide Blvd., 05-04-101A Columbus, Ohio 432115 1-877-677-3678 WHEREAS, CITY and Nationwide (“CONTRACTOR”) executed the PROFESSIONAL SERVICES AGREEMENT (“AGREEMENT”) between CITY and CONTRACTOR (Contract No. 2016-1425) on the 6th day of December 2016; andWHEREAS, CITY and CONTRACTOR executed the FIRST AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT (“FIRST AMENDMENT”) between CITY and CONTRACTOR (Contract No. 2016-1425-1) on the 17th day of November 2020; and WHEREAS, CITY and CONTRACTOR executed the SECOND AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT (“SECOND AMENDMENT”) between CITY and CONTRACTOR (Contract No. 2016-1425-2) on the 22nd day of January 2021; and WHEREAS, the AGREEMENT, FIRST AMENDMENT and SECOND AMENDMENT shall hereinafter be collectively referred to as the AGREEMENT; and WHEREAS, CITY desires to continue to contract with CONTRACTOR to provide third-party administrative services subject to the terms and conditions set forth in the AGREEMENT; and WHEREAS, CONTRACTOR desires to continue to provide certain third-party administrative services to the CITY subject to the terms and conditions set forth in the AGREEMENT. NOW, THEREFORE, CITY and CONTRACTOR hereby amend the AGREEMENT as follows: 1. Section 1. of Exhibit B of the AGREEMENT is hereby amended by deleting subsection (A) and replacing it with the following: A. As of the effective date of this Third Amendment, CONTRACTOR shall receive an annualized Compensation Requirement of 0.0125 percent (1.25 basis points) of the Plan's account value held by CONTRACTOR to be calculated and collected monthly from the Plan participants. CONTRACTOR'S Compensation Requirement will be taken in the form of an explicit asset management fee applied against all Plan assets under management, including Plan balances held in the Self-Directed Brokerage Account and as outstanding participant loan balances. The explicit asset management charge of 0.0125 percent (1.25 basis points) will be [2]
taken against participant loans by applying an additional finance charge to the loan interest rate. These basis points shall serve as CONTRACTOR'S sole compensation for the services provided pursuant to this Agreement, except as outlined in Paragraphs 1(B) and 1(C) of this Exhibit B. CONTRACTOR will provide the CITY a quarterly Compensation Requirement report within forty-five (45) Business Days after the end of each quarter. As used in this Agreement, the term "Business Day" means each Monday through Friday during the hours that the New York Stock Exchange is open for business. 2. Section 1 of Exhibit B of the AGREEMENT is amended by deleting subsection (B)(3) and replacing it with the following: 3) Managed account services (Nationwide ProAccount) - Managed account services are offered by Nationwide Investment Advisors ("NIA"), an affiliate of CONTRACTOR, and the CITY must execute a separate agreement with NIA if the CITY wants to add ProAccount to the Plan. Only participants who choose to utilize CONTRACTOR'S ProAccount managed account service are assessed fees. The fees for the ProAccount services provided by NIA may be set out in a separate ProAccount agreement between the participant and NIA, and are assessed pursuant to the terms and conditions of such agreement. CONTRACTOR represents and agrees that the fees charged for the ProAccount services provided by NIA will at all times be provided at a rate consistent with, and no higher than, the cost of ProAccount services offered to other public agencies with similar plan demographics. 3. Section 9 of Exhibit D of the AGREEMENT is hereby amended by deleting Subsection (A) and replacing it with the following: A. The contract period shall be extended for five (5) years and run from October 1, 2023, to September 30, 2028, unless sooner terminated as provided elsewhere in this Agreement. This contract term shall be automatically extended thereafter for additional one (1)-year periods, unless either party gives notice of non-renewal not less than (90) days prior to the expiration of the original term of any subsequent one-year term. 4. Section 3 of ATTACHMENT 1 TO EXHIBIT A (“401(a) PLAN SCOPE OF SERVICES”) and Section 3 of ATTACHMENT 2 TO EXHIBIT A (“457(b) PLAN SCOPE OF SERVICES “) of the AGREEMENT are amended by deleting Section 3 and replacing it in its entirety with the following: 3. INVESTMENT OPTIONS Nationwide agrees to accept contributions to the Plan for investment in the investment options selected for the Plan by the Plan Sponsor or other responsible plan fiduciary in its sole discretion and agreed to by Nationwide. Plan Sponsor agrees to include the following investment options in the Plan’s investment line-up during the entire term of this Agreement:
[3]
Nationwide Fixed Annuity Plan Sponsor agrees to accept the terms and conditions of the annuity contracts, mutual funds, and any other investment products that the Plan Sponsor has selected for the Plan after being provided with a copy of same.Nationwide agrees to provide a minimum crediting rate on the Nationwide Fixed annuity contract of 2.3% from October 1, 2023, until September 30, 2025, after which the crediting rate will revert to a quarterly reset thereafter based on market conditions and investment performance. The Plan Sponsor acknowledges that Nationwide and its affiliates receive payments in connection with the sale and servicing of investments allocated to participant Plan accounts (“Investment Option Payments”). The Investment Option Payments include mutual fund payments as described in detail at www.cityofsacretplan.com, and other payments received from investment option providers. The Plan Sponsor directs Nationwide to credit all Investment Option Payments to participant accounts on a pro-rata basis based on each participant’s total assets held in all Plan investment options that generated the Investment Option Payments. All Investment Option Payments will be credited on a quarterly basis. Nationwide will report to each Plan participant that receives such a credit the amount of all such credits. 4. Section 7 of ATTACHMENT 1 TO EXHIBIT A (“401(a) PLAN SCOPE OF SERVICES”) and Section 7 of ATTACHMENT 2 TO EXHIBIT A (“457(b) PLAN SCOPE OF SERVICES”) of the AGREEMENT are amended by deleting the Participant Outcomes Grid in Section 7 and replacing it in its entirety with the following: Participant Outcomes: Nationwide will commit $25,000 per year focused on participant outcomes CategoryDescription Amount at Risk Annual Satisfaction Survey Nationwide will conduct an annual participant satisfaction survey $5,000 annually Annual Satisfaction Survey Results: Nationwide will analyze survey results, provide executive summary and recommended actions annually.$4,000 annually On-Site Group Meetings: Nationwide will conduct 50 group meetings annually for Plan's employees. The 50 meetings count will be revisited annually with the Plan to determine appropriateness.$4,000 annually Individual Meetings: Nationwide will conduct 1,000 individual meetings annually for Plan's employees. The 1,000 meeting count will be revisited annually with the Plan to determine appropriateness. $4,000 annually New Hire Enrollments: Nationwide will commit to enroll 50% of new hires into the 457(b) Plan annually. This deliverable is contingent upon receiving new $4,000 annually [4]
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hire census data from the Plan in order to track and measure. Total Enrollments (new hires and existing employees) Nationwide will commit to increase new enrollments into the 457(b) Plan to 185 annually. The 185 enrollment threshold is based on historical Plan data provided by the Plan and will be revisited annually with the Plan based on hiring trends within the City. $4,000 annuallyFinancial Planning Services Nationwide will commit to quarterly onsite and virtual financial planning services from the City’s designated Personal Retirement Consultant.N/ADesignated Marketing ConsultantNationwide will commit a designated Marketing Consultant and enhanced participant marketing through the implementation of custom, targeted campaigns. Specifically, to include one annual custom campaign plus the option of either an annual participant satisfaction survey OR a second annual custom campaign. Marketing Consultant will work with the City and its service team on the execution of the marketing strategy. N/A [5]
Except as otherwise amended herein, all other terms and conditions of the AGREEMENT not in conflict shall remain in full force and effect. If there is a conflict or ambiguity between the Amendments and the AGREEMENT, the documents in the following order shall prevail and control: (1) this Third Amendment, (2) the Second Amendment, (3) the First Amendment, and (4) the AGREEMENT. IN WITNESS WHEREOF, of the parties hereto have executed this Amendment effective on the date first written below. Nationwide Retirement Solutions City of Sacramento A Municipal Corporation By: By: Name: Name: Title: Title: Date: Date: Approved as to Form By: Name: Title: Date: Attested By: