CITY OF SIGNAL HILL
STAFF REPORT
2175 Cherry Avenue • Signal
Hill, California 90755-3799
7/11/2023
AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: GRISSEL CHAVEZ
DEPUTY CITY MANAGER
SHARON DEL ROSARIO
ADMINISTRATIVE SERVICES OFFICER/FINANCE DIRECTOR
SUBJECT:
THIRD AMENDMENT TO AGREEMENT FOR CONTRACT SERVICES BETWEEN
THE CITY OF SIGNAL HILL AND SHUSTER ADVISORY GROUP, LLC Summary:
At its meeting of December 12, 2017, the City Council entered into a Contract Services Agreement with Shuster Advisory Group, LLC (formerly SFG Retirement Plan Consulting, LLC) for investment advisor and fiduciary services for the City’s 457(b) Deferred Compensation Plan and 401(a) Defined Contribution Plan. Since June 11, 2019, Shuster Advisory Group has been serving as the sole fiduciary for the City’s 457(B) and 401(A) plans. Shuster Advisory Group, LLC (Shuster) is requesting a not to exceed 3% cost of living adjustment to its annual compensation, starting on August 1, 2023.
City Council approval of the proposed Third Amendment to the agreement is required for the compensation structure to be modified.
Recommendation:
Authorize the City Manager to execute Amendment No. 3 to the Contract Services Agreement between the City of Signal Hill and Shuster for a cost of living adjustment to its annual compensation, limited to a not-to-exceed adjustment of 3%, in a form approved by the City Attorney.
Fiscal Impact:
The proposed amendment increases Shuster’s annual compensation from $24,000 to $24,720 (3% increase), starting August 1, 2023, thereafter, the annual compensation may be increased by an amount not to exceed 3% if approved by City Council. These costs are borne by the employees participating in the retirement programs and is not a General Fund cost to the City.
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Strategic Plan Objective:
Objective No. 5.7.1: Evaluate the attractiveness of employee compensation, work environment, and employee appreciation programs.
Background:
Shuster currently serves as the fiduciary investment advisor and plan consultant for the City’s 457(b) Deferred Compensation Plan and 401(a) Defined Contribution Plan. The company has been providing these services to the City since December 12, 2017. The City provides employees with employer-sponsored deferred compensation plans under Section 457(b) and Section 401(a) of the Internal Revenue Code (IRC). The plans provide tax benefits to employees who make deposits into the plans on a pre-tax basis for their retirement. When the City hired Shuster for these services in 2017, in addition to a significant improvement in the quality of the investments available in the retirement plan, this resulted in a 86% reduction in recordkeeping fees for the 457(b) and 401(a) plans (from 91 basis points to 13 basis points).
Analysis:
In 2018, Shuster implemented its Fiduciary Investment Advisor and Plan Consultant fee of 25 basis points (approximately $26,000). Shuster approached the City in 2019 to reduce the fee by implementing a flat fee of $24,000. Shuster is now requesting a 3% cost of living adjustment per year, with future annual fee adjustments to be no greater than 3%.
Proposed Change to Fee Structure
If approved by the City Council, effective August 1, 2023, the annual fee for service shall increase to $24,720 payable monthly ($2,060 per month). Thereafter, the fee would be adjusted for cost of living on an annual basis by a mutually agreed upon amount, not to exceed 3%. Shuster shall submit to the City, in writing, its justification for the requested annual cost of living adjustment, no later than May 1 of every year. Upon approval by the City Council, said increase shall take effect every July 1.
Fulfilling the fiduciary responsibilities for the City plans takes a high level of knowledge and understanding of the retirement investment marketplace. Negotiating fee structures, investment options, and fixed interest rates requires professional experience and skill. Shuster continues to maintain the breadth of experience and expertise, as well as time and resources, required to prudently serve as fiduciary. Staff continues to regularly monitor Shuster’s performance of fiduciary duties to confirm the accurate handling of plan investments.
Staff recommends City Council approval of Shuster’s requested not to exceed 3% annual cost of living adjustment starting on August 1, 2023. Thereafter, the requested increase would be submitted to the City in writing, by May 1, 2023. The request will be brought forth to City Council on an annual basis for review and determination. The proposed Third Amendment to the Contract Services Agreement with Shuster would effectuate the recommended action.
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Attachment:
A. Shuster Third Amendment to Contract Services Agreement CITY OF SIGNAL HILL Page 3 of 3 Printed on 7/7/2023
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