CITY OF SIMI VALLEY
MEMORANDUM
Jan
uary 13, 2025
TO: Cit
y Council
FR
OM: Office of the City Manager
SUBJECT: ADOPTION OF A RESOLUTION DELEGAT ING AUTHORITY TO THE CITY
MANAGER FOR ALL RESPONSIBILITIES RELATED TO THE OPERATION OF THE CITY’S 457(B) DEFERRED COMPENSATION AND 401(K) PLANS
STAFF RECOMMENDATION
It is recommended that the City Council adopt Resolution No. 2025-0 1 (page 4) delegating authority to the City Manager for all responsibilities related to the operation and maintenance of the City’s 457(b) Deferred Compensation Plan and 401(k) Plan, including both settlor and fiduciary duties, exclusiv e of setting employee benefits or increasing costs to the City.
BACKGROUND AND OVERVIEW
The City of Simi Valley (City) offers two retirement savings plans to eligible employees: a 457(b) Deferred Compensation Plan and a 401(k) Plan. These plans were established by the City Council and are managed by City staff. As of December 4, 2023, the City hired Benefit Financial Services Group (BFSG) to assist in managing the plans . BFSG is responsible for selecting, reviewing , and managing the investment options available to participants in the retirement plans. In addition, BFSG ensures that the plans comply with all relevant laws and regulations. BFSG has been working with a committee of City staff (the “Committee”) to identify ways to make managing the plans easier for the City, reduce the City’s potential liability, and improve the retirement experience of City employees and retirees.
Currently, the 401(k) Plan, offered by Vanguard, is available to all regular City employees, except for those in the G eneral Unit group. It is funded by both employee contributions (through salary deferrals) and City matching contributions. The Plan is governed by a City- created document that was last amended by the City Council on December 1, 2011. The Plan Administrator is the “Employer , including any person or persons appointed by the Employer” to manage the plan. Assets are held and records are kept by Vanguard.
Participants can choose from a range of Vanguard investment options. Vanguard’s service fees are paid by various revenue-sharing agreements with the investment offerings and are undisclosed to participants. Additionally, some participant transactions are also subject to a fee.
The 457(b) Plan, offered by Empower, is available to all regular City employees and is funded by both employee contributions (through salary deferrals ) and City matching contributions. The Plan is governed by a Hartford Specimen Plan Document that was last AGENDA ITEM NO.
Consent (2)
2 amended by the City Council effective January 1, 2024. The Plan Administrator is the “Employer and includes any person, persons, committee, or organization appointed by the Employer.” Hartford was purchased by MassMutual which was then purchased by Empower. Empower now holds and manages the plan’s assets records. Participants can choose to invest in a range of funds, including proprietary (offered by Empower) and non- proprietary funds. Empower’s service fees are paid by various revenue-sharing agreements with the investment offerings and are undisclosed to participants. Additionally, some participant transactions are also subject to a fee.
FINDINGS AND ALTERNATIVES
After reviewing numerous options and discussing them with BFSG, the Committee has made several recommendations for changes to the plans, including:
• Moving the 401(k) Plan from Vanguard to Empower to take advantage of reduced pricing, a wider variety of investment options, and better administrative assistance. • Changing the 457(b) Plan on the Empower platform to allow BFSG to make changes to the investments in the Plan and utilize the most updated Empower Prototype Plan Document.
• Appointing a corporate trustee to provide an additional layer of oversight for plan compliance.
• Transforming the fee structure of both plans away from embedded administration fees to an asset-based fee that is transparent to participants. • Expanding the eligibility of the 401(k) Plan so that all City employees will be eligible to utilize both plans and maximize their retirement savings. • Adopting several newly available optional provisions under The Securing A Strong Retirement Act of 2022 that will give participants access to limited amounts of their retirement funds in times of need.
Each of these changes requires the signature of the Plan Administrator. In accordance with the plan documents, the Plan Administrator is the Employer, in this case, the City Council.
Anticipated upcoming changes will be implemented over time and require additional decisions and approvals.
It is recommended that the City Council delegate authority to manage the plans to the City Manager, exclusive of setting employee benefits or increasing costs to the City. Under this model, an annual report will be provided to the City Council summarizing the City Manager’s activity related to the plans. All plan expenses will continue to be passed to participants.
The following alternatives are available to the City Council:
1. Delegate authority to the City Manager for all responsibilities related to the operation and maintenance of the City’s 457(b) Deferred Compensation Plan and 401(k) Plan excusive of setting employee benefits or increasing costs to the City;
2. Adopt Resolution No. 2025-01; or,
3 3. Provide staff with alternation direction.
Staff recommends Alternative Nos. 1 and 2.
SUGGESTED CITY COUNCIL MOTION
I move to adopt Resolution No. 2025-01 delegating authority to the City Manager for all responsibilities related to the operation and maintenance of the City’s 457(b) Deferred Compensation Plan and 401(k) Plan, including both settlor and fiduciary duties, exclusive of setting employee benefits or increasing costs to the City.
SUMMARY
It is recommended that the City Council delegate authority to the City Manager for all responsibilities related to the operation and maintenance of the City’s 457(b) Deferred Compensation Plan and 401(k) Plan, including both settlor and fiduciary duties, exclusive of setting employee benefits or increasing costs to the City and adopt Resolution No. 2025-
01. _______________________________
Jennifer Gutierres
Deputy Human Resources Director
Prepared by: Trevor Earle, Risk Manager
INDEX Page
Resolution No. 2025-01……………………………………………………4
RESOLUTION NO. 2025-01
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI
VALLEY FORMALIZING DELEGATION OF DUTIES RELATED TO
THE CITY’S 457(B) DEFERRED COMPENSATION PLAN AND
401(K) PLAN
WHEREAS, the City of Simi Valley (the “City”) maintains a 457(b) Deferred Compensation Plan and a 401(k) Plan (the “Plans”) for the benefit of its eligible employees; and
WHEREAS, the City wishes to formally delegate all responsibility for the Plans to a single City Official;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council hereby delegates the responsibility for all duties, both settlor and fiduciary in nature, associated with the operation and maintenance of the Plans to the City Manager, with the exception of actions that would materially impact the City’s fiscal budget. These duties shall inc lude selection and deselection of various service providers associated with the Plans.
Section 2. The City Manager may delegate duties, both settlor and fiduciary in nature, to other City employees or groups of employees, provided that they are qualified and monitored by the City Manager.
SECTION 3. T he City shall provide indemnification to the City Manager, and any other employees delegated duties related to the operation and maintenance of the Plans, against expenses reasonably incurred by her in connection with any claims against her by reason of her conduct in the performance of her duties under the Plans, except in relation to matters as to which she acted fraudulently or in bad faith in the performance of such duties. The preceding right of indemnification shall pass to the estate of such person.
SECTION 3. The City Clerk shall certify the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk.
4 RES. NO. 2025-01
PASSED and ADOPTED this 13th day of January 2025.
Attest:
Lucy Blanco, City Clerk Fred D. Thomas, Mayor of the City of Simi Valley, California
Approved as to Form: Approved as to Content:
Algeria R. Ford, City Attorney Samantha C. Argabrite, City Manager
Approved as to Content
___________
Jennifer Gutierres Deputy Director, Human Resources
5