May 24, RE: Actuarial Consultant Request for Proposal (RFP)

Transcription

1 May 24, 2018 RE: Actuarial Consultant Request for Proposal (RFP) The Board of Trustees of the Educational Employees Supplementary Retirement System of Fairfax County ERFC (ERFC) is requesting proposals from qualified full service actuarial consulting firms. ERFC is a public sector defined benefit plan, which operates under terms incorporated in a Fairfax County Ordinance and the ERFC Plan Document. The Fairfax County School Board authorizes all changes governing the provisions of the Plan. ERFC benefits structures are outlined below. 1. ERFC (Legacy) for members hired prior to July 1, ERFC 2001 Tier 1 for members hired on or after July 1, 2001 but before July 1, ERFC 2001 Tier 2 for members hired on or after July 1, 2017 ERFC Membership As of December 31, 2017 Retirees 11,729 Deferred Vested Members 4,759 Active Plan Members ERFC (Legacy) 4,488 ERFC 2001 Tier 1 15,683 ERFC 2001 Tier 2 1,670 The ERFC benefit structure was designed specifically to supplement the benefits that members receive from Social Security and the Virginia Retirement System. ERFC 2001 is a simplified defined benefit structure. ERFC 2001 Tier 2 raised retirement eligibility, increased the period for calculating a member s final average salary and changed the cost of living adjustment to be based on the Consumer Price Index. Assets of the two benefit structures, which are combined for all purposes, totaled $2.5 billion at December 31, Detailed information about ERFC is contained in its Comprehensive Annual Financial Report, a copy of which is available on ERFC s website, ERFC is governed by a seven member Board of Trustees that has fiduciary responsibility for the retirement plan, as well as the exclusive authority to contract for investment, actuarial and legal services. The intended schedule for this RFP process appears below. RFP Schedule Issue RFP Thu 5/24/18 Bidder Questions Due Mon 6/4/18 Responses to Questions Due Wed 6/13/18 Page 1 of 13

2 All Responses Received Thu 6/21/18 Evaluations Wed 7/11/18 Interviews Thu 7/19/18 Selection Thu 7/19/18 Board Presentations (consultant selection) Thu 9/20/18 Qualified responses require an original and three hard copies of the proposal be received by 5 p.m. EST on June 21, 2018, at the following office: The Educational Employees Supplementary Retirement System of Fairfax County (ERFC) 8001 Forbes Place, Suite 300 Springfield, Virginia In addition, an electronic copy must be sent to emartinez@fcps.edu by 5 p.m. EST on June 21, Proposals received past the deadline and/or proposals that are incomplete or do not meet the minimum standards will be automatically disqualified. Additional information may be requested at any time from bidding organizations, and addenda to the RFP may be issued at any time during the bid process. Questions concerning this RFP should be sent by to Eli Martinez, emartinez@fcps.edu. Sincerely, Eli Martinez Executive Director and Chief Investment Officer Page 2 of 13

3 Table of Contents Statement of Work... 4 Intent... 4 Scope... 4 Background... 4 Selection Considerations... 5 Bidder Qualifications... 5 Valuation Services... 6 Consultation and Advisory Services... 6 Experience Analysis, Projection Valuations, Demographic Studies and Actuarial Audit... 7 General Duties... 7 Questionnaire Corporate Identity Personnel Services Provided Fees Modeling Questions Miscellaneous Page 3 of 13

4 Statement of Work Intent It is the intent of these specifications, terms and conditions to describe actuarial services being requested by ERFC. ERFC intends to award a five-year contract (with option to renew) to the bidder selected as the most responsible bidder whose response conforms to the RFP and meets ERFC s requirements. Scope ERFC is committed to providing comprehensive, high quality, and cost effective benefit plans and programs that provide optimum value to ERFC, its employees and its retirees. ERFC is seeking to establish a contractual relationship with an actuarial consulting professional to assist in achieving these goals including the mutual development of performance standards that support ERFC s mission and key objectives. Background ERFC is a legally separate single-employer retirement system and fund established under Virginia Code Section to provide pension benefits to all full-time educational and administrative support employees who are employed by the Fairfax County Public Schools (FCPS) and who are not covered by another Fairfax County plan. As such, and as a fund under the financial control of the School Board, the System s financial statements are included in the Schools basic financial statements as a pension trust fund. The System contains two primary benefit structures, ERFC and ERFC Both are defined benefit structures. The original structure, ERFC, became effective July 1, 1973, and is coordinated with the benefits members expect to receive from the Virginia Retirement System (VRS) and Social Security. It remains in effect; however, it was closed to new members employed after June 30, Effective July 1, 2001, all newly hired full-time educational and administrative support employees were enrolled in ERFC 2001, hereinafter referred to as ERFC 2001 Tier 1. Tier 1 was closed to new members employed after June 30, On April 27, 2017, the School Board voted to modify the ERFC 2001 Tier 1 Plan effective July 1, For ERFC members hired on or after July 1, 2017, members of ERFC 2001 Tier 2, retirement eligibility was raised, the period for calculating a member s final average salary was increased and the cost-ofliving adjustment was changed to be based on the Consumer Price Index. For all members, the annual interest rate credited on member accounts was reduced. The Board of Trustees is the governing body of ERFC. The ERFC Board comprises seven members three appointed by the School Board, three elected by the System s active membership, and one trustee who is neither affiliated with, nor employed by FCPS, its School Board, nor by any union or similar organization representing FCPS employees. The initial six trustees annually select and recommend the seventh ERFC Board member, or individual Trustee, for approval by the FCPS School Board. The ERFC executive committee comprises the chairperson and treasurer. Page 4 of 13

5 Benefit provisions for ERFC and ERFC 2001 are established and may be amended by the System s Board of Trustees subject to approval by the School Board. All members are vested for benefits after five years of service. The ERFC benefit formula was revised effective July 1, 1988, following changes to the VRS, which the ERFC has historically supplemented. The benefit structure is designed to supplement VRS and Social Security benefits to provide a level retirement benefit throughout retirement. ERFC 2001 Tier 1 and Tier 2 have a stand-alone structure, although the members that they cover also receive benefits from VRS. Member contributions for ERFC and ERFC 2001 are made through an arrangement that results in a deferral of taxes on the contributions. Further details of member contributions may be found in Article III of both Benefit Structure Documents. Selection Considerations The criteria identified below are considered by ERFC to be of greatest importance in selecting the new consulting actuary. Specific response, comment or clarification may be offered to the extent that any of these issues are not fully addressed in the written response. The ordering of these criteria does not signify the priority in importance. Qualification and experience of the firm and the key personnel assigned to the project Ability to actively participate in the development of actuarial standards that will have an impact on both the Plan and the Plan s sponsor Willingness to work with staff and Board during the modeling process to assess actuarial assumptions material to the ERFC plan Ability to offer superior account management support Strong references Clarity, brevity and focus of the proposal in addressing issues and requirements unique to ERFC Reasonableness of costs to services The successful bidder will provide one annual valuation of the defined benefit plan, an experience study every five years and other special projects. The actuarial consultant will be responsible for affirming the validity of benefit calculations. This latter task is usually done as part of the annual valuation to assure that the pension administration and retiree payroll system (PensionGold) have not been corrupted. Occasionally, special calculations are required to validate the benefit and its components. It is expected this service will be included in the consulting fee. A detailed list of contract services and deliverables is shown below. Bidder Qualifications 1. Bidder Minimum Qualifications a. Bidder shall be regularly and continuously engaged in the business of providing actuarial consulting services for at least ten (10) years. b. Bidder shall possess all permits, licenses and professional credentials necessary to supply products and perform services as specified under this RFP. Page 5 of 13

6 2. The bidder must designate an approved lead account actuary who has been regularly engaged in the business of providing actuarial services to public employee retirement systems and has at least 15 years of experience with major public employee retirement systems or designation as a Fellow in the American Academy of Actuaries. The consulting actuary must be an employee of the firm. ERFC reserves the right to reject the firm s choice of a consulting actuary and may terminate the contract if a consulting actuary, acceptable to the ERFC Board of Trustees, cannot be made available by the firm. Valuation Services 1. Conduct annual valuation to be delivered in final form no later than June 1 of each year, and a GASB 67/68 report to be delivered in final form no later than September 15 of each year. All information necessary for a public employee retirement system defined benefit plan must be included. While maintaining the integrity of its work product, actuary will work with staff and Board during the development process to provide a clear explanation of the assumptions and reasoning underlying its recommendations. 2. Conduct one experience study within the term of the contract. ERFC generally does an experience study once every five years. The results of the experience study when adopted by the Board of Trustees provide the underlying assumptions used for future actuarial valuations. As above, while maintaining the integrity of its work product, actuary will work with staff and Board during the development process to provide a reasonable range of alternatives with respect to key actuarial assumptions, accompanied by a clear explanation of the data and reasoning underlying its recommendations. The most recent experience study was done in Annually provide an actuarial certification of the member benefit calculations provided by PensionGold. ERFC, as part of the annual audit, desires to have the actuary certify the benefit calculations of 15 members who have retired in the last fiscal year. Consultation and Advisory Services 1. Provide actuarial consultation and advisory services. These services may be delivered in meetings or by telephone calls and written correspondence. ERFC expects these services may include public testimony to committees, boards, commissions and legislators on any technical, policy, or administrative issues arising during the course of ERFC operations. The consulting actuary should be readily accessible to the Executive Director by telephone within one working day and will be available for meetings within five (5) working days of a request. ERFC expects the consulting actuary to attend a minimum of three (3) meetings per contract year to give presentations and/or answer questions, including one meeting with the Board of Trustees to review the annual actuarial valuation. ERFC also expects the consulting actuary to be available for educational discussions with the Board of Trustees and/or ERFC employees. The consulting actuary must have the ability to discuss actuarial theory and other matters in lay terms. 2. Prepare various actuarial operating tables and factors. From time to time, these tables and factors may be required for operation of the system. These tools include, but are not limited to, mortality tables, option tables for annuitants, present value factors, survivor benefit factors, and PC programs for service purchase calculations, IRC Section 415 Excess Benefit calculations, Page 6 of 13

7 calculation of Lump Sum amounts for Old Plan Deferred members, required reserve figures and present value calculations. 3. Prepare actuarial cost estimates of proposed legislation and plan amendments. The consulting actuary shall provide timely financial impact estimates of proposed statutory and plan amendments as requested by Executive Director. In general, there are seldom more than two of these requests per year. 4. Recommend possible improvements to ERFC financing and benefit structure. Throughout the duration of the contract, the consulting actuary will be actively involved in the study, development and application of evolving new standards that will impact public plans and their sponsors, and will assist ERFC in assessing the impact of those changes on the most effective financing and benefit structure of a retirement system. The consulting actuary should keep the Board of Trustees and the Executive Director apprised of current trends and advancements within the actuarial profession. 5. Assist in establishing actuarial specifications for the Fund s data files. From time to time, ERFC may ask the consulting actuary to provide feedback on the content of the data files and make suggestions for modifications to ensure that the full range of data needed for costing proposed ordinances or legislation, performing actuarial valuations, and reviewing experience studies is maintained. 6. Provide advice on special benefit cases. ERFC may occasionally request that the consulting actuary review individual benefit applications (e.g., complex marriage dissolutions) and perform complex computations related to these cases. 7. Determine annual cost-of-living increase to the retirement benefits and maintain COLA for retired Tier 2 (or future applicable tier). The consulting actuary shall, no later than March 1 of each year, on or after an applicable member segment is established, determine the Consumer Price Index for the Fairfax County area for the purpose of providing a COLA to eligible retirees. Experience Analysis, Projection Valuations, Demographic Studies and Actuarial Audit Note: ERFC anticipates the consulting actuary will perform the services identified below on an as needed basis. ERFC encourages the firm to separately bid for these services, rather than include these services in the cost projection for the services detailed above. 1. Prepare projection valuation studies of the Plan. When requested, conduct projection valuation studies for the ERFC defined benefit plan. Analyze and report results to the Board of Trustees. 2. Prepare actuarial cost estimates for plan changes. ERFC benefits are subject to change by the plan sponsor. These studies will be paid for by the plan sponsors. In pricing this service, please provide the hourly charges that would apply for the various levels of staff that could be assigned to this project. General Duties (Included in the consulting fee) 1. Provide actuarial analysis relevant to administration of existing retirement benefit structures 2. Provide actuarial analysis relevant to design of proposed new benefit structures, when requested Page 7 of 13

8 3. Provide actuarial advice for implementation of any new benefits that may be adopted 4. Provide analysis and implementation suggestions for any new Governmental Accounting Standards Board (GASB) pronouncements that may have an impact on ERFC 5. Collaborate with ERFC s legal counsel as requested by the Executive Director, when needed regarding actuarial aspects of relevant laws, statutes and regulations 6. Provide regular and timely communication of changes and proposed changes in federal statutes and regulations affecting the actuarial standards applicable to ERFC. Recommend procedures and/or policies ERFC should implement to comply with such statutes and regulations 7. Review and provide a written analysis of reports prepared by ERFC staff for presentation to the Fairfax County Public Schools (FCPS), School Board or FCPS staff relevant to actuarial issues. Recommend changes to reports and/or additional reports for the purpose of providing useful information for effectively managing the plan. Provide reports as needed analyzing valuation reports issued by FCPS. 8. Validate and verify information contained in reports from the FCPS actuary 9. Provide research and responses to technical questions posed by FCPS staff regarding the ERFC retirement plan 10. Provide supporting documentation, explanations and training to administrative committees, Board, Board staff and/or ERFC executive staff, as required on actuarial issues 11. Attend ERFC Board meetings, as requested 12. Provide day-to-day consultation on matters such as, but not limited to, plan interpretation and problem resolution, and attend periodic meetings to facilitate and assist in management of ERFC 13. Respond to inquiries regarding retirement questions or information as requested by ERFC staff or officials 14. Maintain full and accurate records regarding all matters and services provided regarding ERFC. Provide all spreadsheets and analysis, assumption and calculation reports upon completion of any project performed for ERFC. 15. Review and analyze studies provided by ERFC staff for actuarial impact on the ERFC retirement plan, as requested 16. Work collaboratively with ERFC Counsel and any other ERFC-contracted consultants, consulting firms, independent actuarial auditors and/or legal firms on various issues that may arise 17. Treat all member information as confidential. The consulting actuary is to treat as confidential all data provided by ERFC for purposes of the contract and as it applies to all data created, gathered, generated or acquired with the contract 18. Seek ERFC s written consent prior to public release of information resulting from the engagement. With respect to any publicity given to the actuarial services provided under terms of the resulting contract, the consulting actuary shall identify ERFC as the sponsoring agency and shall not release any information without prior approval of the Executive Director or appointed designee. This information includes, but is not limited to, press releases, research and reports, and public release includes all parties other than ERFC staff, including officials and offices of Fairfax County Public Schools 19. Document discussion ideas, issues and extended services. Share responsibility with ERFC for documenting in writing all ideas and issues raised in discussions and meetings. The lead Page 8 of 13

9 consulting actuary must review, approve and sign all price quotations for extended services, final reports, correspondence regarding actuarial assumptions and other technical issues 20. Perform all services within the scope of the contract under the direct supervision of a qualified actuary. Page 9 of 13

10 Questionnaire Respond fully to each of the following questions. Corporate Identity 1. Provide your company s name and address, and the primary RFP contact s name, telephone number, fax number and address. Provide the address of the office that will service this account. 2. Give a brief history of your firm s involvement in the actuarial consulting business, including the year of organization, current ownership and affiliations. Are ownership changes planned or anticipated at this time? 3. How many years has your firm provided actuarial consulting services to public pension plans? 4. What do you consider to be your firm s consulting specialties, strengths and limitations? What services, if any, does your firm offer clients in addition to actuarial consulting services? 5. Has your organization or any officer or principal of your organization been involved in litigation relating to consulting activities? If so, provide a brief explanation and indicate the current status of the proceedings. 6. How many full service actuarial accounts does your firm have? How many are public pension systems? How many systems serving educational employees are current clients? 7. How many relationships have been added in the last five years? 8. How many actuarial services accounts were lost in each of the last five years? What was the reason(s) for each account lost? 9. Provide levels of coverage for fidelity bonds, errors and omissions coverage, and other liability coverage that your firm carries and whether such coverage limit is provided for each client and/or claim or whether there is an aggregate limit of coverage; include the name and address of the coverage provider and a copy of proof of coverage. Specify whether your terms of service require any limitation of liability for errors and omissions and, if so, the details of any such limitation. 10. Describe your firm s plan for managing future growth in terms of: a. Total number of accounts that will be accepted. Page 10 of 13

11 b. Additions to professional staff and approximate timing in relation to anticipated growth in the number of accounts. Personnel 11. List the name and location of the primary individual(s) who would be responsible for our account and provide brief biographies including titles, functions, academic credentials and relevant experience. Identify and explain the role of backup personnel. How many clients are assigned to each person named above? 12. What policies are in effect to control the workload as it relates to the number of clients serviced by each consultant? Is there a limit to the number of accounts a consultant may handle? 13. What incentives are provided to attract and retain top-quality employees at your firm? 14. Describe the turnover in key professional personnel in each of the last five years. Indicate the number of people lost in the following areas: (a) actuaries (b) key technical personnel. Services Provided 15. List all standard services provided in a typical pension plan full service actuarial consulting relationship. Include a description of the research and other technical resources, including online databases and computer-based analytical tools you make available to your clients. 16. Describe the services of your organization that distinguish your firm from your competitors. Convincingly and briefly explain why your firm is the most qualified for this engagement. 17. Briefly summarize your philosophy relating to the consultant s relationship with Boards, Staff, Counsel, etc. 18. Provide a list of representative clients, noting the public pension funds included on the list. 19. Describe your firm s active involvement in, and ability to provide periodic updates regarding federal legislation, IRS Rules or Revenue Rulings and accounting/gasb rules that may affect the operation of the system and the payment of benefits. 20. Describe the media your firm uses to inform clients of changes in pending federal legislation or regulations. 21. List references for three public pension funds with assets each in excess of $1 billion for whom the primary consultant and principal assistant to be assigned to the ERFC account have provided Page 11 of 13

12 actuarial consulting. For each reference include client name, address, telephone number and name of contact person. 22. Include as an addendum item a sample of your firm s actuarial reports. Fees 23. Provide your fee schedule, bundled and unbundled. Break out the fee structure to reflect separate pricing for: a. Actuarial valuation, investigation and report for each year of the five-year contract period for retirement benefits including the Gains and Loss analysis for each year of the fiveyear contract period. b. One plan experience study covering a five-year period plus any necessary changes in operational tables as a result of adopting new actuarial assumptions recommended by the plan experience study. c. Computation of the annual Cost of Living. d. One independent actuarial audit event; minimum and maximum collaboration fees associated with the event. e. An annual validation of benefit calculations of the pension administration and retiree payroll system (PensionGold). f. Computation of optional benefits not programmed in the pension administration and retiree payroll system (PensionGold). g. Consulting services for the five-year contract period. Modeling Questions 24. What sources and methodologies do you utilize in forecasting plan investment returns? Are such forecasts produced within your actuarial firm, from a corporate affiliate, from consultants, from surveys, from other sources or from a combination? What specific resources do you rely upon with respect to anticipated returns from alternative investment classes? How do your processes differ from those generally utilized by investment consultants in predicting portfolio investment returns? 25. What is your view as to the best inflation metric and why? If you expect inflation to rise, do you blend in current low rates for a period average? 26. What is your methodology for predicting a likely nominal rate of return on plan investments? Page 12 of 13

13 27. In establishing the real wage growth assumption for employees, what sources of data do you rely upon? If you use Social Security wage data do you utilize the median, the mean or a combination? Have your practices in this regard changed over the past five years? 28. Describe the process by which you set mortality tables. To what extent do you view the setting of actuarial assumptions regarding demographic experience, such as mortality, as a study of historical data and to what extent do you view the setting of such assumptions as a forwardlooking prediction of future trends? To the extent that future predictions are incorporated in your studies, how do you support and quantify such predictions? Miscellaneous Include any other information that you believe to be pertinent but is not specifically requested elsewhere in this RFP. Page 13 of 13