DEFERRED COMPENSATION COMMITTEE AGENDA. Thursday, February 19, :00 p.m.

Transcription

1 DEFERRED COMPENSATION COMMITTEE AGENDA Thursday, February 19, :00 p.m. City Hall City Attorney s Office Large Conference Room 200 South Anaheim Boulevard Third Floor I. APPROVAL OF MINUTES: NOVEMBER 20, 2014 II. III. PUBLIC COMMENT: NEW BUSINESS: A. BOND FUND PROSPECTUS REVIEW B. QUARTERLY PLAN REVIEW Q C. MESIROW REVIEW Q D. EDUCATIONAL CAMPAIGN REVIEW OF SAMPLE LETTERS E. TARGET DATE FUND AS DEFAULT F. PARTICIPATING EMPLOYEE REPRESENTATIVE RECRUITMENT - FORM SUB-COMMITTEE IV. OLD BUSINESS: A. 457 TRACKING OF PRE-TAX and AFTER-TAX ROTH Update (Discussion /Take Action) B. IN-PLAN ROTH ROLLOVERS/CONVERSION AMENDMENT, FINAL LANGUAGE & RHS PLAN DOCUMENT AMENDED LANGUAGE FOR RETIRED ANNUTITANTS (Discussion) C. OPTIONS FOR NON-ELIGIBLE PART TIME EMPLOYEES OBTAINING ONLINE LOANS D. ADMINISTRATIVE STAFF REPORT V. COMMITTEE MEMBER COMMENTS: Committee Member: Henry Stern Committee Member: Joe Romines Committee Member: Debbie Moreno Committee Member: Jason McBride Committee Member: Lisa Stipkovich Committee Member: David Albaugh Committee Member: Chris Chase

2 VI. TOPICS FOR NEXT MEETING Thursday, May 21, 2015 AWT 5 th Floor Training Rm. VII. ADJOURNMENT CERTIFICATION I certify that a copy of this notice was posted by 5:00 p.m. on February 13, 2015 at the City Council Chambers. Agenda documents are available for review in the Human Resources Office, 5 th Fl, AWT. Signed: Janice Garcia Deferred Comp. Tech.

3 HUMAN RESOURCES DEFERRED COMPENSATION COMMITTEE MEETING City Hall City Attorney s Office Large Conference Room February 19, :00 p.m. PRESENT: STAFF: Henry Stern, Janet Laszlo, Debbie Moreno, Joe Romines, Jason McBride, David Albaugh and Lisa Stipkovich Moses Johnson, Dona Vlha and Janice Garcia GUEST(S): Lori Riley, Tom Axline, Ryan Carpenter and Jason Scharp (ICMA-RC) TELECONFERENCE GUEST(S): Erica McFarquhar and Walid Refai (ICMA-RC) Henry Stern announced that in Chris Chase s absence, he will be the Committee chairperson since he holds the position of Vice-Chairperson. Mr. Stern called the meeting to order at 2:02 PM. Mr. Stern introduced Janet Laszlo as the Human Resources representative for Mr. Chase. Erica McFarquhar also introduced herself as the replacement for Angela Montez who will be promoted in the second quarter of this year. Ms. McFarquhar will be the ICMA-RC legal resource for the committee and contact for the City s legal counsel, Moses Johnson. The sequence of the meeting will not follow the order of the agenda in order to accommodate the teleconference participants. III. NEW BUSINESS A. BOND FUND PROSPECTUS REVIEW Lori Riley announced that Walid Refai will lead the discussion on the PIMCO alternatives to help the committee members make an educated decision on bond alternatives. A report was distributed that listed five alternatives, four of them are not in the VantageTrust series (Calvert Bond I, Dodge & Cox Income, Loomis Sayles Investment Grade Bond N and Loomis Sayles Investment Grade Bond Y). The other fund is the Western Asset Core Plus Bond I (WAMCO) which is available in the VantageTrust and is covered by Mesirow as of the last report. Mr. Refai explained that ICMA-RC conducts due diligence and regularly monitors the funds in the VantageTrust series. The report shows that Western Asset Core has an expense waiver until April 30, Mr. Stern reminded the committee that while Western Asset Core has no fee now, it is expiring soon and the fund will have a higher fee expense. There was a brief discussion regarding ICMA-RC s relationship with WAMCO and whether or not there is potential to negotiate fees. The report showed that PIMCO has lagged from its peer group and ranks 71 in the Total Return percentile rank in the 1 Year category because of the major change in management. However, it has outperformed 90 percent of its peers over the 10 year period. According to Mr. Refai, the PIMCO fund has started to show better growth

4 under the new managers but has lost half of its assets which were $300 billion at its height. The report also shows the ranking, manager tenure and annual return of the funds. Ms. Riley asked the committee if they wanted to replace PIMCO Total Return Instl based on the alternatives that were presented. The fund has 165 participants with $4.956 million in assets, which make up 21 percent of the total assets. Lisa Stipkovich inquired as to what would happen if the committee decides to replace the fund. Ms. Riley said that participants will receive communication 30 days in advance to move their funds and participants who did not make an election will be mapped to the replacement fund. Debbie Moreno made a motion to keep the PIMCO fund and continue to watch it. Mr. Stern seconded the motion. MOTION CARRIED (7-0-0). C. MESIROW REVIEW Q The Mesirow POLICE Report as of December 31, 2014 shows all the funds that were on the watch list on the third quarter for the same reasons except for Columbia Acorn Z which is now on the watch list for performance. It was on the watch list for organization in the third quarter because of the change in their lead portfolio manager. Mr. Refai said that its performance is not quite as strong as of late but is still within the elite list and will be on the watch list for three quarters. Mr. Stern requested Ms. Riley to bring alternatives as well as Columbia Acorn s performance over the last five quarters and their one, three and five year performances to the next meeting so the committee can do an in-depth discussion and decide whether to keep the fund, continue to watch it or replace it. The fund has assets of $11.2 million and 471 participants. Jason McBride asked how often the committee will revisit PIMCO. Ms. Riley said that Mesirow is continuing to monitor the fund but it will be a red flag once it is removed from the elite list. Mr. Stern requested that the annual review also include an update on the PIMCO return, alternative information and a performance summary. Dona Vlha requested soft copies of the annual review to be sent out in advance and hard copies be distributed at the May meeting. I. APPROVAL OF MINUTES The Committee reviewed the minutes from the prior meeting. Mr. McBride recommended the use of the word, motion instead of resolution on the second paragraph, page two under New Business, A New Single Distribution Rule for Retirement Plans. Mr. McBride also suggested that the participant s name should be redacted and should only be referred to as participant on the first paragraph, Old Business, A K-1 Reporting Changes: From Participant to Plan Update. Mr. McBride made a motion to approve the minutes based on the recommended changes. Joe Romines seconded the motion. MOTION CARRIED (5-0-2). Ms. Moreno and Ms. Stipkovich abstained. II. PUBLIC COMMENTS None

5 III. NEW BUSINESS B. QUARTERLY PLAN REVIEW Q Ms. Riley stated that this topic has already been covered as part of the PIMCO alternatives discussion and the Mesirow POLICE report. D. EDUCATIONAL CAMPAIGN REVIEW OF SAMPLE LETTERS Ms. Riley gave out a sample letter that ICMA-RC has prepared for the City of Long Beach. The letter is one way for ICMA-RC to retain participants who will be leaving the Plan and remind them of the benefits of leaving their money in the Plan. The letter can remind the participants that rolling their money in an IRA if they are not 59 ½ will not be in their best interest, that they are enjoying the institutional pricing benefit because the City has negotiated an excellent price with ICMA-RC, that they have access to Certified Financial Planner professionals and that ICMA-RC provides assistance in the computation of RMD and consolidation of holdings. Ms. Riley pointed out that the letter also serves as a retention tool especially for retirees who have high balances and are considering a roll-over to an IRA. Ms. Riley shared that the City s retention rate is excellent. Mr. Romines asked for the percent of roll-out and Mr. Johnson wanted a breakdown of active money and retiree money. This letter can go out electronically, can be included as an electronic survey in the participant s account access and can also be distributed during exit interviews. Mr. Stern made a motion to pursue the educational campaign as proposed by ICMA-RC with a draft of the questionnaire. Ms. Stipkovich seconded the motion. MOTION CARRIED (7-0- 0). The City s legal counsel and DC administration will review and approve the letter prior to distribution. The second approach is to send out s that contain interactive HTML for videos and retirement tools and calculators. Mr. Johnson recommended coursing it through the Human Resources Department and cautioned allowing access to participant s personal information such as addresses. Ms. Laszlo recommended that the best approach for distribution will be a citywide coming from the Human Resources Department that could be done on a quarterly basis. E. TARGET DATE FUND AS DEFAULT The committee members were asked of their opinion on the article that was distributed at the last meeting regarding the Target Date Fund as the default fund. Mr. Romines told the committee that he liked it and David Albaugh agreed because he believes in the efficient market hypothesis. Ms. Stipkovich commented that it is a pretty good choice. Mr. Stern has no problems with the Target Date Fund and thinks that it might be the right choice. Ms. Riley said that the Target Date Fund is still one of the recommendations from the Department of Labor. Ms. Riley informed Ms. Stipkovich that 55 is the retirement age assumption of the Target Date fund based on the plan document and every year, participants get a notice from ICMA-RC informing them that they have chosen the default fund. Mr. McBride commented that there is no benchmark for Target Date Funds and there is nothing to compare it to. Jason Scharp

6 shared that ICMA-RC is on the conservative side with the Target Date Funds and has less exposure to high yield bonds. Mr. Johnson advised the committee to do their homework, document it, and make the best decision as fiduciaries. Mr. Stern requested Ms. Riley to provide data of the Target Date Fund s performance and the number of participants in the default fund. F. PARTICIPATING EMPLOYEE REPRESENTATIVE RECRUITMENT FORM SUB-COMMITTEE The committee was informed that the term of Mr. McBride as a Participating Employee Representative will end on June 30, A sub-committee needs to be formed for the selection process. Mr. Albaugh, Mr. Romines and Ms. Laszlo volunteered to participate on the sub-committee. The open recruitment will start in March 2015 and interviews will be held in April if there are numerous applicants. During the May 21, 2015 meeting, the sub-committee will make a recommendation to the full Deferred Compensation Committee for the new Participating Employee Representative. The new representative s term will start on July 1, 2015 and he/she will attend the meeting scheduled on August 20, IV. OLD BUSINESS A. 457 TRACKING OF PRE-TAX AND AFTER-TAX ROTH Update Ms. Riley updated the committee that ICMA-RC is still on track to be able to offer 457 pre-tax and after-tax allocations in their system in March The City of Anaheim and State of Missouri will be the first ones to test this feature. B. IN-PLAN ROTH ROLLOVERS/CONVERSION AMEND PLAN DOCUMENT Update RHS PLAN DOCUMENT AMEND LANGUAGE FOR RETIRED ANNUITANTS Ms. Vlha sent the final language of the plan amendments to all committee members. Mr. Johnson said that it is informational so the committee is aware of what the final language looks like. Ms. Riley said that she had already forwarded it to ICMA-RC s legal department for review. Ryan Carpenter shared that there has been several inquiries about the ROTH conversion but were never pursued once they realize the tax implications. C. OPTIONS FOR NON-ELIGIBLE PART TIME EMPLOYEES OBTAINING ONLINE LOANS Ms. Vlha informed the committee that four part-time employees were able to obtain a 457 loan in 2014 and there is already one part-time employee who received a 457 loan as of February Ms. Riley told the committee that ICMA-RC s system cannot farm out the 457 loan applications made by these participants. Ms. Riley presented four options to the committee. The first option is to discontinue on-line loans which will result in an increased work load for the Deferred Compensation Division who will be accepting paper applications. The second option is to take the part-time employees

7 money from the voluntary 457 plan and move them to the 457 PTS plan where the only choice of funds is the PLUS fund. The third choice is to create a new 457 voluntary plan only for part-time employees. The fourth choice is the leave it as it is. The committee was made aware that a continued increase in the number of this type of loan applications will jeopardize the plan. Mr. Johnson recommended that the enrollment form needs to include language prohibiting part-time employees from participating in the 457 loan provision. Mr. Stern said that the committee will not take any action on this. D. ADMINISTRATIVE STAFF REPORT Ms. Vlha informed the committee that the DC Committee Member Handbook needs to be reviewed and updated as well as updates for all plan documents. She will be seeking assistance from committee members for input and review. Ms. Vlha announced to the committee members that a Fiduciary workshop will be scheduled in the fourth quarter of Ms. Vlha shared with the committee that there is a Public Records Request made for the City s 457 Plan Service Report. It was requested by an individual as part of his response to an RFP Proposal Response for Santa Clara in Northern California. Mr. Johnson advised that we asked the request to be in writing and respond to it in 10 days. Mr. Johnson asked Ms. Vlha to forward him the copy of the Plan Service Report and the request so he can give it to their paralegal for review because there are exemptions to the Public Records Act. Mr. Stern distributed an article from Pensions & Investments about cybersecurity processes. Mr. Stern inquired about the current practices and the level of competency on cybersecurity within ICMA-RC and third party RHS provider, Meritain. Ms. Lazlo also inquired if there is a back-up procedure. Ms. Riley will provide an update at the next meeting. V. COMMITTEE MEMBER COMMENTS Janet Laszlo None Debbie Moreno None Lisa Stipkovich None David Albaugh None Joe Romines Mr. Romines would like to find out about the number of participants in managed accounts. Jason McBride None Henry Stern - None TOPICS FOR NEXT MEETING Thursday, May 21, 2015 Specific and detailed review on PIMCO and Columbia Acorn status and alternatives, update on new feature

8 allowing separate allocations for pre-tax and after-tax contributions, update on 457 enrollment form with language on prohibition of loans for part-time employees, report on cybersecurity and back-up plans, number of participants in managed accounts, Target Date Fund performance. VI. ADJOURNMENT The meeting adjourned at 3:48 p.m. Respectfully submitted: Janice P. Garcia Deferred Comp Technician