State of Florida Department of Financial Services DFS TR ITN 11/12 02 Addendum #1 Questions and Responses

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1 State of Florida Department of Financial Services DFS TR ITN 11/12 02 Addendum #1 Questions and Responses 1. Question: Will the scoring criteria for fund reimbursements be scored as a simple average or weighted average? Simple Average 2. Question: Are current Investment Providers allowed to propose alternate investment funds if it improves performance or maybe different share classes of funds? Yes, as long as the change is a positive for the participant. 3. Question: Page nine of the ITN document talks about A maximum total reimbursement fee or any single product will be no more than 40 basis points for the portfolio s weighted average of its mutual funds. Is that to say that our weighted average reimbursements, or the investment providers weighted average reimbursements for mutual funds, can be no more than 40 basis points, or each individual investment option within our fund menu can reimburse no more than 40 basis points to us? Any single mutual fund investment option reimbursement shall be no more that 40 basis points. 4. Question: Explain about the monthly payment terms, the $1.70 per participant per month and how that works? Based on the number of active and inactive participants at each company, the company will pay $1.70 for each participant account with a balance greater than $0 each month to the Department of Financial Services. The Bureau of Deferred Compensation will voucher each company for its amount each month. The company will wire the funds to the Department of Financial Services. 5. Question: On the 1,200 new participant s enrollment requirement, could you just explain that? Is there some type of penalty associated with that if a company doesn t meet that number? The Bureau of Deferred Compensation requires each company enroll 1,200 new participants to our system. That does not count for people who were at one company moving to another. It s actual new social security numbers to the program. If you don t reach your goal, each company will participate in a statewide communication piece to participants to increase their contributions and for nonparticipants to enroll. This is not a penalty; it is an alternative method of contract compliance. 1

2 6. Question: Where are Attachment F and Attachment G? They are attached to this document. 7. Question: Regarding the Self Directed Brokerage Option (SDBO), is it your intent to continue to let one provider offer the service or are you open to additional providers? proposal. Additional providers. All proposers are encouraged to offer a SDBO in its 8. Question: Is a company at a disadvantage if it doesn t offer the SDBO in the scoring, or is it going to be separate and distinct in terms of the total proposal? Offering a SDBO will allow up to two points to be added to each proposer s overall score. It is the Department s desire to offer to its participants at least one brokerage service. 9. Question: The term of the contract is five years with unilateral right to renew up to a total of an additional five years. So for all intents and purposes, this is a ten year contract? Will the vendors have the right to terminate at any time during that term? With regard to the language of the right to renew, yes, the Department is binding the option to renew for five years, but it doesn t create a right within the provider to have a renewal. The vendors will be allowed to terminate upon a 90 days notice and will cooperate with the Department in the transition of its participants. 10. Question: Are you currently looking for a new record keeper as well for this process, or would that still be SunGard? us in February. SunGard is our centralized Record Keeper. They began a five year contract with 11. Question: Is there an investment consultant on the panel? No. We are using in house expertise. 12. Question: The $75,000 implementation cost per provider, is that shared amongst all providers, or is that separate amount for each new provider? That amount is separate for each new vendor. That s just an approximate cost. 13. Question: The licensing for the Customer Service Representatives, is that a six? I believe it starts out as a six, but we do prefer our representatives to have other licenses so they can provide investment knowledge and advice. 2

3 14. Question: Do you require mailed statements to the clients? No, but we prefer that participants are given the choice. 15. Question: Are there any provisions in here that are absolutely nonnegotiable? To the extent that the draft contract document does explicitly address a material issue that can be considered nonnegotiable. To the extent that it is silent on an issue, that s going to be subject for negotiation. And to the extent that something in there is not material, it s a minor matter that needs to be adjusted; maybe you discover an inconsistency piece that needs to be corrected, to that extent we would certainly be inclined to modify the document to make it capture what is intended. If you stipulate something that is in direct conflict with something that is in the ITN identified as a shall, something that is identified as a mandatory requirement and you say, no, we won t do that, then there s no room for negotiation on that issue. If there are some things that are in the ITN that are indicated as the Department desires, things that are permissibly stated, we re open to alternatives. It may be that what is desired is something that doesn t fit within your business model, but you can offer something else that we find is just as good or maybe even better, and we d certainly entertain consideration of that. 16. Question: What are the top criteria you re using for selecting a new company to be considered as one of the providers in the program? way. Incumbant providers and new prospective providers will be scored in the same 17. Question: Are there any concerns with providers in the current plan? No. 18. Question: What is the current participation rate for the plan? Forty six percent (46%) state employees only. The 46% does not include University employees as we are unable to attain the appropriate demographic data. 19. Question: Are there going to be any consultants used in the ITN process? No. We use our in house expertise. 20. Question: Is the 46%, in your minds, an acceptable rate of participation? No. 21. Question: The purpose for going out with the ITN is it based on a contact renewal or is there another purpose, objective that has been the catalyst for going out for the ITN? 3

4 With regard to why are we going out for a solicitation at this time, it s as simple as the fact that the five year term on the prior contract period has expired and we re required by procurement law to go through this process. In terms of the objective of the program, the program exists to serve the participants. And so what we re interested in is for the participants to become aware of the program and have the opportunity to make decisions as to whether or not it s appropriate for them. And communication is an important part of that, and we rely heavily on the providers to make the employees aware of the program in the hopes that they will find it beneficial to participate. 22. Question: Will the new college participants, be included in our 1,200 count? Yes. 23. Question: What are the terms or the length of this particular contract? Five years (01/ /2016). 24. Question: In terms of the enrollment requirement of the 1,200 annually, has that happened regularly? If it does happen, will there still be communication avenues available? Yes, to both questions. I handed out a folder to company representatives that include many of our past participant communications. 25. Question: In the category of the low cost provider, I m just curious; are there avenues of reaching out to them via phone, mailings, and advertisements? Yes, once the Bureau approves the communication piece, the company may communicate to our government employees as much as they want. To clear up the confusion, there is no low cost provider category in this ITN. 26. Question: On page 17 of the ITN, it says, Investment Providers must enroll 1,200 new participants to the plan per year. It that number negotiable? No. All Investment Providers must enroll 1,200 new participants to the program, or participate in a statewide communication piece. 27. Question: What is senior suitability training and certification, and who provides it? The Department does have a rule that applies to annuities with regard to implementing a state law that requires seniors, age 62 and older, be given certain disclosures, but the scope of that is simply annuities. Elderly people being sold annuities that are not appropriate for their needs because of their age. There is a rule of the Department that lays out what is required, Rule 69B , Florida Administrative Code. 4

5 28. Question: What about any of us that may have representatives in a home office that might be able to actually enroll. Will they need to obtain the senior suitability training? It s a matter of what product they are selling. If they were selling an annuity, they would be required to be licensed as an insurance agent in the appropriate category by the State of Florida. 29. Question: If you replace a vendor, what happens to the assets from that vendor, if the participant doesn t choose another vendor to transfer their account to? Are the participant s accounts split up among the remaining companies? Yes. The participant will have a choice of a new vendor. If they do not choose, then the Bureau will divide the participant s accounts among the vendors. Participant s accounts will remain whole. Our preference is that the participants would make their own choice and choose a vendor. But we know, from experience, that there s a great deal of inertia and complacency and that giving a choice, we re going to have a large percentage of participants who don t make a choice and the choice has to be made for them. And dividing the participant s accounts that exist seems to be a fair way in terms of how to treat our vendors. 30. Question: Is there a chance that you will go with fewer than five or more than five companies? Please refer to Section 1.1 of the ITN. The Department of Financial Services is seeking to contract with up to five full service Investment Providers Companies with the purpose of soliciting replies for providing full administrative and investment services for the State of Florida s IRC 457(b) program. At least one investment provider company will be chosen to offer a self directed brokerage service. 31. Question: Have you had experience with distributing participant accounts with a nonrenewed company? Yes. 32. Question: Would you entertain that in terms of a company saying they would take all the participants accounts if it s an apple to apples comparison? No. Our central purpose is to serve the needs of the participants. We also have a duty, fairness, to you the vendors. 33. Question: When you do that, is it a mapping in terms of the investment objective of the funds that the participants are currently in or is there a designated default in each of the companies? Mapping will be done to funds with the same investment objectives. 5

6 34. Question: On page nine of the ITN, it says, The Department is seeking no more than five full service providers. Does that mean you could be adding an additional full service provider in addition to the current low cost one? No. All Investment Providers are considered full service providers. 35. Question: The ITN asks on p52, Section A, Question 5 for current investment providers to provide a plan cost analysis sheet. Can you provide a cost analysis sheet or a sample of what we are supposed to fill out? The cost sheet should have your company s revenues and expenses that it incurs and collects for the plan, at quarter end 6/30/ Question: Are the penalties and fees described in the ITN (such as that on Page 27, , item E) negotiable? This is not a penalty or fee but a service level credit to compensate the State for an investment provider s failure to meet agreed upon performance standards. In addition, please see the response to question # Question: In review of Attachment C, Scope of Work & Technical Specifications Questionnaire, we would like to pose a question for clarification. Found on page 61, Question 31: Describe the various types of insurance coverage. List amounts of coverage and any limits. Please state that your company will pay for any deductions. What is the intent for us to pay? The intent is applicable to the deductibles if any of the policy. The companies are responsible for paying the deductibles of the policies on the insurance coverage. 38. Question: Section 3: Special Conditions, subsection C. Tab A 3 Management Summary, question 2(a), pg. 34 makes reference to a "Client Reference Survey" (Attachment F). Attachment F on Page 1, of the State's Invitation to Negotiate is entitled "Conflict of Interest Certification". Please provide clarity of which form should be used as Attachment F. Also please provide ING with the actual selected Attachment F. There was no Attachment F attached to this solicitation. ING has visited the State's purchasing website and was unable to locate either of the above mentioned forms. The Client Reference Survey should be Attachment E. The attachment F is incorporated into this addendum. 39. Question: Page 1, of the State's Invitation to Negotiate makes reference to "Attachment G, Affidavit as to Compliance with Preferred Pricing Clause". This form is also missing from the State's Invitation to Negotiate and we are unable to locate it on the State's purchasing website. The attachment G is incorporated into this addendum. 6

7 40. Question: Attachment C, Scope of Work & Technical Specifications Questionnaire, pg. 52, Section A, question 3 requests we provide four provider references in Attachment E. Attachment E provides space for three references only. Please provide clarity on how many references the State would like ING to provide. The Attachment E has been modified to accommodate four client references (with the State of Florida 457(b) plan being one of the four). 41. Question: Section 2.3.3, G, page 15 of the ITN Please confirm how the Plan will communicate the list of impacted participants to investment providers. What information will be provided? What volume of participants does the Plan expect to be on the report? What is the Plan s preferred method of communication. (phone, mail, , etc.) As indicated, the Bureau will and WinZip a file of terminated participants (average of 300 per month) monthly to each of their provider companies. The list will include the participants name, social security numbers, and addresses. The Bureau believes the companies are best to determine its preferred method of communication. 42. Question: Section 2.3.9, page 26 of the ITN Which investment provider employees are defined by the Plan as Specialists and so required to obtain badges and attend an annual training meeting by the Bureau? Is this local, onsite representatives only? Administrative support staff located at the investment providers home office? A Specialist is an employee of the company that has contact with our state employees and participants and that answers questions about the state s plan whether the company s employee is on the phone, website or onsite. These Specialists must have ID badges and attend annual training by the Bureau Chief. 43. Question: Section , Item E, page 27 of the ITN Please explain how the Plan defines 100% clearing. Clearing the discrepancy report would be defined as addressing each participant discrepancy and having a resolution to clear or remove the discrepancy from the list given to each company after each pay date. Each participant must be contacted before removal of the discrepancy is completed. 44. Question: Section , Item D, page 30 of the ITN Please provide details around the Plan s anticipated process around unclaimed property. What is the expected level of involvement, specific responsibilities from investment providers? 7

8 Annually, the Bureau of Deferred Compensation will request that each approved Investment Provider Company holding participant s accounts identify participants that have not claimed their accounts for distribution. These accounts should be identified if any of the following conditions apply: Participants that are mandated at 70 ½ years to take a distribution and have not done so within 5 years according to Florida Statute Participants whose beneficiaries have predeceased them or cannot be located. Participants whom do not have a trust. IPs must put forth the effort to locate these participants by sending written notification to the last known address of the participants informing them of the unclaimed property and asked that the participant to respond back to the IP. The IPs must provide to the participant a contact name and phone number. A national locating service must be used by the Investment Provider to locate potentially unclaimed accounts. 45. Question: PUR 1000 Document, page 13, Items 40 & 41 Please confirm whether a small business, minority business, disadvantaged business spends requirement exist in connection with this ITN. Items 40 & 41 discuss such spend, but nothing is mentioned in the ITN specifically. If services/products requested in this solicitation are available from respondents who meet the requirements in the PUR 1000 document, items 40 & 41, the provisions would be applicable to this ITN. However, it is expected that the respondents to the ITN will be large publicly held corporations which do not meet those requirements. 46. Question: Attachment C, question 5, page 52 Please provide a sample plan cost analysis that is being requested. Please see the response to question # Question: Plan Document, Section 3.10, pages 14 & 15 Please provide details around the Plan s expectations of investment providers to administer deemed IRAs during the next contract term. There are no plans to offer a deemed IRA during this contract period. 48. Question: Plan Document, Section 15.13, page 39 Please provide details around the Plan s anticipated process surrounding the proposed unclaimed account process. How will information be communicated between the investment providers and the Plan? Please see the response to question # Question: Exhibit F, Section 16, page 10 Please provide details around the anticipated involvement from the Plan regarding this reporting process. 8

9 The response to this question is identified in Exhibit F, Section 16. There is no additional information that can be added at this time. 9

10 ATTACHMENT F Conflict of Certification Company or Entity Name For the purpose of participating in the Request for Proposals process and complying with the provisions of Chapter 112, Florida Statutes, and Section Florida Statutes (F.S.) the undersigned corporate officer states as follows: Proposer (check the applicable block) certifies one or more of the following: A. The persons listed below are current State employees who own an interest of five percent (5%) or more in the company/entity named above: B. To the best of its knowledge, the Proposer or its employees, agents, or subcontractors, have not knowingly participated, through decision, approval, disapproval, or preparation of any part of a purchase request, investigation, or audit, in the procurement of commodities or contractual services by a state agency from an entity in which the contractor, or its employees, agents, or subcontractors, has a material interest, in accordance with Section , F.S. According to Section (15), F.S., material interest means more than 5 percent of the total assets. Agent means any other entity or person acting on behalf of a Proposer. The above information is true and correct to the best of my knowledge. Signed on this day of, 20. Signature Print Name and Title 10

11 ATTACHMENT G Affidavit as to Compliance with Preferred Pricing Clause Pursuant to section 3 of the Contract, the undersigned Contractor hereby attests that the Contractor is in compliance with the preferred pricing clause contained in the Contract. PRINT CONTRACTOR NAME: By: Signature of Authorized Representative Date: Print Representative s Name/Title: STATE OF COUNTY OF Sworn to (or affirmed) and subscribed before me this day of, by. Signature of Notary (Print, Type, or Stamp Commissioned Name of Notary Public) [Check One] Personally Known OR Produced the following I.D. Vendor Name Vendor s Authorized Representative Name and Title Address City, State, Zip Phone Number Address 11

12 REVISED -ATTACHMENT E Client References The Proposer must list four (4) separate and verifiable clients of the Proposer's firm. The clients shall be listed on this form. Any information not submitted on this form shall not be considered. The Department shall not be responsible for errors in addresses or other information listed below. If the information is erroneous, the Department shall be under no responsibility to correct it or make any further effort to communicate with the client. The clients listed shall be for services similar in nature to that described in this solicitation. Information on each client must be provided on this page: 1. Name Address City State Zip Code Phone Number Extension Contact Person Title address 2. Name Address City State Zip Code Phone Number Extension Contact Person Title address 12

13 3. Name _ Address _ City State Zip Code _ Phone Number Extension _ Contact Person Title 4. Name _ Address _ City State Zip Code _ Phone Number Extension _ Contact Person Title I authorize the Department to contact these references: Proposer Authorized Representative Signature 13