MEMORANDUM DATE: March 1, 2015 TO: FROM: RE: All Interested Parties Municipal Employees Retirement System of Michigan Request For Proposal For Actuarial Audit Services The Municipal Employees Retirement System of Michigan (MERS) is soliciting bids for an Actuarial Audit of Valuation Results as of December 31, 2014 and a Peer Review of the Actuarial Experience Study for the Period Ending December 31, 2013. 1134 Municipal Way, Lansing (Delta Township), Michigan 48917. Enclosed for your consideration is MERS Request For Proposal (RFP). To be considered for the contract, your company must submit a written proposal that satisfies all of the requirements set forth in the attached RFP. The deadline for responding is 5:00 p.m. (Eastern Time), April 1, 2015 (proposals received after that will not be considered). The enclosed Title Page must be completed and used as the cover page for the proposal. Please submit your proposal (3 copies) to: Ron Beaton Municipal Employees Retirement System of Michigan 1134 Municipal Way Lansing, MI 48917 Proposals may also be faxed to Ron Beaton at 517-327-8336, or submitted by e-mail to RBeaton@mersofmich.com. MERS welcomes a response from your company. Any questions concerning the RFP must be received (via mail, fax, or e-mail) before 5:00 p.m. (Eastern Time) March 17, 2015. Written answers to any questions will be provided by MERS to all vendors no later than March 25, 2015. Enc. 1
REQUEST FOR PROPOSAL FOR Actuarial Audit Services MUNICIPAL EMPLOYEES RETIREMENT SYSTEM OF MICHIGAN 1134 MUNICIPAL WAY LANSING, MICHIGAN 48917 Name of Firm Submitting Proposal Date 2
INTRODUCTION This Request For Proposal (RFP) for Actuarial Audit Services is issued by the Municipal Employees Retirement System of Michigan (MERS). Under the Municipal Employees Retirement Act of 1984, 1984 PA 427, as amended, MERS is an independent public corporation and an instrumentality of its 750 participating municipalities and courts. MERS Retirement Board and staff are responsible for the administration of benefit programs for over 85,000 individuals. This RFP is issued to solicit bids from qualified companies that are interested in providing Actuarial Auditing Services for December 31, 2014. The RFP is divided into three sections: Section I. Section II. Section III. Section IV. Contractual Terms and Conditions Work Statement Information Required by Bidders Price Proposal Deadlines: Any questions concerning the RFP must be submitted on or before 5:00 p.m. (Eastern Time), March 17, 2015 to: Ron Beaton Municipal Employees Retirement System of Michigan 1134 Municipal Way Lansing, MI 48917 Questions may be submitted in writing; by facsimile (517-327-8336); or via e-mail (RBeaton@mersofmich.com). Written answers to any vendor s questions will be provided by MERS in addenda form to all vendors no later than March 25, 2015. The deadline for proposal submission is 5:00 p.m. (Eastern Time), April 1, 2015. Proposals received after that time will not be considered. The proposals must be in writing, with three (3) copies in a sealed envelope clearly labeled Sealed Bid for MERS RFP; Attn: Ron Beaton (at the above address). The enclosed Title Page must be completed and used as the cover page for the proposal. MERS will notify vendors of intent to award (or not award), on or about April 25, 2015. MERS is a public body corporate, subject to the Michigan Freedom of Information Act, 1976 PA 442, MCL 15.231 et seq. Pursuant to MCL 15.243(1)(i), MERS shall treat all bids confidential and exempt from disclosure until the deadline for submission has expired. 3
SECTION I CONTRACTUAL TERMS AND CONDITIONS A. Purpose The purpose of this document is to obtain bids for and Actuarial Audit as of December 31, 2014,_ 1134 Municipal Way, Lansing (Delta Township), Michigan. The contents of this document and the successful bidder s proposal will become contractual obligations, if a contract ensues. Failure of the successful bidder to accept these obligations may result in cancellation of the award. B. Term of Contract The contract for Actuarial Auditing Services shall be effective as of May 18, 2015 and terminate upon MERS approval of the Final Audit Report. C. Cost Liability MERS assumes no responsibility or liability for any cost incurred by any bidder prior to the signing of a contract resulting from this RFP. The total liability of MERS is limited to the terms and conditions of this RFP and any resulting contract. D. Contractor Responsibilities The contractor will be required to assume responsibility for all contractual activities offered in this RFP whether or not the contractor performs them. MERS will consider the contractor to be the sole point of contact with regard to contractual matters, including payment of any and all charges resulting from the anticipated contract. If any part of the work is to be subcontracted, responses to this RFP must include a list of subcontractors, including firm name and address, contact person, complete description of work to be subcontracted, and descriptive information concerning subcontractor s organizational abilities. MERS reserves the right to in advance approve subcontractors for this project and to require the contractor to replace subcontractors found to be unacceptable. The contractor is totally responsible for adherence by the subcontractor to all provisions of the contract. E. Disclosure All information in a bidder s proposal is subject to disclosure under the provisions of Public Act No. 442 of 1976, known as the Freedom of Information Act. The Act also provides for the complete disclosure of contracts and attachments. 4
F. Indemnification The contractor shall indemnify, defend and hold harmless MERS and its employees and agents from and against all losses, liabilities, penalties, fines, damages and claims (including taxes), and all related costs and expenses (including reasonable attorneys fees and disbursements and costs of investigation, litigation, settlement, judgments, interest and penalties) arising from or in connection with any of the following: a. Any claim, demand, action, citation or legal proceeding against MERS, or its employees or agents, arising out of or resulting from (1) the product provided or (2) performance of the work, duties, responsibilities, actions or omissions of the contractor or any of its subcontractors under this contract; b. Any claim, demand, action, citation or legal proceeding against MERS, or its employees or agents, arising out of or resulting from a breach by the contractor of any representation or warranty made by the contractor in the contract; c. Any claim, demand, action, citation or legal proceeding against MERS, or its employees or agents, arising out of or related to occurrences that the contractor is required to insure against as provided for in the contract; d. Any claim, demand, action, citation or legal proceeding against MERS, or its employees or agents, arising out of or resulting from the death or bodily injury of any person, or the damage, loss or destruction of any real or tangible personal property, in connection with the performance of services by the contractor, by any of its subcontractors, by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable; provided, however, that this indemnification obligation shall not apply to the extent, if any, that such death, bodily injury or property damage is caused solely by the negligence or reckless or intentional wrongful conduct of MERS; and e. Any claim, demand, action, citation or legal proceeding against MERS, or its employees or agents, which results from an act or omission of the contractor or any of its subcontractors in its or their capacity as an employer of a person. In any and all claims against MERS, or any of its agents or employees, by any employee of the contractor or any of its subcontractors, the indemnification obligation under the contract shall not be limited in any way by the amount or type of damages, compensation, or benefits payable by or for the contractor or any of its subcontractors under worker s disability compensation acts, disability benefit acts, or other employee benefit acts. This indemnification clause is intended to be comprehensive. Any overlap in sub clauses, or the fact that greater specificity is provided as to some categories of risk, is not intended to limit the scope of indemnification under any other sub clauses. 5
G. Contractor s Liability Insurance The contractor shall purchase and maintain such insurance as will protect it from claims which may arise out of or result from the contractor s performance under the contract, whether such performance be by the contractor or by any subcontractor or by anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable. The insurance shall be written for not less than any limits required by law, and shall include contractual liability insurance as applicable to the contractor s obligations under the indemnification clause of the contract. Upon request, contractor shall furnish MERS with a description of the policies, including an explanation of its coverage, policy limits, and deductibles. This information shall be furnished to MERS on a proprietary basis. In the event that the insurer cancels, does not renew, or materially changes any policy/coverage, contractor shall immediately notify MERS in writing of such action which notice shall be provided to MERS Legal Department not less than 10 business days prior to such adverse action. A non-resident contractor shall have insurance payable under Michigan s Worker s Disability Compensation Act, 1969 PA 317, for any employee residing and hired in Michigan; and with respect to any employee protected by worker s disability compensation laws of any other state, the contractor shall have insurance or participate in a mandatory state fund to cover the benefits payable to any such employee. H. Cancellation Either party with 30 days written notice may cancel the contract. MERS may cancel the contract immediately without further liability to MERS for default of the contractor. Default is defined as the failure of the contractor to fulfill the obligations of the quotation or contract. In the event of cancellation due to default by the contractor, MERS may procure the services of other sources, and hold the contractor liable for any excess costs occasioned thereby. In addition, MERS may also cancel the contract without further liability to MERS if the contractor, an officer of the contractor, or an owner of a 25% or greater share of the contractor is convicted of any criminal offense which in the sole discretion of MERS reflects on the contractor s business integrity. I. Delegation/Assignment The contractor shall not delegate any duties under this contract to a subcontractor other than a subcontractor named in the bid unless MERS has in advance given written consent to the delegation. The contractor may not assign the right to receive money due under the contract without the prior written consent of MERS. In addition, MERS reserves the right to approve subcontractors for this project and to require the contractor to replace subcontractors who are found to be unacceptable. J. Non-Discrimination Clause In the performance of any contract resulting from this RFP, the bidder agrees not to discriminate against any employee or applicant for employment, with respect to their hire, tenure, terms, 6
conditions or privileges of employment, or any matter directly or indirectly related to employment, because of race, color, religion, national origin, ancestry, age, sex, height, weight, marital status, physical or mental handicap or disability. The bidder further agrees that every subcontract entered into for the performance of any contract resulting here from will contain a provision requiring non-discrimination in employment, as herein specified, binding upon each subcontractor. This covenant is required pursuant to the Persons With Disabilities Civil Rights Act, 1976 PA 220, and the Elliott-Larsen Civil Rights Act, 1976 PA 453, as amended, and any breach thereof may be regarded as a material breach of the contract or purchase order. K. Price Proposal All rates quoted in the bidder s response to this RFP will be firm for the duration of the contract. No fee changes will be permitted without written consent by MERS. L. Modification of Services MERS reserves the right to modify the service requirements during the course of the contract. Such modification may include adding or deleting tasks, which this service shall encompass and/or any other modifications deemed necessary. Any changes in pricing proposed by the contractor resulting from the requested changes are subject to written acceptance by MERS. Changes may be increases or decreases. In the event prices are not acceptable to MERS, the contract shall be cancelled and subject to competitive bidding based upon the new specifications. M. Acceptance of Proposal Content The contents of this RFP and the proposal will become contractual obligations if a contract ensues. Failure of the successful bidder to accept these obligations may result in cancellation of the award. MERS further reserves the right to interview the key personnel assigned by the successful bidder to this project and to recommend reassignment of personnel deemed unsatisfactory by MERS. N. General The following constitute the complete and exclusive statement of the agreement between the parties as it relates to this transaction: 1. Any Contract resulting from the RFP 2. The RFP (and any addenda thereto) 3. The Contractor s response(s) to the RFP (and addenda) The failure of a party to insist upon strict adherence to any term of a contract resulting from this RFP shall not be considered a waiver or deprive the party of the right thereafter to insist upon strict adherence to that term, or any other term, of the contract. 7
Any contract resulting from the RFP may not be modified, amended, extended, or augmented, except by a writing executed by the parties, and any breach or default by a party shall not be waived or released other than in writing signed by the other party. Each provision of the contract shall be deemed to be severable from all other provisions of the contract and, if one or more of the provisions of the contract shall be declared invalid, the remaining provisions of the contract shall remain in full force and effect. In the event of any conflicts between the specifications, terms, and conditions indicated by MERS and those indicated by the contractor, those of MERS take precedence. Any contract resulting from this RFP shall in all respects be governed by, and construed in accordance with, the laws of the State of Michigan. O. Confidentiality The contractor shall instruct its employees and the employees of any subcontractor to keep as confidential information concerning the business of MERS, its financial affairs, its relations with its participating municipalities and courts, members, retirees and beneficiaries, and its employees, as well as any other information which may be specifically classified as confidential by MERS. The contractor must ensure that safeguards and proper procedures are implemented to protect confidential information. SECTION II WORK STATEMENT MERS is an independent, professional retirement services organization that has partnered with Michigan municipalities for more than 65 years. As an agent multiple-employer plan, MERS establishes a separate trust for each municipality. Each entity is responsible for the employer contributions needed to provide benefits for its employees and former employees under the Michigan Constitution, the MERS Plan Document, and MERS enabling legislation (Public Act 427 of 1984, as amended). The pension plan is a tax-qualified plan under section 401(a) of the Internal Revenue Code (most recent letter of Favorable Determination issued April 26, 2012). MERS provides pension administration services to more than 700 municipalities with over 2,000 different divisions each with their own actuarial accrued liability and assets. The average MERS municipality has over 100 participants and 3 divisions. MERS is a complex system with roughly 5% of plans outside the wide array of standard benefit provisions including nonstandard benefit formulas, disability and death benefits, and cost of living adjustments. MERS is seeking the services of a qualified independent actuary (Auditing Actuary), to provide an evaluation of the Actuarial Valuation results as of December 31, 2014 for selective municipalities and participants, and the assumptions and funding policies proposed in the Actuarial Experience Study for the period ending December 31, 2013. 8
Using information and data provided by MERS and MERS consulting actuary (Consulting Actuary), the audit shall produce a limited review of the work of the System s actuary to the degree necessary for the Auditing Actuary to express opinions regarding the accuracy and/or reasonableness of the following: 1. Valuation data including demographic, financial, and provision data for 6 sample municipalities as agreed between MERS and Auditing Actuary; 2. Valuation methodology and application of the actuarial cost method in accordance with generally accepted actuarial practices and any recommendations regarding best practices; 3. Valuation results via sampling including a determination of actuarial accrued liability and normal cost. Test cases shall include, at a minimum, 25 active, 15 terminated vested, and 20 retired members. This allocation is negotiable and subject to change. For simplicity, test cases can be chosen from any of the 6 sample municipalities from (1), however, active test cases shall include several nonstandard benefit provisions that are not otherwise classified as part of the MERS standard Defined Benefit program. RFP Responses may propose additional test case work, at an additional fixed cost, if there exists a concern on whether the minimum number of test cases is sufficient to express the opinions necessary; 4. Actuarially determined contribution rates for 5 divisions from the same municipalities in (1), and 3-5 selective employee contribution rates for severely underfunded plans that are subject to an employer cap^; 5. Recommended assumptions and the conclusions proposed in the Actuarial Experience Study for the Period Ending December 31, 2013. In particular, the Auditing Actuary shall focus on the investment return, wage inflation, mortality, and withdrawal assumptions; and 6. The actuarial soundness and adequacy of the funding policies proposed in the Actuarial Experience Study for the Period Ending December 31, 2013. ^There are nearly 100 divisions in MERS with an employer cap provision which requires an adjustment to the employee contribution rate to ensure the employer contribution rate does not increase above the cap. Many of employee rates for these divisions have risen over 15%, with some exceeding 30% of payroll. The scope is flexible; in the event there are technical issues found with the calculations and additional sample lives or municipalities are needed, additional services will be handled on an hourly basis. In addition, the Auditing Actuary may provide an optional service to be proposed in a separate, fixed sealed price bid. The optional service will assess whether the December 31, 2014 valuation appropriately reflects information required to be disclosed under GASB 67 & 68 reporting standards for 10 randomly selected employers. The randomly selected employers are subject to approval by MERS so as to be a reasonable representation of the System. The Auditing Actuary may produce a reasonableness review of the work of the System s actuary to the degree necessary to express opinions regarding GASB 67 & 68 compliance under the following: 1. Service cost for the year ending on the 12/31/2014 measurement date; 9
2. Changes in total pension liability due to benefit changes, differences between expected and actual experience, and changes in assumptions; 3. Average expected remaining service lives of all employees (active and inactive); 4. Sensitivity of total pension liability due to changes in the discount rate; and 5. Roll forward total pension liability and service cost, where applicable, for the year ending on the 12/31/2015 measurement date. Replication of total pension liabilities, normal costs, and any other information that is otherwise assessed from the previously outlined statement of work are outside the scope of this service and will be provided by MERS Consulting Actuary on an aggregate division level. This service is neither a replication nor sample life audit but rather a peer review of the derivation between valuation results and GASB results. It is at MERS discretion to accept and award a contractual agreement for the GASB review service. The Auditing Actuary shall describe and document any significant discrepancies between the Auditing Actuary s findings, methodology, contribution rates, and adjustments and those of MERS consulting actuary. The report should include any recommendations or opinions regarding the application of current actuarial assumptions and alternatives to the proposed assumptions and/or funding policies. In addition, the contractor may provide any recommendations to improve the quality and understanding of the valuation report. The contractor shall prepare a draft report of their findings for review and comment by MERS prior to the issuance of the final report. The final report shall be presented to the Board of Trustees by the Auditing Actuary. The approximate schedule for this project is as follows: RFP Available 03/02/2015 Deadline for Receipt of Written Questions 03/17/2015 Deadline for Addendum of Answers to Questions 03/25/2015 RFP Response Due Date/ Open Bids 04/01/2015 Select Auditing Actuary 04/25/2015 Finalize Negotiations and Award Contract 05/18/2015 Consulting Actuary Completes Experience Study 07/15/2015 Contract Starts with Auditing Actuary 08/01/2015 Auditing Actuary Completes Preliminary Report 10/15/2015 [Includes GASB Review if Awarded] Auditing Actuary Completes Final Report 10/30/2015 Auditing Actuary Presents Final Report to Board 11/12/2015 10
SECTION III INFORMATION REQUIRED FROM BIDDERS A. General To be considered, each bidder must submit a complete response to this RFP. The proposal should be prepared with a concise description of the bidder s ability to meet the requirements of the RFP. A person who is authorized to enter into a contractual arrangement with MERS must sign the proposal. As stated above, proposals may be submitted in writing, by fax, or through e-mail. No other distribution is to be made by the bidder. The blank cover sheet provided with this RFP must be completed and signed, and returned as the cover sheet to the bidder s proposal. B. Business Organization State the full name and address of your firm, and if applicable, the branch office or other subordinate element that will perform, or assist in performing, the work hereunder. Indicate whether your firm operates as an individual, partnership, or corporation; and if as a corporation, include the state in which it is incorporated. State whether your firm is licensed to operate in the State of Michigan. C. Management Summary Provide a narrative that summarizes your understanding of the services required by MERS under this RFP, and describe how your firm proposes to accomplish the tasks. Describe prior experience, which demonstrates that your firm can successfully accomplish the duties described in this RFP. Provide the name, address, and telephone number for the responsible official of three client organizations who may be contacted as references for you firm. Provide a complete description of any work to be subcontracted, and list all subcontractors by firm name, address and contact person. Include descriptive information concerning the subcontractor s organization and abilities. Provide any other information that is believed to be pertinent but not specifically asked for elsewhere. D. Price Proposal/Award 11
Bidders must complete the Price Proposal form provided in Section IV. Any questions regarding completion of the Price Proposal may be submitted to: Ron Beaton at 517-703-9030 (phone); 517-327-8336 (fax); or RBeaton@mersofmich.com (email). 12
SECTION IV PRICE PROPOSAL Company: Principal of Company: Title: Date: Acknowledgement of addendum received (if applicable): Initials Date Addendum #1 Addendum #2 Addendum #3 Base Bid Pricing for Base Bid Pricing Task Labor Materials Total $ $ $ Bid Grand Total: $ $ $ 13
Number of years in business: Licensed: Yes No Bonded: Yes No Insured: Yes No Contractor Comments: Model RFP 3-14-12 14