COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Resources Department

DATE:

September 21, 2009

BOARD MEETING DATE:

October 6, 2009

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Donna Vaillancourt, HR Director

Peter Bassett, Benefits Manager

SUBJECT:

Agreement with Hartford for Deferred Compensation Services

RECOMMENDATION:

Adopt a resolution:

1. Accepting the Deferred Compensation Committee’s recommendation to select Hartford Life Insurance Company (Hartford) as the County’s deferred compensation provider;

2. Authorizing the Human Resources Director to execute an agreement with Hartford to administer the County’s deferred compensation plan for County employees and retirees and to administer the County’s retirement plan for extra help employees for the period from January 1, 2010 through December 31, 2013; and

3. Authorizing the Human Resources Director or the Director's designee to execute contract amendments which modify the County's maximum fiscal obligation by no more than $25,000 (in aggregate), and/or modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions.

BACKGROUND:

The agreements with Hartford and Nationwide Retirement Solutions (Nationwide), the County’s two deferred compensation providers, expire on December 31, 2009. Prior to this year, the County had not conducted a formal Request for Proposal (RFP) process for its deferred compensation plan in over 15 years.

Of the 4,078 County employees and retirees who participate in the deferred compensation plan, 71% are with Hartford and 29% are with Nationwide.

DISCUSSION:

Earlier this year, the County’s Deferred Compensation Committee solicited and evaluated proposals from deferred compensation providers to ensure that the County is receiving the best plan benefits currently available in the marketplace.

The Committee interviewed four deferred compensation RFP finalists and ranked each of their proposals on the following RFP criteria: fund performance, fund expenses and employee education. Based on these criteria, the Committee unanimously agreed that Hartford’s proposal was the strongest and is recommending that it be selected as the sole deferred compensation provider for the County. Although the Committee considered retaining the current system of Hartford and Nationwide operating as dual providers, this arrangement would have resulted in higher fund fees, lower fund performance, and reduced services. With lower fund expenses under Hartford’s new fund lineup, employees as a whole will save approximately $339,571 annually.

Because of the market decline of the last 18 months, the Committee, after preliminarily selecting Hartford, obtained a 3rd party independent review of Hartford in June 2009. ALIRT Insurance Research LLC conducted an in-depth analysis of Hartford’s viability and financial status. ALIRT concluded that Hartford is well capitalized to address the current market issues the country is facing.

In addition to offering significant improvements in fund performance and reduced expenses, a new contract with Hartford will provide: a guaranteed 4% rate of return on its General Account, FDIC insured savings and total stock index fund options, investment advice and retirement planning services for all County employees through a neutral third-party, customized website, and a new on-site Account Representative. Hartford will also assume responsibility for administration of the County’s retirement plan for extra help employees at significant savings to participants.

This item was presented to the Board Finance and Operations Committee on September 8^th and the Committee accepted the recommendation to select Hartford. Upon approval by the Board of Supervisors, the transition to Hartford as the County’s sole deferred compensation provider is expected to be complete by January 1, 2010.

The contractor has assured compliance with the County's Contractor Employee Jury Service Ordinance, as well as all other contract provisions that are required by County ordinance and administrative memoranda, including but not limited to insurance, hold harmless, non-discrimination and equal benefits.

County Counsel has reviewed and approved the Resolution and Agreement as to form.

Approval of this Agreement contributes to Shared Vision 2025 of a Prosperous Community by providing a cost-effective deferred compensation program to County employees and retirees in order to enhance retirement income.

Performance Measures:

Measure

FY 2008-09
Actual

FY 2009-10
Projected

Deferred compensation plan participants*

4,078*

4,078*

Number of employees actively contributing

707 (Nationwide)

1,859 (Hartford)

2,500

Average annual contribution per actively contributing employee

$6,916

$6,500

*Includes active employees and retirees

FISCAL IMPACT:

There is no net County cost associated with this agreement. Program costs are covered through fees paid by employees participating in the deferred compensation program.

1.

General description of RFP

To administer the County’s deferred compensation plan

2.

List key evaluation criteria

Fund performance, fund expenses, and employee education

3.

Where advertised

The RFP was distributed to approximately 20 firms that specialize in these services and advertised on the County’s website

4.

In addition to any advertisement, list others to whom the RFP announcement was sent

N/A

5.

Total number of RFP’s sent to prospective proposers

Approximately 20

6.

Number of proposals received

6

7.

Who evaluated the proposals

Deferred Compensation Committee:

Michael Wentworth, Public Works

Lilibeth Dames, SamCERA

Tom Bryan, Retiree

Bridget Love, Probation

Steve Perry, Human Services Agency

Donna Spillane, Health Department

Joe Demee, Treasurer’s Office

John Flahavan, Sheriff’s Office

Donna Vaillancourt, Human Resources

8.

In alphabetical order, names of proposers (or finalists, if applicable)

Hartford

ICMA-RC

Nationwide

PARS

Prudential

TIAA-CREF