Template revised September 22, 2016 COMMISSION AGENDA MEMORANDUM Item No. CTION ITEM June 13 , Total estimated project cost: 500,000 ACTION REQUESTED EXECUTIVE SUMMARY ��COMMISSION AGENDA Action Item No. Page of Template revised September 22, 2016. Human Resources responsible for administering the plans. The Deferred Compensation Administrative Committee (the Committee) oversees many aspects of the deferred compensation plans including selecting the investment fund options available to plan participants, monitoring the performance of the funds, establishing the investment strategy that guides the investment funds, and recommending what options are available to plan participants within the deferred compensation plans (such as an after tax option or loans from the pla n). They also recommend many of the non investment details of the plans and assist with determining plan design The fees associated with the employees’ 457 plan accounts as well as the Police and Fire Departments’ 401(a) accounts are paid by plan part icipants. The fees associated with the non represented employees’ matching 401(a) plan accounts , approximately 10% of the total fees, are paid by the Port. The contract with the current consultant expires February 3, 2018. JUSTIFICATION By conducting a competitive procurement for this work, we hope to gain a highly qualified, fully competent firm to fulfill the necessary services and to have the opportunity to learn about each potential firm that submits a bid in order for us to choose the absolute best option The plan administrator and selection committee will work the Office of Social Responsibility to determine small business participation opportunities aligning with the Port’s Century Agenda objective to increase the percentage of funds spent on co nstruction, consulting and goods and services with small businesses to 40 percent. DETAILS The Committee has historically used the services of an investment advisor to help fulfill their fiduciary responsibilities by monitoring performance of the investment funds, recommending replacement funds when funds underperform their benchmarks, and updat ing the plans investment strategy when appropriate. The Committee also utilizes the services of a plan consultant to bring a market perspective to the process of procuring a third party administrator for plan administration, to help the Committee maintain awareness of changing legislation that can impact the plans, and provide briefings and articles related to contemporary deferred compensation topics. The consultant acts as a fiduciary to the plans and provides fiduciary training to the Committee members . On an ongoing basis, the consultant provides information regarding industry trends that can enhance the value of the plans to employees. Scope of Work The consultant will assist the Committee and the Port to administer the deferred compensation plan s and provide investment consulting services by preparing and conducting quarterly performance measurement presentations; providing information regarding Plan investment ��COMMISSION AGENDA Action Item No. Page of Template revised September 22, 2016. options , conduct ing fund manager searches recommendations of minimum criteria fee structure risk and volatility tolerances , and providing performance benchmarks Other services may include the review of fund manager performance and other required qualifications for investment vehicles , recommend ing plan structure , asset allocation , monitor ing and evaluating investment performance , review ing plan statements and the investment policy. The consultant will assist the Committee and the Port with the third party administrator s record keeping of each plan’s administrative account, pr ovide information on regulatory or industry investment standards (e.g. ERISA), and assist in audit of the plans. Acting as a fiduciary, the Consultant will mitigate risk to the Port and provide annual fiduciary training to the Committee. ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Utilize new or existing Port staff to perform the onsultant role Cost Im plications: This would be new work for the Port and it is unlikely that it could be absorbed into an existing job. The estimated cost to hire an employee to do this work, on a full time basis, would be an approximate $130,000 annual salary, annual training costs of u p to $10,000 for specific on going training, plus benefit costs of approximately $52,000 for a total of $192,000 annually. Pros: (1) Staff t ime (from HR, CPO, Legal, and ICT would not need to be allocated to procurement process (2) taff time would be saved by not administering a consultant contract. Cons: (1) The cost is more than twice that of the requested action approximately $1.5 mil lion for the maximum six years of a contract (2) This work would require adding a new job, and conducting a selection process to fill the job. In addition to the standard costs of having the Port’s Talent Acquisition team perform the recruiting activities, the specialized nature of this job may require the use of a search firm which could add approximately 45,000 to the cost of this alternative. (3) Purchasing expensive s pecialized tools or products such as financial analysis software or investment fund tracking tools may be required for a Port employee to perform the investment analysis and reporting required to help the Committee fulfill their role. (4) This alternative would eliminate the possibility of contracting with a small business, as we have in the past, to perfo rm this work. This is not the recommended alternative. ��COMMISSION AGENDA Action Item No. Page of Template revised September 22, 2016. Alternative 2 Add this consulting work to the Scope of Work of the current Benefit Consultant Cost Implications: The cost would be very similar to retaining a consultant who specializes in providin these services, approximately 500,000 for a six year contract. Pros (1) Less s taff time might be required to negotiate an amendment to the current contract than to conduct a competitive procurement for a specialized consultant. (2) This alternative would mean one less contract for Port staff to administer and might thus result in some staff time savings. Cons (1) The Port’s current benefits consultant may not have the specific expertise to provide the required services to the Deferred Compensation plans. (2) The c urrent benefits consultant may not be able to comply with fiduciary requirements for keeping the Port plans in compliance. (3) This alternative would eliminate the possibility of contracting with a small business, as we have in the past, to perform this work. (4) This option will likely cost as much, possibly more, than contracting directly with a consultant that specializes in this type of work. This is not the recommended alternative. Alternative 3 Contract with a specialized consult ing firm to perform required services. Cost Implications: $500,000 for 6 years, or approximately $83,333/year. Pros (1) Procuring a specialized consulting firm enable the Committee and the Port to carry out its responsibilities and actions in a prudent manner and will save the Port money by not adding an additional FTE and the expense of hiring and training Port staff (2) Contracting with a qualified, specialized consultant to perform the required services will ensure continuity of investment and plan advising services to the Com mittee and the Port as well as mitigate risk associated with required fiduciary responsibilities (3) his procurement would provide an opportunity for the Port to contract with a small business. Cons (1) Failure to procure a qualified, specialized consulting firm would adversely impact the Committee’s ability to execute its fiduciary obligations and responsibilities to participants (employees and retirees) who have assets in these plans in a timely and responsible manner. ��COMMISSION AGENDA Action Item No. Page of Template revised September 22, 2016. (2) Staff time for HR, CPO, and Legal woul d be required to conduct the procurement process and execute a new contract. This is the recommended alternative. FINANCIAL IMPLICATIONS Annual Budget Status and Source of Funds The Port paid fees associated with this contract , approximately 10% of the total, are included in the Port’s benefits budget each year. T hey are rolled in to the amount budgeted, and then allocated to departments, along with items such as life insurance premium costs, disability insurance costs, and medical and dental plan co sts. ATTACHMENTS TO THIS REQUEST None PREVIOUS COMMISSION ACTIONS OR BRIEFINGS None