Travis County Commissioners Court
August 19, 2008
Item 20
20. Consider and take appropriate action on the following: a, recommendation of deferred compensation plan oversight committee for third party administrator of deferred compensation plan; and and 20 b is authorize deferred compensation plan oversight committee, deferred compensation consultant and county attorney to begin specific contract development with great west retirement services for plan administration services for the Travis County deferred compensation 457(b) plan, including guarantees related to providing products and services as proposed. We indicate this matter may be taken into executive session under the that's the consultation with attorney exception to the open meetings act depending on how the discussion goes.
>> good morning.
>> good morning. I'm alicia perez, executive manager for administrative operations. We're here today to discuss the administrator or contact for the administrator for our employees 457 deferred compensation plan. 457 refers to the irc code, the internal revenue code that allows public employees to set aside money, usually for retirement purposes, tax deferred. It goes in before taxes. We have had a long standing relationship first with naco, then pepsco and now nationwide. For the last 28 years they have been our providers. We have also a committee that was appointed by the court, made up of different or various members of different departments and I'm going to turn it over to norman mccree who was quickly elected the chair of our committee in the first meeting. Norman?
>> good morning, judge, commissions.
>> good morning.
>> you did appoint a committee last October and we've had 17 meetings of that committee since that date. We've also had an outside consultant, al who all know, dekristefero, a few opening remarks, I will give it to him.
>> good morning, my name is al dekristefero I'm the consultant hired by the court to and his the county and the committee in the 457 process. I would just like to frame this issue today by saying some things that I probably have said before to the court. That I think are worth repeating. First of all this issue is not a budget item. It's not an issue that involves any taxpayer money. It is strictly employee money that -- that for years has been contributed to this plan and in that vein you all on the court are fiduciaries of this plan. Fiduciary by definition acts solely and exclusively in the best interest of the plan's participants and beneficiaries. I think that is -- that is a point worth repeating that -- that any fiduciary, whether it's a fiduciary for 457 plan or a fiduciary as I am with my parents affairs, is required bylaw to act solely in the best interests of the people that you are providing the benefit for. Secondly the law requires if you don't have the knowledge to make rational decisions about the fiduciary responsibility you hire experts to help you make those decisions. And I salute the court because the court has approved the hiring of me, and I am, I've worked in the industry long enough to be an expert in these matters and I salute the court again because you put together a committee of people, committee of employees, a committee that I've worked with as norman just mentioned on at least 17 different occasions and I've worked with a the lot coast around the state in plano, corpus christi, fort worth, el paso, I can assure you this group has been diligent in their efforts and understand the issues and I think have -- have abided by the guiding principle that nothing should happen with this plan unless it benefits everyone who currently participates in the plan or anyone who may in the future participate in the plan and that has been a critical guiding principle throughout all of the committee meetings and throughout this entire process. That any change that might be recommended would have to benefit everyone currently in the plan. And I think what we're looking for today is a decision by the court because we're kind of working under a pretty tight time line, and I think that court will have the option of either accepting what the committee has -- is recommending today and the court also has the option of taking no action and quite frankly that, too, is a decision, a decision as a fiduciary to just leave things as they are right now. And with that I will turn it back over to norman, who wants to kind of outline the process we followed here.
>> thank you. One of the first things that the committee did was train on our legal responsibilities as well as the court's and our responsibility to the court. And we devoted several meetings to that. And all of the committee members were attentive and I have been impressed with everyone's knowledge of our responsibilities in this case. The court did approve the committee's recommendation to go out and seek proposals for the 457 plan and also approved the committee's recommendation to negotiate with three respondents which were great west, icmarc and nation-wide. The committee as well as our consultant al interviewed all three firms and requested best and final offers. The committee unanimously determined and believed that the proposal from great west retirement services provided the best value for employees and participants in the plan. It met the guiding principle as al mentioned before that any changes to the plan must benefit all plan participants. We have several reasons that we believe great west was the best, is the best plan for county employees. I'm going to turn it over first to mary mays to discuss some of those items.
>> I'm mary mays, investment manager for Travis County. The fixed account was one of the things that we looked at very, very carefully because so many of our participants are in the fixed account. I want to tell you about the reasons why we have look and chosen this particular provider, the participants will get a higher rate in the proposed stable value called the putnam stable value plan. We also looked at what happens if sometime in the future we should choose to change providers. Because this has been a critical part of this discussion and what would happen is the plan is backed by securities that are purchased for this plan. And they could be sold, if we were to change providers, we would get the book value. That would be the cost plus any accrued interest. In some plans you would get the market value. And that means that we're taking the risk that the market would be against us at that time. And we chose to -- to do this plan which is book value because that means great west takes that market risk and we don't have to worry about it. And there's another option. In fact we could simply move the putnam value to another provider. Because it is independent of -- of great west. The nationwide fixed assets will move one month at a time over five years. The reason for this arrangement is that it avoid paying the market value adjustment that you have heard so much about. That sounds a little complicated but we think that it will work very well. What will happen during that transition is that participants will receive a blended rate between the rate at the new program and the rate at the old program. So that if we were halfway through that five years and one of the rates was three and a half percent, the other rates were -- was 3%, then they would receive three and a quarter percent. It would blend, you know, some of the math gets complicated but basically that's the idea. All servicing will be done by great west, the participants will only have to deal with great west and they will only receive one statement showing their fixed account balance from great west.
>> thank you,.
>> greg jacobs is going to discuss some of the mutual funds.
>> good morning, greg jacobs. Auditor's office. The mutual funds lineup that great west presented to us was a very good lineup. We have approximately 20 million invariably mutual funds that are divided into three different groups. There's a managed group, there's an index fund group and then there is a -- there is a target date group. The target date group we put special attention on we looked at the fees very carefully on this because they are driven mostly by fees. When we analyze those, the -- the index funds of the -- the index funds of great west were -- were notably -- notably lower than those of imc -- icmr -- rc, and nationwide. Yes. The fees. We also looked at some of the more popular funds that were in the variable accounts and had great west retain those as part of their lineup which was the fidelity contra, the
>> [indiscernible] return, on him mer international bonds. American funds capital world growth in income. The vanguard index funds the that great west offered would replace the current nationwide index funds at significant savings to the Travis County employees. The target date funds would replace the current nationwide investor destination fund which also had -- had reduction in fees for those funds as well.
>> vicki skinner is going to go over some of the service aspects of great west's proposal.
>> all participants will have access to a high level of service through great west because of their strong local presence here in Austin, Travis County. They will dedicate a half time person servicing all of the participant accounts and they also have -- have an office at 6th and congress where they will be easily accessible to everyone and they have said that even if a half time person dedicated to Travis County is not in, whoever is there will assist the participants. They are a leading provider both nationally and in the state of Texas and locally they are the provider for the city of Austin, Austin Travis County mhr and the Travis County hospital district. They are also the provider for the city of houston.
>> michelle is going to go over some of the costs.
>> you heard some talk about the costs. I'm just really going to bottom line it for you here? From every aspect from every perspective that we looked at, the great west proposal has lower costs. Those lower costs translate into better value for all of the plan participants, currently in the plan and future plan participants. The numbers were what the numbers were, also we can make this move without the participants incurring any costs for this move. So when we looked at the whole picture, it was very clear to us that the proposal for great west was the one that was in the best interests of all of the plan participants and that's what we are recommending.
>> thank you, michelle, elliott it's going to go over some of the future implications of this change.
>> good morning, judge, Commissioners.
>> [inaudible - no mic] as a county employee.
>> [indiscernible] I think the foremost issue facing the county Commissioner's court and also Travis County employees is that of --
>> [indiscernible]
>> [microphone not working] you have got the opportunity to -- to control stabilize the future.
>> [indiscernible] that the county has. Our recommended vendor, great west is going to provide a -- an outline -- as outlined a moment ago, an increased presence here in the Austin community to be able to provide quality service, to provide advisors and planners for county employees, they are going to provide a project that does not even have market value adjustment that you heard so much about, this is not an annuity product.
>> [inaudible - no mic] you won't have to deal with that in the future as phased out. The program as a whole
>> [indiscernible] those who are mutual fund investors will have a --
>> [inaudible - no mic] in short what -- what great west is offering here is just a better value, just all around better value in quality of service for the individual. In so doing
>> [indiscernible] getting back to the control word I used a while ago, Travis County employees are going to be in a position to take better control of their retirement future. Great west is bringing to the county, the county Commissioners are so inclined a change for the better that's going to give the county employees the tools they need to work out their retirement future.
>> thank you, elliott. Alicia?
>> yes. Up heard from the members of the committee, really it was a very, very good experience. We had very good attendance. A varied group, a lot of debate and we are here to make a recommendation and our recommendation is for the court to consider and take appropriate action on -- on deferred compensation plan and the third party at administrator for that plan. And authorize the -- the committee to work with purchasing to develop a contract for the administration of the 457 program. We have a couple of other things that I would like to -- to point you to and -- and discuss and that is time line in April, April the 22nd, the court --
>> alicia before you finish that, let me -- let me see who wants to weigh in on this. I am very concerned that the participants of the deferred compensation plan were not notified of a proposed change to the plan. When I asked a committee member about it, I was told the committee voted to wait until the court approved the change before notifying the participants. This is a personal matter and those involved should have been made aware of what was going on before it went to court. I have been very pleased with nation-wide and kim wilder's dedication and availability has been outstanding. The employees of Travis County who participate in the deferred compensation plan should have been notified and given an opportunity to ask questions about it. It has not been handled properly. I respectfully approve that you take no action regarding great west. The employees, the participants have had no input in something that is going on greatly affects them. How would -- would you all respond to that question. That's not something that needs to -- to come to the Commissioners court.
>> [multiple voices]
>> to that -- just a couple of things that I want to mention. We have prepared a -- a frequently asked questions, we usually don't send these out until we bring them to the court and they are approved so we have prepared a piece like that. We also notified the -- the sheriff's officers association earlier in the process and invited them to the meetings. The meetings -- this was decided very early on, the meetings of the deferred compensation committee were posted and everyone was invited to attend.
>> as to the -- as to the question of -- of the court, the committee voting to -- to wait to -- to notify employees, until after the court made a decision, there was a -- there was not an official vote. There was discussion back and forth on that particular item. But I think that we thought that it would be best to get the court's direction on that because we hadn't been to the court since we -- since the committee had voted to make a recommendation. Get y'all's feedback.
>> what's happened here today though, let me back up a little bit. As if this is etched in stone, period. You are making recommendations again I spoke with alicia yesterday, same -- same issue that Commissioner Daugherty read as far as the e-mail that we received is some of the same things that I requested and of course how do we notify our employees? I think the consultant made a good point when he started off, this is not tax money, this is not -- not the budget. It is the employees' money. My whole point on that was to say this. Since it is the employees money that we're dealing with, all of us that are invested in this, everybody not invested but those employees that have and is currently with -- with nationwide, that's because that's who our particular vendor is, it's just appears to me that they should have a say in what we're doing. In the backup,. There was a question Commissioner Gomez requested, according to the survey, in the backup, there were people that wanted to stay with nation-wide. I'm not saying we don't do anything about this. But I don't feel very compelled to -- to ensure that employees it may be a situation where a shoe doesn't fit all. It may be things that personally a person has in a financial situation that they maybe want that's not within the bounds of the questionnaire. Just appeared to me that somewhere along the employees of Travis County have been left out of this thing. I understand, I appreciate what the committee have done individually. You have put a lot of work into this, the consultant has, a lot of other stuff. Let me give you another example. I made a telephone call to this great western folks yesterday evening. I can got -- I wanted to see, blah blah blah, I called that number, no answer. And it was another number that they forwarded. And I called that number, no answer. I was beginning to wonder, wait a minute here. What's really going on. 1-800 number for accessibility. A lot of stuff. I have some serious concerns, maybe the employees have the same serious concerns that I do, is what we're doing here. The -- things are funny out there now. Fannie mae, freddie mac, enron, a whole bunch of other stuff, I want to make sure that Travis County employees get of course the best for them. But I think that I am more concerned that Travis County employees have a say in the direction of their money. So I'm going to end it right there. I really don't want to take action on this today. I need to look into some things, I'm quite sure there are some employees that want to look some things before any transition, if the court decides to do that, takes place.
>> one thing to address that question, we came early on and appointed and asked the court and the court approved an employee committee. This was made up of employees. These are your employees that are indeed invested. Not all of them because I think there was one requirement that we had one that was not invested. These are employees representing seven departments that are in the -- most of them invested in the particular plan. We did contact the larger associations, the sheriff's association, and they sent a representative, she sat halfway through a meeting and said boy I think you all are taking care of us, so she left and was happy about -- about the experience. We also contacted acne and each of the individuals that are on the committee to use back to the -- to the -- to their officers.
>> I appreciate that very much. I really thank all of you, it's a complicated issue, I'm sure that you all looked at everything that was possible to look at. As elliott said, this is a matter of control for the individual participants and, you know, that's been an issue that I've focused on the whole time. That we -- since we started discussing this. And so -- so I guess that we can say that you sort of have yes you are all county employees, but you sort of have a -- have a constituency, if you will, of those people who are participants and what I got this e-mail as well, plus I got -- another e-mail of -- of questions that -- that are going to be addressed after the fact. After it comes to the court and we say yea or nay. Well, we shouldn't make decisions that way, in my view. I think that you make -- you share the information with all of those participants and have, you know, all of the give and take with them and then it's brought to the court for -- to ask me to take a position on it. If we -- we need to give those county employees control. Control over their money and what they want to do. It's their choice. It's -- they earn the money, they need to make the choice.
>> if I could make a comment on -- on -- first of all, I've heard that you had two expressed issues of concern from -- from 1400 participants in the county.
>> it doesn't matter what size of --
>> I'm making --
>> it doesn't matter in this particular case --
>> I understand --
>> because a smaller universe of employees --
>> Commissioner, you will never --
>> still taking -- they are in charge of their money.
>> I understand that. But all I'm saying is you are in charge of the plan. And you have to --
>> but I can't make decisions for them. I'm not comfortable making decisions for them how they are going to invest their money
>> [multiple voices]
>> have the employees been notified. Have the 1400 employees that are under nation-wide currently and -- in their particular deferred comp services that they offer Travis County, have they been notified?
>> [multiple voices]
>> let me ask --
>> let me play county judge.
>> okay. Thank you, judge.
>> go ahead.
>> if I could just --
>> if we could just dial the clock back maybe a year and a half ago when we renegotiated the existing program with nation-wide and we did a major replacement of all of the funds and we got the same concerns from the court that we're getting right now. That why are we -- why are we doing this and almost universally that change was appreciated by -- by all county employees. Because the reality is most employees do not have a good understanding of what is good value and what is not good value. And once again, that's why you formed a committee to do that on behalf of the employees. And you would think that -- that -- I've worked with a lot of committees, I will reiterate. The fact that this group tried diligently to come up with a solution that benefited every county employee. When you change your park plan here, another health care provider, I lose my doctor, I as an individual might be upset at the court, but if it benefits most of the employees as the county made -- has the county made a good decision. I think that's what -- you are never going to please 100% of the people this is not a beauty contest. This is based on facts and figures and a competitive bid process for the first time in 28 years. The county has actually allowed the industry to compete for its business and it's come up with, in my opinion, the best value any county in the state of Texas will realize in a 457 plan.
>> did you finish Commissioner Gomez?
>> yeah, I will -- I'll -- later.
>> Commissioner Davis?
>> yes, thank you, judge. But here's the point. You mentioned health care. A health plan. We, during the time of looking at the health and the benefits, we have public hearings, we have a lot of employees that come and say hey, we don't like it, we want this, we like this, we pick and choose, we try to come up with the best thing. But at least they have an opportunity to participate. Even in our dealing with our health plan benefits. Now, my concern is not that I'm opposing what you're doing. My concern is that the employees have not had an opportunity, I think, to look at this and I think employees, you know, have the wherewithal to know what they want. I just really don't believe no employee here that invested here really don't know what they want. They know that they are investing the money, a lot of these are fixed accounts so the money is pretty much safe. In those stable valentine of situations that's pretty safe stuff. But at the end of the day, it's almost like we are infringing on the integrity of the employees of Travis County by saying they don't know what's best for them. By not allowing them to participate at a level whereby they are able to make decisions and I think everyone -- since you are dealing with their money, go back to what you said mr. Consultant, I don't know your name. But you stated earlier right off the cuff, you said this is not tax money. You said this is not a budget. What this is -- Travis County employees' money, I want to underline ownership of money by the Travis County employees therefore I feel that they should have a say in what we do here before we take action and do the latter. In other words reverse order in my opinion.
>> amen.
>> any response?
>> the only thing that I can say, I don't know what else you could have done other than to make the meetings open and public.
>> they were.
>> they were.
>> and ask people to come in.
>> we do have the --
>> Commissioner eckhardt, ms. Wilder.
>> you had already mentioned the contract with nationwide had been in place. It's been in place for 28 years without competitive bid, correct?
>> that's correct.
>> we renegotiated the contract a year and a half ago and this issue has been going on before I was on the court. It's been discussed. Do we know how many times the -- the issue of changing our program has been before the Commissioners court as an agenda item. About three or four, three times.
>> the subcommittee was established when?
>> this last committee was established last October.
>> a prior committee was established when?
>> I think it was a year before that. Two subcommittees comprised of employee representatives have looked at the issue?
>> yes. A survey was also conducted that was put out to all county employees, not just those who were participants in the nationwide program, correct?
>> where were the meetings posted for the subcommittee?
>> we didn't actually go through the official posting process because of the fluid nature of some of these meetings, especially, also the venue that we would have, but we certainly, the employees from the departments that were represented on the committee knew of the committee meetings and we did -- we did specifically ask members of the -- of the union to attend a meeting so that we can apprise them of what the committee was looking at and recommending. Also we had an official open meeting back in February that -- that we invited nationwide to be at as well, to go over the reports that they had. Annual reports.
>> considering our fiduciary duty, our fiduciary responsibility, in providing this -- in providing this plan or a plan to our employees, would it meet our fiduciary duty to put it to a vote of our employees?
>> as a fiduciary, you have to do what a prudent person would do. And you have to make decisions that are reasonable. Based on objective standards? And to -- to pull the employees might give you another piece of information, but the level of education that would be necessary in order to make that a meaningful vote would be that you would have to take the -- the employees who were voting through the same kind of process that each and every member of your committee went through in terms of learning both the responsibility not just to their own personal preference but to everybody else who is a participant's preference and learning some -- some information about -- about how the whole 457 industry so to speak works. Guessing I would say that you are talking 60 to 840 hours of time on each employees' part to go through that full process.
>> given that, I appreciate the level of commitment to the committee members in taking this -- representing the employees and taking that kind of -- kind of responsibility on your shoulders for the benefit of all of us.
>> ms. Wilder.
>> thank you, judge, kim wilder, nation-wide retirement solutions. Appreciate the opportunity to be with you all this morning. I did hand out a sponges, a nationwide response to the backup yesterday afternoon. I know all of the commissions have that. Commissioners have that. I would like to make you aware that I was at probably 95% of the open enrollment sessions here in Travis County this month from July 15th or 20th to August 20th. I attended most of those and the overwhelming question that I received in those meetings was why is Travis County doing this, I'm happy with my deferred compensation plan. Why are they going out for bid and why don't I have a say in what happens to my money? So this honestly telling you I don't know what the communication is, I don't have the ability to get on the Travis County website the internal website to understand how that's communicated to the employees. But that was the overwhelming response I got in the last four weeks. Spending a lot of time here. The response in the best and final offer that we submitted to Travis County was not intended certainly as -- as a -- as a -- I guess this is -- we intended to go through a negotiation process so when we received an e-mail about a week ago, I guess last Thursday, that the benefits committee had chosen great west, we were a little surprised that we had not gone through any kind of negotiation process to determine what kind, you know, things that you exactly are looking for. So we -- we had a meeting, we had a best and final offer meeting.
>> ms. Wilson.
>> after that --
>> let her finish.
>> thank you so much, thank you so much. Any questions on service, I have got to address the court on this. I was hired by nationwide to service Travis County, period. Five days a week, period. I'm here in Travis County on Wednesdays right in this building. I am available five days a week. If that is what is needed here in Travis County, I enrolled 268 new people in the deferred compensation program last year. Four years ago I believe the enrollment was between 20 and 30, if I can recall. That does not include increases. That does not include account reviews, that does not include beneficiary changes or just someone coming in to talk to me about their investments or whatever. So from a service aspect, I'm not sure -- I understand completely how the value there is going to change with the great -- with the great west coming in because I'm a dedicated representative here in Travis County. Any questions for me.
>> was this time line presented to you?
>> yes, I did get that.
>> so this time line includes rfp release date, deadline for written response to -- to respond to questions, includes again negotiation was selected respondents andments finalized negotiations with selected respondent. Does it not?
>> yes. It does.
>> ms. Wilson?
>> it is true that we did not hand hold nationwide through this process the way they were hand held and pushed through previous processes. To push them three and four and six and eight and 10 times to give us a better deal. They had the same opportunities as every other vendor to provide a proposal, they provided a proposal, in their proposal what they were willing to put out in writing that they would provide is three hours of service a week. I know that kim has given a lot more than that. But that's what they put in writing in their proposal for service. And that was what we were basing the -- the evaluation of service on. As it comes to negotiation, the three who were considered to be the best possible -- offers were all brought in, they were given an equal amount of time, they were given exactly the same format in which to present what they wanted to present, to answer questions and to be told what it was that needed to be done to improve their initial proposal in order to make it the best. Nationwide, in my opinion, received more specific information than any of the other providers in that regard. Nationwide was told very clearly and very plainly, that if they wanted to bring their expenses down to be comparable to other providers, they needed to half them. They got them down by 40%. So -- so the second -- saying we didn't negotiate with them, I don't understand how they think they should get more than everybody else in terms of negotiation and they were given --
>> on the last page of the backup, there's a grading system of -- I'm not sure how -- how it was arrived at, but there's a chart that -- that has us of course being in last place with regard to great west and icma. On -- when we lowered our expenses by 40% we got a -- about a 50% I guess ding on the investment score there. And I just had a question about how that chart was arrived at and how -- why we were graded so low.
>> can somebody answer that?
>> what section, kim?
>> that was the third page of the backup.
>> and the scores --
>> investment criteria?
>> they were all relative to each company's best and final offer. Is that --
>> well, it looks like we are 50% lower in that category.
>> what category are we talking about.
>> the investment category.
>> a lot of that is driven by the cost of the index options that you prepared and the cost of the target date fund that you proposed.
>> so when we reduced our fees by 40%, we still were dinged 50% on the score.
>> 40%.
>> that's reflected in the fee section.
>> can you speak to that?
>> sorry.
>> when you reduced your fees by 40%, we looked at your final fees against everybody else's final fees and you still were a lot higher in your fees. To give you one example, on the index fund, the only index fund that I can ever remember is s and p. Your fees are five times as large as the first choice.
>> okay.
>> I had another question on the mda and the -- in the backup, I know it was not stated at first the supplemental information, it was stated and I want employees to understand that if you choose the -- the
>> [indiscernible] account option or going over to the guaranteed and blending the rate, that they will not have the ability to move their money for the next five years.
>> which is a very true statement. Which is also true if we had picked nationwide in this deal.
>> if you had chosen a guaranteed stable value, correct.
>> that's correct.
>> no, no, not guaranteed stable value --
>> decided to mover to a stable value products that we would never again have to deal with a market value adjustment. So even with nationwide, it would have been a five year payout from the fixed account into the stable value product that they proposed and that --
>> that's correct.
>> -- frozen the funds currently in the fixed account. If I could make one other comments to the court, because I think this is important for people to understand. Nation-wide will continue, even if you were to approve this deal, they will continue to make a boat load of money because they keep the fixed account assets for the next five years. Until they are moved 1/60th each month over the next 60 months. So they will keep the fixed account assets, which is where they make the bulk of their money right now. That's one of the reasons why expense-wise they could have done a much better job for the county and their best and final offer and for reasons that I can't explain to the court, they chose not to.
>> any final question or comments, ms. --
>> did anyone -- did anyone -- did anyone compare total revenue from nation-wide and great west on the entire plan on the entire case?
>> yes.
>> and do you have the difference?
>> that's the fee structure, if you look at the fees.
>> by dollar amount.
>> 20 versus 30. Yeah.
>> okay.
>> total.
>> okay, we have been given this document and the bottom line here is that the return on the investment would be higher.
>> yes.
>> the expenses imposed would be lower.
>> that's correct.
>> with the -- with great west.
>> but there would have to be a five year transition period for the fixed account.
>> that's correct.
>> so what would happen to -- to non-fictioned account?
>> non-fixed account.
>>
>> [indiscernible] funds offered in the great west plate form. In answering part of the concerns of the court, if you are in one of the five funds, for example, fidelity contra or --
>> on oppenheimer, euro pacific by american funds, all of those assets would move from one administrators platform being nation-wide to the new administrator's platform being great west. It's basically invisible. To the participant. The participant will lose nothing. Their investments in those funds would continue as is. But take the 1.7, $1.8 million of assets in the s and p 500 index fund, which participants now pay 63 basis points for, that 1.8 million would move to great west, it's a vanguard option that would charge them 7 basis points. 7 basis points versus 63 basis points. There is no difference in how that fund is managed. The only difference is what you pay for it as a consumer.
>> okay.
>> now, ms. Wilder, the consultant and committee are telling us that is it great western or great west.
>> great west.
>> great west means more money for the investment, on the investment, and less in expenses. Is there any disagreement with those two conclusions?
>> I have not seen the great west proposal so -- the only thing that I could do is pull the city of Austin great west profile yesterday and I did call great west as well and had them verify that the total expenses on the city of Austin website were accurate net of all fees, which is what I provided you yesterday. And ours were very, very similar to the city of Austin, but I do not know what great west is proposing in Travis County. I have not seen that document.
>> two questions: talk to us a little bit about schedules. Criticality is what I'm looking for. Then I have another question as follow-up. Then I will be done.
>> okay.
>> on the schedule like I said, the schedule was adopted on April the 22nd by the court today August the 19th, agenda item for court consideration to -- of contract award. So it's a discussion. We have another -- another option for next Tuesday also, also a contract award. Then our absolute deadline September the 2nd for a contract award. So we let --
>> September 2nd.
>> yes. We left a little -- a time -- barbara is looking at me because she has to prepare the contract in order for you to award it. So we had left some discussion. We have today probably next week would be pushing --
>> actually the next schedule was written up the hope was that if it was possible to -- to reach a decision today that you would have finalized written contract documents to approve on September the 2nd because that would have put us in the position to -- to be able to implement by the end of the current contract with nationwide.
>> okay.
>> my other question is if -- if the court -- is interested in -- in educating and getting some feedback from county employees, between now and next Tuesday, at 9:00 a.m., how would we go about doing that? How much do we think that we could get done?
>> well, we can send -- we can send information out in the -- in what the committee is recommending to the court, what you all will be considering, to employees through e-mail and -- and public announcements and get -- and direct them to give feedback. To our office we can summarize that.
>> could information be posted on the intranet for people to access and read and maybe give us some feedback?
>> right.
>> we could do a number of things, judge. We can get it out on the intranet, we can set meetings here at del valle at airport boulevard to talk to -- to the employees and contact also h.r. Liaisons and certainly send out the frequently asked questions that you had asked us to prepare. So that's how we would go about doing it.
>>
>> [indiscernible] that's the challenge. We have 1400 employees.
>> actually I think that you have a fiduciary responsibility not just to the participants, but to potential future participants which means all 4,000.
>> that's where the intranet comes into effect. I'm just age that I want to make sure those 1400 employees are not excluded. In other words, somebody may slip through the crack. I think internet is one way to canvas that. But again the folks, we are kind of
>> [indiscernible] -- we are accountable for it. Being accountable we are going to ensure things that we do. Whatever it is that we need to do to make sure that we are accountable to all we are dealing with that.
>> we will be including the fact sheet.
>> yes, Commissioner. That's what we brought it forward for your approval so that it could be distributed.
>> after that was distributed to you, there was a request for one more question to go on that. And if you look at -- this sheet here, top little chart with the first column and the last column comparing the historic right of return for both the new product, putnam and the current product, it was asked that be included in the facts. I think that's
>> [multiple voices]
>> suggest that be added.
>> now, I don't know that it makes sense to go through all of these guy rehabilitations if we don't -- gyrations if you don't plan to follow the recommendation. We need to indicate whether we are inclined to follow the committee's recommendation, don't we? If we're not all of this is irrelevant.
>> judge, if I could address the court on -- there has been a lot of questions as to why the committee decided to do that. We wanted the best deal for the employees, us included. We looked at very -- very I think elementary things in terms of your return on the investment, we looked at several quarters going back to '04, great west. Their stable account. The majority of the quarters for icma or nation-wide. That also had higher returns in the fixed account. The other variable we looked at was expense ratio. What does it cost you to -- to invest. Great west had a 50 basis point icmarc had an 87 basis point, nation-wide offered a 70 base points. So the question is would you like to pay 50, 87 or 70, you know, to simplify that and we want to pay the lowest cost and get the highest return. So it was just a matter of value. If you look at some of the other funds, as al mentioned the f and p index, the expense ratio for great west is 7 basis points compared to icmarc at 25 and nrc in their proposal at 35. Now it's at 65. As al mentioned. Very bottom line value. More on your return, less for expenses, you make more money that way.
>> I think the explanations that everybody has given has been factual, all probably true. With that thing that I think is missing is to share this information with the employees so that they can kind of look at it and make some decisions and give us some feedback. Judge, I think that I would have to say that it depends on the feedback that I get from employees and then there's probably going to need to be a couple of -- of references with telephone numbers put on there so they can call for clarification of some of these -- some of these numbers. And is that norman, is that you norman?
>> sure, that's fine.
>> okay.
>> and we can do that so that -- so that people can ask their own questions to have it clarified. And I don't want to force employees to do something that they are not ready to do.
>> I guess I'm sitting here wondering what employee if told you will get more money this way than that way will say I'll take more money won't say that.
>> just a matter of sharing that.
>> if we believe that, the story has been laid out, we just have to tell it. So my guess is half the phone calls that come in will want to know are you really telling the truth? That's why I asked today is this reliable, you are saying all of the committee members believe in the data that -- that you have given us and the conclusions that you have reached.
>> unanimous decision, yeah.
>> and I want to address michelle brinkman again. I understand the hassle of moving and changing, I have faced in my own personal bank account and everything. Normally I don't bother, but if the deal at the other bank reaches a certain threshold where it really is so much better, sentiment goes out the window and I move the money because this is business. I think what we are looking at here is the deal is so profoundly better that it doesn't make sense to me as a committee member not to go there.
>> let's let the employees make those decisions for themselves.
>> I have a legal question on that exact point perhaps you will have to answer it in executive session. But would we be meeting our fiduciary duties if given what we know, given that we have identified better plans with the higher return than the one that we are currently with, if we were to stay with -- with our other plan because of employee -- say everybody came back and said we want to stay with nationwide, would we be meeting our fiduciary responsibilities having done this analysis and having publicly identified two better plans than the one that we are currently with?
>> I can take a stab at that.
>> it's legal. I'm sorry, I know that you could take a stab at it. I appreciate that. I appreciate that y'all have been, you know, sticking in with us on this very, very -- this topic of great concern for our employees. But it is a legal question to our legal counsel.
>> I think you hit the nail on the head that your legal counsel does not want to answer that without the movement to the executive session room.
>> okay.
>> we can blitz employees with information between now and next Tuesday.
>>
>> [indiscernible]
>> yes.
>> excuse me, my name is amy draper, I'm an employee. I feel like I may be intruding a little bit. I have been a participant over 10 years.
>> speak up a little bit.
>> I have been a participant over 10 years. I believe that I can answer at least part of the question about why you are not getting e-mails from employees about changing the plan and that is the committee has been saying it. The committee has been saying for 25 years you did not go out for bid, you didn't even look at anybody else and honestly when I heard that, I almost cried. I was like how could you not do that? And I know that I am a full-time employee, I have a family, I have elderly family members, I was going to school. I didn't have time to look into where is a better deal. I knew that I was getting a tax deferment I wanted that. I did look the a the funds and tried to pick the best one out of the bunch, but I really wasn't happy with any of the funds, but it was the best of the deal that I could get. The fact that you are now look knowledge at possibly much better funds and I don't know them but I trust the committee to have researched that, makes me very happy. I have been watching this for over two years, I'm just amazed that -- that in anything else for the county, we would have to go with what's the best deal. And for the employees we're just going with it's our fiduciary responsibility but I have a gut feeling that I don't want to change. I think that your employees want to change. I think a number of employees don't know enough financially to -- to be sure of what they are getting. But the fact that you've had a committee researching it, you have a paid consultant, advising you. It's something that -- that gives me a great level of comfort. And I want that. I personally am looking forward to a change. And I'm hoping that we get it. I'm just one person out of your 1400, but I'm hoping that -- that other employees will realize that -- that it's only those who think kimberly is a wonderful representative and she's a wonderful representative, I've enjoyed working with her. But I need a better deal. And I want what's best for my future.
>> 1399 to go.
>> [laughter]
>> thank you.
>> thank you.
>> 1398, me, too.
>> 97.
>> [laughter]
>> we will authorize the committee to -- move that we authorize the committee to take any and all steps to notify all of the county workforce of the change that the Commissioners court is considering and that we follow all of the methods that we discussed previously and any others that we -- that we conjure up that make sense and are doing between now and next Tuesday.
>> second.
>> and --
>> seconded by Commissioner Davis. That's probably the best we can do today. Okay? All in favor? That passes by unanimous vote.
>> thank you.
>> thank you all very much for your hard work, dedication, et cetera. See you next Tuesday.
>> now, we need to come back promptly at 1:30 today because we have those interviews scheduled for 2:00, but other county business to get done. Move that we recess until 1:30.
>> second. All in favor? That passes by unanimous vote.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Wednesday, August 20, 2008 8:37 AM