Travis County Commissioners Court
August 26, 2008
Item 29
>> now on to the deferred comp item. Are we able to take that in a few minutes, we think? 29, consider and take appropriate action on recommendations of deferred compensation plan and b 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 for 457 b plan including guarantees related to providing products and services as proposed.
>> yes, sir. Alicia perez, executive manager for administrative operations. Last week we brought this item before you and this is to change plan administrators for the county's 457 deferred compensation plan. There was excellent suggestions from the court that we go and provide the -- a frequently asked questions, information and set up meetings with employees. We did that last Wednesday. We sent that out, the public information from the benefits administrator, and we also set several meetings. And they were very successful. We had meetings at granger on Friday. We had two of them. We had meetings at airport boulevard, and we had some at del valle. A total of 87 people in the Friday meetings. We had several comments from individuals and positive comments on e-mails were 23 do not want change were 3 and new tall 10 for a total of 36. And we received about 15 phone calls and the majority were positive about the committee's recommendation. So overall --
>> overall, I would request that I wanted to make sure -- all of us wanted to make sure that it gets looked over organizational-wise as far as making sure the folks are aware of what's going on here. And my question, though is was it enough observation exposure, in your opinion, as far as the meetings, the -- all the other necessary tools that you use to make sure that the folks were very well brought up to speed on what's going on, in your opinion.
>> yes, sir. And I say that because representation at the meetings went from ground crew to managers to supervisors to everybody in between. We had a very good, diverse group and had a lot of people show up. There were a lot of questions asked. And there was a very good discourse and a presentation of all the information. Along with the e-mails and the information from the benefits administrator that was posted.
>> okay.
>> and so that was a very good, like I said, recommendation and we followed through and had very good reception from the employees in terms of them attending the meetings and having questions and expressing their thoughts on the changing administrators.
>> the summary information, one or two statements, what was that again?
>> I'm sorry?
>> three expressed disagreement?
>> yeah, I got 36 e-mails and 23 of those were in support of the committee's recommendation. Three wanted to retain nationwide. They didn't really give an arena, they just -- they liked nationwide and they wanted to retain their services. Then we have about ten that just were general questions, didn't say one way or the other what they supported, just questions about it. So I would say, you know, about 10-1 were in favor of the committee's recommendation. Phone calls, most -- the majority of phone calls I got were in favor, and in the meetings that we had, very little -- most of us supportive and very little comment on a negative reaction to the committee's recommendation.
>> questions? Would you like the opportunity to give comments? Okay.
>> good morning.
>> good morning.
>> william sawyer and I just have a statement I would like to make this morning to the judge and Commissioners. That nationwide retirement solutions is an ethical company and kim and I are
>> [inaudible] for the last five years and me for -- to address the concerns of Travis County and let it be known that nationwide's fixed account bears no costs to the employees of Travis County who invest in that product. It has been said by the consultant and nationwide that nationwide is making a boatload of money off the fixed accounts. Nationwide is a for-profit company, but to say such a thing is unevident cal. Nationwide bears risk of guaranteeing the interest rate on the fixed account paid to the employees on the fixed account. As we all know, the economy and the stock market is not doing well at this time. So nationwide is bearing a higher risk, but the bottom line is the employees that invest in the fixed account pay nothing on that -- pay nothing to nationwide on that rate. When the economic tax, economic tax and reconciliation act of 2001, the 457 b deferred compensation plan game a different product in 2001. It became more like a 401-k. With this the changes came -- with this change came opportunity for consultants to address the fiduciary responsibility and for more competition in the fund. And the fund -- from fund companies to the 457 market. We have made different enhancements to Travis County's plan over the last five years to address some of the enhancements that the economic tax and reconciliation made available. All I ask the court to do is that to recognize that kim and d I are professionals and extremely ethical and with integrity. And nationwide retirement solutions is a leader in the -- in providing the 457 deferred compensation program to counties and cities across the country. And we ask that the judges give the employees of Travis County a choice to if they want to stay with nationwide or they want to move to another provider. I'm thinking that if two providers are here, that way they can make their own decision if they want to move their assets to another company. Especially in a down market as it is now. This is not a time to move. Thank you.
>> thank you. Any response?
>> there was an opportunity, I believe, when we sent the r.f.p. Out for proposals to have, you know, two providers, and I don't believe that we got any responses that had two providers, including from nationwide.
>> it was all or nothing.
>> every single one of the people who proposed in their proposal, including nationwide, said they wanted to be the exclusive administrator.
>>
>> [inaudible].
>> pardon me?
>> but it did not show up in your best and final offer and it's a little bit late in the game.
>> we were just answering the questions that were asked of us.
>> I move we accept the recommendations of the committee and move forward with negotiations with -- I'm sorry --
>> great west.
>> great west. Just having a senior moment.
>> I second that motion and I would like to just say this. I'm a member of -- all of us are, all within Travis County, we use nationwide. But, of course, my intention was to make sure that employers -- employees with Travis County had an opportunity to participate in the process, per se. I felt that we, in my opinion, did not do that from the standpoint of going out to see what employees really felt about this particular endeavor that we're dealing with today. However, after the results have come in overwhelmingly supporting the motion that's being made here today, I'd like to maybe stick with that. Now -- and I remember, I think I recall briefly about the -- the opportunities for one vendor bid having exclusive recognition or exclusive jurisdiction as opposed to sharing it. I recall a little of those discussions and, of course, I hear what you are saying here today, but it was some benefit, disadvantages -- disadvantages for it to be shared between two vendors other than opposed to one vendor having that -- according to what I listened to, having jurisdiction. So I'm supporting the motion, but based on what the employees of Travis County have indicated what they want to do. And, of course, we go through a lot of things as far asbestos example health insurance. We hear the folks come in and testify to this court that they would like to see this instituted into what we feel would be something that we may need to cover as far as health provider and the necessary components of a good self-insured program under united health care. However, we know that there are some things that we just can't do, but at least employees do come and testify to some of those things, but there are some things that it appears that the majority of the folks would like to have after hearing these things. And after we hear these things, can we do it. That's what the folks want and this is a benefit to the employees and their families of Travis County. So we try to get the thing from what the folks are telling us to do, and whether it's come to health insurance and whether it comes to this, I am not going to be satisfied -- I'll vote one way or the other until I heard from the report that I heard this morning from the participants and employees of Travis County. So this is why I'm supporting this particular motion. This is why I'm supporting the vote. I seconded this particular vote is because of that process. That's my answer to what you had just made comment on. Thank you so very much for your service.
>> I appreciate it and I'm just thinking, judge and Commissioners, that just consider it all the way. Seems that this bid, the bid was very low. What they are offering is -- I understand, it looks good. But the city of Austin what happens if great west were to lose the city of Austin's case, they would lose that office, how would it affect the employees at Travis County?
>> can we just state for the record again why great west -- great west or great western?
>> great west.
>> great west is the best proposal of the three finalists?
>> al, do you want to --
>> yeah, I would say the -- they proposed the best investment menu at the lowest cost and committed to some service -- to servicing the employees of Travis County, and quite frankly, in a contractual situation that regardless of whether or not they won another piece of business or lost the city of Austin, they would be on the hook for the duration of this contract period with the proposal they made, and this goes back to the guarantees that we proposed to get in writing in the contractual agreement. So I don't -- I'm not concerned that they -- that they would not honor the commitments they made to Travis County and its employees in this process.
>> ms. Wilder.
>> I would like to give some observations. Good morning, I think it's afternoon now. Kim wilder, nationwide retirement solutions. My commentary has to do with specifically with the presentation, did y'all see al's presentation on Friday or yesterday at all? Were y'all able to attend his presentation? I did attend his presentation. Several of the presentations. And the employees of Travis County were presented with a presentation that, in my opinion as an investment professional, did not compare apples to apples. Great west's proposal is a stable value account which was compared to our fixed account rate. That is not a apples to apples comparison, Commissioners and judge. You cannot put up two different investment options, completely different investment options and try to compare past performance history. So what I did myself last week was take the putnam stable value account that great west is proposing, and I took the county's proposed dates and I set it to our guaranteed separate account rate and our fixed account rate, and in five out of the eight months that the county chose, nationwide's rate was higher. So when you put up a slide that compares an interest rate on a product that doesn't even exist because, of course, the putnam stable value account will not be the rate that the employees are going to receive when they move their money from the nationwide fixed account. We all know for five years it will be sometime of blended rate that's undetermined. It's completely undetermined.
>> and that was fully disclosed in the presentation, and if I could make a comment to the court, the product kim is referring to, the guaranteed separate account, was initially included in the nationwide proposal and because of market risk involving that product it was discounted by the committee. It was no longer considered. Nationwide was kind enough to offer an alternative that did not move the market risk of that particular option to the county, and that product did not compare as favorable as the other product --
>> I understand that.
>> I just wanted to make sure everyone is on the same page.
>> I understand that, but by showing a slide that compares two completely different investment products, interest rate, guarantees, that's not correct. That's not fair to your employees. So how -- my -- the example is reflective of the comment that you would have gotten. Oh, sure, I want that rate, I want that putnam stable value rate, it's much higher than the fixed account rate. That's my point. That's just the point that I want to make. On the life cycle funds that great west is proposing, they are proposing the t. Rowe price target funds, and we proposed the american century live strong funds. And the assets that great west will need to provide in those t. Rowe price funds, the expense rate is higher than the american century live strong funds that we have proposed in both circumstances. Nationwide also embraced the Commissioners court's recommendation to provide historicry underutilized business subcontracting working through the Austin law specialist who is a h.u.d. Certified Austin based financial planning firm, and we're not aware of that great west did that at all. So my -- my comments and my -- what I saw from the meetings on Friday and Monday were -- were that the employees got a presentation that was already approved, that was approved by the Commissioners court. Great west is our new provider, and look what we have done, when many, many, many of the details and many of the rates that the -- that the employees will actually receive are very different from the presentation.
>> can't they make an actual vote, your honor? Can't they have a written vote?
>> we went through this before regarding our fiduciary duty and whether it would be met if we put it to a majority vote of the full employees of Travis County.
>> that way you can actually see.
>> and what the response was was that would not be meeting our fiduciary obligations unless we had made a -- could assure that all of the votes were informed to a degree that is not really feasible.
>> I'm thinking that way we can actually see if the employees are really -- who are participating in the plan actually are really understand that --
>> I understand your desire to maintain this account and I would too if I were in your shoes, but we did establish a process that was rather vigorous and included two different committees that included employees and to reopen it at this point even after final and best offer would be, in my opinion, a -- not a wise thing to do. In my opinion.
>> would be we have been given legal advice that if there is a better or of the three the best product is the one that we have the fiduciary responsibility to select. In answer to your question. So that duty doesn't change. Based on
>> [inaudible].
>> there's a motion to approve the staff recommendation if this passes. It would be to authorize the committee and county attorney to negotiate and the consultant to attempt to negotiate a contract with great west. Okay? Any more discussion of the motion?
>> just one. And that is I still wish that -- because I don't know if my question got answered. I just wish that we had had ample time at the beginning, and I can't seem to make that point because it seems to get lost, that all people, all employees want is the opportunity to have questions answered. And I had one question and I don't think -- I think it's going to go unanswered. And I certainly don't appreciate that at all. And so -- but, you know, yes, everybody needs to make more money, everybody wants to make more money. I don't think you even have to have a vote for that, but people want more information. Way ahead of time. Not at the last minute before a vote is due. And so just to keep my fiduciary responsibility to employees, I will support this, but it's going to be taking me screamingal you're screaming andhollering because n was not answered with ample time and I hope we don't repeat this error again.
>> any more discussion?
>> I have three brief comments. Nancy goodman gill. Good afternoon. I appreciate the time. I'm a Travis County employee. Eye you're I'm also the human resources manager for health and human services veterans services and I want to thank norman and alicia for working so hard on this. This has been a labor of love and I appreciated the opportunity to attend yesterday's meeting and to get some good information that norman shared with me last week after your presentation. I just wanted to highlight three interests that I have in my personal capacity and also in discussing with some of my colleagues back at health and human services, I think a lot of folks would support these interests as well. The first is regarding education and advice. There's an interest that the contractual agreement with great west needs to have a comprehensive and ongoing learning and consultation opportunities for employees to have the tools and information that they need to make prudent decisions for themselves and their families. One of the concepts programs that was discussed yesterday was that there is a program called reality investing that great west offers. I would encourage the court to look at this program and that this would be a program that employees and their families could meet with somebody, a financial planner that would help them make good decisions on their deferred comp situations in light of overall assets, goals, time lines, et cetera. We would also like to suggest financial wellness brown bag seminars and financial investment literacy classes to improve on what we've done. She akin to what we've done with our well homelessness program offering employees advice and council. And then to enhance our defeared compensation overview during new employee orientation so we can really equip our new employees to come on board to really see the value of this and get our mind wrapped around what these choices are. The second interest that we have is to have a self-directive brokerage account. The proposed great west package reference is referenced as being comparable to the city of Austin, city of houston, all of these plans include a self-direct brokerage account where employees can invest all or part of their dollars into this account with ability not only to purchase mutual funds but individual stocks and equities. So the Travis County plan is not truly comparable unless this flexible self-directed broke rage account is part of the mix. The last thing that I'd like to take a look at is clear contractual language regarding fixed assets of the fund. Yesterday's meeting yielded more clarity is needed regard employees to stay in this fund in transition to great west. If these employees choose to retire and begin drawing down funds during that five-year transition time it's not clear how that will impact them and we may have a number of folks over the next five years that will be moving into retirement mode and many of them may actually, you know, be in this particular -- invested in this particular area so we would want to make sure there was real good clarity in the contract to address that. Finally I'd like to just quote the statement that you have in your investment policy. You've stated in this policy under subsection 4 that the plan's participants and beneficiaries are expected to have different investment objectives, time horizons and risk tolerances. To meet these varying investment needs, participants are able to self-direct account balances among a range of investment options to construct diversified portfolios that expand the risk for rewards program n bold your last statement in this policy is participants and beneficiaries alone bear the risk of investment results from the investment options and asset mixes that they select. So with that in light, with that policy that you've already stipulated and in light of the comments and sent it is you have expressed today and last Tuesday, I would encourage that there are self-directed brokerage account be a part of that and if you are able to get all of that integrated into the new great west plan, then I think we'll have a plan that meets your objectives as stated in your policies and thank you very much for your time.
>> thank you.
>> real good points, judge.
>> if I may address the issue of self-directed funds.
>> [one moment bless]
>> but there was never any intent not to have that option included in the contract.
>> so it is -- there is a self-directed fund, but it goes into mutuals as opposed to stocks. And that was -- that conservative stance that the committee took, there was a lot of debate, there were people that wanted to be able to invest it in stocks. We just found out yesterday, nancy, that the city does not have it in stocks, they also just limit to mutual. The aic and the state do.
>> and mhmr.
>> but it's just, again, the committee was conservative. It's not something that cannot change, but it was part of the policy that was adopted by the court to limit that self-direct investments to mutuals as opposed to stocks and equity.
>> any more discussion? All in favor of the motion? That passes by unanimous vote. Thank you all very much. Move we recess until 1:45. All in favor? That passes by unanimous vote.
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Last Modified:
Tuesday, August 26, 2008 8:37 AM