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County Administrator's Report 14. 3.

BCC Regular Meeting

Discussion

Meeting Date:	03/07/2019
Issue: Nationwide 457 Agreement Amendment
From:	ERIC KLEINERT
Department:	Human Resources
CAO Approval:

RECOMMENDATION:

Recommendation Concerning the Nationwide 457 Amendment Options - Eric Kleinert, Human Resources Department Director

That the Board approve and authorize the Chairman to sign, subject to Legal review and sign-off, one of the following three Nationwide 457 amendment options:

A. Option One: Guaranteed Minimum Interest Rate (GMIR) for 2019 @ 3.0% and lowers by 0.5% in 2020-2021 and then by 1.0% in 2022. Active employees have a 20% liquidity of funds. Retirees remain with 100% liquidity. Crediting Rate is 3.5% for the remainder of 2019 and market based starting in 2020;

B. Option Two: GMIR will follow the same sliding scale as Option One. Active employees have a 40% liquidity of funds. Retirees remain with 100% liquidity. Crediting Rate is 3.4% for the remainder of 2019 and market based starting in 2020; or

C. Option Three: Existing balances in the current Fixed Contract will remain at a 3.5% GMIR. All new contributions to the Fixed Contract will be established with a GMIR of 1.0% and a Crediting Rate of 1.2%. The Crediting rate is subject to change with the market beginning in 2020. New funds can also be placed in the existing Default Investment Alternative (DIA). Participants must elect a new option. Retirees maintain 100% liquidity; and

D. Approve, if “Option 1” or “Option 2” is selected, the Supplemental Fee Structure of the Nationwide 457 Agreement Amendment (for Deferred Compensation Services).

BACKGROUND:

The amendment to the Nationwide 457 agreement will become effective the first quarter of 2019. This is a required change by Nationwide in regard to the Guaranteed Minimum Interest Rate (GMIR) of the fixed annuity contract. Currently, our Guaranteed Minimum Interest Rate is 3.5%. Nationwide is making a mandatory change to lower the GMIR; which will help to better align with the market and reduce the mandatory reserve funds, allowing Nationwide to offer more valuable retirement plans. The Crediting Rate, the annual effective yield to participants, is currently 3.5% and is guaranteed to remain as such for the year. Starting 2020 the Crediting Rate is determined by the market. Should the Crediting Rate decrease; it cannot go below the GMIR. Nationwide has been slowly implementing this plan over the last five years, nationally.

Nationwide has given Escambia County three options to choose from regarding the lowered GMIR. If no action is taken, contributions will no longer be accepted.

Our options are as follows:

Option One: GMIR for 2019 @ 3.0% and lowers by 0.5% in 2020-2021 and then by 1.0% in 2022. Active employees have a 20% liquidity of funds. Retirees remain with 100% liquidity. Crediting Rate is 3.5% for the remainder of 2019 and market based starting in 2020.

Option Two: GMIR will follow same sliding scale as Option One. Active employees have a 40% liquidity of funds. Retirees remain with 100% liquidity. Crediting Rate is 3.4% for the remainder of 2019 and market based starting in 2020.

Option Three: Existing balances in the current Fixed Contract will remain at a 3.5% GMIR. All new contributions to the Fixed Contract will be established with a GMIR of 1.0% and a Crediting Rate of 1.2%. The Crediting rate is subject to change with the market beginning in 2020. New funds can also be placed in the existing Default Investment Alternative (DIA). Participants must elect a new option. Retirees maintain 100% liquidity.

Nationwide is also offering the following amendment for the Supplemental Administration Fee Structure to options 1 and 2 above: Escambia County’s current Administration Fee structure (administrative fees) for the fixed mutual funds is at 0.0 and will remain as such in the supplemental option. Escambia County’s current Fee structure (administrative fees) for the variable mutual funds is at 0.8, 0.55, or 0.45 dependent upon which investment the employee selects. With the supplemental option selection these basis points will be decreased to 0.3, 0.1, or 0. This is allowable due to the lowered mandatory reserve.

BUDGETARY IMPACT:

N/A

LEGAL CONSIDERATIONS/SIGN-OFF:

N/A

PERSONNEL:

N/A

POLICY/REQUIREMENT FOR BOARD ACTION:

N/A

IMPLEMENTATION/COORDINATION:

N/A

Attachments
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