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County Administrator's Report 12. 8.

BCC Regular Meeting

Discussion

Meeting Date:	06/06/2019
Issue: Recommendation Concerning Nationwide 457 Agreement Amendment to the Guaranteed Minimum Interest Rate (GMIR)
From:	PAULETTE STALLWORTH
Department:	Human Resources
CAO Approval:

RECOMMENDATION:

Recommendation Concerning Nationwide 457 Agreement Amendment to the Guaranteed Minimum Interest Rate - Paulette Stallworth, Interim Human Resources Director

That the Board choose an option (A, B, C1, or C2) concerning the Nationwide 457 Agreement Amendment to the Guaranteed Minimum Interest Rate (GMIR), and authorize the Chairman to execute the appropriate form(s):

A. Option One (Crediting Rate): Guaranteed Minimum Interest Rate (GMIR) will follow schedule table below. Active employees exchange and transfer limit is 20%. Retirees remain with 100% liquidity. Crediting Rate is 3.5% for the remainder of 2019 and market based starting in 2020;

2018	2019	2020	2021	2022
3.5%	3.0%	2.5%	2.0%	1.0%

B. Option Two (Increased Participant Level Exchange and Transfer Limit): GMIR will follow the same sliding scale as Option One. Active employees exchange and transfer limit is 40%. 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 (New Investment Option): 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. Two options are available. If Option 3 is chosen, a sub-option needs to be selected; and

1. Continue to offer Nationwide Fixed Contract. This Contract will be established with an initial Crediting Rate of 1.2% and a 1.0% GMIR; or

2. Utilize the plan’s existing Default Investment Alternative (DIA). If the participant does not elect a new investment to replace the fixed option, it will be treated as if no investment direction has been given and the DIA will be used for future contributions.

If the County chooses Option 1 or Option 2, the Chairman would execute the Options Form (noting 1 or 2) and the Fixed Account Amendment to Group Flexible Purchase Payment Deferred Variable Annuity Contract.

If the County Chooses Option 3, the Chairman will execute the Options Form (noting C(1)) and the Application for Group Flexible Payment Deferred Fixed Annuity Contract; or Chairman will only execute Options Form (noting C(2)).

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.

BUDGETARY IMPACT:

N/A

LEGAL CONSIDERATIONS/SIGN-OFF:

Legal has reviewed all documents as of 4/25/19 and has signed off on them.

PERSONNEL:

N/A

POLICY/REQUIREMENT FOR BOARD ACTION:

N/A

IMPLEMENTATION/COORDINATION:

The Human Resources Department will coordinate with Nationwide to distribute the Amendment.

Attachments
Nationwide Forms