March 1, 2008 TO: SUBJECT: DUE DATE: All Prospective Bidders Job No. 08/0106 March 17, 2008, no later than 2:00 pm
All bidders are required to sign and attach a copy of this addendum with each proposal for 401(k) and 457 Plan Administrative Services for the Harris County Hospital District. This addendum must be received by the Purchasing Department no later than 2:00 p.m. Central Time, Monday, March 17, 2008 ADDENDUM #1 The following information is provided in response to vendor questions: 1. Will you be consolidating vendor questions and sharing them with all vendors? Yes, answers to all vendor questions will be answered in the form of an addendum to the RFP, and distributed to all vendors. Sole Fiduciary Responsibility and Indemnification a. Can you clarify your definition of "sole fiduciary responsibility" for the administration and/or investment of assets? b. Is it permissible to modify the fiduciary and indemnification provisions of the contractual agreement referenced above? c. Based on the scope of services outlined in the RFP, it does not appear that the Administrative Services Agency will have discretion over the Plan and therefore would it be possible that the Administrative Services Agency would not have to be a named fiduciary? d. The indemnification language includes claims which may result from HCHD negligence. Would it be possible to narrow the scope of this indemnification so it is not applicable in situations where HCHD was the negligent party? e. How important is it that the selected vendor has sole fiduciary responsibility? Is this negotiable? The Trustee role is not negotiable. It is required that the vendor package include full trust powers and it will be named as the Plan Trustee. Neither the Hospital District nor any District employees will act as Trustee. The Trustee will be a “named fiduciary.” 3. Can you explain the limited flexibility associated with changing the investment fund options of the 401(k) plan? The fund structure is satisfactory in the 401K Plan. Vendors may recommend their own funds such as target date funds. The fund structure is not satisfactory in the 457(b) Plan. Therefore, the existing 401K Plan structure is a reasonable example of what may be adopted for the 457b Plan structure. 4. Is Harris County open to changing additional investment fund options outside of the target date funds, S&P 500 Index fund, and the money market fund? Yes, Harris County is willing to revise the fund lineup in the 457 plan. Ideally we will reduce the number of fund options by remapping existing funds to the successor lineup. 2.
Job No. 08/0106 – Addendum #1 March 1, 2008 Page 2 5. Is it possible to get a listing of the plan assets for the 457 plan for the period ending 12/31/07 broken out by individual investment option? The RFP included this information for the period ending 9/5/07. Yes 6. Can we get the fund ticker symbols for each of the funds currently offered within the 457 plan? For questions 5 and 6 please see below:
As of 12/31/07 Fund Name Nationwide Fixed Account Nw Inv Dest Mod Sc Nw Inv Dest Mod Aggr Sc Fid Contrafund Nw Inv Dest Aggr Sc Nw Inv Dest Mod Cnsrv Sc Nw Lgcap Gr Invm’t Co of America Loan Unpaid Principal Fid Equity Income Fnd Am Cent Vista Fd Ic Neu Ber Genesis Fd Tc Jpm Intl Equity Fd Slct Sh Jpm Midcap Value A Fid OTC Port Pimco Ttlretrn Fnd Cls A Opp Global Fnd Cls A Nw Inv Dest Cnsrv Sc Nw Fund D Fid Puritan Fnd Temp Foreign Fnd Cls A SEI Inst Mgd S&P500 Indx E Fed US G’tsc Fnd 2−5 Ys Is Nw Mny Mkt Prime Am Cent Growth Fnd Ic Nw S&P 500 Indc Isc Nw Intl Indx A Am Cent Value Ic Brwn Cap Mgmt Sml Co Fd Ic Vankamp Growth & Inc Fd A Nw Smcap Indx A Loan Defaulted Unpaid Principal Neu Ber Eq Soc Resp Fd Ic Nw Mdcap Mkt Indx A MFS High Incm Fnd Cls A Drey Appreciation Fnd Inc Ms Ift Fixed Incm Port Ic Nvit Mult−Mgr Sm Co I Drey Prem Smcap Val I T Rowe Price Grwth Stk Adv AIM STIC Treas Port Ic W&R Advisor High Income Y Edgar Lomax Value Fd Nw Bd Indx A Am Cent Int’l Disc Ic Value 13,122,689.05 5,946,161.35 4,597,902.52 4,054,269.24 2,873,414.45 1,744,545.41 1,327,194.49 1,292,268.29 1,198,793.16 1,055,318.94 884,873.49 806,281.23 787,018.55 633,103.93 619,412.99 613,672.99 598,442.95 596,961.16 577,619.77 576,507.12 562,560.26 538,153.56 476,342.11 466,439.92 464,442.63 463,297.75 444,215.98 408,321.93 384,640.07 300,406.21 223,297.86 202,137.22 196,645.28 192,914.90 146,204.07 134,453.71 125,370.50 123,633.01 104,816.24 104,583.54 79,715.49 77,932.46 60,622.36 57,513.24 43,394.28 50,288,505.66 Ticker N/A NSDMX NDMSX FCNTX NDASX NSDCX N/A AIVSX N/A FEQIX TWCVX NBGEX VSIEX JAMCX FOCPX PTTAX OPPAX NDCSX MUIFX FPURX TEMFX TRQIX FIGIX MIFXX TWCGX GRISX GIIAX TWVLX BCSIX ACGIX GMRAX N/A NBSRX GMXAX MHITX DGAGX MPFIX N/A DSVRX TRSAX N/A WYHIX LOMAX GBIAX TWEGX
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7. Would you consider implementing the new 457 fund line-up as of 1/1/09 (proposed date of implementation) instead of delaying the transfer to the new fund line-up for a period of up to 12 months? If not, would it be possible to understand the reason for delaying the implementation of the new 457 plan fund line-up? The new fund line up may be implemented by 1-1-09. We want to implement it as soon as feasible while allowing for employee communications, etc. The new fund structure shall be implemented within 12 months of 1-1-09 at the latest. 8. Section XIV question 68 asks if our recordkeeping system can recordkeep the current Nationwide fixed account option. In order for us to make this determination we would like to ask for a copy of the Nationwide fixed account contract so that we can determine our ability to recordkeep it on our platform. Also, the question mentioned above seems to indicate that there are more then one Nationwide fixed account options. Please confirm that there is only one. There is only one such account option and a copy of the contract is enclosed. Also, all assets will be transferred out of this account option as soon as is feasible. We are working around the MVA surrender charges and you may make suggestions for how you have converted such contracts in the past. Please see attached 9. Page 24 - 457 Plan - Contract Surrender Charges (such as MVA or back end loads) a. What is the amount of the current contract surrender charges and/or Market Value Adjustment (MVA)? Please provide the details. Please see MVA attachment. b. Are there are any explicit administrative charges currently? If so, please provide the details. Administrative charges are permissible. Nationwide does not have the capability to charge such fees on a per head or pro-rata basis at this time. Please clarify why is the “pro forma fund line-up” implemented 12 months following the conversion See number 7 above. On site for EE orientation & Help desk a. What is the number of onsite service days a year? b. What is the number of group meetings? c. Of individual meetings? d. How many representatives provide local services? There are 26 days (every two weeks) of orientation meetings. Approximately one onsite meeting per month is held at each of three different locations. Individual meetings occur by appointment and are rarely utilized. For the 401(k) plan there is one representative providing local service (not solely dedicated to plan). For the 457 there are three but these are not solely dedicated to the plan.
10. date? 11.
12. Prototype Plan Document (page 23) - Please clarify. Does HCHD have a custom or model plan document for the 401(k) plan? The 457 has a model plan that will need to be provided. An SPD should be provided with the model (prototype) document. The 401(k) plan is a custom plan document that will not need to be modified. 13. Unique Participants and Eligible Employees - What is the unique number of participants, i.e.,how many participants have accounts in both the 457 and 401(k) plan? What is the number of eligible employees? There is no current count of total eligible participants; however, all full and part time employees are eligible.
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14. Will all money from both the 457 and the 401(k) transfer on day one? The intention is to plan a conversion project and timeline that includes a window for participants to move funds from the legacy options to the new investment options. Remainders will be moved to default funds(s). The objective is to complete that process as soon as is feasible while being very sensitive to employee communications. The new vendor will help us to plan that process. 15. Is this proposal for an exclusive provider for both the 457 and 401(k) plans? Not necessarily. It could be for one Plan or for both Plans. 16. Regarding the "Fund Line-up of the 457 Plan" section of the RFP on page 12: will the money stay with the current 457 vendor and be recordkept by the new vendor for 12 months and then move over to the new vendor? If that is the case, how will the revenue generated from the mutual funds in the 457 plan be distributed during the first 12 months? Please clarify the intention of the Hospital District as it relates to the first 12 months of the contract relative to the 457 plan. This will probably be a routine conversion. It should be completed in 12 months or less. 17. What restrictions, if any, exist with respect to transfers among competing fixed income funds or any brokerage window options (e.g., equity washes)? We do not expect to use a brokerage window option. 18. What percentage of a plan participant’s total assets can be allocated to a self-directed brokerage account? None 19. Please provide quarterly stable value cash flow history for the last 3 years. If cash flow history is not available, please provide stable value/fixed account assets for the last 5 years (please provide separate information for each plan). Year-end Fixed Account balances (last five years): 12/31/03: $7,296,141 12/31/04: $8,441,459 12/31/05: $10,410,976 12/31/06: $11,641,469 12/31/07: $13,123,689 20. How is interest currently credited to participants (e.g., blended year basis, cash year basis)? If on a class year basis, does the plan allow for prepayment of loans? Interest is credited on a portfolio basis. That guaranteed rate is set quarterly. 21. What proportion of the stable value fund/fixed account is controlled by retired and terminated employees? If fund level information is not available, what proportion of the total plan is controlled by these participants? This information is not currently available. 22. Will there be a surrender charge or market value adjustment when the assets move to a new provider? If yes, what is the amount or percentage? See the attached MVA. 23. Are you requesting a market value makeup? If yes, what is the amount or percentage? For the 457, we would like the fund lineup to closely resemble the structure of the 401(k) fund lineup.
Job No. 08/0106 – Addendum #1 March 1, 2008 Page 5 24. What is/are the current crediting rate(s) for the existing stable value/fixed account option(s)? 1st Quarter 2008 guaranteed rate is 3.90%. For the calendar year 2008, the rate is guaranteed not to drop below 3.50%. 25. When can a participant withdraw balances (e.g., upon retirement, termination, disability, other)? type of termination plus loans and hardship distributions. Any
26. Will Nationwide be paying withdrawals for participant benefits and transfers on a pro rata basis with the new stable value option? See the attached MVA. 27. How many Harris County Hospital District full-time and part-time employees are eligible to participate in the 401(k) and 457 plans? There are 6261 active and full time employees eligible to contribute to the Plans. 28. On page 8 of the RFP in Section IV: Special Requirements you ask for a copy of the sample plan document. Is the current 401(k) plan document written as a non ERISA plan (model government plan document)? Please provide a copy of the current HCHD 401(k) Plan document. The current 401K Plan document is a customized document. It will not change. A copy is attached. The 457(b) Plan document is a prototype document that was provided by the vendor. We expect it remain a prototype document. If that vendor is changed, we would want a prototype document and SPD from the new vendor. If is should happen to map over onto a Non Standardized prototype document, we would want the new vendor to file it with the IRS to obtain a determination letter. 29. On page 12 of the RFP, in the Description section you state that the current 457 fund line-up will be implemented at conversion. Please provide all current fund ticker symbols for the funds in the 457 plan. Please provide the ticker symbols for the investment options in the 401(k) plan. Ticker symbols are provided in the answer to question #6. We do not expect to keep either the 457 fund line up or those particular funds. That will be true even if there is no change in the vendor. What we want is a structure that is more similar to the 401K Plan structure. We want target date funds plus a few other options. We want fewer funds. We want more competitive fees. We anticipate converting funds by initially adding new funds and requiring participants to move their accounts to the new options themselves. If you look at the current fund structure, it is very difficult for the Plan Sponsor to create a map over the funds in the conversion – especially without incurring fiduciary liability for arbitrary selection of map over funds. A new fund line up is where we are going to. The new vendor would help us to plan the conversion and how to get there. 30. On page 13 of the RFP, I. 401(k) Plan information is provided for the current participant loan balances. What is the total number of participant loans outstanding? Please provide a copy of the current plan loan guidelines. Total number of loans has been provided. 401K Plan - There is not a separate Loan Guideline Policy. The policies are covered in the Plan Document. On a go forward basis, we expect to change the 401K Plan loan policies to allow only one loan at a time. That will happen in 2009 after we complete any vendor conversions. There are now two loans permitted.
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Also, loans are now being repaid by employees who go to a temporary status or a terminated status by personal check. We have already discontinued that on a go forward basis. We are in the process of converting outstanding old loans to collection by ACH only. 31. Are participant loans currently available in the 457 plan? If yes, please provide the participant loan details for the 457 plan. 457 plan loan details are stated in the First Amendment to the Plan. Copies of both the Plan and the Amendment are attached. On a go forward basis, we want a prototype document that refers to a Loan Policy. Then we will write the Loan Policy separately. As you know, the Loan Policy can be changed from time to time without requiring a plan amendment which throws the plan out of a Standardized Prototype status and then requires a filing with the IRS for a separate approval determination letter. 32. On page 21 of the RFP, in the 457 Plan Pro Forma Fund Line-up you have the Nationwide Fixed Account mapping into the Intermediate Term Bond option. Would HCHD consider an alternative where the money in the Nationwide Fixed Account mapped into a Pooled Stable Value Fund instead? Possibly, we are looking for solutions. As described above, we want a different fund line up. The new vendor could help us with that process. Callan Associates will help us to evaluate the quality of your recommended funds. 33. Do the 401(k) and 457 Plans have an investment policy statement in place for their investment options? If yes, is a copy available? If no, is HCHD considering developing one in the future? We do have that in place. It can and will be provided to you soon. Do not have copy attached yet. 34. On page 34 of the RFP, question 27 asks for explanation of compliance expertise in non-discrimination testing. What compliance tests are currently being performed for your 401(k) plan? We are governmental and not for profit. There are no ADP/ACP tests. We monitor 402(g) limits and appropriate refunds and tax forms would be needed if there were any excess contributions. We also have 401(a) compensation limits. 35. On page 35 of the RFP, question 43 asks how pro rata consulting and legal fees would be processed for the 457 plan. How are these fees currently being processed? What amount is currently being deducted from participants for consulting and legal fees in the 457 plan? Are these fees only charged against the 457 plan? Are these pro rata fees also being charged against the 401(k) plan? If yes, what amount is currently being deducted from participants for consulting and legal fees in the 401(k) plan? The current 457(b) vendor is unable to pro rate fees to participants. That is un acceptable and will cease on a go forward basis. A per participant recordkeeping fee may be charged to participants if that is part of your fee structure. If we have any outside legal fees or investment consulting fees, these will be pro rated to participants by account balance. That is the current process in the 401K Plan. 36. If HCHD elects retain the Nationwide Fixed Account and liquidates it over time at book value, what is the book value payment schedule (timing and amount)? Would the money remaining in the Nationwide Fixed Account be benefit responsive? What is the current interest rate being paid on the Nationwide Fixed
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Account? Would the interest rate change on the NW Fixed Account if HCHD elected to liquidate over time at book value? If yes, what would the rate change to? We are considering a variety of options that have already been suggested. If you have approaches based on your experience, we will consider those as well.
Jack R. McCown, C.P.M. Purchasing Agent
LMW Attachments (3)
__________________________________ Bidder’s Signature