Work Statement

PART IV

WORK STATEMENT

IV-1.Objectives.

1. General. The BOARD is seeking proposals from interested firms to provide full service Third Party Administration for the Commonwealth of Pennsylvania Deferred Compensation Program, IRC Section 457(b) Plan. The Program is to be administered without any cost to the Commonwealth. All costs are borne by the participant. The committee will recommend for Board interview the proposals that most closely meet the requirements of the RFP and this Work Statement and satisfy the Commonwealth needs. The BOARD reserves the right to terminate the agreement upon ninety (90) days written notice.
2. Specific.

i)General Administration.

1)Administer the ‘Program’ in accordance with current federal law, the Commonwealth’s enabling statute, and the Plan Document.

2)Preparation and timely disbursal of accurate investment instructions for distribution of participant contributions from the State Treasury to the investment manager, per participant allocation instructions, supported by proper confirmation of disbursal to the investment managers and the BOARD. Investing of payroll deferrals occurs daily.

3)Provide follow-up verification notices to all participants who transfer funds between investment managers and who make deferral and allocation changes.

4)Provide monthly administration reports to the BOARD as determined.

5)Prepare and distribute quarterly employee account statement reports, including a cumulative review of all historical earnings, fees, contributions, and the current valuation of each individual investment option. Include separate summary of any Roth 457 and brokerage account options and rollovers from other plans. Broker will provide individual statements.

6)Make determinations to approve or disapprove all hardship withdrawal requests in accordance with clearly defined IRC rules and regulations, which will be made available to the BOARD. Conduct a second review of denied applications if the participant requests one.

7)Provide a detailed explanation of your firm’s process for handling second reviews of disapproved hardship withdrawal requests. SERS handles all final appeals.

8)Provide legal and tax consultation to the BOARD on any Program issues.

9)Provide to participants that have terminated service a confirmation of their request for benefit payment.

10)Provide participant benefit payment information to DCP staff on an Excel spreadsheet format.

11)Provide toll-free telephone service for participants seeking counselor assistance.

12)Provide an automated telephone voice response system allowing the participant to access account balances, request brochures and literature and other options the BOARD may deem necessary.

13)Periodic review of the Program, as requested by the BOARD.

14)Assist in the review and revision of the Plan Document as needed.

15)Provide interactive web site to allow for participant changes to allocations, deferral amounts, and transfers between investment options. Allow for posting of current news items or other information deemed relevant by the Board, on a timely basis. Provide participant with daily unit prices and periodic investment performance returns.

16)As needed, develop and mail surveys to participants. Provide survey results within 30 days of receiving the responses.

ii)Recordkeeping. The firm selected to maintain records for the Program will be under the direction of the BOARD. The firm will perform all recordkeeping services as requested to include distribution of accurate quarterly statements to the membership. Deferrals are invested daily. The Program has a Federal Tax Identification Number that the TPA will use to process all tax documents to participants and federal government entities on behalf of the Program. Deferrals can beeither a fixed dollar amountor a percentage of salary. Participants contributions may be to the traditional 457 tax deferred option, the after tax Roth option, or a combination of the two. The TPA currently does not handle any of the Programs’ funds. The SERS staff performs all cash movements. The Program will also require separate records for Roth contributions and rollover accounts. The specific responsibilities shall include, but not be limited to:

1)Perform timely action to participants request for account maintenance, including transfers, deferrals, withdrawals, and changes to personal data.

2)Maintain participant account history to determine catch-up limitations. Report the underutilized amounts to employers and ensure that the participant’s catch-up is limited to three consecutive years.Monitor program deferral limits in accordance with existing IRC requirements and refund over-deferrals as needed to participants in accordance with IRC Section 457 limitations and IRA limitations, adhere to required minimum distribution rules, and issue appropriate tax documentation

3)Provide to the BOARD, timely reconciliation of monthly statements between investment manager and records maintained by TPA.

4)Provide all proper income tax reporting to participants, the Internal Revenue Service, the Pennsylvania Department of Revenue (if needed), and various municipalities, as required.

5)Provide to the BOARD, a timely reconciliation of the annual participant 1099R forms to the annual disbursements and the federal form 945.

6)Report timely, the investment rate of returns to the BOARD and, maintain historical rates of returns for the selected investment options consistent with SEC and AIMR requirements.

7)Report, administer, and process the reports to instruct DCP staff to distribute the funds to participants, covering all phases for employee terminations, financial hardships, deaths, disabilities, rollovers, cash outs, retirements, and plan to plan transfers with respect to the terms of the Plan Document, enabling statute, and IRC Section 457 requirements.

8)Notify participants via phone of any over deferral amounts being refunded to them prior to payment distribution.

9)Payroll processing of employee deferrals for investment into the Program. Post contributions to participant’s accounts on investment date.

10)Ensure that electronically transmitted SSNs are protected information. Indicate what safeguards are in place to ensure this information is not able to be accessed by unauthorized users.

11)Contribution allocations to the investment products as selected by the participant and the related recordkeeping will be the sole responsibility of the TPA. The TPA must be able to handle a minimum of six core investment product selections per participant and a Self-Directed Brokerage Option. The current SDBO provider is Charles Schwab. The firm must be able to co-ordinate with Schwab regarding the SDBO. The TPA must also maintain a minimum of four profile funds consisting of various combinations of the six core funds. Profile funds are rebalanced quarterly by the TPA. The TPA must be able to maintain separate records for other account plans such as Roth and rollovers.

12)Perform semi-annual reviews of the employee database in order to determine the number of deceased employees and the employees with incomplete records. Follow-up with beneficiaries and employees in order to maintain up-to-date records.

13)As needed, conduct an annual direct mail campaign for participants who do not have an updated beneficiary form.

iii)Enrollment. The firm selected will maintain a level of account representatives as mutually agreed to with the BOARD. Account representatives are to be appropriately licensed and knowledgeable in IRC 457 Plans and IRAs.

1)Provide and maintain a full complement of account representatives to service participants throughout the Commonwealth. Offeror shall provide a marketing manager and the necessary administrative staff to ensure that the approved marketing strategy by the BOARD is presented to Commonwealth employees.

2)Provide services that would enable a participant to determine the desired amount to defer from salary and the tax consequences and effect on net pay for each retirement plan option.

3)Maintain an office in the metropolitan Harrisburg area.

iv)Marketing. The firm selected by the BOARD must provide all marketing material. Allmaterials must be approved prior to Program use by the BOARD, and available to all Commonwealth employees. Marketing material may include newsletters, brochures, Program forms, Internet websites, or videos.

1)Provide quarterly newsletter articles that address the needs of Program participants in a timely manner. Provide all participants, (active, inactive, and terminated) with an informative quarterly Newsletter on topics pertaining to the Program and must be approved by the BOARD or its designees prior to distribution. Newsletter should include articles for active employees, as well as retired employees.

2)Provide the BOARD with assistance to develop or use a current Website to post Program information for participant use.

3)Provide a detailed marketing plan for group meetings.

4)Provide periodic presentations of the Program to Commonwealth employees and officers, on a statewide basis, at employee locations or as approved by the BOARD. Also, provide periodic presentations of general investment educational information, to plan participants

5)Provide all marketing materials, Program literature, and brochures, including DCP letterhead, envelopes and postage for benefit payments that are mailed by the Board.

6)Provide administrative forms (provide samples) and provide copies to the employees.

7)Attend promotional events, such as benefit fairs, as approved by the Board.

8)Explain your bi-lingual literature, brochure and other marketing capabilities, should that be necessary.

v)Counseling. The firm will provide assistance to participants in selection and determination of benefit payments and benefit options.

1)Provide participant with updated brochures, and forms for processing benefit payments and transfers.

2)Provide participants with assistance in their selection of the appropriate benefit payout method.

3)Assist in resolving any issues with retired participants. Provide benefit statements listing the type of payment selected by participant.

4)Provide beneficiary forms to employees and encourage employees to complete the forms at enrollment and update the beneficiary forms as needed.

vi)Managed Accounts. The firm selected must be ableto provide managed accounts to individual Plan participants.The firm must stand as a fiduciary, if it provides that service directly or through a partnership with another financial services firm.

IV-2.Tasks In accordance with Part II, Section II-3 of this RFP, Offerors must describe in narrative form in their Technical Submittal their work plan for accomplishing the following task descriptions:

1. General Administration.

i)The requested participant benefit information shall be sent to SERS staff in Microsoft Excel format. Fields shall include date paid, name, SSN, type of payment, gross and net amounts paid, and federal withholding tax. Additional fields may be required.

ii)Demographic administration reports shall at a minimum consist of plan participation by employer, deferral accounts by salary, group or age, the number of participants using catch-up option, and other reports as requested by the BOARD.

iii)Telephone representatives are to be knowledgeable of the requirements of the Commonwealth of Pennsylvania Enabling Statute (Act 81-87), the Plan Document, the Roth 457 provision and the IRC Section 457.

iv)Automated voice response system should allow participants to access individual account values, request all forms and brochures to be mailed to their home address, provide deferral information, allow for transfers between accounts, and any other options deemed necessary.

v)Provide to BOARD a monthly emergency hardship report. Report shall list name, SSN, approval/disapproval, amount, and a brief reason for approval or denial.

vi)Employee account statements shall list beginning values, contributions, transfers, withdrawals, fees, and ending values for the quarter. Statement shall also include summary of the above information since the employee joined the Program. Separate information should be reported for all retirement plans offered, IRA’s and rollovers. Statement shall be released seven business days after unit values are determined. Statements should also include summary SDBO account information.

vii)Selected Offeror must have appropriate errors and omissions insurance and be held liable for any errors to participant accounts due to untimely and improper recordkeeping.

viii)Provide a timetable and method of transfer of all data for possible conversion to a new TPA. Account balances must be reconciled to the current TPA statements prior to transfer.

1. Recordkeeping.

i)Provide participants and Plan with timely reporting of income tax statements in accordance with federal requirements. Provide all federal year-end tax reporting on behalf of the Board, as required.

ii)Monitor and resolve any discrepancies of the unit value to the appropriate benchmark and research differences.

iii)Participant benefit statements must list type of benefit option selected, federal withholding tax, remaining account balance, gross amounts, federal withholding tax, year-to-date payments and net pay.

iv)TPA must be able to download electronic data transmission from the employer payroll offices to capture employee payroll deferrals, and separation of service information.

v)The TPA will be required to provide each employer with a detailed file of the changes made by participants for input into their respective payroll system.

vi)The State Treasury issues all benefit payments per instruction of the TPA. Communication of the information must be in acceptable format for the State Treasury. Benefit payments are mailed three times per month.

vii)Allow for dial up data communications, to the Pennsylvania State Treasury to initiate direct deposit or to produce hard check, in accordance with the Appendix N. Provide similar service for FWT payment to IRS through the State Treasury in the format of Appendix Nto meet timely deposits of participant federal withholding tax.

viii)Payroll deductions will be made utilizing deduction codes and deductions may be made weekly, biweekly, semimonthly, and/or monthly according to employer payroll processing cycles.

ix)Payroll deferral information will be provided to the TPA by the employervia various reporting methods (hardcopy or electronically) for the purpose of recordkeeping and verification and prior to the release of investment funds to the investment managers.

x)Provide access to participant data via TPA software to give SERS the ability to produce various demographic reports.

1. Enrollment Services.

i)Offeror is to provide account representatives, a regional manager, and local office staff devoted solely to servicing the Commonwealth of Pennsylvania Deferred Compensation Program. Account representatives are to be licensed in NASD series 6, 63 and have a Pennsylvania insurance license. Account representatives are to be knowledgeable in Section 457(b) plans and IRA’s. Account representatives must be employees of the firm. No subcontracting of account representatives will be permitted.

ii)Offeror is to present a proposal to provide the applicable level of service to the Program, as required by the Board as participation, asset diversification, and assets grow in the future.

1. Marketing.

i)Brochures must be updated and available for distribution within 60 days of a tax law, plan administration, or investment option change.

ii)Forms used in enrollment will be uniform for all participants. Such forms must be approved in advance by the BOARD and provided by the TPA and available to all potential participants.

iii)Every reasonable effort will be made to provide all employees with information relative to the Plan as well as access to enrollment on a continuing basis. Such efforts will consist of, but not limited to:

1)Publicizing the Plan through internal communications, brochures, various employee organization publications, Internet, direct mailings and other types of distribution outlets.

2)Preparation of a detailed brochure that will be available to all participants.

3)Conducting meetings with interested employees. Such meetings will be scheduled and held at the direction of the BOARD, at places throughout the Commonwealth where satisfactory employee attendance can be expected. Such meetings will be organized by the TPA and conducted by representatives of the TPA who have a thorough knowledge of each investment product offered. Meetings must be posted and updated monthly on the Program’s website.

iv)Marketing activity by the TPA is expected to be thorough and of an informative nature. The BOARD will reserve the right to monitor the meetings.

1. Counseling.

i)Provide participants with projection and analysis of selected benefit payout options to assist in their selection of the appropriate payout method.

ii)Provide participants receiving benefit payments an annual Newsletter updating information on the Program.

1. Managed Accounts.

i)Explain how your firm would deliver the managed account service. Explain how that service would be provided e.g, Internet, PhoneCenter with licensed personnel, individual meetings or a combination of the aforementioned features.

ii)Describe whether the managed accounts service is based on internally developed systems, or through a partnership with another financial professional.

iii)Explain whether your firm is able to co-ordinate the plan participant information with a Board selected independent financial advisor and investment options. If not please explain why.

iv)Explain whether your firm can provide an automated annual participant portfolio review and rebalancing.

v)Describe whether the managed accounts service allows for inclusion of all participant retirement assets, (i.e. projected Defined Benefit entitlements, Defined Contribution assets; IRAs; Social Security benefits; Spouse’s holdings/ benefits, other assets). Indicate how often the plan participant can update his / her information and receive a new projection.

vi)Explain when a participant can opt into or out of the managed accounts programs. Without disclosing costs, indicate how all fees are assessed (i.e. .asset based or flat fee, monthly, quarterly).

IV-3.Contract Requirements—Disadvantaged Business Participation and Enterprise Zone Small Business Participation.

1. All contracts containing Disadvantaged Business participation and/or Enterprise Zone Small Business participation must also include a provision requiring the selected Offeror to meet and maintain those commitments made to Disadvantaged Businesses and/or Enterprise Zone Small Businesses at the time of proposal submittal or contract negotiation, unless a change in the commitment is approved by the BMWBO. All contracts containing Disadvantaged Business participation and/or Enterprise Zone Small Business participation must include a provision requiring Small Disadvantaged Business subcontractors, Enterprise Zone Small Business subcontractors and Small Disadvantaged Businesses or Enterprise Zone Small Businesses in a joint venture to perform at least 50% of the subcontract or Small Disadvantaged Business/Enterprise Zone Small Business participation portion of the joint venture.

1. The selected contractor’s commitments to Disadvantaged Businesses and/or Enterprise Zone Small Businesses made at the time of proposal submittal or contract negotiation shall be maintained throughout the term of the contract. Any proposed change must be submitted to BMWBO, which will make a recommendation to the Contracting Officer regarding a course of action.

1. If a contract is assigned to another contractor, the new contractor must maintain the Disadvantaged Business participation and/or Enterprise Zone Small Business participation of the original contract.

1. The selected contractor shall complete the Prime Contractor’s Quarterly Utilization Report (or similar type document containing the same information) and submit it to the contracting officer of the Issuing Office and BMWBO within 10 workdays at the end of each quarter the contract is in force. This information will be used to determine the actual dollar amount paid to Small Disadvantaged Business and/or Enterprise Zone Small Business subcontractors and suppliers, and Small Disadvantaged Business and/or Enterprise Zone Small Business participants involved in joint ventures. Also, this information will serve as a record of fulfillment of the commitment the selected contractor made and for which it received Disadvantaged Business and Enterprise Zone Small Business points. If there was no activity during the quarter then the form must be completed by stating “No activity in this quarter.”

NOTE: EQUAL EMPLOYMENT OPPORTUNITY AND CONTRACT COMPLIANCE STATEMENTS REFERRING TO COMPANY EQUAL EMPLOYMENT OPPORTUNITY POLICIES OR PAST CONTRACT COMPLIANCE PRACTICES DO NOT CONSTITUTE PROOF OF DISADVANTAGED BUSINESSES STATUS OR ENTITLE AN OFFEROR TO RECEIVE CREDIT FOR DISADVANTAGED BUSINESSES UTILIZATION.