HomeMy WebLinkAbout04-10-85 Personnel & Finance atuntudttn Squirt
Ohl the ennui= council of ttp etty of Ifoutl Stott PERSONNEL AND FINANCE COMITTEE
The April 10, 1935 meeting of the Personnel and Finance Committee
was called to order by its Chairman Councilman Ann Puzzello at 4: 00 p.m.
in the Council informal meeting room.
Persons in attendance included: Councilmen Beck, Puzzello, Voorde,and
Zakrzewskii Irene Gammon, Michael Vance, Tim Meinkin, Kathleen Cekanski-
Farrand, and the individuals listed below.
Councilman Puzzello noted that the purpose of the meeting was to
hear presentation from various companies on deferred compensation. She then
passed out two. (2). handouts (attached) .
AETNA
The first presentation was from Aetna with Ralph Muszynski, Scott
Wilson, and Scott Gibson giving the presentation. A handout was given to
each of tke Councilmen present. It was noted that Aetna has been in
existence since 1853, and has deferred compensation plans no, 457 in effect
in 12 states and 800 political sub-divisions, as well as for the American
Hospital Association, the LAICU, the Police Chiefs Association, and the
Country Club Managers Association.
They dressed that they provide quality services and ongoing
administrative support. They have an entirely separate unit which deals with
deferred compensation and everything from data processing to money management
to their legal department is done in-house. They would provide legal and
technical assistance at no charge; have group meetings for enrollment and
counselling purposes ; and would provide immediate confirmation and
reconciliation services. There would be monthly billings and in turn they
would provide confirmation of dates when money was received, dates when money
was applied, total amounts of funds received to date, total values of accounts ,
as well as individual breakdowns. They would also have a watts line into
Hartford, Ct. available.
There would be five different investment options , namely:
1. Common Stock Fund
2. Bond Fund
3. Money Market Fund
4. Guaranteed Accumulation Account
5 . Fixed Accounts
Aetna presently has control over $l billion dollars in assets.
The following fees would be in effect: $15 .00 per account as a
maintenance fee payable on the anniversary date and investment advice at
1.257 on the variables. Individuals could move money around up to 4 times
each year at no charge and after that a $25 .00 fee would be assessed.
Minimum contributions would be $50.00 per month. Individuals who leave City
employment can have their accounts rolled over into other deferred compensation
programs . They also would provide free annuity conversion at the time of
retirement. They predicted a participation rate of 60-70%. They provide
•R[[ PRESS 0E90 PUBLISHING CO.
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a ten day "free look". They also provide a life insurance option called
"Unimaster". Following questions by the Committee the Council then heard
the presentation from Prudential.
PRUDENTIAL
Mark Schmidt, Jim Houghton, and Lynn Dnyager were the presenters and
gave a slide presentation highlighting their deferred compensation program.
They offer three investment options :
1. Fixed Dollar Annuity Accounts
2 . Money Markets
3. Common Stock
They noted that they have been in business for over 100 years and were the
largest insurance company in the United States. They emphasized that they
offer a program that is diversified and flexible.
The minimum contribution allowable would be $10.00 per week in a
maximum dollar.: amount on an annual basis of $7,500.00 . They charge an
annual administration charge of $12 .00 per account and would send quarterly
statements to the City. They would hold group meetings to explain the
program. They are hoping to add new investment programs in 1986 which would
include bond accounts, agressive common stock account, and index accounts .
Invidivuals could call locally or the corporate office collect. They predicted
a participation rate of 20-257 which could grow to 45-50%. Upon questioning
from the Committee they stated that confirmation of contributions "could be
worked out".
USCM/PEBSCO
Mr. Tom Taylor gave the next presentation. He noted that the
US Conference of Mayors began the program in 1978 when the Federal law was
passed. The plan was submitted to 100 of the largest insurance companies
with Nationwide of Columbus, Ohio being the successful underwriter/banker.
The conference joined with the National Association of Counties and desired
a third party administrator which is now PEBSCO (Public Employees Benefit
Services Corporation) .
Currently PEBSCO administers 11 state programs and over 1, 300 local
goverment programs .with 23 being in the State of Indiana. They are currently
serving 200,000 public employees and oversee over $1 billion dollars in
assets.
They believe in having a broad based approach and nationally have
a 30% participation rate. Deferred compensation is the only program offered.
They offer 11 investment options with one being fixed and 10 variables
all of which are regulated securities . including money market, two bond funds ,
and seven mutual common stock funds. Splitting is permitted and a person
may change as often as he wants .
Minimum contributions are $5.00 per week with maximum contributions
being $7 ,500 annually.
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PEBSCO offers insurance which permits individuals to sign up for
coverage even if they are terminally ill. They offer insurance with a
salary guarantee for monthly benefits of $300 minimum or $1, 500 maximum.
There is a $12. 00 per year basic administrative charge . The company
provides semi-annual statements and a toll free number; and would be
willing to provide quarterly statements with the administrative charge
being $15 . 00 rather than the $12.00.
Deferred compensation programs either have a front-end fee or
a surrender fee. PEBSCO has a surrender fee of 4% however if an employee
is with the program for 16 years the fee is waived.
PEBSCO offers a hold-harmless clause in the event that the City
would ever be sued PEBSCO would defend at their own cost.
The City would be receipted on every transaction with quarterly
and annual breakdowns being provided. A descriptive handout was then
presented to the Committee.
ADMINISTRATIVE SERVICES
Mr. Ralph Costello and Mr. Bob Grossnickle gave the presentation,
with the latter individual representing Bankers Life of Des Moines , Iowa.
He noted that they have been in business since 1879 and as of 1984 offer
deferred compensation programs .
They outlined the 401K income deferral plan which permits 25% of
your income or $30, 000 (whichever is less) to be deferred. They have
tentative approval from the IRS however each plan is custom made and must
be submitted to the IRS for approval.
There are "discrimination tests" which must be met for contributions
with the top 1/3 of salaried employees not contributing more than the bottom
2/3 .
The City would have to make the discrimination test with an average
3 months in preparing the plan for submission to the IRS.
The basic advantages are permitting higher contributions and pay-outs
in lump sums which would permit 10 year forward averaging. The basic
disadvantage is the ongoing "discrimination tests".
They offer five types of funding vehicles plus life insurance which
include: guaranteed interest accounts , private market bonds , common stock,
money market, and real estate . They do allow contributions to be split .
Besides the cost involved for the "discrimination tests", there
would be a record-keeping expense with the annual charge being dependent
on the number of participants . A packet of information was presented to
the Committee for review.
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INDIANA DEFERRED COMPENSATION PLAN, INC.
The last presentation was given by Gene Thompson, Sue Griffin,
and Frank Trost. They noted that the Committee should be looking at
three criteria: unique services , incentives of the plan, and how successful
the plan is.
They noted that their company was formed solely to serve Indiana
employees. They believe they offer unique services which include payroll
take-home deductions and preparation of W-2 forms being the only services
performed by the City.
They noted that they gave a presentation to the City Council late
last year and gave additional written documentation today . The program
is monitored by a Board of Finance Sub-Committee.
Currently there are 63 local entities in Indiana participating and
they also have a toll free number.
They offer 9 investment options to be chosen by the employees .
Their company has a 21-22 percent State-wide participation rate.
Minimum contributions are $5.00 per week with a maximum of $7 ,500
annually. Mr. Frank Trost would be the local representative who would meet
with the employees to explain the program and the investment options .
Following questions from the Committee, the last presentor then left
and Mr. Vance noted that two other companies had sent information to the
City for consideration. It was recommended that this information be referred
to Mr. Tim Meinkin for recommendation.
Following further discussion it was also recommended that Prudential
and Administrative Services not be considered in the final review. Mr.
Meinkin would prepare a report for review by the Committee at a later date.
Following further discussion the meeting was adjourned at 7 : 20 p .m.
Respectfully submitted,
Ann Puzzello, Chairman