Orange County Employees Retirement System

Request for Proposals For

Actuarial and Consulting Services

March, 2010

TABLE OF CONTENTS

I. INTRODUCTION

A. NOTICE OF REQUEST FOR PROPOSALS ................................................................... 1 B. BACKGROUND INFORMATION ON OCERS ................................................................. 1

II. INSTRUCTIONS FOR SUBMISSION OF PROPOSALS

A. CLOSING DATE, PLACE TO SUBMIT PROPOSALS AND POINT OF CONTACT ........ 2

B. QUESTIONS ABOUT THIS REQUEST FOR PROPOSALS/CONTACT WITH OCERS OR OTHER OFFERORS ............................... 2

C. PREPARATION OF PROPOSAL .................................................................................... 2 III. DESCRIPTION OF SERVICES REQUESTED

A. ACTUARIAL & CONSULTING SERVICES .................................................................. 3-4 B. INDEPENDENT REVIEW OF ACTUARIAL ASSUMPTIONS

AND METHODOLOGY .................................................................................................... 4

IV. CONTENTS OF PROPOSAL

A. TABLE OF CONTENTS ................................................................................................... 4 B. TRANSMITTAL LETTER ................................................................................................. 5 C. WORK PLAN ................................................................................................................... 5 D. FLAT FEES AND HOURLY RATES ................................................................................ 5 E. FIRM'S EXPERIENCE WITH PUBLIC SECTOR RETIREMENT SYSTEMS ............... 5-6 F. PERSONNEL ASSIGNED TO OCERS ........................................................................... 6 G. QUALITY ASSURANCE PROCEDURES/PEER REVIEW ............................................. 6 H. FIRM’S FINANCIAL STABILITY………………………………………………………………6

V. CRITERIA FOR PROPOSAL EVALUATION AND SELECTION PROCEDURE ................ 6 VI. SAMPLE AGREEMENT ...................................................................................................... 7 VII. POTENTIAL CONFLICTS ................................................................................................... 7 VIII. CLAIMS AGAINST FIRM .................................................................................................... 7 IX. INSURANCE AND LIABILITY ............................................................................................. 7

X. RIGHT TO REJECT PROPOSAL………………………………………………………………..7 LIST OF ATTACHMENTS ................................................................................................... 8 APPENDIX A…………………………………………………………..…………………………...8

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I. INTRODUCTION

A. NOTICE OF REQUEST FOR PROPOSALS

The Orange County Employees Retirement System ("the System") invites offers of professional services from independent firms for the purpose of providing actuarial and consulting services.

An internal committee of System staff will make objective comparisons among the proposals submitted and forward recommendations to the Board of Retirement. One firm will be selected for a five-year contract beginning in 2010. All firms submitting bids will be informed of the Board's decisions immediately thereafter. The System assumes no obligation to pay any costs incurred in the preparation of a proposal. A firm’s preparation and submittal of a proposal or subsequent participation in presentations or contract negotiations creates no obligation on the System to award a contract or to pay any associated costs. All proposals and related materials will be retained by the System and will be subject to disclosure as required in accordance with the Brown Act and the California Public Records Act.

B. BACKGROUND INFORMATION ON THE ORANGE COUNTY EMPLOYEES

RETIREMENT SYSTEM

OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937, and provides members with retirement, death, disability, and cost-of-living benefits. There are 38,932 members served by OCERS, of which 12,246 members are retirees. The Board of Retirement consists of nine members, of whom four are appointed by the County’s Board of Supervisors, four are elected by the members of OCERS, and the County’s Treasurer is an ex-officio member. There is also an elected alternate member.

OCERS is a cost-sharing multiple-employer, defined benefit pension plan consisting of the following agencies: City of San Juan Capistrano, The County of Orange, Orange County Children and Families Commission, Orange County Cemetery District, Orange County Department of Education (closed to new members), Orange County Employees Retirement System, Orange County Fire Authority, Orange County IHSS Public Authority, Orange County Local Agency Formation Commission, Orange County Public Law Library, Orange County Sanitation District, Orange County Superior Courts, Orange County Transportation Authority, Transportation Corridor Agency, and UCI Medical Center (closed to new members). OCERS has multiple employers with separate rates and benefits. Members may be either Tier 1 or Tier 2 based on entry date. Final earnings for Tier I members are based on the highest twelve months of earnings. Final earnings for Tier II members are based on the highest thirty six months of earnings. For General members the retirement benefits are based upon the following formulas: 1.667%@57 ½, 2%@55, 2%@57, 2.5%@55 and 2.7%@ 55. The Safety members have a 3%@50 formula for law enforcement, fire suppression and probation officers. This formula is represented by both Tier I and Tier II members. New hires into the law enforcement ranks will be under a 3%@55 formula.

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II. INSTRUCTIONS FOR SUBMISSION OF PROPOSALS

A. CLOSING DATE, PLACE TO SUBMIT PROPOSALS AND POINT OF CONTACT

Five copies of the proposal offering to provide the requested services must be delivered to the System's office no later than April 30, 2010 at 5:00 p.m. Proposals should be addressed to the Point of Contact, Tracy Ayres, at:

Orange County Employees Retirement System Attention: Tracy Ayres

2223 Wellington Ave., Suite 100 Santa Ana, CA 92701

Once a proposal has been submitted in accordance with this Request for Proposals, the candidate may contact Ms. Ayres to confirm the System's receipt. From the date of issue of this RFP until a successful candidate is selected and announced, candidates are not allowed to communicate, for any reason, with OCERS staff or Board members regarding this particular procurement, except through the Point of Contact named herein. Any unauthorized contact may result in disqualification. Candidates shall not discuss or share the contents of their proposals with other potential candidates.

B. QUESTIONS ABOUT THIS REQUEST FOR PROPOSALS/CONTACT WITH OCERS

OR OTHER OFFERORS

In order to ensure that all candidates have the same information and instructions concerning the preparation of proposals, any questions or other communication between a candidate and the System prior to the submission of proposals must be in writing. The answer to all question posed will be made available to all candidates via a posting on our web site.

Questions must be submitted no later than 5 p.m. April 6, 2010 to: Tracy Ayres at tayres@ocers.org. Email is the preferred method of communication. The subject line of the email should be “Actuarial RFP Questions”. All questions must include the name of the firm and the person submitting the question(s). Candidates may confirm the System's receipt of their questions by telephoning Ms. Ayres at (714) 569-4818. A compilation of all questions and answers, along with any RFP addenda, will be posted on the OCERS website, http://www.ocers.org, no later than April 9, 2010.

C. PREPARATION OF PROPOSAL

Each proposal must conform to the requirements of this Request for Proposals. The proposal should be prepared in language making performance of the work contemplated by the offering firm mandatory (e.g., "The Firm shall…") and suitable for use as an attachment to any resulting contract so as to legally bind the offering firm to performance of the specific work being proposed.

Conciseness and clarity of content are encouraged. The System reserves the exclusive right to determine compliance with these requirements and to exclude from consideration proposals which, in its judgment, do not so conform.

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III. DESCRIPTION OF SERVICES REQUESTED

A. ACTUARIAL AND CONSULTING SERVICES

1. Prepare Annual Actuarial Valuation Reports Annual actuarial valuations are to be performed as of each December 31, beginning with the December 31, 2010 valuation. The data for annuitants, active and inactive membership are provided as of December 31 each year. The report must be finalized and the major findings of the report will be presented to the Board by the supervising actuary, no later than the date of the regular Board meeting in the following June.

The actuarial report will:

Be in a format similar to the December 31, 2008 Actuarial Valuation Report

(Attachment 1).

Specify statutory funding requirements for the July 1 – June 30 year subsequent to the calendar year covered by the actuarial report. Funding requirements may vary between employers and for specific groups of employees.

Contain projections of unfunded liabilities and required employer contributions.

Potentially contain an estimate of projected accrued liabilities and assets, as may be required in future years.

Contain information in compliance with the Governmental Accounting

Standards Board Statement No.25.

2. Actuarial Experience Analysis The System will require an actuarial experience analysis for the three years ending December 31, 2010. The results of this study will be used to determine any changes in actuarial assumptions to be adopted in the December 31, 2010 valuation and will be presented to the board by the supervising actuary. The experience analysis must be in the same time frame as the December 31, 2010 valuation. Future experience studies will be conducted every three years. The System's most recent experience analysis for the period ending December 31, 2007 is set forth in Attachment 2.

3. Actuarial Programs for Use by System Staff Please describe the firm's experience in designing actuarial programs for use by its clients. OCERS occasionally requires the preparation of programs for calculating of purchase of service costs or similar items.

4. Preparing Cost Estimates for Benefit Changes The actuary will be required to provide estimates of the cost of potential changes in benefit provisions. In very rare instances, the actuary may be required to appear before legislative committees, commissions, or other bodies including the board to explain the estimates.

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5. Consulting Services The System may require, from time to time, analyses of certain proposals and laws affecting the System. Examples would include federal tax treatment of compensation and retirement benefits under qualified benefit plans and defined contribution plans. Please state whether the firm would be able to prepare special explanatory letters or reports on such topics as needed. (Fees for such projects would either be billed at an hourly rate or for a specified amount, as mutually agreed by the System and the firm.)

B. INDEPENDENT REVIEW OF ACTUARIAL ASSUMPTIONS & METHODOLOGY

The review of the System's actuarial assumptions and methodology should be comprehensive. It should cover as many years as the firm deems appropriate based on generally accepted actuarial standards and practices. The study should examine current analytical and forecasting methods as well as the System's assumptions.

The System’s last independent actuarial review was in 2004. The System's current actuary, The Segal Company, has provided services for five years.

IV. CONTENTS OF PROPOSAL

Proposals should be designed to cover the content requirements identified within this Section. All pages of the proposal must be numbered. Each proposal must be organized in the manner described below to facilitate comparison among the firms submitting proposals: A. Table of Contents

B. Transmittal Letter

C. Work Plan (for items described in Part III, Description of Services Requested)

D. Flat Fees and Hourly Rates (for items in Work Plan)

E. Firm's Experience with Public Sector Retirement Systems

F. Personnel Assigned to OCERS & Their Public Sector Experience

G. Quality Assurance Procedures

Appendices -Candidates are invited to submit other relevant information provided that it is clearly identified in the Table of Contents.

Separate documents -A sample actuarial valuation report and a sample independent review of a system's actuarial assumptions and methodology may be submitted as separate documents. These are not required.

A. TABLE OF CONTENTS

The proposal should include a table of contents. Tabs would be helpful.

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B. TRANSMITTAL LETTER

I. Briefly state the firm's understanding of the services desired by this Request for Proposals and make a positive commitment to perform jobs within the periods noted.

2. Provide the name, address, telephone and email address of the person authorized to

answer questions concerning the proposal. This person should be available and accessible to the System staff throughout the period of any resulting contract.

3. Provide the name, address, and telephone and email address of the person

authorized to execute the contract on behalf of the candidate firm.

4. Summarize the proposed fees for the five-year contract period.

C. WORK PLAN

The proposal must include a plan of work which should describe in detail the methodology to be employed by the firm to perform services. When possible, indicate the number of hours that will be allocated for each of the services and functions.

D. FLAT FEES AND HOURLY RATES

1. Actuarial and Consulting Services

Please provide flat fee estimates for the following services: • Actuarial valuations on an annual basis

• Actuarial experience analysis

Please provide hourly billing rates for the following services:

• Legislative requests (although in practice, the System generally requests a flat fee estimate for specific legislative proposals when the total fee is expected to exceed $5,000).

• Consulting services

• Please provide names, current job titles, and specific hourly rates for the

individuals assigned to OCERS.

E. FIRM'S EXPERIENCE WITH PUBLIC SECTOR RETIREMENT SYSTEMS

Each firm shall submit a list of its current public retirement system clients. Please identify the clients which are served by the personnel who would provide services to the System. Please show: • Name of retirement system;

• Number of years the system has been a client;

• Numbers of active members and all benefit recipients;

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• Number of plan sponsors • Number of benefit formulas being administered;

• Net Assets at Market Value (latest available);

• System contact person: name, telephone number, and address;

• Specific services provided.

F. PERSONNEL ASSIGNED

Please provide biographical information on the individuals who would provide services to OCERS highlighting their public sector experience and the number of years they have been with the firm. Note which of the individuals is an enrolled actuary as defined in sections 1241 and 1242 of Title 29 of the United States Code.

In addition, the supervising actuary must have experience with large public pension systems in determining pension benefit obligations and contribution rates, analyzing and reporting on selected experiences of such systems, testifying before legislative and other bodies in support of legislation, and the ability to present actuarial information in laymen's terms. The supervising actuary must be familiar with the work being conducted for the System and be available to answer System staff questions about that work.

G. QUALITY ASSURANCE PROCEDURES/PEER REVIEW

Briefly describe your firm's internal procedures for ensuring accuracy of work performed for the System. Please provide a copy of the latest peer review performed on the firm’s work product.

H. FIRM’S FINANCIAL STABILITY Please provide a copy of the firm’s latest audited financial reports.

V. CRITERIA FOR PROPOSAL EVALUATION AND SELECTION PROCEDURE The System’s staff will review proposals timely submitted by candidate firms. Proposals submitted in response to this Request for Proposals may be accepted as submitted, or may be used as a basis for further negotiation of specific project details with firms. The weighted factors listed below will be considered by OCERS when evaluating the firms’ submittals.

Evaluation Criteria Weight Qualification and Experience of firm and assigned individuals 30% Internal quality controls 25% Communication (Written and Verbal) 25%

Cost 20% If determined to be necessary, candidates may be requested to make oral presentations to the Board or staff or to otherwise respond to specific questions about the proposal.

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VI. SAMPLE AGREEMENT Once OCERS has identified potential finalists, a Sample Agreement will be provided to the firm(s) involved. The System reserves the right to negotiate with the candidate(s) additions, deletions, or modifications to the terms of proposals submitted or to make modifications to the agreement ultimately negotiated. The outcome of those discussions will be a part of the ultimate selection decision. VII. POTENTIAL CONFLICTS Firms should address the following:

• Are there any potential conflict of interest issues your firm would have in servicing OCERS;

• How does your firm identify and manage conflicts of interest;

• Have you or anyone in your firm provided any gifts, travel and room expenses,

entertainment or meals to any OCERS Board member or staff during the past 12 months, if yes, please describe the amount of expenses and what it was for;

• List and describe any professional relationship you have with the OCERS plan sponsors

during the past three years. VIII. CLAIMS AGAINST FIRM Within the last five years, has your organization or an officer or principal been involved in litigation or other legal proceedings relating to your actuarial services assignments, if so, please provide an explanation and indicate the current status or disposition. If your firm has been terminated from a contract for actuarial services similar to that described in this RFP, please provide a detailed explanation of the circumstances. IX. INSURANCE AND LIABLITY

• What limitation on liability, if any, do you propose through your contract;

• Please describe the levels of coverage for errors and omissions insurance and any fiduciary or professional liability insurance your firm carries. Is the coverage on a per client basis, or is the dollar figure applied to the firm as a whole? List the insurance carriers;

• Describe your firm’s disaster recovery plan as it relates to the equipment, software, and

data and personnel that would be used in providing the services required by OCERS.

X. RIGHT TO REJECT PROPOSAL By submitting a proposal, the vendor acknowledges that it has read this RFP, understands it, and agrees to be bound by its requirements unless clearly and specifically noted in the response submitted. OCERS reserves the right without prejudice to reject any and all responses.

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LIST OF ATTACHMENTS Attachment 1 Actuarial Valuation Report Attachment 2 Actuarial Investigation APPENDIX A

TIMELINE ID Milestone Date Time 1 Release of RFP 3/15/10 2 Questions from vendors due 4/6/10 3 Answers to questions posted 4/9/10 5:00 PM 4 RFP submission deadline 4/30/10 5 Staff evaluation of submittals 5/21/10

6 Interview of finalists by Retirement Board (est.)

6/21/10

OCERS reserves the right to alter this schedule at any time.