After re-issuing a request for proposals and a court battle, the City of Los Angeles Deferred Compensation Plan is close to choosing a recordkeeper for its $2.2 billion, 36,000-life 457 plan. The firms that responded to the request for proposals are CitiStreet, Great-West Retirement Services, which has been the incumbent since 1999, and ICMA Retirement Corp. A decision is expected at the end of September.
The problems arose in 2004 when Nationwide Retirement Solutions sued the city for terminating a contract offer to the firm. The offer was rescinded after city employee unions complained about higher fees. The Los Angeles Superior Court dismissed the case in June 2005 and ruled the Board of Deferred Compensation Administration could issue a new request for proposals for a recordkeeper (DCSPA, 9/19).
Steven Montagna, program manager, said the city council implemented several recommendations to revamp the process of selecting a recordkeeper. One was to survey plan participants before an RFP is issued. Another was a redesign of the RFP by altering the questions asked of prospective firms. Montagna said a new question asked the capabilities of bidders in processing beneficiary claims, which are usually processed in house. The selection process was also changed, with board members no longer included in the review and recommendation process. A special review committee was established to prepare a summary and make a recommendation to the board.
Separately, the city also made changes to its 457 plan by adding Lazard Asset Management‘s U.S. Mid-Cap Equity Fund to the city’s 21 fund options. Montagna said, “Small-cap and mid-cap funds have outperformed large cap in a multi-year period. He added there was also a need in the category.