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Res. No. 146-01-11294RESOLUTION NO. 146 -01 -11294 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF SOUTH MIAMI, FLORIDA, RELATING TO PENSION ACTUARIAL CONSULTING SERVICES, AUTHORIZING THE CITY MANAGER TO SIGN A THREE -YEAR CONTRACT WITH GABRIEL, ROEDER, SMITH & COMPANY(GRS), WITH THE OPTION FOR RENEWAL FOR ADDITIONAL YEARS. WHEREAS, the City of South Miami employee Pension Fund currently utilizes WATSON WYATT as the actuarial consulting firm; and WHEREAS, Watson Wyatt (actuaries) has advised the City that effective August 31, 2001, it reached an alliance with Gabriel, Roeder & Company (GRS); and WHEREAS, the City sought to conduct a formal search for actuarial services from different companies and received proposals from four of them; and WHEREAS, the pension board reviewed the proposals submitted and interviewed representatives of the four companies that responded; and WHEREAS, the pension board has recommended that the service contract be awarded to Gabriel, Roeder & Company, and the pension attorney concurred that the company is premier in the industry. NOW THEREFORE BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF SOUTH MIAMI, FLORIDA, THAT: Section 1 Effective immediately, Gabriel, Roeder & Company (GRS) will serve as the actuarial consulting firm in accordance with the terms and conditions of the City pension plan. Section 2 The City Manager is authorized to sign a three -year contract with the option for renewals for additional years with the company for pension actuarial services. Section 3 This resolution shall take effect immediately upon approval. PASSED AND ADOPTED this 2nd day of October 2001. ATTEST: CIfY CLERK y 1 F n CITY ATTORNEY APPROVED... -• >' A .� ,'�' JULIO -RUBM NAB MAYOR COMMISSION VOTE: 4 -0 Mayor Robaina: Yea Vice Mayor Feliu: Yea Commissioner Bethel: Yea Commissioner Wiscombe: not preser. Commissioner Russell: Yea TO: Mayor and City Commission FROM: Charles D. Scurr City Manager x)."-"y ' The Request DATE: September 26, 2001 Re: AGENDA ITEM # Transfer of Actuarial Consulting Services from Watson Wyatt to Gabriel, Roeder, Smith & Company A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF SOUTH MIAMI, FLORIDA, RELATING TO PENSION ACTUARIAL CONSULTING SERVICES, AUTHORIZING THE CITY MANAGER TO SIGN A THREE YEAR CONTRACT WITH GABRIEL, ROEDER, SMITH & COMPANY (HEREINAFTER GRS) WITH RENEWAL OPTION FOR ADDITIONAL YEARS. Background and Analysis Recently, the City pension board made a business decision to solicit bids for actuarial services from different companies with the intention of reducing the total cost of administering the pension plan. Four companies submitted proposals in response to the solicitation. These four companies are as follows: Gabriel, Roeder, Smith & Company (Watson Wyatt) Buck Consultants AON Consulting Services Segal Company The four proposals were reviewed by the pension board members, and the representatives of each company were given the opportunity to respond to questions posed by the board members with regards to the proposals submitted. After careful deliberations, the pension board unanimously agreed to award the service contract to Gabriel, Roeder, Smith & Company (GRS). The company recently formed an alliance with Watson Wyatt. It is a private corporation that has been in business since 1938. It provides benefit consulting services to over 500 public and private sector clients nationwide with an emphasis on the public sector retirement system. Just for your information, the pension attorney concurred that GRS is a premier company in the industry. Attached with the resolution is the schedule of services that will be provided and fee to be charged by the company for the next three years. The payment of the fee will be charged directly against the pension fund bank account. RECOMMENDATI ®N I recommend approval. 1. FIXED FEE SERVICES Based upon our experience with similar Plans and based upon our discussions, we propose a comprehensive fixed -fee services that the Boards can be expected to require. We have then determined our fees based upon our analysis of these comprehensive regular recurring services. The advantages of this fixed fee approach to the Boards include knowing in advance the annual cost for all anticipated recurring services and the ability to budget and to prevent any surprises after the work has been performed. Further, we will guarantee this fixed fee amount for two years. The fixed fee amount will be increased only by inflation as measured by the Consumer Price Index for the third and subsequent years. The fixed fee services may be summarized as follows: • Preparation and delivery of the annual Actuarial Valuation Report including attendance at a Pension Board meeting to present the results of our valuation and respond to any questions. Our report will include the following requested services: ✓ Collection and reconciliation of Member census data, ✓ Recommendation of actuarial assumptions and methods, ✓ Calculation and reconciliation of actuarial value of assets, ✓ Determination of liabilities in accordance with State, actuarial and Government Accounting Standards Board (GASB) requirements, ✓ Determination of required contributions, ✓ GASB expense and disclosure exhibits (GASB #25 and #27) and ✓ Compliance with Chapters 112 and 185, Florida Statutes. • Preparation and delivery of Individual Employee Benefit Statements. We recommend that we prepare one copy to be distributed to active members and a second copy to be retained in the Plan records. • Preparation and delivery of actuarial studies to determine financial effect of plan changes or changes in actuarial assumptions or methods (up to 2 per annum), • Preparation and delivery of Actuarial Impact Statements to be filed with the State after passage of amending City Ordinances after passage at first reading but prior to passage at second reading. (up to 2 per annum), • Attendance at up to two additional Committee Meeting. • Response to any inquiries from the State relating to our Actuarial Valuation Report. • Response to auditor's confirmation request and coordination with other service providers. • Biennial preparation of SPD financial addendum. • Triennial review of actuarial equivalence definition for determining optional forms of payment including preparation of revised option factor tables upon any update. • Review of plan experience in comparison to actuarial assumptions. • Preparation of benefit calculations for retiring or terminating employees (up to 6 per annum). • Calculation of buy -back amounts (up to 6 per annum) • Telephone conversations on pending or anticipated issues that may affect our Actuarial Valuation Report that do not result in a work assignment • Review legislation that may impact plan in coordination with Plan Attorney. • Review compliance with State and Federal regulations in coordination with Plan Attorney Our fixed fee for these comprehensive services will be $15,500 annually. We will bill for our fixed fee services quarterly at the rate of $3,900 per quarter. GABRIEL, ROEDER, SMITH & COMPANY 2. While the breadth of fixed fee services is quite comprehensive, additional services of a non- recurring nature will be based upon our hourly rates. These rates would apply to any actuarial studies or impact statements in excess of the two per annum included under the fixed fee arrangement. . Our hourly rates are determined based upon the experience and abilities of our employees. The following are our current hourly rates reflecting the South Miami Team members. • Senior Consultant and Actuary: $285 • Consultant and Actuary $150 • Analyst $125 • Administrative Assistant $ 85 Our hourly rates are quite competitive in the industry. Further, we will not increased these hourly rates for two years. In the third and subsequent years our hourly rates will be increased only by inflation as measured by the Consumer Price Index for the third and subsequent years Unlike some other firms, our hourly rates include our overhead. We do not load our fees for technical and administrative services. 3. BENEFIT CALCULATIONS AND BUY BACK CALCULTIONS (IN EXCESS OF SIX EACH PER ANNUM) While we do not anticipate a volume of calculations in excess of the six each covered under the fixed fee arrangement, our fees for excess benefit calculations and buy —backs will be determined based upon hourly rates and we will agree to a not -to- exceed basis. That is, to the extent that our costs based upon our hourly rates are lower than the not -to- exceed amounts, we will bill our costs. To the extent that our costs based upon our hourly rates equals or exceeds the not -to- exceed amount, we will bill the not -to- exceed amount. We anticipate that our costs may be less than the not -to- exceed amount when verifications, calculations or buy -backs are batched (requested in groups). The following are our not -to- exceed amounts: • Benefit verifications: $150 per verification • Benefit calculations: $250 per calculation • Buy -back calculations: $275 per calculation. Our hourly rates are shown above. GABRIEL, ROEDER, SMITH & COMPANY GABR1E1„ ROEDER, SMITH & COMPANY Cansuitants h Actuaries September 26, 2401 301 East Las Olas Blvd. a S vita 2C0 o Ft. Le ce date, FL 33301 * 954-527-1616 *FAX 654 - 525.0063 Ms. Jeanette Enrizo- Navarro Pension Administrator General and Police Pension Funds City of South Miami 6130 Sunset Drive South Miami, Florida 33143 -5093 Dear Jeanette: As discussed, we are confirming our oral advice agreeing to at. expansion of the services covered under our fixed -fee proposal. As you are aware, our initial fixed -fee proposal provided for up to two (2) actuarial cost studies plus up to tvo (2) actuarial impact statements per annum. We had previously agreed to expand these services to include a total of eight (8) actuarial cost s udies or actuarial impact statements in any combination during each period of two (2) years. We now confirm that we will expand our fixed- fee services to include a total of nine (9) actuarial cost studies or actuarial impaot statements in any combination, during each perod of two (2) years That is to say, for the period from date ofis ception (i,e.. October 1, 7,0"Ji) to the "s'ec6hd anniversary of the date of inception (Le. October L 2003), we wia pm''bra, up to a total of nine (9) actuarial studies or actuarial impact statements. During the subsequent rwo -year period (i.e. October i, 2003 — October 1, 2005), the fixed -fee would cover nine (9) actuarial cost studies or actuarial impact statements in any combination. For example, during the two year period, the Board could request six (6) actuarial cost studies and three (3) actuarial impact statements, or some other combination totaling nine (9), without incurring additional fees. We trust that the Pension Boards and City will find our clarification worthwhile. We remain excited about the opportunity to work with you. Sincerest regards, (\ Lawrence F. Wilson, A.S.A. Senior Consultant and Actuary