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HomeMy WebLinkAboutRES 2013-30RESOLUTION NO. 2013- 30 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DIAMOND BAR ADOPTING THE EMPLOYEE DEFERRED COMPENSATION PLAN .INVESTMENT POLICY AND APPOINTING ITS COMMITTEE MEMBERS WHEREAS, City Resolution 89-107 established a Section 457 Deferred Compensation Plan for the employees of the City in November 1989; and WHEREAS, the Plan Sponsor of the Section 457 Deferred Compensation Plan has certain fiduciary responsibilities as set forth by the California Constitution; and WHEREAS, the Plan Sponsor can fulfill its fiduciary responsibilities with the adoption of an Investment Policy and the appointment of its Investment Committee members; and WHEREAS, staff prepared and attached Exhibit A — Section 457 Deferred Compensation Retirement Plan Investment Policy Statement. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Diamond Bar that it adopts the Investment Policy for the Section 457 Deferred Compensation Retirement Plan and appoints its Committee members as follows: City Manager Finance Director Human Resources Manager Two (2) City Staff Members who are participants in the Plan who will be appointed annually by the standing Investment Committee members PASSED, ADOPTED, AND APPROVED this 1 st day of October, 2013. i ! Jack Tanaka, Mayor 2013-30 I, Tommye A. Cribbins, City Clerk of the City of Diamond Bar, California, do hereby certify that the foregoing Resolution No. 2093-30was duly and regularly passed and adopted by the City Council of the City of Diamond Bar, California, at its adjourned regular meeting held on the 1st day of October, 2013, by the following vote, to wit: AYES: COUNCILMEMBERS: Chane, Herrera, Tye, MPT/Everett, M/Tanaka NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ABSTAIN: COUNCILMEMBERS: None Tommye A. Cribbins, City Clerk 2 2013--30 Attachment 1 City of Diamond Bar Section 457 Deferred Compensation Retirement Plan Investment Policy. Statement October 2013 2013-30 TABLE OF CONTENTS I) INTRODUCTION Page A) Purpose and Scope of Investment Policy Statement.......................................................1 B) Plan Objective.... .....................................--..................................................1 Q. Investment Option Menu...................................................................................1 II) STATEMENT OF RESPONSIBILITIES A) Committee .......... ............................................................................... . ............2 B) Investment Managers ....... ........................... ................................................. , . 3 C) Plan Participants................................................................................................4 D) Investment Consultant ....................... . ....................... ......... ......................4 E) Record Keeper....................................................................................... ..5 F) Custodian..........................................................................................................6 "COMMITTEE PROCESS A) Meeting Frequency ...... ......................................................... --- ...... ....,........... 6 B) Investment Fund Selection...................................................................................6 C) Investment Fund Performance Evaluation...................................................................6 D) Investment Fund Termination and Watch Status...........................................................7 M ASSETCLASSES...................................................................................................8 V) ERISA 404(c) STATEMENT...................................................................................................... 9 VI) ADOPTION & SIGNATURE...................................................................................................... 10 V11) APPENDICES A) Potential Plan Investment Options, Benchmarks, and Peer Groups 2013-30 I) INTRODUCTION A) Purpose and Scope of Mvestment Policy Statement. The purpose of this Investment Policy Statement is to record the investment objectives and investment policies solely for the City of Diamond Bar Section 457 Deferred Compensation Retirement Plan (the "Plan"). The City of Diamond Bar Deferred Compensation Committee (the "Committee") administers and provides oversight of the Plan. This investment Policy Statement supersedes any other investment policy or guidelines previously adopted by. the Committee. It is intended to assist the Committee in meeting its fiduciary responsibility, effectively constructing, supervising, and evaluating the investment program established for the Plan by: 1) Making a clear distinction among the responsibilities of the Committee, the investment fund managers, the Plan participants and beneficiaries, and other PIan service providers, and 2) Establishing a framework for the selection, monitoring, and evaluation of the Plan's investment fund managers. Although the Employee's Retirement Income Security Act of 1974 ("ERISA") does not apply to the Plan, the Committee intends to operate the Plan generally in conformance with ERISA 404(c). Investment decisions made by the. Committee will be made for the sole interest of the participants and beneficiaries of the Plan. The policies and practices outlined herein will not be overly restrictive given changing economic, business, and capital market conditions. The intent of these objectives is to be sufficiently specific to be meaningful, but flexible enough to be practical. It is understood that there can be no guarantees about the attainment of the goals or investment objectives outlined herein:. The Policy may be reviewed annually and revised anytime as necessary to ensure it adequately reflects changes related to the Plan. B) Plan Objective. The Plan was established to provide eligible employees an opportunity to save on a tax-deferred basis. The Plan is a tax-deferred defined contribution plan that provides for benefits based solely on the amount contributed to each participant's account, plus or minus any income, expenses, and gains or losses. The Plan Document and Summary Plan Description for the Plan are the governing plan documents and contain the specific plan provisions and requirements for determining eligibility to make and/or receive contributions under the Plan. C) Investment Option Menu 1) Purpose of Investment Options 2013-30 (a) Consistent with ERISA 404(c), investment options are selected to provide participants with an opportunity to diversify their accounts across a reasonable risk and reward spectrum. (b) Participants may select from any combination of investment options and may change the asset allocation of their investments pursuant to the Plan provisions and guidelines set by Investment Fund Managers and/or Record Keepers. 2) Construction of the Investment Option Menu (a) The number and types of investment options and the investment fund managers retained to manage the investment options are subject to change based upon the Committee's on-going review and evaluation of the investment menu offered to participants. (b) The Committee may add, replace, or remove investment options or funds at any time when it concludes such a change is in the best interests of Plan participants and beneficiaries. (c) Investment options generally will not be added if, in the Committee's judgment, they are redundant or duplicative of existing options. (d) When selecting investment options the Committee will bear in mind the wide range of objectives of the participants. (e) The investment options that may be available in the Plan are described in the attached Appendix A. II} STATEMENT OF RESPONSIBILITIES A) Committee. The Committee has the responsibility as the fiduciary for management of Plan Assets. It is the intent of the Committee to fulfill its fiduciary responsibilities with respect to the Plan solely in the interest of the participants and beneficiaries. The Committee members, as fiduciaries, are to perform their duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In fulfilling its fiduciary duty, the Committee shall be responsible for: 1) Selecting the investment design features of the Plan. This includes establishing the following: (a) the investment policy and objectives, 2013-30 (b) the number and types of investment alternatives available to Plan participants, and (c) participant investment procedures. 2) Appointing, monitoring and evaluating all investment funds in accordance with guidelines and benchmarks established within. this Investment Policy Statement. 3) Monitoring Plan costs which are charged to Pian assets and or paid by Plan participants, including but not limited to investment management fees, custodial fees and fees paid to other Plan service providers from Plan assets. 4) Delegating, when necessary, certain tasks or various functions io Subcommittees, the Plan Administrator, and/or service providers. 5) Complying with all laws and regulations governing the Plan. I3) Investment Managers At present, the Plan primarily utilizes mutual funds as Plan investment vehicles. The Committee may utilize separately managed accounts, commingled pooled funds, mutual funds, variable annuity contracts and any other funding vehicles as it deems appropriate for use by the Plan and is consistent with governing law and regulations. These various funding vehicles and approaches are collectively and interchangeably referred to using the term, "investment manager," "investment funds," "investment fund managers," "investm.ent products," "mutual funds," and/or "registered investment advisors" within this Investment Policy Statement. i) General Responsibilities. All Investment Managers managing assets of the Plan shall maintain the assets of the Plan in compliance with all applicable laws and regulations. Responsibilities include, but are not limited to, the following: (a) Plan assets shall be invested with the care, skill, prudence, and diligence that would be applied by a prudent professional investor, acting in like capacity and knowledgeable in the investment of retirement funds. (b) All transactions undertaken on behalf of the Plan shall be for the sole interest of Plan participants and beneficiaries. (c) With respect to the use of mutual funds, the Committee expects assets of such funds to be invested in accordance with the applicable prospectus, (d) All mutual funds shall be registered Investment Companies as defined under the Investment Company Act of 1940 (Act). The Investment Companies need not be classified as "diversified" Investment Companies as defined in the Act. Funds also may be offered through a variable annuity contract. 2) Information Provided to the Committee. The Committee may from time to time request the Investment Managers or their representatives to meet with them to discuss the following topics, including but not limited to: 2013-30 (a) The manager's views concerning the economy and the securities markets, with focus on the likely impact of the fund's strategies on portfolio performance. (b) The effects of any changes to the investment fund's organization, investment philosophy, financial condition, or professional staff. . 3) Specific Duties. The specific duties and responsibilities of each investment fund are as follows: (a) Managing the Plan's assets under their supervision in accordance with their mandates or those contained within their published guidelines or prospectuses. (b) Exercising full investment discretion in regards to buying, managing and selling assets held in the portfolio. C) Plan Participants. The Committee recognizes that the Plan is a significant source of retirement income for Plan participants and their beneficiaries. Investment, contribution, and allocation decisions shall be made solely by each Plan participant subject to certain procedural and administrative guidelines and default investment procedures for automatically enrolled or other participants that do not make an investment election. The Committee shall mare available through the Record Keeper investment option performance results and other educational information relating to investment concepts and the investment options. The provision of this information and service does not constitute investment advice. It is solely the responsibility of each Plan participant to direct the investments in their account. Participants alone bear the risk associated with their selections. Participants are responsible for the following: 1) Determining their contribution deferral rate above the City contribution, if any. 2) Selecting their investment options for both existing balances and new contributions. 3) Monitoring their asset allocation strategy and making adjustments as personal situations change, 4) Electing the timing and form of distributions according to the. terms of the Plan. D) Investment Consultant. The Committee may retain the services of a qualified independent Investment Consultant. The primary responsibility of the Investment Consultant is to inform and advise the Committee on various investment related issues with respect to ,the oversight of and potential enhancements to the Plan. Such services include: 1) Assisting the Committee with determining an appropriate process for constructing the structure of the investment menu. 4 2013-30 2) Providing timely, accurate, and unbiased reports evaluating return, risk and characteristics (where available) of each of the funds. compared to appropriate indexes and/or peer group universes. 3) Apprising the Corarnittee of changes with regard to its funds in an appropriate time frame given the significance of the information. 4) Conducting a fund review at the request of the - Committee when, for example, noteworthy changes or material under -performance occurs. S) Assisting the Committee in the search and replacement of existing funds when a review so merits this change. The Investment. Consultant's role is to provide information and advice to the Committee. The Investment Consultant has no discretionary control or authority over the Plan and its assets. However, in its role as an advisor to the Committee the Investment Consultant has acknowledged a fiduciary role with respect to the investment advice provided to the Committee. E) Record Keeper. The Record Keeper has no discretionary authority over the Plan and its assets and is not a fiduciary with respect to the Plan or its assets. Among other items, the Record Keeper is responsible for: 1.) Maintaining the Plan's participant account balances in an accurate and confidential manner. Z) Preparation of quarterly participant statements. 3) Completion of the annual compliance tests as included in their service agreement. 4) Accurate and timely Plan data and reports to the Committee as included in their service agreement. 5) Providing participants with electronic access to account information and transactions as contracted by the Company. 6) Coordination of the provision of fund prospectuses to participants as requested. 7) Providing various participant communication materials as described in the service agreement and/or requested by the Committee. 8) Providing general investment education to Plan participants regarding the procedures for making investment choices under the Plan and general investment education regarding each of the investment options offered under the Plan consistent with the requirements of ERISA 404(c), S 2013-30 1 F) Custodian. The Custodian is non -discretionary and takes direction from the Committee or its dolegates. The Custodian is charged with the following responsibilities: 1) Safekeeping all securities; 2) Settling transactions; 3) Receiving contributions; 4) "Allocating contributions among investment accounts as instructed; 5) Making participant distributions as instructed; 6) Providing periodic account statements to the Committee and other service providers as requested by the Committee. III) COMMITTEE PROCESS A.) Meeting Frequency. The Committee or designated subcommittee will review the investment perfon-nan.ce of the funds offeredd in the Plan no less frequent than semi- annually. The Committee will also review the investment policy and investment options offered in the plan on an annual basis. The Committee may choose to meet on a more frequent basis (e.g., monthly, bimonthly, or quarterly). The Committee may designate one or more subcommittees which may meet periodically. B) Investment Fund Selection. Searches for investment funds should include candidates that have demonstrated success in similar strategies. In selecting an investment fund, a due -diligence process is followed, which analyzes the investment fund in terms of 1) Investment performance track record and consistency of returns achieved with risks taken. 2) Alignment of fund investment philosophy, process, and style with Plan option objectives. 3) Size and experience of professional staff. 4) Tenure of investment management team and parent organization. 5) Competitiveness of Investment management fees. 6) Compatibility with flan trading requirements. 7) An assessment of fund statistics measuring risk related to its benchmark. C) Investment Fund Performance Evaluation. Performance objectives will be established for each fund and/or asset class at the time the class is included. The performance review 0 - -- 20 11 - 3 0_ will include measuring the funds' investment performance to stated benchmarks and peer groups, as well as monitoring risk measures. The Committee will review the performance of investment funds to determine if they are achieving the established objectives. The following will be evaluated: 1) Quantitative Measures. (a) Active Investment Strategies. Funds employing active management are expected to rank above the 50th percentile of the appropriate peer group for the rolling three and five year time periods. It is also expected that the risk of each fund, as defined by standard deviation of returns, be commensurate with ' the appropriate market index and/or peer group. The benchmarks and peer groups are outlined in Appendix A. (b) Passive Investment Strategies. Passive funds are expected to track the performance of the index strategy that the option is' designed to replicate, less management fees, with marginal tracking error. Typically rolling three and five year periods will be evaluated. It is also expected that the risk of each fund, as defined by standard deviation of returns, be commensurate with the appropriate market index. The benchmarks are outlined in Appendix A. 2) Qualitative Measures, The funds will also be monitored on an ongoing basis for other material changes which the Committee may determine are of importance to the decision to retain an investment fund, such as personnel departures; organizational changes; or alterations in investment style, philosophy, or strategy; and adherence to stated guidelines. 3) Time Periods. The Committee acknowledges that fluctuating rates of return characterize the securities markets, particularly during short-term time -periods. Recognizing that short-term fluctuations may cause variations in a -fund's performance, the Committee intends to employ investment funds with long-term investment strategies and 'will evaluate fund performance from a long-term perspective. Performance over market cycles- of three to five years will be weighted more heavily than performance over shorter time periods, such as. one year or less. D) Investment Fund Termination and 'Watch Status. All investment funds are expected to perform according to their prescribed objectives under this Investment Policy Statement, The Committee recognizes the longterm nature of retirement plan investing and the variability of market returns. Periodic underperformance in any of the criteria outlined in this investment Policy Statement will not necessitate the termination of a fund. Underperformance will provoke thoughtful consideration by the Committee of the factors causing underperformance and possible courses of action that the Committee may take. The Committee will place a fiend on watch if, for two consecutive quarters, the fund's performance is below the 75th percentile of its peer group over both the three- and five- year rolling periods. A fund that is on watch will undergo a greater level of review and 7 2013--30 analysis. A fund may remain on watch status until the Committee decides to take further action_ Committee actions include, but are not limited to, the following: ■ Remove the fund from watch status, ■ Continue the fund watch status, ■ Terminate the fund and reallocate fund assets to an alternate fund or replacement fund by Committee direction. A fund may be removed from watch status if performance exceeds median for both conditions noted above for two consecutive quarters. Other factors contributing to placing a fiend on watch are: ■ Material change in the risk profile of the portfolio as measured by the standard deviation of returns, Material increase in management fees or expense ratios, Turnover in the management team, of the portfoli©, ■ Material increase or decrease of assets under management, ■ Deviation from style for which the fund was selected, ■ Material organizational change, changes in ownership, mergers, etc, ■ Other factors, which the Committee may determine, are important for consideration. The Committee will endeavor to use its best judgment and information available to act in a prudent manner on behalf of the Plan and its participants. The Committee reserves the right to terminate any investment fund at any time for any reason when it determines such termination is in the best interests of the Plan and its participants and beneficiaries. TV)ASSET CLASSES The Committee may consider the following asset classes for possible inclusion in the Plan as investment choices to be made available to participants: - Domestic Equity - Inter -national Equity - Fixed Income - Cash and Capital Preservation. Pre -Set Asset Allocation Funds The Committee may decide to offer Pre -Set Asset Allocation Funds and/or balanced funds which are intended to provide an investor with an asset allocation option that they may determine is aligned with their own risk and return. preferences. These asset 2013-30 allocation type funds are broadly diversified by asset class, issuer, issue type, and economic sector. These Pre -Set Asset Allocation Funds may be made up of funds currently offered individually as fund choices (see Appendix A). The Committee may utilize outside research in making .determination of the asset allocations of the Pre -Set Asset Allocation Funds. Other Asset Classes. The Committee may also consider other asset classes or strategies. Self -Directed Brokerage Accounts. Assets under this class are not monitored nor evaluated by the investment committee due to the nature of participant directed with access to funds and classes outside of what is offered within the 457 Deferred Compensation Plan and its fund line up. V) ERISA 404(c) STATEMENT A) ERISA 404(c) Safe Harbor Compliance. It is the Committee's intent that the Plan generally comply with ERISA 404(c). However, the Plan participants will be solely responsible for the investment decisions and investment transactions that they make under the Plan. VI)ADOPTION & SIGNATURE: This Investment Policy Statement is adopted by the Committee and effective on this day of ^ Octoher > 2413. 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