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HomeMy WebLinkAbout081919_ca04 Consent Agenda Commissioners Office JEFFERSON COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST TO: Board of County Commissioners Philip Morley, County Administrator FROM: Leslie Locke, Executive Assistant DATE: August 19, 2019 SUBJECT: Authorization for County Administrator to Sign AGREEMENT re: Deferred Compensation Plan, Guaranteed Minimum Interest Rate Change Option; No Dollar Amount; Jefferson County Auditor;Nationwide Retirement Solutions STATEMENT OF ISSUE: Authorization for County Administrator to Sign AGREEMENT re: Deferred Compensation Plan, Guaranteed Minimum Interest Rate Change Option; No Dollar Amount; Jefferson County Auditor; Nationwide Retirement Solutions. Nationwide is taking steps to change the Guaranteed Minimum Interest Rate of the Fixed Annuity Contract available in the 457(b) deferred compensation plan. FISCAL IMPACT: None. RECOMMENDATION: The Commissioners are being asked to approve and authorize the County Administrator to sign this agreement. REVIEWED BY: • "':�'!t ounty Administr. r. ate Nationwide is on your side Dear KARI BINNS, RE: JEFFERSON COUNTY WA FINAL NOTIFICATION—YOUR RESPONSE IS NEEDED BY SEPTEMBER 30TH This is a final follow up request to two notifications that you should have previously received concerning the Nationwide Fixed Annuity Contract available in your 457(b) Deferred Compensation Plan. We ask that you please review the attached information and respond by September 30, 2019. As previously communicated, Nationwide is taking steps to change the Guaranteed Minimum Interest Rate (GMIR) of the Fixed Annuity Contract available in your plan. As a contract holder, you have options. The following packet includes all the steps required to make the necessary changes to your plan. If we do not receive an option selection by September 30th, your plan will no longer have an active fixed annuity investment option. New contributions will no longer be accepted into your current fixed annuity investment option and future participant allocations will be directed into your existing Default Investment Alternative (DIA). More details can be found on the enclosed Guaranteed Minimum Interest Rate Change:Explanation of Options. Next Steps As part of this change, we are asking you to consider the options outlined in the enclosed Guaranteed Minimum Interest Rate Change:Explanation of Options. As Plan Sponsor, you have a responsibility to make decisions on behalf of the entire plan regarding products and features available to your plan participants. Please take time to review the options and sign and return the required documents to Nationwide. If you do not select one of the options provided, new contributions will no longer be accepted to your current Fixed Annuity Contract.This includes, but is not limited to, payroll contributions, rollovers, transfers and exchanges. All future contributions will be invested into your plan's Default Investment Alternative Fund. Questions? Refer to the enclosed FAQ for more information. If you have additional questions about this change or the options available for the adjustment, please contact our service center at 877-496-1630 or your local Nationwide Retirement Solutions Representative. Our specialists are available Monday through Friday, 8 a.m. to 8 p.m. Eastern time. Thank you for your partnership as we mutually work to help your participants prepare for and live in retirement. Sincerely, Nationwide Retirement Solutions Nationwide,the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. l 2019 Nation wide. NRM-17364A0(07/19) 66 0 Nationwide' is on your side Guaranteed Minimum Interest Rate Change: Explanation of Options Please consider your available options before making a selection on the Guaranteed Minimum Interest Rate Change:Options Form (the Options Form). The Options Form and required documents are enclosed.An option will need to be chosen and sent in to prevent your current fixed fund from being closed to future contributions, including rollovers,transfers and exchanges. 1)Option One Your contract is amended to lower the Guaranteed Minimum Interest Rate annually on the following schedule: 2019 2020 2021 2022 2023 3.5% 2.5% 2.0% 1.0% 0.5% Nationwide commits to limiting the reduction of the Crediting Rate'to no more than 0.12%per quarter for the next 12 quarters.The reduction is based on market conditions and investment performance and may be less than 0.12%, which is the maximum per quarter as illustrated in the following table: Minimum Gross Exchange/Transfer GMIR Crediting Rate Limit Q2 2020 2.50% 3.38% 20%annual Q3 2020 2.50% 3.26% 20%annual Q4 2020 2.50% 3.14% 20% annual Q1 2021 2.00% 3.02% 20% annual 2)Option Two The contract is amended to lower the Guaranteed Minimum Interest Rate annually on the same schedule shown in Option One.Additionally,the annual per participant exchange and transfer limit is also increased from 20%to 40%. Nationwide commits to limiting the reduction of the Crediting Rate'to no more than 0.12%for the next 12 quarters. However, because of the increased exchange and transfer limit,the Crediting Rate under this option will be 0.10% less per quarter than under Option One,as illustrated in the following table: Minimum Gross Exchange/Transfer GMIR Crediting Rate Limit Q2 2020 2.50% 3.28% 40% annual Q3 2020 2.50% 3.16% 40% annual Q4 2020 2.50% 3.04% 40% annual 01 2021 2.00% 2.92% 40% annual 'The Crediting Rate is the interest rate credited as an annual effective yield as defined by your Fixed Annuity Contract. 2 66 What happens if I don't select an Option? Default: If you do not act on any option, new contributions will no longer be accepted to your current Fixed Annuity Contract.This includes, but is not limited to, payroll contributions, rollovers,transfers and exchanges. You are electing to place future participant allocations into your existing Default Investment Alternative Fund (DIA), or in the most conservative investment option in the plan's core fund line up if a DIA does not exist. Subsequently, if your participants do not elect a new investment to replace the Fixed Annuity Contract option,the DIA will be used for future contributions that would have otherwise been allocated into the Fixed Annuity Contract. Your plan's current fund lineup can be viewed online at www.nrsforu.com/plansponsor. The participants will be notified of the change so that they may have the opportunity to change their allocation. Important Note:Please see the notice below on how plans that offer ProAccount Managed Account Services, provided by Nationwide Investment Advisors, will be affected by not choosing an option and defaulting. Important notification concerning ProAccount Managed Account Services and the Guaranteed Minimum Interest Rate Changes If your plan offers Nationwide ProAccount Managed Account Services, please take a moment to read why your option selection is important to ProAccount balances of your participants. By selecting Options 1 or 2 on the enclosed Options Form,there will be no changes to the participant's allocation within ProAccount and your participants will have no disruption to their managed account services. However, if you do not act on either option,you are electing to place future participant allocations into your existing Default Investment Alternative Fund (DIA),or in the most conservative investment option in the plan's core fund line up if a DIA does not exist.Your plan will no longer have an active Fixed Annuity Contract and ProAccount will no longer have access to the existing balances of the Fixed Assets that are currently under ProAccount management.The Fixed Assets will be held in the participants' account outside of ProAccount at the 3.5%GMIR and will not be open to new contributions. Those participants with ProAccount will no longer have the Fixed Annuity Contract available in their ProAccount allocation and will be invested in other conservative allocation options available in your plan. Participants who wish to fully incorporate their Nationwide retirement plan assets in professional management can contact Nationwide to move the assets currently invested in the Fixed Annuity Contract into their ProAccount Portfolio. Plan Level Exchange and Transfer contract features will still apply. Please contact our service center at 877-496-1630 or your local Nationwide Retirement Solutions Representative if you have any questions. Our specialists are available Monday through Friday,8 a.m.to 8 p.m. Eastern time. 3 66 01 Nationwide' is on your side FAQ: Guaranteed Minimum Interest Rate What is changing? We're adjusting the Guaranteed Minimum Interest Rate (GMIR) to ensure we can continue offering current and future participants valuable retirement plan solutions. Accordingly, Nationwide must align with the market and gradually reduce the GMIR in our fixed annuity contracts. What is a Guaranteed Minimum Interest Rate? The Guaranteed Minimum Interest Rate is the lowest Crediting Rate that Nationwide will credit to participant accounts under the terms of the contract. What is a Crediting Rate? The Crediting Rate is the interest rate credited as an annual effective yield to participants that are invested in the fixed annuity on a daily basis. The Crediting Rate is determined on a quarterly basis by Nationwide and is different than the GMIR. Why is Nationwide making this change now? As we survey the retirement plans market, we've recognized a need to change a feature of our product suite— the GMIR of the fixed annuity contract available in your plan. Over the past five years, many providers have lowered their GMIRs. During that time, Nationwide did not take any action; however, long-term interest rates have only increased modestly, creating an interest rate environment in which we can no longer offer an above- market crediting rate. For the last several years, the industry has operated in a consistently low interest rate environment, which has directly impacted the investment returns available in the market. During this time, Nationwide has continued to provide an above-market crediting rate to participants invested in our fixed contract, but now recognizes the need to adjust the GMIR to allow for more market driven crediting rates. What is the difference between a Crediting Rate and a GMIR? While the quarterly Crediting Rate may vary depending on market conditions and investment performance,the GMIR is the minimum interest rate established under the Contract. It is meant to act as a floor, meaning regardless of market conditions or investment performance, participants with assets invested in the Contract will not receive a crediting rate that is lower than the GMIR. 4 66 What happens when the crediting rate wants to drop below the GMIR but is limited by the guarantee? Nationwide's goal is to pay a competitive crediting rate to participants. Reducing the Guaranteed Minimum Interest Rate may not have a direct impact on the crediting rate that is paid to the participant. Even though Nationwide will annually step down the Guaranteed Minimum Interest Rate to 0.5%, the crediting rate may change quarterly.And while it may be reduced occasionally due to market conditions or investment performance, it will never drop below the Guaranteed Minimum Interest Rate. What can I expect from Nationwide? You can expect Nationwide to continue to offer a competitive crediting rate to your participants. Our goal is to help America's workers prepare for and live in retirement and we will help do this through the products and services that we offer. Nationwide can also provide materials and tools to help communicate this change to affected participants upon request. What is the exchange and transfer limit under Option 2? The percentage of the participant's assets invested in the contract which can be exchanged or transferred out of the contract per year will be increased from 20%to 40%, enabling your participants to transfer more money out of their Fixed asset. If the limit is exceeded, no further exchanges or transfers will be permitted until the following year. When will the change to the GMIR be effective? The adjustment for any option selected and the default option, if no option is selected, will be effective on 4/1/2020. 5 Nationwide t) is on your side Guaranteed Minimum Interest Rate Change: Options Form Plan Name: JEFFERSON COUNTY WA Entity Number: 0038929001 Please select only one of the options below, sign the bottom of this page, and return both this Options Form and any required documents by September 30, 2019. [ ] Option One: Crediting Rate r> Return Signed Options Form > Return Signed Amendment OPTION 1 [ ] Option Two: Increased Participant Level Exchange and Transfer Limit > Return Signed Options Form Or ➢ Return Signed Amendment OPTION 2 Please Note:If you do not act,you are electing to place those participant allocations in your existing Default Investment Alternative on file,or in the most conservative investment option in the plan's core fund line up if a DIA does not exist. Participants will be notified of the change so that they may have the opportunity to change their allocation. REQUIRED The signed documents can be returned to Nationwide in one of three ways: DOCUMENTS • Return in the provided envelope • Scan and email to NRSFORU@nationwide.com • Fax directly to 1-877-677-4329 For information about each option, please refer to the Guaranteed Minimum Interest Rate Change: Explanation of Options. Plan Sponsor Signature Date By signing above,I certify that I have the authority to act on behalf of the Plan and that I have fully reviewed the information provided to me.The unregistered group variable and fixed annuity is issued by,and any guarantees are subject to the claims-paying ability of,Nationwide Life Insurance Company,Columbus,OH. 6 66 NATIONWIDE LIFE INSURANCE COMPANY ONE NATIONWIDE PLAZA COLUMBUS,OHIO 43215 FIXED ACCOUNT AMENDMENT to Group Flexible Purchase Payment Deferred Variable Annuity Contract General Information Regarding this Amendment This Fixed Account Amendment replaces the Fixed Account Endorsement that was previously issued to the Contract Owner and is made a part of the Contract to which it is attached. To the extent the terms of the Contract and this Amendment are inconsistent, the terms of this Amendment shall control the Contract accordingly. Non-defined terms shall have the meaning given to them in the Contract. WHEREAS, the above-referenced group annuity Contract was issued to the Contract Owner for the benefit of the Participants and their Beneficiaries in the Contract Owner's Plan by Nationwide Life Insurance Company ("Nationwide")along with a Fixed Account Endorsement;and WHEREAS, Nationwide and the Contract Owner wish to modify the Contract provisions that were added to the Contract through the Fixed Account Endorsement pursuant to the Alteration or Modification section of the Contract, NOW, THEREFORE, pursuant to the agreement of Nationwide and the Contract Owner, the Contract is hereby modified as follows: 1. The terms and provisions that were added to the Contract through the Fixed Account Endorsement are deleted in their entirety and replaced with the following: DEFINITIONS The following definitions are modified in,or added to,the Contract: Annual Guaranteed Interest Rate - The minimum guaranteed interest rate applied to the Fixed Account for a calendar year. Nationwide determines this rate at its sole discretion. Contract Value-The combined value of the Variable Account(s)and the Fixed Account. Exchange-The movement of amounts attributable to Participant Accounts to a Companion Investment Option under the Plan,or from one or more Sub-Accounts of the Variable Account to one or more Sub-Accounts of the Variable Account, or from one or more Sub-Accounts of the Variable Account to the Fixed Account, or from the Fixed Account to a Companion Investment Option under the Plan or to one or more Sub-Accounts of the Variable Account. Fixed Account-An option funded by Nationwide's general account crediting specified interest rates. Guaranteed Minimum Fixed Account Interest Rate - A minimum interest rate established under the Contract. All rates under the Contract are guaranteed to be at least as great as the Guaranteed Minimum Fixed Account Interest Rate. Participant Account Value - The present value of the units and the Fixed Account attributable to a Participant's Account. Quarterly Guaranteed Interest Rate - The minimum guaranteed interest rate applied to the Fixed Account for a calendar quarter. This rate may be equal to or greater than the applicable Annual Guaranteed Interest Rate. Nationwide determines this rate at its sole discretion. NRD-0104WA 1 (Washington) (12/2010) FIXED ACCOUNT The following is added to the Contract: General Information Regarding the Fixed Account The Fixed Account is an investment option under the Contract offering an Annual Guaranteed Interest Rate and a Quarterly Guaranteed Interest Rate. The Contract also provides a Guaranteed Minimum Fixed Account Interest Rate. Nationwide credits interest to the Fixed Account at these rates that it prospectively declares. At no time will there be an interest rate declared that is lower than the Guaranteed Minimum Fixed Account Interest Rate. Interest rates are determined at the sole discretion of Nationwide,and Nationwide reserves the right to modify the Guaranteed Minimum Fixed Account Interest Rate upon notice to the Contract Owner in accordance with the Alteration and Modification section of the Contract. Nationwide declares all of its rates as annual effective yields. Nationwide reserves the right to discontinue accepting additional Purchase Payments and Transfer and Exchange allocations to the Fixed Account at any time. Fixed Account guarantees are supported by the general account of Nationwide and are not insured by the FDIC, NCUSIF or any other agency of the Federal government. The Fixed Account is a non-participating option. Allocations to the Fixed Account do not share in any surplus of Nationwide. Guaranteed Interest Rates The Guaranteed Minimum Fixed Account Interest Rate for the Contract is listed on the Contract Specifications Page. Nationwide reserves the right to modify the Guaranteed Minimum Fixed Account Interest Rate upon notice to the Contract Owner in accordance with the Alteration or Modification section of the Contract. No later than the last Business Day of a calendar year,Nationwide declares the Annual Guaranteed Interest Rate for the Fixed Account for the next calendar year. In addition,no later than the last Business Day of a calendar quarter, Nationwide will declare the Quarterly Guaranteed Interest Rate, that is calculated on an annualized basis, to be credited to the Fixed Account for the next calendar quarter. Crediting Interest to the Fixed Account Nationwide interest rates are all declared as annual effective yields. An effective yield takes into account the effect of interest compounding. Nationwide credits interest to the Fixed Account on each Business Day. Annual effective yields are converted by Nationwide into a daily interest rate factor. The current Fixed Account value is calculated by taking the daily interest rate factor and multiplying it by the previous Business Day's Fixed Account value. Because interest is credited only on Business Days,interest from multiple non-Business Days(e.g.,days falling on a weekend or holidays)accumulate and are credited on the next available Business Day. Calculating the Fixed Account Value The Fixed Account value on any given Business Day is equal to: (1) total Purchase Payments allocated to the Fixed Account; plus (2) The daily interest earned,plus (3) Exchanges or Transfers to the Fixed Account,minus (4) Exchanges or Transfers out of the Fixed Account;minus (5) Withdrawals from the Fixed Account;minus (6) Participant Benefit Payments;minus (7) any applicable Contract Maintenance Charge,the aggregate Participant Account Charge,charges associated with plan expenses or additional services, additional expense charges that are applied to Participant Accounts. 2 NRD-0104WA (Washington)(12/2010) Calculating a Participant Account Value in the Fixed Account A Participant Account Value in the Fixed Account on any given Business Day is equal to: (1) total Participant Contributions allocated to the Fixed Account;plus (2) the daily interest earned on the Participant's Account;plus (3) Exchanges or Transfers to the Fixed Account;minus (4) Exchanges or Transfers out of the Fixed Account;minus (5) Withdrawals from the Fixed Account;minus (6) Participant Benefit Payments;minus (7) any applicable Contract Maintenance Charge, the aggregate Participant Account Charge, charges associated with plan expenses or additional services, additional expense charges that are applied to Participant Accounts. CONTRACT EXPENSES The"Contract Expenses"provision of the Contract is amended with the addition of the following. Unless otherwise mutually agreed to by the Contract Owner and Nationwide,all expenses and charges attributable to the Contract,except the Variable Account Charge,will be deducted proportionally from the Variable Account(s)and the Fixed Account based on the value each account bears to the total Contract Value. Any applicable expenses or charges attributable to a Participant Account will be deducted proportionally and in the same manner. EXCHANGES AND TRANSFERS The following is added to the Contract: Exchanges and Transfers to and from the Fixed Account Nationwide will generally accept Exchanges and Transfers to the Contract. Nationwide reserves the right to discontinue accepting Exchanges and Transfers to the Fixed Account at any time. Exchanges and Transfers out of the Fixed Account are subject to certain limitations. The Contract Owner elects at the time of application to accept a Participant level Exchange and Transfer limitation or an aggregate Contract level Exchange and Transfer limitation. Liquidations of Contract Value via Exchange and Transfer are combined into a single percentage limitation. The type of limitation and percentage limitation are listed on the Contract Specifications Page. Nationwide, in its sole discretion, may agree not to impose any Exchange or Transfer restrictions. If no such Exchange or Transfer restrictions will be imposed,this will be reflected on the Contract Specifications Page. In the event that Exchange or Transfer restrictions are imposed under the Contract, Nationwide may agree to waive any Exchange and/or Transfer restrictions listed on the Contract Specification Page on Exchanges and Transfers involving Participants actively utilizing asset allocation models or asset allocation services available under the Plan. All Exchange and Transfer limitations are set, or reset, on a calendar year basis. The permissible Exchange and Transfer amount cannot be rolled from year to year or otherwise "banked" for utilization in subsequent calendar years. The Contract Owner may request to change the type of Exchange and Transfer limitation for the next calendar year if Nationwide receives, in a form acceptable to Nationwide,the request by at least ninety (90) days prior to the end of the preceding calendar year. All Exchanges to and from the Fixed Account are done in conjunction with a Companion Investment Option. In order for Nationwide to accept Exchanges to or from a Companion Investment Option, the Contract Owner must 3 NRD-0104WA (Washington)(12/2010) V identify the Companion Investment Option to Nationwide in writing and Nationwide must agree to accept Exchanges to or from the identified Companion Investment Option. Nationwide may discontinue accepting Exchanges to or from a Companion Investment Option by giving the Contract Owner at least thirty (30) days advance written notice. In the event the Contract Owner elects to add a Companion Investment Option to the Plan with characteristics in structure, investment time horizon, rate setting, or any other characteristics that could compel on-going Exchanges between the Fixed Account and such Companion Investment Option, the Contract Owner shall provide Nationwide with notice of the addition of such a Companion Investment Option to the Plan at least ninety(90) days prior to the addition of such Companion Investment Option. If such a Companion Investment Option is added to the Plan, then Nationwide may impose an equity wash that prohibits direct Exchanges between the Fixed Account and such Companion Investment Option. Nationwide will notify the Contract Owner in the event an equity wash will be imposed with regard to Exchanges with a Companion Investment Option and the Fixed Account. Nationwide processes Transfer requests within seven (7) Business Days of the date the request is received and accepted by Nationwide from the Contract Owner on behalf of the Participant, or directly from the Participant if permitted by the Plan. Nationwide may require Transfer requests to be on a form it provides. Sixty Month Exchange or Transfer Program If the Contract Owner has elected a Participant level Exchange and Transfer limitation, Nationwide may permit Participants to direct the complete liquidation of amounts attributable to a Participant Account that are allocated to the Fixed Account via a monthly Exchange or Transfer over a period of sixty (60) months. Nationwide may,in its sole discretion,permit the Contract Owner,on behalf of a Participant,to direct the complete liquidation of amounts attributable to a Participant Account that are allocated to the Fixed Account via monthly Exchange or Transfer over a period of sixty(60)months. Any such sixty(60)month Exchange or Transfer shall be subject to the following. (1) The amount to be Exchanged each month is equal to the value of the Fixed Account of the Participant Account divided by the number of remaining months until the 60 month Exchange or Transfer program is completed. (2) Any additional Participant Contribution, Exchange and/or Transfer to the Fixed Account of a Participant Account where the 60 month Exchange or Transfer program is in effect will result in immediate cancellation of any additional Exchanges or Transfers under this program. (3) If the Participant level Exchange limitation (whether the percentage limitation or number of transactions limit) has been met in the calendar year in which the request to initiate the 60 month Exchange or Transfer program is received,Nationwide will reject the request. The request may be made again beginning on the first day of the next calendar year. (4) The 60 month Exchange or Transfer program is only available for Participant Account Values of at least $1,000. TERMINATION AND WITHDRAWALS The following is added to the Contract. Termination In the event the Contract Owner or Nationwide terminate the Contract, the following will apply to the Fixed Account. At least thirty (30) days prior to the effective date of termination, the Contract Owner must elect one of the two Withdrawal methods listed below for amounts attributable to the Fixed Account. (1) Lump-sum Payment. If the Contract Owner elects to have funds Withdrawn from the Fixed Account in one lump-sum payment, Nationwide will pay to the Contract Owner the Withdrawal Value of amounts attributable to the Fixed Account less a market value adjustment if the present value of 4 NRD-0104WA (Washington)(12/2010) amounts attributable to the Withdrawal are less than the present Contract Value of such amounts. The market value adjustment is determined by Nationwide at its sole discretion, but will be done in a manner consistent with making a reasonable approximation of the present value of assets attributable to the Fixed Account. Nationwide will provide the Contract Owner the current procedures it uses to determine the market value adjustment upon request. (2) Sixty (60) Monthly Installments. If the Contract Owner elects to have funds Withdrawn from the Fixed Account in sixty (60) monthly installments, Nationwide will begin installment Withdrawals no later than ninety(90)days following the effective date of termination of the Contract,unless otherwise mutually agreed by the Contract Owner and Nationwide. The amount of each installment is determined by the following: the Fixed Account value on the date before the installment is Withdrawn;divided by a) the number of remaining installments. b) Fixed Account Withdrawals in addition to installment Withdrawals will not be permitted,nor will any Exchanges or Transfers be permitted. IN WITNESS WHEREOF,the parties have caused this Amendment to be executed this day of ,201_. APPROVED: CONTRACT OWNER: NATIONWIDE LIFE INSURANCE COMPANY: By: By: 5 NRD 0104WA <2> (Washington) (12/2010)