HomeMy WebLinkAbout03-11-2009 Administration Committee Agenda
AGENDA
REGULAR MEETING OF THE
ADMINISTRATION COMMITTEE
ORANGE COUNTY SANITATION DISTRICT
WEDNESDAY, MARCH 11, 2009, AT 5:00 P.M.
ADMINISTRATIVE OFFICE
10844 Ellis Avenue
Fountain Valley, California 92708
www.ocsd.com
PLEDGE OF ALLEGIANCE
DECLARATION OF QUORUM
PUBLIC COMMENTS
REPORT OF COMMITTEE CHAIR
REPORT OF GENERAL MANAGER
REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES
CONSENT CALENDAR ITEMS
(1)
1. Approve minutes of the February 11, 2009, meeting of the Administration Committee.
ACTION ITEMS
(2)
2. Recommend to the Board of Directors to: a) Adopt Resolution No. OCSD 09-XX, Approving the Deferred Compensation Plan with ING Financial Services for Officers and Employees of
the District, and Repealing Resolution Nos. OCSD 03-27 and 05-27; and,
b) Authorize the General Manager, or his designee, to execute all documents necessary to
effect said Deferred Compensation Plan, in a form approved by General Counsel.
March 11, 2009 Page 2
INFORMATIONAL ITEMS (3 - 4)
3. Status on renewal quotes of the District’s major operational insurance programs
for FY 2009-10.
4. 2009-10 District Budget Update.
CLOSED SESSION
During the course of conducting the business set forth on this agenda as a regular meeting of the Committee,
the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted.
Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure
under the California Public Records Act, may be reviewed by the Committee during a permitted closed session and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information.
Convene in closed session.
Reconvene in regular session.
Consideration of action, if any, on matters considered in closed session.
Other business and communications or supplemental agenda items, if any.
Adjournment: The next regular Administration Committee meeting is scheduled for Wednesday, April 8, 2009, at 5 p.m.
March 11, 2009 Page 3
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Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda
has been posted in the main lobby of the District’s Administrative offices not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less
than 72 hours prior to the meeting to all, or a majority of all, of the members of District’s Board, are available for public inspection in the office of the Clerk of the Board, located at 10844 Ellis Avenue, Fountain Valley, California.
Items Not Posted: In the event any matter not listed on this agenda is proposed to be submitted to the Committee for
discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or because there is a need to take immediate action, which need came to the attention of the Committee subsequent to the
posting of agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date.
Public Comments: Any member of the public may address the Administration Committee on specific agenda items or
matters of general interest. As determined by the Chair, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes.
Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by
the Committee except as authorized by Section 54954.2(b).
Consent Calendar: All matters placed on the consent calendar are considered as not requiring discussion or further explanation, and unless a particular item is requested to be removed from the consent calendar by a Director of staff
member, there will be no separate discussion of these items. All items on the consent calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar.
All items removed from the consent calendar shall be considered in the regular order of business.
The Committee Chair will determine if any items are to be deleted from the consent calendar.
Items Continued: Items may be continued from this meeting without further notice to a Committee meeting held within five (5) days of this meeting per Government Code Section 54954.2(b)(3).
Meeting Adjournment: This meeting may be adjourned to a later time and items of business from this agenda may be
considered at the later meeting by Order of Adjournment and Notice in accordance with Government Code Section 54955 (posted within 24 hours).
Accommodations for the Disabled: The Board of Directors Meeting Room is wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board‘s office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature
of the disability and the type of accommodation requested.
Notice to Committee Members: For any questions on the agenda or to place any items on the agenda, Committee members should contact the Committee Chair
or Clerk of the Board ten days in advance of the Committee meeting.
Committee Chair: Mark Waldman (714) 827-1969 Committee Secretary: Lilia Kovac (714) 593-7124 lkovac@ocsd.com General Manager: Jim Ruth (714) 593-7110 jruth@ocsd.com
Assistant General Manager Bob Ghirelli (714) 593-7400 rghirelli@ocsd.com Director of Finance and Lorenzo Tyner (714) 593-7550 ltyner@ocsd.com Administrative Services
Human Resources and Employee Jeff Reed (714) 593-7144 jreed@ocsd.com Relations Manager
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ADMINISTRATION COMMITTEE Meeting Date
03/11/09
To Bd. of Dir.
03/25/09
AGENDA REPORT Item Number 2 Item Number
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance & Administrative Services
SUBJECT: DEFERRED COMPENSATION PROGRAM
GENERAL MANAGER'S RECOMMENDATION
(1) Adopt Resolution No. OCSD 09-XX, Approving the Deferred Compensation Plan with ING Financial Services for Officers and Employees of the District, and Repealing
Resolution Nos. OCSD 03-27 and 05-27; and,
b) Authorize the General Manager, or his designee, to execute all documents necessary
to effect said Deferred Compensation Plan, in a form approved by General Counsel.
SUMMARY
Due to numerous legislative and regulatory changes which significantly changed the way public
sector employers must administer deferred compensation plans with regard to fiduciary responsibility as Plan Administrators, OCSD conducted an evaluation of the deferred
compensation plan and identified several areas for improvement. In December 2008, staff
informed the Administration Committee, and the General Manager reported to the Board OCSD’s intent to transfer deferred compensation plan assets from the three incumbent
providers (AIG Retirement Company, Lincoln Financial Group, ICMA-RC) to ING Financial Services as a result of the Request for Proposal (RFP) process. The following outlines the plan enhancements available to plan participants immediately upon transition:
• A new menu of core investment options with lower average fund expenses;
• The ability to select investment options outside of the core menu under a self-directed brokerage account option;
• Increased access to a local representative for the Plan available on-site for personal service;
• The opportunity to receive online investment advice and managed account services;
• A customized educational approach for the Plan; and,
• Enhanced technology capabilities available on a new custom Plan website.
The Investment Policy Statement and agreement for this plan are available for review by contacting the Clerk of the Board.
It is anticipated that this plan will result in annual savings exceeding $700,000 in fees, expenses and charges.
Transition to ING Financial Services is expected to be complete in May 2009.
Page 2
PRIOR COMMITTEE/BOARD ACTIONS
11/16/05: Resolution No. 05-27 - Amending the Deferred Compensation Plan to include a
mandatory cash-out provision for Officers and Employees of OCSD.
11/19/03: Resolution No. 03-27 - Amending the Deferred Compensation plan to authorize
the Plan Administrator, or her designee, to execute, on behalf of the District, any and all documents necessary to effect the District’s Deferred Compensation Plan Loan Program.
05/28/03: Resolution No. 03-10 - Amending the Deferred Compensation plan to include a loan provision.
07/12/02: Resolution No. 02-12 - Amending the Deferred Compensation plan to comply with
amendments to the Economic Growth and Tax Relief Reconciliation Act of 2001.
07/01/98: Resolution No. 98-36 - Reaffirming Resolutions 94-36, 95-80, 98-07, and 98-20
consolidating County Sanitation Districts Nos. 1, 2, 3, 5, 6, 7, 11, 13, and 14 into a single
District; approving and adopting the OCSD Deferred Compensation plan.
ADDITIONAL INFORMATION
The legislative and regulatory changes that have impacted public sector administration of
deferred compensation plans include the Small Business Job Protection Act, the Economic
Growth and Tax Relief Reconciliation Act, and the Pension Protection Act. As a result, employers are required to exercise fiduciary “due diligence” to assure that fund options and
provider services are competitive and provide optimal investment return to participants. In compliance with these new requirements, OCSD conducted a comprehensive review of its providers, its processes for selecting providers, and its review of specific funds, costs, and
services to assure that we adhere to all legislative and regulatory mandates.
Evaluation of the OCSD deferred compensation plan showed that investments had grown to
over $40M since inception, which was the basis of the request for proposal (RFP) in August 2008. The increased plan size provided the Sanitation District with a better platform from which
to negotiate terms of our deferred compensation contract(s). As a result, there will be some
improvements to the deferred compensation program. The changes are going to provide substantial benefits to the participants through higher quality investment choices, reduced costs,
and improved service and educational offerings. A competitive process was used to evaluate the Plans offered by various companies. A
selection committee representing OCSD employees and retirees evaluated those submittals
based on the following: historical return on investments and performance; fees/charges/disclosures; educational services; and recordkeeping services. The current three
incumbent providers submitted proposals; however, the Committee unanimously determined that other companies offered Plans that were more beneficial to the participants. Three well-established companies, The Hartford, ING Financial Services, and Prudential Life, submitted
superior proposals and were selected as finalists. The finalists were subsequently interviewed by the Committee.
Page 3
The evaluation and interview process demonstrated that retaining multiple providers would
perpetuate higher administrative fees, increase mutual fund costs, and reduce the proposed credited interest rates that were offered under the sole provider option. A single-provider
platform will reduce the Plan’s costs and increase the expected net return on participant
investments.
The Committee recommended, and management supported, moving to a single-provider
platform with deferred compensation services provided by ING Financial Services (ING). These decisions were based on the initial primary criteria including: historical return on investments
and performance; fees/charges/disclosures; educational services; and recordkeeping services as well as secondary criteria including information and support services; transition support; legal/contract requirements; and standards and performance guarantees. ING also made
numerous enhancements as a result of the finalist interviews.
ING will offer a variety of core investment choices that are different from the funds offered now,
but in the same investment classes. Historically, these have been better-performing funds with lower costs, which would be expected to provide higher total returns than we currently receive.
In addition, a Self-Directed Brokerage option will be available for anyone who prefers to invest in
specific funds (such as their existing fund choices) outside the new core choices.
Specific plan changes offered in ING’s proposal and compared to the incumbent providers
included the following:
Factor ING Financial Services Incumbent Providers
Average Fund
Performance (Morningstar Rating) 4.8 stars 2.8 stars
Overall Fund Expenses
(Average)
0.96%
($220,000 annual savings) 1.74%
Contingent Deferred Sales Charges Eliminated $500,000 (approximate)
Fixed Account Crediting 4.25% initial return 3.7% annually
(Lincoln: 87% of fixed account assets)
On-Site Customer Service Three days per week One day per month (per provider)
Managed Account Services 40 BPS (basis points) Not Included
Contingent upon approval by the Board of Directors, the assets currently held with the three
incumbent providers will be moved to ING Financial Services. Transition to the new provider will be mandatory; however, participants will not be subject to payment of any contingent
deferred sales charges (penalties) and asset allocations will remain intact. And, as previously
noted, a Self-Directed Brokerage option will be available for participants who prefer to invest in specific funds (such as their existing fund choices) outside the new core choices.
ATTACHMENTS
1. Resolution No. OCSD 09-XX 2. Administrative Services Agreement
JDR:LT:JR:KE
621887.1
RESOLUTION NO. OCSD 09-___
APPROVING A DEFERRED COMPENSATION PLAN WITH
ING FINANCIAL SERVICES FOR OFFICERS AND
EMPLOYEES OF ORANGE COUNTY SANITATION DISTRICT
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT APPROVING A DEFERRED
COMPENSATION PLAN WITH ING FINANCIAL SERVICES FOR
OFFICERS AND EMPLOYEES OF ORANGE COUNTY SANITATION
DISTRICT; AND, REPEALING RESOLUTION NOS. OCSD 03-27 AND 05-27
WHEREAS, the Orange County Sanitation District Deferred Compensation Plan
was most recently amended by Resolution Nos. OCSD 03-27 and 05-27, adopted by the District’s Board of Directors on November 19, 2003, and November 16, 2005, respectively;
WHEREAS, the assets in the Existing Plan, as amended, are currently held with
AIG Retirement Company, Lincoln Financial Group, and ICMA-RC; WHEREAS, as the result of numerous legislative and regulatory changes
increasing the scope of the District’s fiduciary responsibilities as an employer in the
administration of deferred compensation plans, OCSD requested proposals to act as
agents or advisors for the purpose of implementing and administering the District’s Deferred Compensation Plan;
WHEREAS, the Board of Directors desire to adopt a new deferred compensation
plan; and,
WHEREAS, the Board of Directors desire to have ING Financial Services appointed to act as agents or advisors for the purpose of implementing and
administering the District’s Deferred Compensation Plan.
NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District DOES HEREBY RESOLVE, DETERMINE AND ORDER:
Section 1. All of the recitals herein contained are true and correct and the
Board of Directors of the District so finds.
Section 2. The Orange County Sanitation District Deferred Compensation Plan, as set forth in Exhibit “A,” attached hereto and incorporated herein by reference as though set forth herein at length, is hereby adopted, as the new Deferred Compensation
Plan of the District, superseding all previous plans and amendments of the District, and
621887.1
shall remain in effect until amended or terminated by Resolution of the Board of Directors.
Section 3. The District’s General Manager, or his designee, is hereby
authorized to appoint or employ the services of ING Financial Services to act as agents
or advisors for the purpose of implementing and administering the District’s Deferred Compensation Plan.
Section 4. The District’s General Manager, or his designee, is hereby
authorized to execute, on behalf of the District, any and all documents necessary to
effect the new Deferred Compensation Plan, with the approval as to form by the
District’s General Counsel.
Section 5. Resolution Nos. OCSD 03-27 and 05-27 are hereby repealed.
Section 6. This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED at a regular meeting held on March 25, 2009.
Chair
ATTEST:
Clerk of the Board
APPROVED:
General Counsel, Orange County Sanitation District
ORANGE COUNTY SANITATION DISTRICT
457(b) DEFERRED COMPENSATION PLAN ADMINISTRATIVE SERVICES AGREEMENT
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Orange County Sanitation District 457(b) Deferred Compensation Plan
TABLE OF CONTENTS
RECITALS ................................................................................................................ 1
SECTION 1 SERVICES ................................................................................................... 2
1.01 Good Order.......................................................................................................... 2
1.02 Allocation of Contractor Responsibilities ........................................................... 2 1.03 Scope of Services ................................................................................................ 2
1.04 Administrative Requirements.............................................................................. 2
1.05 Performance Standards........................................................................................ 2
1.06 Selection of Investment Options ......................................................................... 2
1.07 Investment Provider Minimum Standards .......................................................... 2 1.08 Selection of Investment Options ......................................................................... 2
1.09 Limits Imposed by the Underlying Funds ........................................................... 3
1.10 Limits Imposed by the Contractor on Frequent Transfers ................................. 3
1.11 Access to Investment Advice ............................................................................. 3
1.12 Access to Self Directed Brokerage Accounts .................................................... 4
SECTION 2 PARTICIPANT INFORMATION ............................................................ 4
2.01 Provision of Certain Participant Information ...................................................... 4
2.02 Changes in Deferral or Contribution Information; New Participant Deferral or Contribution Information ........................................................................ 4
SECTION 3 FEES AND REIMBURSEMENTS ............................................................ 4 3.01 Contractor's Compensations ................................................................................ 4
3.02 Reimbursement of Plans Expenses ..................................................................... 5
3.03 Compensation Paid to Sales Professionals .......................................................... 5
SECTION 4 TERMS ........................................................................................................ 5
4.01 Term ................................................................................................................ 5
4.02 Termination ......................................................................................................... 5
SECTION 5 GENERAL ................................................................................................... 6
5.01 Circumstances Excusing Performance ................................................................ 6
5.02 Business Recovery .............................................................................................. 6
5.03 Ownership of Records ......................................................................................... 6 5.04 Parties Bound ...................................................................................................... 7
5.05 Applicable Law ................................................................................................... 7
5.06 Severability ......................................................................................................... 7
5.07 Acknowledgement............................................................................................... 7
5.08 Notices ................................................................................................................ 7 5.09 Copies of Agreement........................................................................................... 8
5.10 Headings .............................................................................................................. 8
5.11 Independent Contractors ..................................................................................... 8
5.12 Contractor Primary Contact ................................................................................ 8
5.13 Subcontracting..................................................................................................... 9 5.14 Contract Assignability ......................................................................................... 9
ii
5.15 Licenses and Permits ........................................................................................... 9
5.16 Conflict of Interest .............................................................................................. 9
5.17 Improper Consideration ...................................................................................... 9
5.18 Indemnification ................................................................................................... 9 5.19 Insurance ........................................................................................................... 10
5.20 Right to Monitor ................................................................................................ 10
5.21 Confidentiality .................................................................................................. 10
SECTION 6 RFP AND RFP RESPONSE 6.01 RFP and RFP Response……………………………………………………….10
SCHEDULE A: SCOPE OF CONTRACTORS SERVICES ......................................... 12
APPENDIX 1 TO SCHEDULE A: UNFORESEEABLE EMERGENCY WITHDRAWAL REVIEW AND APPROVAL
REQUIREMENTS ........................................................................................... 16
APPENDIX 2 TO SCHEDULE A: DOMESTIC RELATIONS ORDER
REVIEW AND APPROVAL REQUIREMENTS 18
APPENDIX 3 TO SCHEDULE A: CONTRIBUTION RATE SERVICES ................... 20 SCHEDULE B: LOAN PROGRAM ................................................................................ 22
SCHEDULE C: ADMINISTRATIVE REQUIREMENTS ............................................. 27
SCHEDULE D: PERFORMANCE STANDARDS ........................................................ 29
SCHEDULE E: PLAN INVESTMENT OPTIONS ........................................................ 34
SCHEDULE F: INVESTMENT PROVIDER MINIMUM STANDARDS DISCLOSURE STATEMENT ............................................................. 35
SCHEDULE G: ING EXCESSIVE TRADING POLICY ................................................ 37
SCHEDULE H: INVESTMENT ADVISORY ACCESS AGREEMENT ...................... 39
APPENDIX 1 TO SCHEDULE H: DISCLSOURE STATEMENT FOR
INVESTMENT ADVISORY SERVICES ........................................... 45 SCHEDULE I: REIMBURSEMENT OF PLAN EXPENSES ........................................ 57
SCHEDULE J: CONTRACTOR’S PRIMARY CONTACT .......................................... 58
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ORANGE COUNTY SANITATION DISTRICT
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made and entered into this 1st day of May, 2009, by and between
Orange County Sanitation District (the “Plan Sponsor”) on behalf of the Orange
County Sanitation District 457(b) Deferred Compensation Plan, (the “457 Plan”),
(unless specified otherwise, referred to herein as the “Plan”). ING Life Insurance and Annuity Company (“ILIAC”), a corporation organized and existing under the laws of the State of Connecticut and ING Financial Advisers, LLC a limited liability company
organized and existing under the laws of the State of Delaware and registered as a broker-
dealer under the federal securities laws (the “Broker-Dealer”). (ILIAC and the Broker-
Dealer are hereinafter collectively called the “Contractor”). This Agreement is separate
and apart from any other contract issued to the Plan, including any group annuity contract or funding agreement issued to the Plan Sponsor by ILIAC.
RECITALS
WHEREAS, the 457 Plan has been established as an “eligible deferred compensation plan” pursuant to Section 457(b) of the Internal Revenue Code (the “Code”) and the laws of the State of California; and
WHEREAS, the Plan Sponsor has selected certain investment products offered or
otherwise made available by or through ILIAC or the Broker-Dealer, respectively, for the investment of the Plan’s assets (the “Program”); and
WHEREAS, the Plan Sponsor further wishes to engage the Contractor as an
administrative service provider to facilitate the administration of the Plan by providing
services that shall include without limitation, accounting for deferrals or contributions, disbursement of funds, withholding of taxes, investment education, retirement counseling, investment of assets in the appropriate Plan investment options and proper recordkeeping
of participant accounts; and
WHEREAS, the Contractor wishes to provide such administrative services to the Plan.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties do hereby agree as follows:
2
Section 1. Services
1.01 Good Order: The Contractor and the Plan Sponsor acknowledge that for purposes
of this Agreement “Good Order” is defined as the receipt at the Contractor’s designated location of instructions that are complete, accurate and in an acceptable format, and which do not require the Contractor to apply any research or
discretionary judgment. To qualify as current business day instructions,
instructions sent by telephone, facsimile or mail must be received by us no later
than the close of the New York Stock Exchange (typically 4:00 p.m. ET).
1.02 Allocation of Contractor Responsibilities: The Broker-Dealer or other broker-
dealers with which ING Financial Advisers, LLC has a selling agreement shall
service or perform all marketing communications, enrollment and securities
transactions settlement and processing functions assigned to the Contractor. ILIAC shall perform all other responsibilities assigned to the Contractor, including Plan
and participant recordkeeping.
1.03 Scope of Services: The Contractor agrees to provide the Plan with the services
listed on Schedule A for the term of this Agreement. Services offered pursuant to the Plan’s loan program will be subject to the terms specified in Schedule B.
1.04 Administrative Requirements: The Contractor agrees to comply with the
requirements set forth on Schedule C in the performance of this Agreement. The
Contractor and the Plan Sponsor will review these administrative requirements periodically and make adjustments as necessary and mutually agreed.
1.05 Performance Standards: The Contractor agrees to comply with the standards set
forth on Schedule D in the performance of this Agreement. At the Plan Sponsor’s
request, the Contractor shall report to the Plan Sponsor how it measures compared to these performance standards. Any non-performance fee payable pursuant to the
terms of Schedule D shall be in addition to any damages or other remedies
available to the Plan, participants or the Plan Sponsor hereunder. The Contractor
and the Plan Sponsor will review these performance standards at the Plan
Sponsor’s request and make adjustments as necessary and mutually agreed.
1.06 Selection of Investment Options: The Contractor agrees to provide Plan
participants with a selection of investment options as specified in Schedule E.
1.07 Investment Provider Minimum Standards: Subject to the minimum standards set forth in Schedule F, the Contractor will provide its administrative services in
connection with the Plan Sponsor’s selection of investment products to fund the
Plan’s non-stable value investment options.
1.08 Selection of Investment Options: The addition or removal of any investment option to the Plan must be mutually agreed to by the Contractor and the Plan
Sponsor and will be made in accordance with a mutually agreed upon schedule for
implementing the change.
3
(1) Subject to mutual agreement between the parties to add an investment
option;
(i) The Plan Sponsor may direct the Contractor to add an investment option from the range of investment products the Contract currently
offers, and that are currently available in the Program, upon forty-
five (45) days written notice of the proposed change.
(ii) The Plan Sponsor may direct the Contractor to add an investment option that the Contract does not currently offer or an investment
option that the Contractor currently offers but is not currently
available in the Program, upon at least ninety (90) days written
notice of the proposed change. Any investment option additions
made pursuant to this Subsection 1.07(1)(ii) will be made in accordance with the Contractor’s scheduled quarterly fund updates.
(2) The Contractor reserves the right to reject any new investment option that
imposes short-term trading (redemption) fees on participant accounts.
(3) To the extent an existing investment option imposes short-term trading
(redemption) fees on Participant accounts, the Contractor reserves the right
to discontinue offering the investment option or to deduct any such short-
term trading (redemption) fees from participant accounts.
1.09 Limits Imposed by Underlying Funds: The Plan Sponsor understands and
acknowledges that orders for the purchase of fund shares may be subject to
acceptance by the fund. The Contractor reserves the right to reject, without prior
notice, any allocation of payments to the variable investment products, including
the NAV Funds, if the Contractor’s purchase order for the corresponding fund is not acceptable by the fund for any reason.
1.10 Limits Imposed by Contractor on Frequent Transfers: The Plan Sponsor
understands and acknowledges that the investment products offered or otherwise
made available by or through the Contractor are not designed to serve as vehicles for frequent trading in response to short-term fluctuations in the market. Such
frequent trading can disrupt management of a fund and raise its expenses. This in
turn can have an adverse effect on fund performance. Accordingly, the Plan
Sponsor agrees to adhere to the Contractor’s current Excessive Trading Policy, as
set forth in Schedule G (the “Excessive Trading Policy”). The Contractor reserves the right to modify the Excessive Trading Policy in whole or in part at any time and
without prior notice, depending on the needs of the underlying fund(s), the best
interest of contractowners and fund investors, and/or state or federal regulatory
requirements.
1.11 Access to Investment Advice: The Contractor agrees to provide Plan participants
access to an independent third party online investment advice provider, as specified
in Schedule H.
4
1.12 Access to Self Directed Brokerage Account: The Contractor agrees to make
available to Plan participants, a self directed brokerage account option (“SDBO”),
as specified in a separately signed agreement.
Section 2. Participant Information
2.01 Provision of Certain Participant Information: The Plan Sponsor or its authorized
representative shall facilitate the transmission to the Contractor of all current Plan
participant level records including, but not limited to: name; address; social security number; active or terminated employment status; and deferral amount
information. Over the term of this Agreement, the Contractor and the Plan Sponsor
will develop procedures for the Plan Sponsor to notify the Contractor of changes in
employment status and, to the extent the Plan Sponsor has knowledge of the death
of any participant, the Plan Sponsor will notify the Contractor of such death. The Plan Sponsor shall provide such information on a timely basis and use its best
efforts to assure the accuracy and completeness of all information provided to the
Contractor.
2.02 Changes in Deferral or Contribution Information; New Participant Deferral or Contribution Information: The Contractor and the Plan Sponsor will develop
procedures to coordinate the processing of (i) changes in deferral or contribution
amount information and (ii) initial deferral or contribution information pertaining
to participants joining the Plan on or after the date the Contractor commences the
provision of services under this Agreement.
Section 3. Fees and Reimbursements
3.01 Contractor’s Compensation: The Contractor’s services under the Agreement are
rendered in connection with the Plan Sponsor’s selection of certain investment products offered by or through the Contractor. The revenues paid to the Contractor
from such investment products shall constitute the sole source of compensation for
the services rendered and expenses incurred under this Agreement. The Contractor
shall not assess a daily fee against the value of all participant accounts allocated to
Plan investment options made available through direct purchases of registered investment company shares.
Any fees, reimbursements, products and services rendered in connection with this
Agreement are contingent on the Contractor being the exclusive provider (with the
exception of any contractual obligations in existence prior to the transition to the Contractor) of investment products and administrative services to the Plans during the Term of this Agreement and any subsequent renewal periods (as described in
Section 4.01). The addition of any other provider or providers to the Plans during
the Term of this Agreement and any subsequent renewal periods or changes in the
Plan document may impact any fees, reimbursements, products and services under this Agreement.
5
This Agreement and fees are contingent on the Plan provisions in effect on the date
of this Agreement. Any amendment to the Plan may impact this Agreement and
fees.
3.02 Reimbursement of Plan Expenses: The Contractor shall reimburse the Plan for
reasonable administrative expenses as set forth in Schedule I.
3.03 Compensation Paid to Sales Professionals: The Contractor shall pay sales
professionals a flat salary. The compensation paid to sales professionals will be derived exclusively from the Contractor’s revenue. Sales professionals may also be eligible for additional expense reimbursement and bonuses based upon enrollment
goals. Compensation may also be paid at the time of participant election of an
annuitization distribution option and will be disclosed to the participant at the time
the distribution option is elected. Sales professionals are also eligible for compensation derived from the sale of financial products outside of the Plan. The Broker-Dealer will provide an annual report of this ancillary sales and support
activity to the Plan Sponsor.
Section 4. Term
4.01 Term: This Agreement shall commence on the Effective Date and continue for an
initial term of 5 years. Unless either Plan Sponsor or Contractor provides written
notice of intent to terminate this Agreement at least sixty (60) calendar days before
the end of the initial term, the Agreement shall automatically renew thereafter for subsequent one-year terms; provided, however, that either Plan Sponsor or
Contractor may terminate the Agreement as of the last day of any such one-year
term by providing written notice of such termination at sixty (60) calendar days
prior to the effective date of the termination. The Plan Sponsor and Contractor may
mutually agree in writing to an earlier termination. This Agreement may be amended in writing if agreed to by both parties.
4.02 Termination: Notwithstanding Section 4.01, either party may terminate this
Agreement at any time upon written notice “for cause”. For this purpose, “for
cause” shall mean: (1) failure of the other party to comply substantially with this Agreement and attached schedules hereto which, when called to the attention of the
other party in writing has not been corrected within thirty (30) days; (2) the fraud or
embezzlement on the part of the other party or provider of investment advice; (3) if
the other party ceases to conduct business in the normal course, becomes insolvent,
makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes
subject to any proceeding under the Federal Bankruptcy Act or any other statute of
any state relating to insolvency or the protection of the rights of creditors; (4)
failure of the other party to pay any fees under this Agreement; or (5) if pursuant to
Section 1.07 the Plan Sponsor requests the addition or removal of an investment option under the Plans, that is reasonably anticipated by the Contractor to result in a
reduction in revenues under the Plans and no mutual agreement is reached between
the parties on the recoupment of such lost revenues, the Contractor shall have the
right to terminate this Agreement.
6
Section 5. General
5.01 Circumstances Excusing Performance: Neither the Plan Sponsor nor the Contractor shall be liable to the other for any delays or damages or any failure to act due, occasioned, or caused by reason of restrictions imposed by any
government or government agency, acts of God, strikes, labor disputes, action of
the elements, or causes beyond the control of the parties affected thereby.
5.02 Business Recovery Plan: The Contractor acknowledges that it has a Business
Recovery Plan in place for its computer environment, specifying steps to be taken
in the event of a disaster. The plan is built around a worst-case scenario involving
loss of the facility or loss of access to the facility. It is also adaptable to less severe
disasters. Generally, there are three phases to the Contractor’s Business Recovery Plan:
Immediate response, damage assessment and critical notifications
Environmental and operation restoration
Operational readiness, testing and business resumption.
A critical part of this plan is the Contractor’s System Recovery Plan, which itself
has three components:
Hardware: the Contractor maintains a primary data center to support it mainframe applications and a portion of its mid-range and Intel based distributed environment.
The Contractor has contracted with an outside vendor to provide hot site recovery
capabilities for the primary data center in case of a site level disaster. The vendor
maintains equipment that the Contractor will use to restore its applications in case
of emergency. In addition, the Contractor has several data centers located throughout the U.S. with mid-range and distributed equipment to lessen the risk
from any one site. On-site generators and UPS systems provide continuous power
to the Contractor’s facilities. A fully redundant wide area network connects all of
the data centers in the U.S. as well as to the hot site vendor facility.
Application software: the Contractor secures program libraries, to tape cartridges
weekly, storing them in both on-site and off-site vaults.
Production data: the Contractor’s system and database files are backed up
periodically, many on a daily basis, to tape cartridges stored in both on-site and off-site vaults.
The Contractor’s internal auditors have reviewed its disaster recovery procedures.
Portions of the plan are tested on an annual basis.
5.03 Ownership of Records: The Contractor agrees that all computer tapes, discs,
programs and any records generated by the Contractor under this Agreement shall
be the property of the Plan. In the event of the termination of this Agreement, the
Contractor shall provide all electronic and/or written data records to the Plan’s
7
designated representative or to a new contractor in an agreed upon format at no cost
and within 180 days of written notice of intent to terminate this Agreement.
5.04 Parties Bound: This Agreement and the provisions thereof shall be binding upon the respective parties and shall inure to the benefit of the same.
5.05 Applicable Law: This Agreement shall be construed in accordance with the laws of
the State of California. The Contractor and the Plan Sponsor shall comply with all
state and federal laws and regulations applicable to the services to be performed.
5.06 Severability: If any provision of this Agreement shall be found to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining
parts of this Agreement and the remainder of this Agreement shall be construed and
enforced as if said illegal or invalid provision had never been inserted herein. Neither party shall be required to perform any services under this Agreement which
would violate any law, regulation or ruling.
5.07 Acknowledgment: The Plan Sponsor acknowledges that:
(a) the Contractor is performing non-discretionary, ministerial administrative services at the direction of the Plan and it’s authorized representatives;
(b) the Plan Sponsor and its authorized representatives have sole authority for
making all benefit determinations. The Plan Sponsor may delegate the day-to-day administration of initial benefit determinations to the Contractor as indicated in Schedule A;
(c) the Plan Sponsor and its authorized representative have the sole authority
for the review and final disposition of a Plan Participant’s appeal of any benefit determination made by the Contractor under the Plan;
(d) the Contractor does not directly provide any investment advice to the Plan
Sponsor with respect to the Plan’s assets, but the Contractor does perform
certain functions with respect to the selection of investment options, as outlined in Section 1.08;
(e) in performing services under this Agreement, the Contractor is entitled to
rely on any information the Plan Sponsor, or it’s authorized representatives
or the Plan participants provide. The Contractor has a reasonable duty to inquire as to the authenticity or the accuracy of such information or the actual authority of such person to provide it; and
(f) The Plan Sponsor will promptly provide to the Contractor any proposed
amendments to the Plan for review and comment by the Contractor at least 90 days prior to the proposed amendment effective date.
5.08 Notices: Each party will promptly provide the other with notice and copy of any
attempts to levy or attach amounts held under the Plan and/or any litigation
8
affecting the Plan of which it becomes aware and/or any notices or demands to be
given under this Agreement. All such notices, demands or other communications
hereunder shall be in writing and duly provided if sent certified mail, return receipt
requested, addressed to the party to be notified or upon whom a demand is being made, at the addresses set forth in this Agreement or such other place as either
party shall from time to time designate in writing. The date of service of a notice
or demand shall be the receipt date on any certified mail receipt
Notices to the Contractor shall be sent to:
ING Life Insurance and Annuity Company
Attn: Associate General Counsel
Legal Department, C1S
One Orange Way Windsor, CT 06095
Notices to the Plan Sponsor shall be sent to:
Kim Erickson Senior Human Resources Analyst
Orange County Sanitation District Deferred Compensation Plan
10844 Ellis Avenue
Fountain Valley, CA 92708-7018
5.09 Copies of Agreement: This Agreement may be executed in any number of
counterpart copies, each of which when fully executed shall be considered as an
original.
5.10 Headings: Headings are for convenience of reference only. Headings do not limit or expand the scope of the text and are not intended to emphasize any portion thereof.
5.11 Independent Contractor: The Contractor is associated with the Plan Sponsor only
for the purposes and to the extent specified in this Agreement, with respect to the performance of the contracted services pursuant to this Agreement, the Contractor
shall have the sole right to supervise, manage, operate, control and direct
performance of the details incident to its duties under this Agreement.
5.12 Contractor Primary Contact: The Contractor designates certain individual(s) to serve as the primary point of contact for the Agreement. These individuals are
identified in Schedule J:
The Contractor or designee must confirm to Plan Sponsor its receipt of written
inquiries within two (2) business days and provide a full written response within three (3) weeks. The Contractor shall not change the primary contact without prior notice to the Plan Sponsor.
9
5.13 Subcontracting: The Contractor agrees not to enter into any subcontracting
agreements for work contemplated under the Agreement without first obtaining
written approval from the Plan Sponsor. Any subcontractor shall be subject to the
same terms and conditions as the Contractor. The Contractor shall be fully responsible for the performance of any subcontractor.
5.14 Contract Assignability: Without the prior written consent of the Plan Sponsor, the
Agreement is not assignable by the Contractor either in whole or in part.
5.15 Licenses and Permits: The Contractor shall ensure that it has all necessary licenses
and permits required by the laws of federal, state, and municipal laws, ordinances,
rules and regulations. The Contractor shall maintain these licenses and permits in
effect for the duration of this Agreement. The Contractor will notify the Plan
Sponsor immediately of loss or suspension of any such licenses and permits. Failure to maintain a required license or permit may result in immediate
termination of this Agreement.
5.16 Conflict of Interest: The Contractor shall make all reasonable efforts to ensure that
no conflict of interest exists between its officers, employees, agents or subcontractors and the Plan Sponsor. The Contractor shall make a reasonable
effort to prevent employees, consultants, or members of governing bodies from
using their positions for purposes that are, or give the appearance of being,
motivated by a desire for private gain for themselves or others such as those with
whom they have family, business, or other ties.
5.17 Improper Consideration: The Contractor shall not offer or be forced to provide
(either directly or through an intermediary) any improper consideration such as, but
not limited to, cash, discounts, services, the provision of travel or entertainment, or
any items of value to any officer, employee, group of employees, or agent of the Plan Sponsor in an attempt to secure favorable treatment or consideration.
5.18 Indemnification: The Contractor agrees to indemnify and hold the Plan Sponsor, its
officers, employees and agents harmless from any loss, liability, claim, suit or
judgment resulting from work or acts done or omitted by the Contractor’s officers, employees or agents in carrying out the Contractor’s responsibilities as set forth in
this Agreement to the proportionate extent that it results from the negligence or
wrongdoing of the Contractor or any of its officers, employees or agents. The
Contractor agreements to indemnify shall not extend to any injury or damage which
results from the Contractor’s reliance on information transmitted by the Plan Sponsor.
The Plan Sponsor agrees to indemnify and hold the Contractor, its officers,
employees and agents harmless from any loss, liability, claim, suit or judgment
resulting from work or acts done or omitted by the Plan Sponsor’s officers, employees or agents in carrying out the Plan Sponsor’s responsibilities as set forth in this Agreement to the proportionate extent that it results from the negligence or
wrongdoing of the Plan Sponsor or any of its officers, employees or agents.
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5.19 Insurance: During the term of this Agreement, the Contractor shall maintain
Comprehensive General Liability insurance with limits of not less than one million
dollars, as well as automotive and Workers' Compensation insurance policies.
Also, the Contractor shall maintain Professional Liability in the amount of not less than five million dollars. A Certificate of Insurance evidencing said coverage shall
be provided prior to commencement of performance of this Agreement.
Throughout the term of this Agreement, the Contractor shall provide upon request
an updated Certificate of Insurance upon expiration of the current Certificate.
5.20 Right to Monitor: The Plan Sponsor or any appointee thereof, shall have the right
to review and audit all records, books, documents, and other pertinent items as
requested, and shall have the right to monitor the performance of the Contractor in
the delivery of services provided under this Agreement. Full cooperation shall be
given by the Contractor in the implementation, and in any auditing or monitoring conducted.
5.21 Confidentiality: The Contractor acknowledges that all information made available
by the Plan Sponsor about its employees shall be considered confidential. The
Contractor agrees that it will not distribute, disclose or release to any third party any such confidential information except as may be necessary to the performance of services hereunder either during or at any time after the term of the Agreement,
upon the prior written approval of the Plan Sponsor or as otherwise required by
law.
Section 6. RFP and RFP Response
6.01 RFP and RFP Response: Incorporation by Reference: Orange County Sanitation
District Request for Proposal dated August 4, 2008 and ILIAC’s responsive
proposal date September 10, 2008, as supplemented by ILIAC’s response to the Finanalist Interview: Issues and Questions dated October 24, 2008, as subsequently
signed by all parties, (collectively the “RFP Response”) are hereby incorporated by
reference and made a part of this Agreement. ILIAC agrees that it will comply
with all obligations undertaken in the RFP Response.
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement (including all
referenced and attached Schedules and Appendices) to be executed by their respective
officers thereunto duly authorized as of the day and year first above written.
ORANGE COUNTY SANITATION ING LIFE INSURANCE AND DISTRICT ANNUITY COMPANY
By: _____________________________ By: ______________________________
Printed Name:_____________________ Printed Name: _____________________
Title: ____________________________ Title: ____________________________
ING FINANCIAL ADVISERS, LLC
By:_______________________________
Printed Name:______________________
Title: _____________________________
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Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule A: Scope of Contractor Services
For purposes of this Schedule, all references to “participant” are intended to apply equally to all account holders under the Plan. This includes participants, beneficiaries and
alternate payees.
1. The one-time preparation and implementation of a Plan-specific product and service
conversion or transition schedule which shall include notice to all Plan participants.
2. The initial installation of overall Plan records and individual Plan participant records.
3. The development of Plan enrollment materials.
4. Conducting introductory on-site education and enrollment meetings for employees.
5. Ongoing allocation of Plan contributions to individual participant accounts, and
reconciliation of Plan and participant activity on a daily basis.
6. Ongoing maintenance of participant beneficiary designations, including a solicitation
of current participant beneficiary designations, unless otherwise mutually agreed to.
7. Ongoing maintenance, recordkeeping of individual participant account records and
processing in a timely manner of all transactions permitted under the Plan as authorized or approved by the Plan Sponsor. Any delegation of the Plan Sponsor’s
role of authorizing or approving transactions under the Plan to the Contractor will be
as directed later within this Schedule or other written instrument between the parties.
8. Ongoing provision to the Plan Sponsor of periodic Plan reports, as mutually agreed to.
9. Ongoing provision of necessary tax forms on a timely basis to participants who
received taxable distributions during the previous year.
10. Ongoing provision of licensed representatives to perform enrollment and education
services, and to assist participants with account balance inquiries, investment
selection changes, interfund transfers or exchanges, and transaction initiation.
11. Ongoing provision of employee enrollment and education services, including the provision of communication packages which includes the necessary information for
employees to enroll and make investment choices. Establish and maintain an
electronic interface with the Plan Sponsor for changes to the participant’s
contribution amount or rate, as proved in Appendix III to Schedule A.
12. Access to customer service representatives via a toll free telephone line to respond to
Plan participant inquiries, provide information about participants’ accounts and
investment options and to distribute administrative forms.
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13. Access to an automated voice response system via toll free telephone lines, through
which participants may obtain updated account and investment information and
initiate transactions permitted under the Plan.
14. Access to a customized internet site, through which participants may obtain updated
account and investment information, and initiate transactions permitted under the
Plan including electing a new contribution amount or rate and designating a
beneficiary(ies) under the Plan.
15. Incoming Rollovers / Transfers
Ongoing review and processing of participant-initiated incoming rollover or transfer requests, on behalf of the Plan Sponsor, shall be based on mutually acceptable procedures for the review, and processing of these types of requests. Incoming
rollover and transfer requests determined to be in Good Order will be processed on
the same business day as the assets are received by the Contractor.
At the Plan Sponsor’s direction, participants who have had a request denied shall be
given the opportunity to appeal to the Plan Sponsor for review and final disposition
of the determination.
16. Unforeseeable Emergency Withdrawal
Ongoing review and processing of participant unforeseeable emergency withdrawal
requests on behalf of the Plan Sponsor, based on the standard for the review, qualification and processing of these withdrawals as provided in Appendix I to
Schedule A.
The Contractor will make a determination (approval / denial) within 5 business days
of receipt of the request, and supporting documentation, in Good Order. If the request is approved, the request will be processed as of the date of favorable
determination; with payment being mailed or made available electronically through
ACH no later than 3 calendar days following the date of favorable determination.
The Contractor is responsible for IRS penalties associated with the improper administration of Unforeseeable Emergency withdrawals.
17. Domestic Relations Order Administration
Ongoing review and processing of Domestic Relations Orders (DRO) on behalf of
the Plan Sponsor, based on the standard for the review, qualification and processing
of DROs as provided in Appendix II to Schedule A.
The Contractor will make a determination within 5 business days of receipt of the
domestic relations order in Good Order. If the request is approved, the request will
be processed as of the date of favorable determination.
If the domestic relations order is not received in good order, the Contractor will work with the respective parties until the order is presented in Good Order.
18. Benefit Payment Authorization
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Ongoing review and processing of participant-initiated benefit payment requests
(including annuity payments and death benefits) due to participant’s separation from
service or death, on behalf of the Plan Sponsor, based on mutually acceptable
procedures for the review, qualification and processing of these requests. The Plan Sponsor is responsible for providing the Contractor with any and all participant
termination data in the mutually agreed upon electronic format, within a reasonable
time period following the participant’s separation from service or death. The
Contractor may not make the applicable benefit payment request paperwork available
to the participant until the termination data is received from the Plan Sponsor in Good Order.
Benefit payment requests are processed as of the date received in Good Order; with
payment being mailed or made available electronically through ACH.
At the Plan Sponsor’s direction, participants who have had a withdrawal request
denied shall be given the opportunity to appeal to the Plan Sponsor for a review and
final disposition of the benefit determination.
19. Access to counseling by licensed agents or representatives for Plan participants, who are retiring or otherwise requesting a benefit payment from the Plan, based on
mutually acceptable standards.
20. Ongoing processing of Required Minimum Distributions (“RMD”) in accordance
with the rules of Code Section 401(a)(9) for eligible Plan participants and their beneficiaries as follows:
(a) Participants: In the absence of an affirmative election or instructions received
in Good Order from the Participant on an annual basis for receiving the RMD,
the Contractor is directed by the Plan Sponsor, to calculate the RMD amount. The Contractor shall calculate the RMD in the following manner.
i. For Participants with either (1) no beneficiary, (2) a non-spouse
beneficiary, (3) a spouse beneficiary without a date of birth, or (4) a
non-individual beneficiary (e.g., charitable organization), calculate
the current year RMD by dividing the account balance on 12/31 of the prior year by the distribution period under the Uniform Lifetime
Table using the Participant’s age on 12/31 of the current year.
ii. For Participants with a spouse beneficiary more than 10 years
younger than the Participant, calculate the current year RMD by
dividing the account balance on 12/31 of the prior year by the combined life expectancy factor under the Joint and Last Survivor
Table using the ages of the Participant and the spouse beneficiary on
12/31 of the current year.
(b) Beneficiary(ies): In the absence of an affirmative election or instructions
received in Good Order from the beneficiary (ies), the Plan Sponsor directs the
Contractor to calculate the RMD amount in accordance with Code Section
401(a)(9) provided the Contractor has received in Good Order proper
15
notification of the Participant’s death and complete beneficiary(ies)
information (including the complete name and address of the beneficiary(ies)).
In situations where the life expectancy rules are not available for the
calculation of the RMD either because the Contractor has not received the requisite information by the date for issuing RMD payments or the beneficiary
is not entitled to receive RMD under the life expectancy rules, the Plan
Sponsor directs the Contractor to apply the five-year payout rule and force out
a lump sum by December 31st
of the fifth year following the year of the
Participant’s death.
The Plan Sponsor acknowledges that the Contractor shall not be responsible for any
tax penalties or excise taxes the Plan Sponsor, Plan Participants, or beneficiaries may
incur as a result of the Contractor’s failure to calculate the RMD amount where the
failure is due to the Plan Sponsor’s, the Plan Participant’s or the beneficiaries’ failure to provide the required information in a timely manner.
21. Ongoing facilitation of communications between the Contractor, the Plan Sponsor
and the Plan participants based on mutually acceptable guidelines.
16
Orange County Sanitation District 457(b) Deferred Compensation Plan Appendix I to Schedule A:
Unforeseeable Emergency Withdrawal Review and Approval Requirements
The Contractor is responsible for the ongoing review and processing of participant
unforeseeable emergency withdrawal requests on behalf of the Plan Sponsor. The Contractor’s process is based on the following procedures for the review, qualification and
processing of these withdrawals under 457(b) deferred compensation plans.
To request an unforeseeable emergency withdrawal, a participant must complete the
relevant paperwork and provide the appropriate documentation to support the request. The Contractor will review the request to determine whether it satisfies the IRS and Plan
requirements for an unforeseeable emergency. Specifically, an unforeseeable emergency means extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the participant including:
• severe financial hardship of the participant resulting from an illness or accident of a
participant, the participant’s spouse or of a participant's dependent (as defined in Code Section 152(a))*;
• loss of the participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by homeowner’s insurance); or
• other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.
*Effective in 2007, the Pension Protection Act of 2006 expanded this definition to include the participant’s
designated primary beneficiary. In its evaluation, The Contractor will limit the withdrawal to the amount reasonably
necessary to satisfy the emergency need, which may include any amounts necessary to
pay Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution. In addition, a withdrawal shall be allowed only to the extent that such
emergency is or may not be relieved through: 1) reimbursement or compensation from
insurance or otherwise; 2) liquidation of the participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or 3) cessation
of the participant’s deferrals under the Plan. The determination of whether a request qualifies as an unforeseeable emergency will be
based on all the facts and circumstances of the participant’s specific situation. While it is a subjective decision, the Contractor’s process incorporates three underlying principles:
consistent application of the IRS rules to similar situations; decisions must be reasonable
and not arbitrary; and when there is a close call, we err on the conservative side.
The Contractor takes this review process very seriously and understands the importance
of consistently administering the IRS and Plan requirements. The Contractor recognizes that failure to do so, and thus treating the Plan like a savings account, can result in
adverse tax consequences to the participant and to the Plan.
Withdrawal requests will be reviewed in a timely manner. For requests which are
approved, The Contractor will process the withdrawal as of the date of the approval. A
17
participant, who has had a withdrawal request denied because of insufficient documentation, can resubmit his or her request to the Contractor for re-review with all
applicable documentation.
A participant whose request has been denied after submission of all relevant
documentation has the opportunity to appeal the decision to the Plan Sponsor.
Appeals of Denied Requests The Plan Sponsor is the final authority for review of any withdrawal requests which have been denied by the Contractor.
• A participant desiring to appeal the Contractor’s decision must submit the appeal to
the Plan Sponsor or its designee within 30 days of receipt of the denied request. The participant must document in a letter the reason he or she feels the request should be
reevaluated and why the circumstances quality as an unforeseeable emergency.
• Appeals must include all documentation submitted with the original request to the
Contractor; the Contractor’s determination letter and any additional supporting documentation not previously submitted.
• The Plan Sponsor will review a participant’s request within 30 business days of the
date of receipt of an appeal request.
• In reviewing the original decision, the Plan Sponsor will review the specific facts and
circumstances of the participant’s situation, the Contractor’s analysis and the applicable IRS and Plan requirements. The Plan Sponsor’s focus is on ensuring that
the Contractor’s decision was made in accordance with all of the IRS and Plan
guidelines, as summarized above. In its appeal review, the intent of the Plan Sponsor is not to be more lenient than the law requires as this would jeopardize the favorable
tax treatment for the participant and the Plan.
• The Plan Sponsor or its designee shall provide written notification to the participant,
with a copy to the Contractor, as to whether its decision is to affirm the Contractor’s original decision to deny the request, or reverse that decision and approve the
participant’s request.
• The Plan Sponsor’s decision shall be binding on the participant, and he or she shall
have no further ability to have the Plan Sponsor’s decision overturned.
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Orange County Sanitation District 457(b) Deferred Compensation Plan Appendix II to Schedule A:
Domestic Relation Order
Review and Approval Requirements
For a domestic relations order to meet the Contractor’s good order processing standards,
the order must meet the following requirements regardless of the type of plan. Certain
governmental plans are subject to less stringent requirements in the determination of
whether a domestic relations order is considered “qualified.” In addition, certain state rules may be imposed on domestic relations orders by statute.
1. The order must be an original or a court-certified copy of the original, signed by the
judge or clerk of the court. A fax or a photocopy cannot be accepted in order to
meet Contractor’s good order standards.
2. The order must create or recognize the existence of an alternate payee’s right to, or
assigns to an alternate payee the right to, receive all or a portion of the benefits
payable with respect to a participant under the plan.
3. The order must constitute a judgment, decree or order (including approval of a
property settlement agreement) that relates to provisions of child support, alimony
payments or property rights to a spouse, former spouse, child or other dependent of
a participant, made pursuant to a state domestic relations law (including a
community property law).
4. The order must clearly and unambiguously name each plan to which the order
applies.
5. The order must clearly specify the name and last known mailing address of the participant and each alternate payee covered by the order. (If the alternate payee is
a minor or is legally incompetent, the order must include the name and address of
the alternate payee’s legal representative.)
The order should identify the social security number and date of birth of the participant and each alternate payee covered by the order. If State or local law
prevent the inclusion of such information in the court order, this data must be
provided to ING, in writing, by the party that drafts the court order, in order for
good order processing standards to be met.
6. The order must include the amount or percentage, or the manner in which the
amount or percentage is to be determined, of the participant’s benefits to be paid by
the plan to each alternate payee. The calculation of this amount must be very clear
and not subject to interpretation. If the amount ordered to be paid to the alternate
payee’s account is at all ambiguous, then the order cannot be accepted.
7. The order must be specific with respect to the dollar amount or percentage of the
participant’s benefit to which the alternate payee is entitled. The order must specify
the exact date as of which the account should be valued. Participant accounts are
19
valued each day the New York Stock Exchange is open under Contractor’s
processing standards.
8. The order must provide that the calculation of the amount of the participant’s benefit to which the alternate payee is entitled to be readily calculable and
according to records currently available to the Contractor. Pursuant to this
requirement, the Contractor will not accept any order that requires calculations
prior to the time the Contractor began providing services to the plan, unless the
actual financial records necessary to make such calculation are provided to the Contractor.
9. If the order specifies a dollar amount to be paid to the alternate payee, such amount
may not exceed the participant’s vested balance in the plan. Amounts payable to an
alternate payee shall be distributed proportionately from the participant’s account with the Contractor. Account values fluctuate with market conditions, if the dollar amount specified is above the current balance, the request may be rejected.
10. A plan may specify a date as of which QDROs are allowed under the plan (such as
orders dated after a specified date, e.g., January 1, 2002). Court orders which pre-date the allowance of QDROs under the plan may not be accepted.
11. The order must not require the plan to provide any type or form of benefit, or any
option, not otherwise provided under the plan.
12. The order must not require the plan to provide increased benefits (determined on
the basis of actuarial value).
13. The order must not require any payment of benefits to an alternate payee that is
required to be paid to another person under any court order.
14. The order must not provide for tax treatment of the account other than as required
under federal law and regulations.
15. If earnings prior to the effective date are also to be segregated on behalf of the alternate payee, the attorney representing the participant must provide the actual
financial records necessary to make such calculation, if such records are not
available to the Contractor.
When the Contractor receives a signed Domestic Relations Order (DRO), or is notified that a legal action is pending in which a DRO will be sought, the Contractor will place an
administrative hold on the participant’s account. During this period, the participant will be
restricted from taking a distribution or loan until the QDRO has been processed.
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Orange County Sanitation District 457(b) Deferred Compensation Plan Appendix III to Schedule A:
Contribution Rate Change Service
This service allows participants to make contribution rate changes via the Contractor’s
Participant internet site. Please note it is your responsibility to notify ING of terminated
employees. Contribution rate changes are allowed in fractional percentages greater than 1
percent. The Plan Sponsor elects to utilize the Contactor’s Contribution Rate Change
service in accordance with the following criteria (please check).
Minimum and Maximum Contribution Amount / Rate: Pursuant to the Plan document, indicate the minimum and maximum contribution amount or rate a participant can elect.
Employee elective deferral contributions Minimum _N/A $ Maximum _N/A $
Minimum _N/A % Maximum _N/A % If applicable, indicate the maximum total contribution percentage allowed ___________%
If you have elected the Contribution Rate Change service feature, please provide the
minimum and maximum percentages in your plan: Electronic File Delivery:
The Contractor will provide contribution rate reporting data through an automated process.
Please select one of the following delivery types (required): Email: Contractor will send files to a specified recipient in an encrypted format
and access information will be provided Please provide the email address:
FTP (File Transfer Protocol): Contractor will send files via FTP. Please provide
the FTP delivery address, ID and password: FTP Delivery Address: ftp://
FTP ID:
FTP Password:
Sponsor Web/Archive: Plan Sponsor will obtain reporting data though the
Contractor’s plan sponsor internet site.
The Contractor will send electronic contribution rate reporting data based on the
information selected above until a change is provided, in writing, by the Plan Sponsor.
Reporting Frequency: The Contractor will provide the automated contribution rate reporting data on the
frequency that best meets the needs of the Plan Sponsor. Please select one of the following
delivery types (required):
21
Monthly (indicate preferred day):
Semi-Monthly (indicate preferred days):
Bi-weekly
Quarterly Weekly
Semi-Annually
Please provide the first date the report is required. Future reports will be based on this date
and the frequency selected above (mm/dd/yyyy): 06/08/2009
22
Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule B: Loan Program
Terms of Contractor’s Loan Program (“Loan Program”):
• Types of Loans Permitted – select all that apply.
General Purpose
Residential
• Maximum number of loans that may be outstanding at any time. 2 General Purpose
1 Residential
• Minimum Loan Amount - Indicate the minimum loan amount pursuant to this Loan
Program $1,000.00.
• Maximum Loan Amount - the maximum amount of a loan made pursuant to this Loan Program shall be an amount which, when added to the outstanding balance of any other loans to the participant from the Plan and any other qualified plan of the
Employer, does not exceed the lesser of:
(i) $50,000 reduced by the excess (if any) of
a) the highest outstanding balance of loans from the Plan to the participant during the one year period ending on the day before the date on which such loan is made, less
b) the outstanding balance of loans from the Plan to the participant on the
date on which such loan was made, or
(ii) one-half (1/2) of the present value of the non-forfeitable accrued benefit of the participant under the Plan.
• For purposes of this limit, all plans of the Employer shall be considered one
plan, to the extent required by Section 72 of the Internal Revenue Code, and the
balance of all loans under any plan of the Employer under which the individual
participates must be aggregated in determining the maximum loan available from the Plan. The Employer will be responsible for confirming the accuracy
of the loan amount available for participant and has an outstanding loan balance
with an Employer sponsored plan that is not administered by ING.
• All assets under the participant’s Account with the Contractor will be
considered in determining the maximum loan amount available.
• Loan fee shall be deducted from the participant’s total account balance before
determining the maximum loan amount available.
• Loan Interest Rate – the interest rate used for loans from your Plan must be
commensurate with interest rates currently charged by persons in the business of
lending money for loans which would be made under similar circumstances. Select one of the following options:
The Contractor will set the loan interest rate on the first business day of each
calendar month following the month in which a change in the loan interest rate
index occurs. Changes to the loan rate will be applicable to loans issued on or after
the first business day of the month following the month in which the rate is
23
changed. The index for establishing the loan interest rate for the Plan is as follows.
Select one of the following options:
The Prime Interest Rate published in the Wall Street Journal on the last
business day of any month. Moody's Corporate Bond Yield Average – Monthly Average Corporates, as
published by Moody's Investors Service, Inc. on the last business day of any
month.
The following adjustment factor is to be added to the indexed interest rate for loans
issued under the Plan. Select one of the following options. No adjustment
0.5% (one-half percent)
1.0% (one percent)
1.5% (one and one-half percent)
2% (two percent) 2.5% (two and one-half percent)
Other (specify)* ______________________________________________
* Subject to the Contractor’s underwriting review and approval.
Plan Sponsor will set, and provide the Contractor with, the loan interest rate. If the
Plan Sponsor fails to submit an update, the Contractor will administer loans in accordance with the latest interest rate provided by the Plan Sponsor. Select one
frequency.
Monthly
Quarterly
Semi-Annually Annually
• Loan Repayment Frequency - The loan repayment frequency will be used to
amortize the loan and calculate loan repayments. Select only one frequency.
Monthly
Semimonthly Biweekly
Weekly – Additional fees may apply
• Prepayment - Prepayment of the full loan amount will be allowed at any time, without
penalty. One partial loan prepayment is permitted for each outstanding loan.
• Maximum loan repayment period General Purpose 60 months (maximum of 60 months.)
Residential 240 months (maximum of 240 months.)
• Investment of Loan Repayments - Loan repayments will be allocated in accordance
with the participant’s current contribution investment allocation instructions on the
date a loan repayment is received in good order.
• Loan Default Restrictions - If the participant defaults on any loan under the Plan, the
participant shall not be allowed to initiate another loan of that type under the Plan until
the defaulted amount is repaid.
• Loan Fee - The Contractor shall charge a one-time fee to the Participant at the time of
loan for services rendered under this Loan Program, in the amount of $100 per loan.
24
• Money Source Withdrawal Sequence – A withdrawal or liquidation sequence for
money sources available to fund a loan must be identified. Omit from the sequence the
money-sources that are not available to fund a loan. The default sequence for a governmental 457(b) plan is shown below – if no changes are made, this is the withdrawal sequence that will apply to loans issued under the Plan.
1st Employee Elective Deferrals
2nd Rollovers from another 457 Plan
3rd Rollovers from a 401 or 403(b) Plan or IRA
Other (Please specify)
Other (Please specify)
• Fund Withdrawal Sequence – money will be withdrawn from participant investment
options on a pro-rata basis.
• Spousal Consent – indicate if spousal consent is required for loans from the Plan
Yes
No
• Loan Authorization – indicate who will be responsible for authorizing loan
disbursements. Select one of the following options: Authorized Plan Sponsor representative
the Contractor, based on the loan provisions of the Internal Revenue Code Section
72(p), corresponding regulations and terms of the Loan Program as identified in this
Schedule.
• Paperless Loan Processing – This is an optional service that allows Plan participants to initiate general purpose loans through a toll-free customer service line and receive a check directly from the Contractor without completing loan request paperwork. The
loan provisions (Promissory Note and Truth and Lending Disclosure) are included on
the check remittance. By endorsing the check, the participant accepts the terms of the
loan.
Paperless loan processing service is not available if the Plan requires additional qualifying criteria for loans (e.g., hardships or unforeseeable emergency) or if the Plan
requires spousal consent for loan requests. This service is not available for residential
loan requests.
Select one of the following options: Not applicable
Applicable
• Loan Request Notification – The Contractor will provide the Plan Sponsor with a
daily report, accessible from the internet, of those Plan participants that have request a
loan package from the Contractor within the previous 90 days.
• Loan Monitoring – select one of the following options:
Quarterly loan monitoring by the Contractor – the loan default process will occur
only on four specific days per year, i.e., the last business days of each calendar
quarter. This schedule allows us to more effectively monitor and take action on
loans that risk default. If you elect this option, you agree that the grace period on all existing and future loans will be the last business day of the calendar quarter following the calendar quarter in which the loan repayment was due. You also
25
agree to have the Contractor actively monitor and alert participants of potential loan
defaults and defaulted loans.
Ongoing loan monitoring by the Plan Sponsor – If you elect this option, you agree
to monitor loans and direct the Contractor on actions to be taken regarding missed loan payments. It is your responsibility to notify the Contractor when a loan is to be defaulted. It is your responsibility to alert participants of potential loan defaults and
defaulted loans. The grace period to be used to administer all existing and future
loans will be as noted below. Select one of the following options.
months (cannot extend beyond the end of the quarter following the
quarter the loan payment was missed.)
The end of the quarter following the quarter the loan payment was missed.
• Trust Requirement - Loans extended under this Loan Program will be held in trust by
ING National Trust. Plan Sponsor Responsibilities:
• Ensure the Plan document and any applicable state/local law allows for loans to be
administered in accordance with the terms of this Loan Program.
• The Plan Sponsor will inform the Contractor of the any change to the provisions of the Loan Program (and thus the criteria for approving loans under the Plan) as identified in this Schedule.
• Notify the Contractor of any participant with an outstanding loan who begins a leave of
absence, either bona fide (for a period of not more than one year) or due to uniformed
service (military duty) and for whom suspension of loan repayments will apply. Contractor Responsibilities:
• The Contractor will set the interest rate to apply to loans issued under the Plan. Such
rate will be determined monthly for new loans. A loan will be processed using the rate
in effect when the loan request package is sent to the Participant. The loan request package and interest rate will be valid for a maximum of 30 days. The Contractor will
reset the loan interest rate as indicated in the Loan Interest Rate section above. The rate
will apply for the duration of the loan.
• Process loans from a participant’s account in accordance with the terms of the Loan
Program and the loan request package.
• Deduct the loan amount from the participant’s account based on the Money Source
Withdrawal Sequence selected above, on a pro-rata basis across all current investment
options within the participants account or such other method as agreed upon between
Contractor and the participant.
• Furnish quarterly reports to the Plan Sponsor showing participant loan activity.
• Furnish participants with quarterly account statements, reflecting loan activity since the
prior statement date.
• Process loan repayments made by directly by participants to the Contractor. Contractor
will accept checks and, upon completion of the Contractor’s scheduled development,
payments via Automated Clearing House (ACH).
26
• Upon notice from Plan Sponsor that a participant with an outstanding loan is on a
qualifying leave of absence, loan repayments may be suspended for the maximum
period permitted under IRS rules. Currently, IRS rules permit loan repayments to be
suspended in the following circumstances:
• A participant on a bona fide leave may suspend payments for up to one year if the
pay received by the participant during this period is less than the amount of the
installment payments required under the terms of the loan. However, the loan
must still be repaid by the end of the loan term (i.e., the period of suspension will
be less than one year if the loan was within one year of the final payment due date when the leave began).
• A participant on a leave of absence due to performance of the uniformed services
(as described under Internal Revenue Code Section 414(u)), may elect to suspend
loan repayments for the period of uniformed service. In this situation, upon the
participant’s return from uniformed service, the loan repayment period will be extended by a period equal to the length of the uniformed service.
• The Contractor will monitor loan repayments and perform default processing if a
scheduled loan repayment is not received by the end of the grace period allowed for
payment as defined in the Promissory Note and Security Agreement. Should this occur,
the entire loan will be in default. At the beginning of each calendar quarter, we will generate a warning letter to any participant who has missed a loan repayment in the
previous quarter. The letter will describe the implications of missing a loan repayment
and the date on which the loan will be defaulted unless a repayment prior to the end of
the grace period. At the same time, we will generate loan reports noted below and
include them in the package of sponsor reports mailed on a quarterly basis.
• Report of all loans and loan repayments during the previous quarter.
• Report of all defaulted loans during the previous quarter.
• Report of all loans for which a repayment was missed during the previous calendar
quarter. These loans are potential defaults for the end of the upcoming calendar
quarter. The report would represent a list of all the letters sent to participants who missed a loan repayment during the previous quarter.
One month prior to the end of each calendar quarter, we will mail warning letters to
participants who have missed a loan repayment in the preceding calendar quarter. The
letter would again explain the implications of a missed loan repayment.
On the last business day of the calendar quarter we will default any loan in which the grace period expires that day. A confirmation letter will be sent to participants for whom a loan default is processed.
• Compute and withhold federal and state income taxes, as required by law, for loan
defaults or withdrawals from the Plan in order to repay outstanding loan amounts in
full, in accordance with the Internal Revenue Code and applicable guidance. The Contractor will forward, within the applicable time limit, the appropriate information return reflecting the amount of the defaulted loan disbursement and taxes withheld to
the appropriate taxing authority and to the participant.
27
Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule C: Administrative Requirements
For purposes of this Schedule, all references to “participant” are intended to apply equally to all account holders under the Plan. This includes participants, beneficiaries and
alternate payees.
1. Participant account statements and Plan Sponsor reports shall reflect accurate
information with regard to contributions, allocations, earnings and withdrawals.
2. Under normal circumstances and unless otherwise authorized by the Plan Sponsor;
participant quarterly statements shall be mailed within 10 business days of the end of
a calendar quarter.
3. Information on payout options, including a notice which satisfies the requirements of
Internal Revenue Code Section 402(f), will be made available to participants through
the internet or a toll free telephone number. Additionally, upon a terminated
Participant’s request, a licensed representative will provide to the Participant
education and assistance on the available payout options.
4. Contributions determined to be in Good Order on any day that the New York Stock
Exchange is open (a "Business Day"), and prior to the close of the exchange, shall be
applied to the appropriate account on that day's close of business of the New York
Stock Exchange. Contributions received at any other time will be applied to the appropriate account on the next succeeding Business Day. Written confirmation of
receipt and deposit will be provided to the Plan Sponsor or its designee by mail. The
Contractor shall notify the Plan Sponsor or its designee by telephone within two
business days of discovery of transactions received not in Good Order. If after 5
business days, transactions remain not in Good Order, the Contractor will require the Plan Sponsor to provide written consent for the Contractor to continue holding the
amount of the contributions related to the not in Good Order transactions in a non-
interest bearing suspense account. If after 14 business days, the transactions remain
not in Good Order, the amount of the contributions received not in Good Order will
be refunded to the Plan Sponsor.
5. All correspondence and marketing materials written specifically for the Plan
Sponsor, the Plan participants and the Plan Sponsor’s employees shall be provided to
the Plan Sponsor or its designee for approval prior to the scheduled date of
publication or distribution.
6. A calendar year-end report shall be delivered to the Plan Sponsor, by March 31st
Investment Performance;
of
the following year. Such report shall be prepared for the Plan and shall include:
° Asset Allocation by Investment Option;
° Investment Option Summary by Asset Class;
28
° Asset Distribution by Participants Age;
° Historical Assets;
° Contributions/Deferrals by Asset Class;
° Contributions/Deferrals by Investment Option;
° Historical Contributions/Deferrals;
° Investment Diversification;
° Participant Demographics (Age & Gender);
° Participation Levels;
° Participant Service Utilization;
° Communication Update
29
Orange County Sanitation District 457(b) Deferred Compensation Plan
Schedule D: Performance Standards
10.1. Transition Services (period from formal approval to fund transition)
A. Pre-Transition Services Standard: Assure attendance at finalist meetings by representatives who will provide direct transition and ongoing services. Date: Finalist Meeting
Guarantee: N/A
Will meet Unable to meet Will exceed
B. Standard: Answer phone calls from employer contact designee within 24 hours and propose method of measuring standard. Date: Transition Period. Guarantee: $100 per incident for failure to return phone calls
from employer contact designee within 24 hours.
Will meet Unable to meet Will exceed
C. Standard: Provide draft, customized contract (incorporating agreed-upon, proposed services). Date: 30 Days after formal approval by OCSD. Guarantee: $1,000.
Will meet Unable to meet Will exceed
D. Standard: Respond, in writing with a copy to the
employer, to phone or in-person complaints within 5
business days. Date: Transition Period. Guarantee: $100 per incident of failure to respond to
complaint within specified time.
Will meet
Unable to meet
Will exceed
E. Standard: Comply with Sarbanes-Oxley Act
requirements regarding notification of blackout period.
Date: Transition period. Guarantee: $1,000 plus the equivalent of any penalties that would be assessed.
Will meet
Unable to meet
Will exceed
F. Standard: Finalize and publish performance standards
and guarantees.
Date: Provide final copy to employer within 30 days of being
selected by employer.
Guarantee: $500
Will meet
Unable to meet
Will exceed
G. Standard: Provided agreed upon training to employees
and retirees within transition period.
Date: Transition period.
Guarantee: $1,000
Will meet
Unable to meet
Will exceed
10.2. Transition Exit (period from notification of non-renewal to fund transition)
A. Standard: Upon termination, provide: 1) last four
quarters of transaction reports, 2) current account balances, 3) past 12 months distribution and deferral information and 4) loan or other outstanding payment amounts. Date: Within 30 business days after termination, provide report
on disk, tape or internet. Guarantee: $1,000 for initial failure to provide and $500 per
day thereafter.
Will meet
Unable to meet Will exceed
B. Standard: Upon termination, provide information as described in Section 8 on disk, tape or internet. Date: Within 30 days of request.
Will meet Unable to meet Will exceed
30
Guarantee: $1,000 on failure to provide information within
timeframe.
10.3. Customer Services
A. Standard: Telephone calls to service center(s) will be
answered within 90 seconds 90% of the time. (Propose
method of measuring standard).
Date: Transition Period.
Date: Quarterly summary / review due before the end of the month following the quarter. Guarantee: $1,000 per year for failure to meet annual, calendar year average.
Will meet
Unable to meet
Will exceed
B. Standard: Participant statements will be mailed within
10 business days after quarter-end.
Date: Quarterly.
Guarantee: $5 per participant per quarter for each statement
postmarked after 10 business days.
Will meet
Unable to meet
Will exceed
C. Standard: Finalize customized web within parameters
specified in 5.2B site providing hot link between
employer and provider websites and draft participant
communication advertising site content and way to
access.
Date: Due 60 days after implementation.
Guarantee: $500 for failure to provide live web site and participant announcement by end of 3rd month after implementation.
Will meet
Unable to meet
Will exceed
D. Standard: Process investment fund transfers,
contribution reconciliation and posting within one
business day and propose method of measuring
standard.
Date: Annual report due 31 days after each 12 month period from fund transition. Guarantee: Maximum $1,000 for failure to meet agreed-upon standard.
Will meet
Unable to meet
Will exceed
E. Standard: Process hardship distributions, rollover
requests, in-service distributions, retiree distribution
requests within 5 working days of acceptable
documentation and propose method of measuring
standard. Date: Annual summary of performance by provider. Guarantee: $1,000 annually for failure to meet standard in
90% of actions.
Will meet
Unable to meet
Will exceed
F. Standard: Review plan documents for legal, legislative
compliance, identify policy issues between employer
and provider and summarize, in writing, any recommended changes to documents. Date: Within 180 days of fund transition and annually thereafter. Guarantee: $500 for failure to provide each written summary.
Will meet
Unable to meet
Will exceed
G. Standard: Review investment policy and summarize, in
writing, any recommended changes.
Date: Annually with fund evaluation results. Guarantee: $500 for failure to provide review / summary within specified timeframe.
Will meet
Unable to meet
Will exceed
H. Standard: Provide written proposal of services and draft
plan for ongoing participant communication utilizing
Will meet
Unable to meet
31
internet educational resources (e.g. internet or computer based training). Date: Within 180 days of fund transition.
Guarantee: $500 for failure to provide proposal within
timeframe.
Will exceed
10.4 Reports
A. Standard: Provide written summary of Quarterly
Reports (as described in Section 7.2) to employer. Date: Mailed within 30 days of quarter-end. Guarantee: $500 per failure to provide reports by specified date.
Will meet
Unable to meet
Will exceed
B. Standard: Provide written draft proposal for
recommended reports that will be available to employer
online (internet) including proposed access protocols.
Date: Within 90 days of fund transition.
Guarantee: $500 for failure to provide written draft proposal
within specified time.
Will meet
Unable to meet
Will exceed
C. Standard: Provide written Plan / Participant
Enhancement Services (as described in Section 7.5) to
employer.
Date: Annual Summary at time of Investment Review.
Guarantee: $1,000 per month for failure to provide written
report within specified time.
Will meet
Unable to meet
Will exceed
D. Standard: Conduct training of employer-designated
personnel on access to online reports and use of
reporting capability.
Date: Within 120 days of fund transition
Guarantee: $500 for failure to provide training within specified
time.
Will meet
Unable to meet
Will exceed
10.5. Surveys
A. Standard: Draft survey. Date: Draft due by end of 4th month after implementation. Guarantee: $500 if failure to provide draft survey.
Will meet Unable to meet Will exceed
B. Standard: Distribute survey to all plan participants.
Date: Distribution by end of 6th month after implementation.
Guarantee: $500 if failure to mail 30 days from date of final
agreed upon survey content.
Will meet
Unable to meet
Will exceed
C. Standard: Analyze survey results, provide executive
summary and recommended actions.
Date: Complete by end of 8th month after implementation.
Guarantee: $1,000 if Executive Summary and Recommended
Actions is not provided within timeframe.
Will meet
Unable to meet
Will exceed
D. Standard: Repeat survey process steps described above for surveys at 24 and 36 months after implementation. Date: Executive Summary and Recommended Actions due by
end of 24th and 36th month after implementation.
Guarantee: $1,000 for failure to provide Executive Summary
and Recommended Actions by 24th and 36th month.
Will meet Unable to meet Will exceed
E. Standard: Survey results will average Satisfactory or Above and will be incorporated into Executive Summary and Recommended Actions document. Date: Due by 8th, 24th and 36th month after implementation Guarantee: $1,000 for any survey results that fail to meet
Satisfactory or Above
Will meet Unable to meet Will exceed
32
10.6. Educational Services
A. Standard: Provide training to all decision-makers and administrative staff on 404(c) requirements. Date: 90 after fund transition. Guarantee: $500 for failure to provide on-site training within timeframe.
Will meet Unable to meet Will exceed
B. Standard: Propose and schedule first year on-site
training sessions and content of training for decision-makers and administrative personnel. Date: Proposal within 90 after fund transition and educational programs quarterly thereafter. Guarantee: $500 for failure to provide proposed training and
$500 for failure to provide four training sessions in any year of
contract.
Will meet
Unable to meet
Will exceed
C. Standard: Develop and schedule new decision-maker
training for employer identified new Committee
members or administrative staff. Date: Provide half-day on-site training for identified new personnel within 30 days of notification by OCSD. Guarantee: $500 for failure to provide training within specified
timeframe.
Will meet
Unable to meet
Will exceed
D. Standard: After implementation, provide mutually
agreeable number of educational seminars annually to participants. Date: Within 90 days after fund transition. Guarantee: $1,000 for failure to provide agreed-upon number of onsite group seminars.
Will meet
Unable to meet Will exceed
E. Standard: After implementation, provide newsletters to
plan participants regarding plan benefits / issues.
Date: Quarterly. Guarantee: Annual $500 penalty for failure to provider quarterly newsletters
Will meet
Unable to meet
Will exceed
F. Standard: Provide representative on site for mutually
agreeable number of days per month to meet with plan
participants.
Date: Monthly.
Guarantee: $1,000 per year in agreed-upon number of days is
not provided for 3 or more months.
Will meet
Unable to meet
Will exceed
G. Standard: Provide draft PowerPoint and / or other
communication material for transition specifically
proposed for group meetings separated for employees /
retirees.
Date: 30 Days after formal approval.
Guarantee: $500 for initial failure to provide within 30 days after formal approval and $500 per day thereafter.
Will meet
Unable to meet
Will exceed
H. Standard: Draft communication to plan participants
describing investment advice services and access.
Date: Within 60 days of fund transition.
Guarantee: $500 for initial failure to provide within 60 days
after formal approval and $500 per day thereafter.
Will meet
Unable to meet
Will exceed
I. Standard: Recommend, in writing, steps provider and employer may take to communicate and coordinate information regarding defined benefits offered through
the employer and available fund options.
Date: Within 180 days of fund transition.
Will meet Unable to meet Will exceed
33
Guarantee: $1,000 for failure to provide within specified time.
J. Standard: Provide one half-day session per quarter to employer decision-making and administrative personnel on mutually agreeable topics. Date: Quarterly. Guarantee: $250 per quarter if education sessions are not
provided.
Will meet Unable to meet Will exceed
10.7. Miscellaneous Performance Standards / Guarantees
A. Standard: Provide web site copy listing final agreed-upon Performance Standards / Guarantees.
Date: Implementation Date and 30 days after any mutually
agreed-upon revisions.
Guarantee: $500 for each failure to provide web-ready
document to employer.
Will meet Unable to meet
Will exceed
B. Standard: Provide agreed upon number of written copies of final agreed-upon Performance Standards / Guarantees to employer for distribution.
Date: Implementation Date and 30 days after any mutually
agreed-upon revisions.
Guarantee: $500 for each failure to provide specified number
of copies of final agreed-upon Performance Standards /
Guarantees.
Will meet Unable to meet Will exceed
C. Standard: Provide annual written summary of all Performance Standards / Guarantees categories and
results to employer and as a web document for
communication to plan participants.
Date: 30 days after annual anniversary of implementation.
Guarantee: $1,000 for failure to provide web-ready document
within specified timeframe.
Will meet Unable to meet
Will exceed
D. Standard: Recommend, in writing, to employer any modifications / enhancements to Performance Standards / Guarantees.
Date: 30 days after annual anniversary of implementation.
Guarantee: $1,000 for failure to provide written
recommendations.
Will meet Unable to meet Will exceed
E. Standard: Encrypt all laptops and remote computers carrying District participant information and provide written quarterly reports on any compromise of data
that occurs.
Date: Immediate notification of any data compromise (within
24 hours of provider knowledge of compromise) and quarterly
written reports.
Guarantee: $100 for each participant information
compromised and/or $1,000 for each quarter in which report not provided.
Will meet Unable to meet Will exceed
34
Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule E: Plan Investment Options
Stability of Principal
9958 ING Stable Value Option 0167 ING Money Market Fund - Class I
Bond
2540 Loomis Sayles Investment Grade Bond Fund - Class A
1500 Pioneer Global High Yield Fund - Class Y 1451 Oppenheimer International Bond Fund - Class Y
Asset Allocation / Target Date
2199 LIVESTRONG 2015 Portfolio from American Century Investments®
2200 LIVESTRONG 2025 Portfolio from American Century Investments
- Inv Class ®
2201 LIVESTRONG 2035 Portfolio from American Century Investments - Inv Class ®
2202 LIVESTRONG 2045 Portfolio from American Century Investments - Inv Class ®
2203 LIVESTRONG Income Portfolio from American Century Investments
- Inv Class ®
- Inv Cl
Balanced 0788 ING T. Rowe Price Capital Appreciation Portfolio - Service Class
Large Blend / Value / Growth
2539 Eaton Vance Dividend Builder - Class A
1404 Vanguard® 500 Index Fund - SignalTM Shares 2534 Blackrock Equity Dividend - Class A
1355 Allianz NFJ Dividend Value Fund - Class A
0215 Janus Adviser Series Forty Fund - Class S
0572 The Growth Fund of America® - Class R-4
Mid-Cap Blend / Growth / Value
1599 Fidelity®
1576 Vanguard
Advisor Leveraged Company Stock Fund - Institutional Class ®
1607 Fidelity
Mid-Cap Index Fund - Investor Shares ®
2028 RiverSource
VIP Mid Cap Portfolio - Service Class 2 ®
Mid Cap Value Fund - Class R4
Small Blend / Growth / Value
1312 Keeley Small Cap Value Fund
1519 Vanguard®
1571 Royce Value Plus Fund - Investment Class
Small-Cap Index Fund - Investor Shares
0275 Allianz NFJ Small-Cap Value Fund - Class A
Global / International
1308 ING Global Real Estate Fund - Class I
1004 Capital World Growth and Income FundSM - Class R-4 2538 Allianz NFJ International Value Fund - Class A
0936 Lazard Emerging Markets Equity Portfolio - Open Shares
35
Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule F: Investment Provider Minimum Standards Disclosure Statement
The following items summarize the minimum administrative requirements
required in order for the Contractor to transact with an investment provider on
the Plan’s behalf:
1. Pricing Deadlines: The investment provider must furnish the Contractor with confirmed net asset value information as of the close of trading
(generally 4:00 p.m., Eastern Time) on the New York Stock Exchange
(“Close of Trading”) on each business day that the New York Stock
Exchange is open for business (“Business Day”) or at such other time as
the net asset value of the fund is calculated as disclosed in the relevant then current prospectus(es) in a format that includes (i) the fund’s name
and the change from the last calculated net asset value, (ii) dividend and
capital gains information as it arises, and (iii) in the case of a fixed
income fund, the daily accrual or the distribution rate factor. Such
information shall be provided to the Contractor by 6:30 p.m. Eastern Time. “Net” means after all management, service and administrative
expenses are deducted.
2. Pricing Error Reimbursements: The investment provider shall agree to
hold the Plan harmless for any amounts erroneously credited to participant accounts due to (i) an incorrect calculation of the fund’s
daily net asset value (“NAV”), dividend rate, or capital gains
distribution rate or (ii) incorrect or late reporting of the daily net asset
value, dividend rate, or capital gains distribution rate of a fund, by
reimbursing the Contractor, on the Plan’s behalf. In addition, the fund shall be liable to the Contractor for systems and out of pocket costs
incurred by the Contractor in making the Plan’s or the participant’s
account whole, if such costs or expenses are a result of the fund’s failure
to provide timely or correct net asset values, dividend and capital gains
or financial information and if such information is not corrected by 4:00 p.m. Eastern Time of the next Business Day after releasing such
incorrect information provided the incorrect NAV as well as the correct
NAV for each day that the error occurred is provided. If a mistake is
caused in supplying such information, which results in a reconciliation with incorrect information, the amount required to make a Plan’s or a
Participant’s account whole shall be borne by the investment provider
providing the incorrect information, regardless of when the error is
corrected.
3. Sales Literature: The investment provider will provide to the Contractor
at least one complete copy of all prospectuses, statements of additional
information, annual and semiannual reports and proxy statements, other
related documents, and all amendments or supplements to any of the
above documents that relate to the fund promptly after the filing of such document with the SEC or other regulatory authorities. The investment
36
provider agrees to provide to the Contractor, in electronic format,
performance updates and portfolio updates for the fund within 10
business days after the end of each calendar quarter.
4. Advertising: Advertising and literature with respect to the fund
prepared by the Contractor for use in marketing shares of the fund to the
Plan shall be submitted to the investment provider for review and
approval before such material is used with the Plan. The investment
provider shall advise the Contractor in writing within three (3) Business Days of receipt of such materials of its approval or disapproval of such
materials.
5. Expense Reimbursement: The investment provider shall make available for reimbursement certain out-of-pocket expenses the Contractor incurs
in connection with providing shareholder services to the Plan. These
expenses include actual postage paid by the Contractor in connection
with mailing updated prospectuses, supplements and financial reports to
participants, and all costs incurred by the Contractor associated with proxies for the fund, including proxy preparation, group authorization
letters, programming for tabulation and necessary materials (including
postage).
6. Excessive Trading: The investment provider shall use its best efforts and shall reasonably cooperate with the Contractor to generally prevent
any market timing and frequent trading activity under the Plan. See the
ING “Excessive Trading” Policy, Attachment I.
37
Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule G: ING Excessive Trading Policy
The ING family of insurance companies (“ING”), as providers of multi-fund variable insurance and retirement products, has adopted this Excessive Trading Policy to respond to
the demands of the various fund families which make their funds available through our
variable insurance and retirement products to restrict excessive fund trading activity and to
ensure compliance with Section 22c-2 of the Investment Company Act of 1940, as
amended. ING’s current definition of Excessive Trading and our policy with respect to such trading activity is outlined below.
1. ING actively monitors fund transfer and reallocation activity within its variable
insurance and retirement products to identify Excessive Trading.
ING currently defines Excessive Trading as:
a. More than one purchase and sale of the same fund (including money market
funds) within a 60 calendar day period (hereinafter, a purchase and sale of the
same fund is referred to as a “round-trip”). This means two or more round-trips
involving the same fund within a 60 calendar day period would meet ING’s definition of Excessive Trading; or
b. Six round-trips within a twelve month period.
The following transactions are excluded when determining whether trading activity is
excessive: a. Purchases or sales of shares related to non-fund transfers (for example, new
purchase payments, withdrawals and loans);
b. Transfers associated with scheduled dollar cost averaging, scheduled
rebalancing or scheduled asset allocation programs;
c. Purchases and sales of fund shares in the amount of $5,000 or less; d. Purchases and sales of funds that affirmatively permit short-term trading in
their fund shares, and movement between such funds and a money market fund;
and
e. Transactions initiated by a member of the ING family of insurance companies.
2. If ING determines that an individual has made a purchase of a fund within 60 days of a
prior round-trip involving the same fund, ING will send them a letter warning that
another sale of that same fund within 60 days of the beginning of the prior round-trip
will be deemed to be Excessive Trading and result in a six month suspension of their
ability to initiate fund transfers or reallocations through the Internet, facsimile, Voice Response Unit (VRU), telephone calls to the ING Customer Service Center, or other
electronic trading medium that ING may make available from time to time (“Electronic
Trading Privileges”). Likewise, if ING determines that an individual has made five
round-trips within a twelve month period, ING will send them a letter warning that
another purchase and sale of that same fund within twelve months of the initial purchase in the first round-trip in the prior twelve month period will be deemed to be
Excessive Trading and result in a six month suspension of their Electronic Trading
Privileges. According to the needs of the various business units, a copy of the warning
letters may also be sent, as applicable, to the person(s) or entity authorized to initiate
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fund transfers or reallocations, the agent/registered representative or investment adviser
for that individual. A copy of the warning letters and details of the individual’s trading
activity may also be sent to the fund whose shares were involved in the trading activity.
3. If ING determines that an individual has used one or more of its products to engage in
Excessive Trading, ING will send a second letter to the individual. This letter will state
that the individual’s Electronic Trading Privileges have been suspended for a period of
six months. Consequently, all fund transfers or reallocations, not just those which
involve the fund whose shares were involved in the Excessive Trading activity, will then have to be initiated by providing written instructions to ING via regular U.S. mail.
During the six month suspension period, electronic “inquiry only” privileges
will be permitted where and when possible. A copy of the letter restricting future
transfer and reallocation activity to regular U.S. mail and details of the individual’s
trading activity may also be sent to the fund whose shares were involved in the Excessive Trading activity.
4. Following the six month suspension period during which no additional Excessive
Trading is identified, Electronic Trading Privileges may again be restored. ING will
continue to monitor the fund transfer and reallocation activity, and any future Excessive Trading will result in an indefinite suspension of the Electronic Trading
Privileges. Excessive Trading activity during the six month suspension period will also
result in an indefinite suspension of the Electronic Trading Privileges.
5. ING reserves the right to limit fund trading or reallocation privileges with respect to any individual, with or without prior notice, if ING determines that the individual’s
trading activity is disruptive, regardless of whether the individual’s trading activity
falls within the definition of Excessive Trading set forth above. Also, ING’s failure to
send or an individual’s failure to receive any warning letter or other notice
contemplated under this Policy will not prevent ING from suspending that individual’s Electronic Trading Privileges or taking any other action provided for in this Policy.
6. Each fund available through ING’s variable insurance and retirement products, either
by prospectus or stated policy, has adopted or may adopt its own excessive/frequent
trading policy. ING reserves the right, without prior notice, to implement restrictions and/or block future purchases of a fund by an individual who the fund has identified as
violating its excessive/frequent trading policy. All such restrictions and/or blocking of
future fund purchases will be done in accordance with the directions ING receives from
the fund.
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Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule H: Investment Advisory Access Agreement
ING LIFE INSURANCE AND ANNUITY COMPANY PLAN SPONSOR INVESTMENT ADVISORY ACCESS AGREEMENT
This Agreement (“Agreement”) effective May 1st , 2009 is between ING Life Insurance and Annuity Company (“ILIAC”) and Orange County Sanitation District (“Sponsor”), the Sponsor of the Orange County Sanitation District 457(b) Deferred Compensation Plan (the “Plan”), ING Plan / Contract No. 666889,
located at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018.
BACKGROUND
A. Sponsor maintains the Plan, and has entered into a separate written agreement with ILIAC to provide investment options, recordkeeping and/or other administrative service to the Plan
(the “Plan Services Agreement”); and
B. Morningstar Associates, LLC (“Morningstar”) has developed proprietary, independent investment advice (“Managed by You”) and managed account (“Managed by Morningstar”)
services, provided over the Internet through the Morningstar Retirement ManagerSM
platform (“Retirement Manager”); and
C. ILIAC has entered into agreements with Morningstar to allow ILIAC to provide access to
Retirement Manager services for participants of plans in which ILIAC acts as investment product provider and/or recordkeeper (the “Morningstar Agreements”); and
D. Sponsor desires to make available Retirement Manager services to participants in
connection with the Plan; and
E. Sponsor and Morningstar have entered into a separate agreement, the Plan Sponsor Investment Advisory Services Agreement, to provide Retirement Manager services to the
Plan (the “Advisory Services Agreement”); and
F Pursuant to the Advisory Services Agreement, Morningstar will enter into an agreement (the “Participant Advisory Services Agreement”) with Plan participants to provide them
with investment advisory services through Retirement Manager.
Sponsor and ILIAC, in consideration of their mutual promises and covenants contained herein, and of other good consideration duly received, hereby agree as follows:
ILIAC SERVICES
1.1 Set-up and Maintenance (a) Set up services with Morningstar.
(b) Maintenance services: refresh Plan business rules, participant information and profiles with Morningstar.
(c) Standard reporting on participant activity. (d) Sponsor and participant customer service support services. 1.2 Retirement Manager Services Access. ILIAC hereby agrees to facilitate Sponsor’s
participants’ access to Retirement Manager services provided by Morningstar. Only participants for whom ILIAC maintains account records shall be entitled to access Retirement
Manager.
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1.3 Limited Duties. ILIAC’s duties under this Agreement are limited to facilitating access to
Retirement Manager services and providing related administration and recordkeeping services.
Sponsor agrees and acknowledges that ILIAC is not providing any investment advice under this Agreement, and that ILIAC is not responsible for any losses or claims arising or alleged to have arisen from the provision of investment advice by Morningstar.
2. SPONSOR RESPONSIBILITIES
2.1 Provision of Data. Sponsor agrees to provide accurate and timely data and understands that ILIAC will transmit such data to Morningstar. ILIAC shall not have any liability for Sponsor’s
failure to timely inform ILIAC or Morningstar, as applicable, of any changes to the Plan or participant data. Specifically, Sponsor shall:
(a) Provide Plan information and rules to ILIAC and Morningstar that are necessary for set-
up and promptly update this information if changes are made; and (b) Promptly provide to ILIAC any changes to Plan investment options or transaction rules.
2.2 Independent Decision. Sponsor has made its own determination to enter into this Agreement
and to utilize Retirement Manager services from Morningstar. Sponsor is solely responsible choosing to make Retirement Manager services available to its participants and has not relied
upon ILIAC or any of its affiliates or its or their employees or representatives in making that decision.
2.3 Provision of Data to Morningstar. In connection with making Retirement Manager
available to participants, Sponsor acknowledges and agrees that: (a) ILIAC will provide Plan and participant data to Morningstar for its use in providing
Retirement Manager services; and (b) Morningstar is not required to continue to provide Retirement Manager if ILIAC
terminates its relationship with Morningstar.
2.4 Sponsor Representations and Acknowledgments. In connection with making Retirement Manager available to participants, Sponsor hereby represents that it has entered into an
Advisory Services Agreement directly with Morningstar, pursuant to which Sponsor acknowledged and, where necessary, consented to the following:
(a) The data and advice are produced solely on the Plan and participant data provided to
Morningstar by ILIAC and Morningstar is not responsible for any errors or omissions or incomplete data provided by ILIAC.
(b) Retirement Manager services and the analysis, opinions and other information produced by Morningstar may only be used for purposes of assisting participants in making their
retirement planning decisions and not for any other purposes. (c) Morningstar is not required to continue to provide Retirement Manager services if the
Plan Sponsor terminates its relationship with ILIAC. (d) Morningstar will be a fiduciary to the Plan, as defined under ERISA (where applicable),
with respect to the provision of investment advice and discretionary asset management under the Advisory Services Agreement and Participant Advisory Services Agreements,
but Morningstar is not thereby a fiduciary to the Plan for any other purposes. In addition, Morningstar has no responsibility for any benefits due or claimed to be due
under the Plan, for administering the Plan or determining whether the Plan is operated or administered in accordance with ERISA or other applicable laws, including (but not
by way of limitation) any requirements governing delivery of information to participants under ERISA, regulations and interpretations under ERISA, or under any
other applicable law or regulation. (e) Morningstar uses commercially reasonable efforts to ensure that data, analysis, opinion
or other information provided within Retirement Manager is correct. Data and other information are gathered from sources that Morningstar believes to be reliable.
Timeliness of data is dependent on Morningstar schedule for collecting the data and cooperation of the sources, which is outside Momingstar’s control. Morningstar does
41
not represent or warrant the accuracy, correctness, completeness, or timeliness of
Retirement Manager.
(f) Use of Retirement Manager is contingent on the Plan’s investment options satisfying Morningstar’s compatibility requirements. Only funds included in Morningstar’s database are covered by the Morningstar Retirement Manager service.
(g) If the Plan Sponsor wishes to make a change to the investment options available for the Managed by Morningstar Service, it shall provide ILIAC with forty five (45) days’ prior written notice thereof. If custom data collection is required, an additional ten (10)
weeks prior notice is required to provide data collection and maintenance of such funds.
3. FEES
There is no fee due from the Plan, the Plan Sponsor or Plan participants to either ING or Morningstar in connection with the use of Retirement Manager. For the Managed by Morningstar services, the
following fee schedule, set forth below, shall apply. ILIAC is hereby authorized to deduct fees from participant accounts in accordance with the following schedule: Basis points payable Administrative and recordkeeping
to Morningstar: fee payable to ILIAC:
25 bp per annum 15 bp per annum
The fees will automatically be deducted from participant accounts on a periodic basis. The fees paid to Morningstar Associates and ILIAC are reviewed annually at the plan’s contract anniversary and
are subject to change (up or down) based on the overall level of assets in the plan at that time. While the fee paid to Morningstar is subject to change up or down, the administrative fee payable to ILIAC may be lowered, but will not be raised.
4. TERM AND TERMINATION 4.1 Term. Except as otherwise provided herein, the term of this Agreement shall begin on the effective date and continue for an initial term of one (1) year unless terminated as forth in this
Section. Upon expiration of the initial term, the Agreement will automatically renew for successive one (1) year terms unless otherwise terminated by either party pursuant to this
Section, or unless one party notifies the other party in writing of their intent not to renew this Agreement within 90 days of the end of a term.
4.2 Breach. If either party materially breaches in the performance of any provision of this
Agreement or the Plan Service Agreement, or is otherwise in noncompliance with any provision of this Agreement, and such breach is not cured within thirty (30) days of written
notice of breach to the breaching party, the party giving such notice may terminate this Agreement by providing the breaching party with written notice of such termination.
4.3 Automatic Termination. The Agreement will automatically terminate upon written notice if
(a) either party files a petition in bankruptcy, is adjudged bankrupt, or ceases to do business in the ordinary course; (b) Morningstar’s registration as an investment adviser terminates, or is
terminated, suspended, withdrawn or restricted so as to substantially impede performance of Retirement Manager hereunder; (c) this Agreement is assigned in violation of Section 7.7 or
(d) the Agreement between ILIAC and Morningstar expires or is terminated for any reason. 4.4 Termination of Morningstar Agreement or Plan Services Agreement. In addition to any other termination, this Agreement will terminate automatically upon the termination of the
Morningstar Agreement between ILIAC and Morningstar or the Plan Services Agreement between ILIAC and Sponsor, or the full withdrawal/case surrender of all amounts invested
with 1NG under the Plan. 4.5 Effect of Termination. Upon termination of this Agreement for any reason, Sponsor and participants shall no longer have to access to the Retirement Manager services. The Plan and
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Plan Participants’ obligations to pay any fees accruing under this agreement before the
effective date of termination, if applicable, will survive termination of this Agreement.
Sections 5 and 6 hereof also shall survive the termination of this Agreement. 5. LIMITATION OF LIABILITY SPONSOR WILL NOT BE LIABLE TO ILIAC FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS INCURRED BY
ILIAC OR ANY THIRD PARTY, ARISING FROM OR RELATED TO THIS AGREEMENT OR RETIREMENT MANAGER, HOWEVER CAUSED AND WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER THEORY OF LIABILITY. ILIAC’S
LIABILITY WILL IN NO EVENT EXCEED THE AMOUNT OF FEES PAID BY SPONSOR
UNDER THIS AGREEMENT. THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS IS A REASONABLE ALLOCATION OF RISK AND THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. FEDERAL AND STATE SECURITIES LAWS IMPOSE LIABILITIES UNDER CERTAIN CIRCUMSTANCES ON PERSONS WHO ACT IN GOOD FAITH, AND THEREFORE NOTHING IN THIS AGREEMENT ACTS TO WAIVE OR LIMIT ANY OF
THESE RIGHTS.
6. SPONSOR INDEMNIFICATION (a) ILIAC Indemnification. ILIAC agrees to hold harmless and indemnify Sponsor, Sponsor’s agents, officers and employees when acting on Sponsor’s behalf, from every claim and demand to
the proportionate extent that it results from ILIAC’s negligence or wrongdoing or the negligence or wrongdoing of its representatives acting in that capacity in connection with this Agreement. (b) Indemnification. Sponsor agrees to hold harmless and indemnify ILIAC, ILIAC’s agents,
officers and employees when acting on ILIAC’s behalf, from every claim and demand to the proportionate extent that it results from Sponsor’s negligence or wrongdoing or the negligence or
wrongdoing of its representatives acting in that capacity in connection with this Agreement.
7. MISCELLANEOUS
7.1 Disclaimer. Sponsor agrees that ILIAC makes no warranties or guaranties of any kind
regarding Retirement Manager, including access to Morningstar’s web site. Sponsor shall not make any warranties or guarantees to participants with respect to Retirement Manager.
7.2 Notice. Each party will promptly provide the other with notice and copy of any litigation of
which it becomes aware of involving the terms or Retirement Manager under this Agreement and/or any other notices or demands to be given under this Agreement. All such notices,
demands or other communications hereunder shall be in writing and duly provided if sent certified mail, return receipt requested, addressed to the party to be notified or upon whom a
demand is being made, at the addresses set forth in this Agreement or such other place as either party shall from time to time designate in writing. The date of service of a notice or demand
shall be the receipt date on any certified mail receipt.
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Notices to ILIAC shall be sent to: ING Life Insurance and Annuity Company
One Orange Way Attention Legal Department - C1S Windsor, CT 06095
Notices to Sponsor shall be sent to:
Kim Erickson Senior Human Resources Analyst Orange County Sanitation District Deferred Compensation Plan
10844 Ellis Avenue
Fountain Valley, CA 92708-7018 7.3 Governing Law; Jurisdiction. This Agreement shall be governed by the laws of the State of California, without regard to its conflicts of law provisions. The parties agree that any and all actions relating to this Agreement will be brought exclusively in the state and/or federal courts located in Orange County, California, and that each party is subject to the personal jurisdiction
of those courts. 7.4 Force Majeure. Neither party shall be liable to the other for any delays or damage or any failure to act due, occasioned, or caused by reason of restrictions imposed by any government
or government agency, acts of God, strikes, labor disputes, action of the elements, or causes beyond the control of the party affected thereby.
7.5 Severability. If any provision of this Agreement shall be found to be illegal or invalid for any reason, the illegality of invalidity shall not affect the remaining parts of this Agreement and the remainder of the Agreement shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein. No party shall be required to perform any services under this Agreement that would violate any law, regulation or ruling.
7.6 Waiver; Amendment. A waiver or amendment of any provision of this Agreement or of a
party’s rights or remedies under this Agreement must be in writing and signed by an authorized representative of both parties to be effective. Any waiver of the terms of this
Agreement shall be effective only in the specific instance and for the specific purpose. 7.7 Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party; provided that ILIAC may assign the agreement to an affiliate. Any
assignment or attempted assignment of this Agreement in violation of this section is void. This Agreement shall be binding upon and inure to the benefit of the parties’ permitted successors
and assigns.
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WHEREFORE, the parties have signed below to indicate their acceptance of the terms and
conditions of this Agreement.
ING Life Insurance and Annuity Company Orange County Sanitation District
Signature: Signature:
Name: Name:
Title: Title:
Date: Date:
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Orange County Sanitation District 457(b) Deferred Compensation Plan Appendix 1 to Schedule H
PLAN SPONSOR INVESTMENT ADVISORY SERVICES AGREEMENT This investment advisory services agreement and the exhibit(s) hereto (the “Agreement”) is entered into as of May 1, 2009 ("Effective Date") by and between Morningstar Associates, LLC, a Delaware limited liability company and an investment adviser registered under the Investment Advisers Act of 1940, with its principal place of business at 225 West Wacker Drive, Chicago, Illinois 60606 ("Morningstar"), and Orange County Sanitation District, (“Plan Sponsor”) with its principal place of business at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. WHEREAS Plan Sponsor maintains the Orange County Sanitation District 457(b) Deferred Compensation Plan (the “Plan”), a defined contribution plan that is intended to comply with certain provisions of the Internal Revenue Code; and WHEREAS Plan Sponsor has entered into a separate written agreement with ING Life Insurance and Annuity Company and/or an affiliate (the “Service Provider”) to provide daily valuation, recordkeeping and other administrative services to the Plan, including access to Morningstar’s investment advisory services, if Plan Sponsor so elects; and WHEREAS Plan Sponsor wishes to have Morningstar provide certain investment advisory services to and for the benefit of the Participants in Plan Sponsor’s Plan, and Morningstar is willing to provide Plan Sponsor with such investment advisory services, subject to the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the mutual promises set forth herein, Morningstar and Plan Sponsor hereby agree as follows: 1. DEFINITIONS The following definitions shall apply to this Agreement and to any exhibit(s) attached hereto.
• Advice Service shall mean Fund specific non-discretionary investment advisory service provided to a Participant by Morningstar. Advisory Services shall mean individually or collectively the Advice Service and the Managed Accounts Service, provided, however, that the Plan and Participants shall only receive those Advisory Services specifically selected by Plan Sponsor pursuant to this Agreement. The Advisory Services specifically exclude analysis of or advice regarding the potential local, state or federal tax consequences resulting from any investment advice or recommendation provided by Morningstar.
• Initial Delivery Date shall mean that date on which the Advisory Services are made available to the Plan and its Participants pursuant to the terms of this Agreement.
• Managed Accounts Service shall mean Fund specific discretionary investment advisory service provided to a Participant by Morningstar.
• Morningstar Services shall mean the services to be performed or delivered by Morningstar along with the Advisory Services, including the various modules described in this Agreement. Morningstar Services shall not include Advice Service or Managed Accounts Service.
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• Participant shall mean an individual who is enrolled or is eligible to enroll in any Plan offering the Advisory Services. The parties acknowledge and agree that Morningstar reserves the right to exclude any Participant whose current age is greater than his or her retirement age. 2. MORNINGSTAR OBLIGATIONS a. Morningstar shall: (i) Provide the Advisory Services and the Morningstar Services to the Plan and its Participants pursuant to the terms and provisions of this Agreement; (ii) Act as a fiduciary to the Plan only to the extent of its provision of Advice Service or Managed Accounts Service to Participants, and not as a plan administrator or in any other capacity; and (iii) Retain final control and authority over the Advisory Services and Morningstar Services provided to the Participants. b. No Liability for Plan Benefits. In providing the Advisory Services, Morningstar shall not be liable for any benefits due, or claimed to be due, under the Plan. c. Standard of Care. Morningstar will provide the Advisory Services at all times in good faith, and will use reasonable care, consistent with industry practices of similarly situated advisors, in providing the Advisory Services. Morningstar does not guarantee that the Advisory Services will be delivered without interruption, timely, error-free, or secure. Errors may occur in the software-based Advisory Services as a result of programming errors, database errors, or other causes. Morningstar will provide the Advisory Services with that degree of prudence, diligence, care, and skill which a prudent person rendering similar services as an investment advisor would exercise under similar circumstances. The provisions of this Agreement shall not be interpreted to imply any other obligation on the part of Morningstar to observe any other standard of care. Under certain circumstances, the federal and state securities laws impose liabilities on persons who act in good faith and nothing contained in this Agreement should be construed as a waiver or limitation of your rights under such laws. 3. PLAN SPONSOR OBLIGATIONS
a. Provision of Data Plan Sponsor agrees to provide or cause Service Provider to provide accurate and timely data and understands that Morningstar will rely on such data to provide the Advisory Services. Morningstar shall not have any liability for Service Provider’s or Plan Sponsor's failure to timely inform Morningstar or Service Provider, as applicable, of any changes to the Plan or Participant data. Therefore, Plan Sponsor shall or shall cause Service Provider to:
(i) Provide all necessary Participant census data and updates as requested by Morningstar or Service Provider in order for Morningstar to provide the services described in this Agreement;
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(ii) Provide Plan information and rules to Service Provider that are necessary for set-up services and promptly notify Service Provider with any updates to this information if changes are made; and
(iii) Promptly provide to Service Provider any changes to Plan investment options or transaction rules.
b. Selection of Plan Investment Options Plan Sponsor shall:
(i) Select investment options offered under the Plan;
(ii) Monitor and periodically review Plan investment options; and
(iii) Determine if changes to Plan investment options are necessary.
c. Cooperation Plan Sponsor shall fully cooperate with Morningstar in Morningstar's provision of the Advisory Services and Morningstar Services, in such manner as Morningstar may from time to time reasonably request. Such cooperation shall include accurately communicating to Participants the scope of the Advisory Services and Morningstar Services, and, in certain instances, the Participants' ultimate responsibility for investment decisions.
d. Disclosure to Participants In addition to any disclosure required of Plan Sponsor in the applicable exhibit(s), Plan Sponsor shall disclose, or will cause Service Provider to disclose, to Participants in the Plan (a) the amount of any charges to the Participant's Plan account, (b) whether or not such charges will be imposed if the Participant does not use the Advisory Services, and (c) that any such charges may be allocated among various service providers to the Plan, including but not limited to Morningstar, to compensate them for the services they provide to the Plan. Upon Morningstar's request, Plan Sponsor shall provide Morningstar with copies of such disclosure, or shall direct Service Provider to provide such copies.
e. Errors Plan Sponsor shall promptly notify Service Provider of any errors, incompleteness or untimeliness in any of the data, analyses, opinions or other information contained in the Advisory Services or the Morningstar Services about which Plan Sponsor becomes aware.
f. Fund Universe The initial universe of funds for the Plan (the “Fund Universe”) must be provided (or have previously been provided) to Morningstar by the Service Provider, no later than twelve (12) weeks prior to the Initial Delivery Date. Plan Sponsor agrees and acknowledges that any funds not included in the Fund Universe shall not be included in the recommendation given by Morningstar, and that any funds added to the Fund Universe after such date may not be included within the Morningstar Services on the Initial Delivery Date.
If, after the Initial Delivery Date, Plan Sponsor intends to add funds to the Fund Universe or make a change to the investment options available for the Managed Accounts Service, it shall cause Service Provider to give Morningstar fourteen (14) days’ prior written notice thereof, which notice shall include the name of the fund, the fund type (i.e. open-end fund or custom fund) and the fund identifier, such as the ticker symbol, cusip, or external fund identification number, as may be applicable. If custom data collection is required, Morningstar requires twelve (12) weeks prior notice.
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A plan has a sufficient set of funds if all of the following conditions are met: 1. There is at least one Core Blend fund OR (There is at least one Core Value fund and at least one Core Growth fund) 2. There is at least one Core Stable Value fund OR (There is at least one Cash fund AND at least one Core Bond) Plan Sponsor acknowledges that all funds within a Plan’s Fund Universe must be covered in Morningstar Inc.’s database in order for such Fund to be included in the Advisory Services. The Plan Sponsor acknowledges that the Service Provider may require additional time to complete the Fund Set Up. g. Proxy Voting Plan Sponsor represents that with respect to proxies attributable to securities held in Plan accounts, the Plan provides that the Plan Sponsor, the Plan trustee or the Participants shall be responsible for voting such proxies. Plan Sponsor agrees that Morningstar shall have no responsibility or liability for such proxy voting.
4. USE AND PROMOTION
a. The Advisory Services shall be made available only to retirement plans duly established under the laws of the United States of America and to Participants that are citizens and/or legal residents of United States of America or its territories.
b. The Advisory Services, or any portion thereof, may be used by Plan Sponsor and its Participants only for effecting retirement planning for Participants that elect to receive the Advisory Services. Any other use by the Plan Sponsor, including commercial use for the benefit of another person, is prohibited under this Agreement and shall be a material breach of this Agreement. Plan Sponsor shall take all commercially reasonable actions to ensure that there is no unauthorized use by its employees, agents, independent contractors, vendors or other third parties. Plan Sponsor shall immediately notify Morningstar of any actual or potential unauthorized use of which Plan Sponsor becomes aware. Plan Sponsor agrees to cooperate and provide reasonable assistance to Morningstar in connection with preventing and stopping any unauthorized use, of the data, analyses, opinions and other information contained in the Advisory Services or the Morningstar Services.
c. Plan Sponsor may not mention or refer to Morningstar, the Advisory Services, the Morningstar Services, any of Morningstar’s Intellectual Property or any of Morningstar’s web sites in any public announcements, advertising, marketing or promotional materials (collectively, the “Promotion Material”) without Morningstar’s prior written approval, except if such material was provided to Plan Sponsor by Morningstar or the Service Provider. This provision shall not be construed to prohibit Plan Sponsor from referring to Morningstar or the Advisory Services in any announcements or correspondence made directly to Participants.
5. CONFIDENTIALITY The parties acknowledge that in the course of their dealings hereunder, each may acquire information about the other, its business activities and operations, its technical information and its trade secrets, all of which are proprietary and confidential (the “Confidential Information”). Each party hereby agrees that: (a) all Confidential Information (including, but not
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limited to the terms of this Agreement) remains the exclusive property of the disclosing party; (b) it shall maintain, and shall use prudent methods to cause its employees and agents to maintain (and not to otherwise copy, publish, disclose or use other than as contemplated under this Agreement), the confidentiality and secrecy of the disclosing party’s Confidential Information; and (c) it shall return or destroy all copies of the disclosing party’s Confidential Information upon request of the disclosing party. Notwithstanding the foregoing, Confidential Information shall not include any information to the extent it: (i) is or becomes a part of the public domain through no act or omission on the part of the receiving party; (ii) is disclosed to third parties by the disclosing party without restriction on such third parties; (iii) is in the receiving party’s possession, without actual or constructive knowledge of an obligation of confidentiality with respect thereto, at or prior to the time of disclosure under this Agreement; (iv) is independently developed by the receiving party without reference to the disclosing party’s Confidential Information; (v) is released from confidential treatment by written consent of the disclosing party; or (vi) is required to be disclosed by court of competent jurisdiction; provided the receiving party gives the disclosing party prior written notice of such proposed disclosure sufficient to enable the disclosing party to obtain an appropriate protective order, if it so desires.
6. OWNERSHIP Notwithstanding the rights granted under this Agreement, Plan Sponsor acknowledges and agrees that: (i) Morningstar retains sole and exclusive ownership over and all data, analyses, opinions, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information or other information contained in the Advisory Services and the Morningstar Services (“Intellectual Property”), except the data referred to in (ii) below, and that the Advisory Services and the Morningstar Services and all data, analyses, opinions and other information contained in it include valuable copyrighted and proprietary material of Morningstar; (ii) Morningstar, Inc. retains sole and exclusive ownership rights in certain data contained within each the Morningstar Services and the Advisory Services (the “Morningstar Data”) and that the Morningstar Data contain the valuable copyrighted and proprietary material of Morningstar, Inc. (iii) Morningstar or Morningstar, Inc, as applicable, retains sole and exclusive ownership over the Intellectual Property; (iv) the Morningstar Services and Intellectual Property are being made available to the Plan Sponsor for the express purposes and use set forth herein and nothing contained herein transfers to Plan Sponsor any ownership interest in the Intellectual Property or the Morningstar Services and any software, pictures, images, materials, changes, materials, or other works of authorship provided contained therein or Intellectual Property; and (v) Plan Sponsor shall not have any rights in and to the Morningstar Services and Intellectual Property, except as specifically granted by this Agreement. Plan Sponsor has no right to make derivative works of the Morningstar Services, the Morningstar Data or the Intellectual Property in any form for use in any medium currently in existence or under development, now or in the future.
Plan Sponsor shall not, at any time during or after the term of this Agreement: (i) contest or assist any third party in contesting the validity or enforceability of Morningstar’s ownership of all right, title and interest in and to the Morningstar Services and all corresponding intellectual property rights, or in Morningstar, Inc.’s ownership of all right, title and interest in and to the Morningstar Data and all corresponding intellectual property rights thereto; (ii) use the Intellectual Property, except as specifically authorized by this Agreement; (iii) use any trademark, service mark, trade name or corporate name that is a colorable imitation or confusingly similar to any of the Intellectual Property, except as expressly authorized by Morningstar in writing in advance; or (iv) contest or assist any third party in contesting the validity or enforceability of the Intellectual Property or the ownership of all right, title and interest in and to the Intellectual Property. To the extent Plan Sponsor is authorized to use any of the Intellectual Property, such use shall inure to the benefit of Morningstar
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or Morningstar, Inc., as appropriate. Plan Sponsor shall, at all times during or after the term of this Agreement, execute any documents and take such other actions reasonably requested by Morningstar to confirm or protect Morningstar’s and Morningstar, Inc.’s right, title and interest in and to the Morningstar Data or the Intellectual Property, as applicable, and any corresponding intellectual property rights. 7. TERM AND TERMINATION
a. Term The term of this Agreement (“Initial Term”) shall begin on the Effective Date and shall continue for one (1) year from the Initial Delivery Date unless the term ends earlier as otherwise provided for under this Section 7. This Agreement shall automatically renew for successive periods of one (1) year each (“Renewal Term”) after the Initial Term and each Renewal Term unless either party provides written notice of non-renewal to the other party no later than ninety (90) days prior to the expiration of the Initial Term or any Renewal Term, as the case may be.
b. Termination Upon Default or Insolvency If either party defaults in the performance of, or is in non-compliance with, any provision contained in this Agreement (including, but not limited to, any uncured insolvency or the like), and such default is not cured within thirty (30) days after written notice thereof is given to the defaulting party, the party giving such notice may then give further written notice which shall terminate this Agreement as of the date specified in such notice.
c. Termination upon Termination of Agreement between Morningstar and Service Provider or Plan Sponsor and Service Provider This Agreement will terminate automatically upon (i) the termination of the agreement between Morningstar and the Service Provider under which Morningstar provides the Service Provider with certain retirement services, including, but not limited to, any of the Advisory Services or Morningstar Services described herein, or (ii) the termination of the agreement between Plan Sponsor and Service Provider under which Service Provider provides certain recordkeeping and administrative services to the Plan.
d. Effect of Termination Upon expiration or termination of this Agreement for any reason, all rights granted to Plan Sponsor hereunder shall terminate immediately and all Participants shall no longer have access to the Advisory Services or the Morningstar Services. Expiration or termination of this Agreement for any reason shall not affect Plan Sponsor’s or their Participants’ obligation to pay any and all fees and other amounts due and payable or relieve Plan Sponsor of any liability for breach of this Agreement.
8. FEES AND BILLING
a. Fees During the term of this Agreement (including any Renewal Term), the Participants and/or the Plan Sponsor, as the case may be, shall pay the applicable fees that are set forth on Exhibit A attached hereto and made part hereof.
b. Collection Authorization and Payment Terms The parties hereby agree that Service Provider shall deduct all applicable fees from the Participant accounts and is hereby authorized to remit such fees to Morningstar. The parties agree and acknowledge that Service Provider shall deduct and remit the applicable Managed Accounts Fees in periodic installments in arrears.
9. REPRESENTATIONS AND WARRANTIES
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a. Representations of Morningstar Morningstar represents and warrants to Plan Sponsor that it is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 and, to Morningstar’s knowledge (a) it has all rights in and to all the Intellectual Property necessary to market, distribute the Advisory Services and the Morningstar Services in accordance with the terms of this Agreement; (b) this Agreement is binding on Morningstar; and (c) Morningstar’s entry into this Agreement does not violate any prior obligation or agreement of Morningstar.
b. Representations of Plan Sponsor Plan Sponsor represents and warrants to Morningstar that (a) Plan Sponsor has the authority and power to enter into and comply with its obligations under this Agreement and the rights and licenses necessary to enter into and perform its obligations under this Agreement; (b) this Agreement is binding on Plan Sponsor; (c) Plan Sponsor’s entry into this Agreement does not violate any prior obligation or agreement of Plan Sponsor; (d) the individual signing this Agreement and any exhibit(s) thereto on behalf of Plan Sponsor is a named fiduciary of Plan or is authorized to sign on behalf of the Plan Sponsor in its capacity as a named fiduciary of Plan and is authorized to sign on behalf of the Plan Sponsor; (e) consistent with the terms and conditions contained in all governing documents of Plan Sponsor’s Plan with respect to the voting of proxies, Plan Sponsor, the Plan Trustee or the Participants will vote proxies for securities held in any investment account for which Morningstar may provide advice hereunder, and (f) the instruments under which the Plan is maintained authorize the use of Plan assets to pay any fees for which the Participant is responsible as provided in this Agreement.
10. DISCLAIMERS
a. Data Disclaimer Morningstar will use commercially reasonable efforts to ensure that the data, analysis, opinion, and other information contained in the Advisory Services or the Morningstar Services are correct. Although gathered from sources believed to be reliable, Plan Sponsor acknowledges that Morningstar cannot guarantee the accuracy of the data or information used to provide the Services. The completeness and timeliness of all data and information used to provide the Services is dependent upon the sources of such data and information, which are outside of Morningstar's control.
b. Disclaimer of Warranties EXCEPT AS EXPRESSLY SET FORTH IN SECTION 9 ABOVE, MORNINGSTAR PROVIDES NO WARRANTIES, EITHER EXPRESS, IMPLIED OR OTHERWISE WITH RESPECT TO THE SERVICES DELIVERED PURSUANT TO THIS AGREEMENT, OR THE SOFTWARE COMPRISING THE SERVICES, AND TO THE EXTENT PERMITTED BY LAW, MORNINGSTAR DISCLAIMS THE IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY WITH RESPECT TO SUCH SERVICES.
c. Acknowledgement of Limitations on Recommendations Plan Sponsor acknowledges and agrees that in formulating recommendations through the Advisory Services, Morningstar will only consider investment options offered by the Plan Sponsor’s Plan. As a result, the Advisory Services may not be comprehensive because it may not recommend use of investment options that otherwise might be appropriate investments but that are not offered through Plan Sponsor’s Plan.
11. LIMITATION OF LIABILITY The following Limitations of Liability shall be applicable:
52
a. Limitation of Damages EXCEPT AS OTHERWISE PROVIDED BY LAW, AND EXCEPT FOR DAMAGES ARISING AS A RESULT OF A PARTY’S WILLFUL MISCONDUCT OR BREACH OF FIDUCIARY DUTY, EACH PARTY’S AGGREGATE LIABILITY FOR ANY DIRECT DAMAGES ARISING UNDER OR IN ANY WAY RELATING TO THIS AGREEMENT, THE ADVISORY SERVICES, AND MORNINGSTAR SERVICES PROVIDED HEREUNDER (WHETHER ARISING IN CONTRACT, TORT, OR ANY OTHER LEGAL THEORY) SHALL BE LIMITED TO ONE MILLION DOLLARS ($1,000,000).
EXCEPT AS OTHERWISE PROVIDED BY LAW, AND FOR DAMAGES ARISING FROM A PARTY’S WILLFUL MISCONDUCT, IN NO EVENT WILL THAT PARTY BE LIABLE TO THE OTHER FOR ANY PUNITIVE, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR SIMILAR DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. b. Plan Sponsor's Rights Under Securities Laws Nothing in this Agreement is intended to or shall waive any rights to which Plan Sponsor is specifically entitled under the securities laws of the United States.
12. ENHANCEMENTS AND MODIFICATIONS Morningstar reserves the right in its sole discretion to enhance, modify, or provide upgrades (collectively "Changes") of the Morningstar Services or Advisory Services from time to time.
13. ACCESS AND TECHNICAL REQUIREMENTS
Method of Access Morningstar shall provide Participants with access to Morningstar Retirement Manager via Service Provider’s call center or via the Internet through an HTTP connection, which connection shall be established and maintained by Service Provider for Plan Sponsor’s benefit. Technical Requirements for access to Morningstar Retirement Manager: Browsers:
• Microsoft® Internet Explorer 6.0 and above
• America Online 9.0 and above
• Apple Macintosh Safari
• Firefox 1.5 and above System Requirements:
• Windows®
• Mac® OS X® with Safari browser
• JavaScript and Cookies must be enabled
• Adobe Acrobat (for printing reports from the Retirement Manager Web site)
• Sun's Java Plug-in - J2SE Java Runtime Environment (JRE) version 1.4.2 or higher Security:
• 128 bit encryption Pop-ups:
• In order to view certain pages in the Retirement Manager site, pop-ups much be enabled.
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Morningstar reserves the right to change the above-referenced technical requirements as certain browser versions become obsolete or outdated or as new versions are released. 14. RESEARCH, EDUCATION, AND MEASUREMENT MODULES Plan Sponsor will be provided access to Morningstar’s Research Module, Education Module and Measurement Module. The Research Module will consist of reports and information concerning Funds within the Fund Universe. The Education Module will consist of articles, information and interactive planning tools. The Research Module and the Education Module will be made available to the Plan Sponsor and Participants that have agreed to receive the Advisory Services, and may not be offered outside of this Agreement. The Measurement Module will be made available to the Service Provider who may then provide access to the Plan Sponsor. Licensor reserves the right in its sole discretion to modify, add, or delete data points in the Research Module, the Education Module, and the Measurement Module.
15. INVESTMENT PROCESS AND RESTRICTIONS
a. Investment Process Upon receipt from the Service Provider of personal and financial data for a Participant (“Participant Data”), if a Participant has selected the Advisory Services, Morningstar will use the Funds made available by the Plan Sponsor to create a portfolio with an asset allocation composition (each a “Participant Portfolio”).
Morningstar will analyze the Funds to determine which particular Funds will be assigned to a Participant Portfolio. If the Participant has indicated an instruction that his or her Participant Portfolio not include a particular Fund (“Restriction”) which Morningstar deems unreasonable, Morningstar shall not be required to deliver a Participant Portfolio for that Participant. b. Self-directed Brokerage Accounts Morningstar shall have no duty to provide the Advisory Services with respect to assets held within a Self-directed Brokerage Account. 16. PROPOSAL LETTER Morningstar will provide information about the Advisory Services to the Participants though a Proposal Letter in its standard design with current supported plan types and functionality and any subsequent global modifications, enhancements, or upgrades. Plan Sponsor has authorized Service Provider to deliver to Morningstar such Participant data as is required to create and deliver the Proposal Letter to Participants. Morningstar agrees that it shall not use any such Participant data for any purpose other than providing the services expressly described herein. 17. MISCELLANEOUS a. Notices All notices or other communications shall be in writing and be delivered in person, or sent by certified mail, return receipt requested, overnight courier service, facsimile or e-mail to such addresses or numbers as may be stipulated in writing by the parties pursuant hereto. Unless otherwise provided, notice will be effective on the date it is officially recorded as delivered by return receipt or equivalent or by facsimile confirmation date.
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b. Entire Understanding; Partial Invalidity This Agreement, along with any exhibit(s) or other attachments hereto, sets forth the entire understanding between the parties and supersedes any and all oral or written agreements between the parties as to the subject matter of this Agreement. If any provision of this Agreement shall to any extent be held to be invalid or unenforceable, the remainder of the Agreement, or the application of such provisions as to which it is not held to be invalid or unenforceable, shall not be affected thereby, and each provision shall be valid and be enforced to the fullest extent permitted by law.
c. Modification This Agreement may be modified only in a document signed by both parties.
d. Assignment The parties’ benefits and obligations in this Agreement shall not be assigned without the prior written consent of the other party. This Agreement shall apply to, inure to the benefit of, and be binding upon the parties hereto and upon their permitted successors in interest and assigns. The parties acknowledge that there are no intended third party beneficiaries of this Agreement.
e. No Waiver; Force Majeure The failure of one party to require the other to perform hereunder shall in no way affect the first party’s right to require such performance thereafter, nor shall the waiver by either party of a breach of any Agreement provision be deemed a waiver of any succeeding breach of that provision or a waiver of the provision itself. In no event shall one party be liable to the other for any delay or failure to perform hereunder if the delay or failure is due to causes beyond the reasonable control of that party.
f. Injunctive Relief Each party acknowledges that the other’s legal remedies (including the payment of damages) would not adequately compensate the non-breaching party for the other’s breach of this Agreement regarding ownership, use, copying, distribution, confidentiality or nondisclosure, as applicable, of the Morningstar Services or the Advisory Services (or any part thereof), the Intellectual Property, or Confidential Information and that it would suffer continuing, irreparable injury as a direct result of such breach. Therefore, in the event of any such breach or threatened breach, the non-breaching party may seek entry of any injunctive relief necessary to prevent or cure such breach (including temporary and preliminary relief, and relief by order of specific performance), without posting of bond or other security or proof of irreparable harm.
g. Arbitration Any dispute under this Agreement shall be settled by binding arbitration in Los Angeles, California before a panel of three impartial arbitrators under the rules of the American Arbitration Association. Such panel shall consist of an actuary, an attorney and an employee benefit consultant, each of whom shall have had at least ten (10) years of professional experience in the administration of participant-directed defined contribution plans similar to the Plan. In any such arbitration, each party shall bear its own costs, expenses and attorneys' fees. The arbitration award may be enforced in any court having jurisdiction over the parties and the subject matter of the arbitration, and the parties irrevocably submit to the nonexclusive jurisdiction of the Superior Court of the State of Illinois, and the United States District Court for the Northern District of Illinois, in any action to enforce an arbitration award.
h. Choice of Law and Venue Except as provided in Section 14(g), all disputes arising under this Agreement or its performance shall be determined exclusively under the laws of the State of California without regard to its conflict of laws provisions.
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i Acknowledgment of Receipt of Morningstar’s Disclosure Statement Plan Sponsor acknowledges that it has received Part II of Morningstar’s Form ADV at least 48 hours prior to entering into this Agreement.
j. Survival of Rights Termination or cancellation of this Agreement for any reason shall not relieve either party of obligations that accrued prior to termination or cancellation, or of obligations that by their nature are intended to survive this Agreement, including but not limited to obligations in connection with warranties, confidential information and indemnification.
k. Counterparts This Agreement may be signed in two counterparts, which together shall form a single agreement as if both parties had executed the same document.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date set forth above.
Orange County Sanitation District Morningstar Associates, LLC
(Plan Sponsor) By: _____________________________ By: __________________________
Name: ___________________________ Name: Patrick Reinkemeyer Title: ____________________________ Title: President
Date:____________________________ Date:_________________________
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EXHIBIT A
There is no fee due from the Plan, the Plan Sponsor or Participants to either the Service Provider or Morningstar in connection with the use of Morningstar Retirement Manager. For the Managed Accounts Service, the following fee schedule, set forth below, shall apply. ILIAC is hereby authorized to deduct fees from participant accounts in accordance with the following schedule:
Select one (X) Plan Asset Range Basis points payable
to Morningstar: ________ Less than $3 million 30 bp per annum
________ $3 million to $10 million 28 bp per annum ____X____ Over $10 million 25 bp per annum
In addition to the fees set forth above, the Plan, Plan Sponsor or Participants may also pay an
administrative and recordkeeping fee to the Service Provider. The fees are reviewed annually at the Plan’s contract anniversary and are subject to change (fees may be lowered but will not be raised) based on the
overall level of assets in the plan at that time.
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Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule I: Reimbursement of Plan Expenses
The Contractor shall reimburse the Plan Sponsor annually for the Plan’s reasonable and
necessary administrative expenses as set forth below. The annual reimbursement will be
paid by the Contractor no later than December 31st of each contract year.
2009 $43,470 2010 $46,360
2011 $48,210
2012 $48,860
2013 $45,910 The Plan Sponsor represents that any amounts reimbursed to the Plan pursuant to this
Agreement shall be for expenses that are both reasonable and necessary to the
administration of the Plan.
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Orange County Sanitation District 457(b) Deferred Compensation Plan Schedule J: Contractor’s Primary Contact
The Contractor designates the following individual(s) to serve as its primary point of
contact to the Plan Sponsor with respect to this Agreement.
Susan (“Sue”) Silva Plan Manager
ING Life Insurance and Annuity Company
One Orange Way
Windsor, CT 06095
Phone: 860.580.3277
Email: Susan.Silva@us.ing.com
Form No. DW-102.3 Revised: 02/17/09 Page 1
ADMINISTRATION COMMITTEE Meeting Date
03/11/09
To Bd. of Dir.
AGENDA REPORT Item Number 3 Item Number
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: STATUS ON THE RENEWAL QUOTES OF THE DISTRICT’S MAJOR
OPERATIONAL INSURANCE PROGRAMS FOR FY 2009-10
GENERAL MANAGER'S RECOMMENDATION Informational Item.
SUMMARY
The District budget provides funds for the renewal of four major insurances connected with
the District’s operations:
1) Excess General Liability Insurance
2) All-Risk Property and Flood insurance
3) Excess Workers’ Compensation 4) Boiler & Machinery insurance
These policy renewals are scheduled to be presented to the Committee at its May Committee meeting. The District’s Insurance Broker of Record will present a short status
report in March and will be in attendance in May to provide quotations.
PRIOR COMMITTEE/BOARD ACTIONS
• In June 2008, the Board approved renewals of the major insurance coverages for FY 2008-09.
ADDITIONAL INFORMATION
Each winter and spring, the District’s Risk Manager works with the District’s Broker (Alliant Insurance Services) to prepare a strategy for renewal of the District’s operational insurance.
In previous years, the Administration Committee had asked for a status report as to how the
renewals were developing. Here are details about the four major types of insurance:
Form No. DW-102.3 Revised: 02/17/09 Page 2
1) Excess General Liability Insurance Program
The District’s Excess General Liability Insurance Program is currently provided through the
California Municipal Excess Liability Program (“CAMEL”) and its sister program, the Alliant
National Municipal Liability Program (“ANIMAL”). The District has participated in the CAMEL program since FY 1996-97.
This program currently provides the District with a $30 million policy of comprehensive coverage for municipal liability, bodily injury and property damage, and personal injury. The
program was structured to also include Employment Practices, and Public Officials Errors & Omissions coverage. The $30 million coverage is per occurrence, with a self-insured deductible of $250,000 per occurrence. Since 1997, the Employment Practices portion of
coverage has enhanced from a $2 million sub-limit to the full $30 million policy limit.
The actual insurance coverage currently consists of two separate layers. The first layer is
the “Basic” $10 million program with self-insured retention of $250,000. The second layer consists of $20 million of coverage in excess of the first layer of $10 million.
The premium for 2008-09 was $370,498.
2) Excess Workers’ Compensation Insurance
The District’s Excess Workers’ Compensation insurance coverage is with the California
State Association of Counties Excess Insurance Authority (“CSAC EIA”). This is the sixth
year the District has participated in this program or its predecessor. The coverage expires on June 30, 2009. The District’s Excess Workers’ Compensation Program currently
provides statutory (unlimited) coverage with a self-insured retention (SIR), or deductible, of $500,000.
The District’s use of Excess Workers’ Compensation insurance dates back to 1989-90. At that time, the Fiscal Policy Committee approved a self-insured retention (SIR), or deductible, of $250,000, for such coverage.
Due to the hardening of the workers’ compensation market, this deductible was raised to
$500,000 beginning in FY 2002-03 through a policy with Employers Reinsurance
Corporation (ERC) that provided coverage to $25 million with a self-insured retention (SIR), or deductible of $500,000.
Staff has reviewed the District’s most recent five-year workers’ compensation loss history with Cambridge Integrated Services Group, the District’s third-party workers’ compensation
administrator. Staff is seeking workers’ compensation insurance renewal with coverages
and deductibles at statutory limits.
Some additional risk is associated with the CSAC EIA joint powers authority in that a premium surcharge can be assessed to individual members based on an unusually large number of losses occurring outside of the actuarial evaluation estimates. However,
historically the CSAC EIA premiums for excess workers compensation have been so much less than competing quotes that even if there were a surcharge, the cost might still continue to be cheaper.
The premium for 2008-09 was $161,359 (based on estimated payroll for the year).
Form No. DW-102.3 Revised: 02/17/09 Page 3
The District’s All-Risk Property and Flood Insurance Program (“Property Insurance”) expires
June 30, 2009, and is now up for renewal for FY 2009-10. The All-Risk insurance program
provides for comprehensive coverage for the District’s real and personal property regarding virtually all perils including fire, flood, and business interruption.
3) All-Risk Property and Flood Insurance
The District previously carried earthquake insurance as part of its Property Insurance, but in the last few years earthquake insurance has been impossible to obtain or not cost-effective.
Currently, the District has earthquake insurance only in connection with some of its buildings under construction.
The District’s current Property Insurance limits are $1 billion for most perils other than flood and earthquakes, and $175 million for flood, with many sub-limits for various situations. In
order to reach $1 billion in limits, the District’s broker had to arrange for nearly a dozen
different layers of insurers. The Self-Insured Retention (“SIR”) is $25,000 per occurrence for most types of losses.
For ten consecutive years, the District’s Property Insurance has been with a nationwide joint purchase property insurance program called Public Entity Property Insurance Program
(PEPIP); one of the world’s largest property programs. It is important to note that this joint
purchase property insurance program offers the purchasing power of numerous large public entities without
the pooling or sharing of coverages or losses.
The District’s broker, Alliant Insurance Services, is also acquiring quotes for Earthquake Insurance, and will know by the May meeting if the quotes are cost-effective.
The premium for 2008-09 was $468,394.
4) Boiler & Machinery insurance
It is also time for the annual renewal of Boiler & Machinery insurance coverage for the
District covering the period from July 1, 2009 through June 30, 2010. The Boiler & Machinery insurance program provides comprehensive coverage for loss caused by
machinery breakdown and explosion of steam boilers or other covered process equipment,
including damage to the equipment itself and damage to other property caused by covered accident.
The District’s current Boiler & Machinery insurance program provides coverage ($100 million per occurrence with deductibles ranging from $25,000 to $350,000) for losses caused by
covered machinery breakdown (e.g., motors, steam turbines, digesters, co-gen engines).
Damages to the equipment, as well as damages to other property and improvements caused by the machinery breakdown, are covered by the Boiler & Machinery insurance.
This program augments the District’s all-risk property insurance that covers perils such as
fire and flood.
The premium for 2008-09 was $16,788.
JDR:LT:MW:RK
Page 1
ADMINISTRATION COMMITTEE Meeting Date 03/11/09 To Bd. of Dir.
AGENDA REPORT Item Number
4
Item Number
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: 2009-10 DISTRICT BUDGET UPDATE GENERAL MANAGER'S RECOMMENDATION
Informational item.
SUMMARY
This report will provide an overview of the Sanitation District’s 2009-10 Budget. The Proposed
Updated Budget will be presented to the full Board for adoption on June 24, 2009. ADDITIONAL INFORMATION
Highlights of the 2009-10 Budget include: 1) Economic Downturn
As anticipated when the budget was adopted, total resource requirements are estimated to decrease to $467 million, or 22 percent over FY 2008-09. The majority of the reduction is
due to decreased capital requirements as part of the Capital Improvement Program (CIP).
However, as a result of the economic downturn, $82 million of the $374 million FY 2008-09 CIP was deferred out to future years. Staff is currently reevaluating the previously approved
FY 2009-20 CIP and it will be impacted from the current year’s deferral. However, the
overall ten-year $2.0 billion CIP cash flow projection allows the Sanitation District to maintain a projected rate increase of 10 percent over FY 2008-09. 2) A revised Capital Improvement Program (CIP) Staff completed a comprehensive review of the Sanitation District’s long-term CIP and previously received approvals of CIP outlays of $374 million and $229 million for fiscal years
2008-09 and 2009-10. This level of outlay is currently being reevaluated by staff for
updating the FY 2009-10 Budget. 3) Strong Financial Position
The budget assumes ongoing revenues and reserve levels that are sufficient to maintain the District’s AAA Bond Rating from Standard and Poors and AA by Fitch. Bond ratings of AA are judged to be of high quality by all standards and Bond ratings of AAA are the highest
level that can be obtained. 4) Flat Staffing Levels The budget includes an increase of 7 additional Full-Time Equivalent (FTE) positions
bringing the total staffing level to 648 for FY 2009-10. These position are necessary to support the new secondary treatment facilities being placed into service as the District
moves towards full secondary treatment standards. 5) Two-Year Budget FY 2009-10 will be the second year of the two-year budget that was adopted in June 2008.
The budget document will provide an update on all major expense categories for FY
2009-10.
Page 2
BUDGET SUMMARY FY 2009-10 % of
(in millions) Total Revenues: Fees & Charges $ 244 50%
General Income 120 25% Debt Proceeds 120 25% Total $ 484
Expenditures:
CIP, including Debt 311 67%
Treatment & Disposal 108 23% Central Agency Costs (including Self-Insurance) 48 10% Total $ 467
Second Year of the Two-Year Budget The 2009-10 District Budget is approximately $467 million. The District’s Capital Improvement
Program and Treatment and Disposal Program represent 67% ($311M) and 23% ($108M) of
the budget respectively. These two activities represent the largest portion of the budget (90%) and are vetted through a separate and established approval process.
Because FY 2009-10 is the second year of the two-year adopted budget, the full budget does not need to be adopted for FY 2009-10. Instead, staff will report on the CIP, the Collection,
Treatment and Disposal program, and all staffing changes.
The Budget Development Process
For the second year of the two-year budget, staff updated the comprehensive list of
assumptions that were used in the preparation of the two-year budget. These assumptions were applied in developing the adopted budget for FY 2009-10 relating to costs, revenue, rates,
inflation etc. The updated assumptions were subsequently recommended by the Administration
Committee and approved by the Board.
With these guidelines in mind, Sanitation District Finance staff reviewed all major District
resources and expenditures. Staff and the General Manager are in the process of meeting with each department to review, discuss, and prioritize each department’s major activities.
These activities were also reviewed to ensure alignment with the Sanitation District’s goals. A formal process for reviewing these goals will be established as a part of the development of the
District’s Strategic Plan and will be updated annually.
Page 3
Revenues and Expenditures
Revenues
The Sanitation District obtains it revenues from three main sources:
FY 2009-10 % of (in millions) Total
Revenues: Fees & Charges $ 244 50% General Income 120 25%
Debt Proceeds 120 25% Total $ 484
A) Fees – $244 Million (50%) 1) General User Fees $211 million
User fees are ongoing fees for service paid by customers connected to the sewer system. A property owner, or user, does not pay user fees until connected to the sewer
system and receiving services. Once connected, a user is responsible for his share of
the system’s costs, both fixed and variable, in proportion to his demand on the system. These fees are for both Single-Family Residences (SFR) and Multiple-Family
Residences (MFR).
2) Permit User Fees $10 million
Permit fees are paid by large industrial and commercial property owners connected to the sewer system. These fees are for the owner’s share of the system’s costs, both fixed and variable, in proportion to his demand on the system.
Since the inception of the Permit User Fee program in 1970, users of the District’s system that discharge high volume or high strength wastewater have been required to
obtain a discharge permit and pay extra fees for the costs of service. The fees are initially calculated on the basis of actual flow, Biochemical-Oxygen Demand (BOD), and Suspended Solids (SS) discharged to the sewer and are subsequently reduced by the
actual property taxes they have paid to the Sanitation District. This practice is intended to ensure that these users pay their actual cost of service through a combination of user
fees and property taxes.
3) Capital Facilities Capacity Charge (CFCC) $23 million
The Capital Facilities Capacity Charge is charged to newly connected customers and to
customers with facility expansions which indicate a potential for increased flows. It is intended to pay for costs of future plant growth that is necessitated by the additional
capacity needed as customers connect or increase their flow capacity. The recent independent study of the Sanitation District’s rate structure indicates that
these rates should be adjusted upward. Residential CFCC will increase at a greater that
sewer service fees because the CFCC have remained flat for several years and must also be adjusted to reflect the increased Capital Improvement Program (CIP).
Page 4
B) General Income – $120 million (25%)
1) Property Taxes $68 million The County is permitted by State law (Proposition 13) to levy taxes at 1 percent of full
market value (at time of purchase) and can increase the assessed value no more than
two percent per year. The District receives a share of the basic levy proportionate to what was received in the 1976 to 1978 period less $3.5 million; the amount that
represents the State’s permanent annual diversion from special districts to school
districts that began in 1992-93. The District’s share of the one percent ad valorem property tax is dedicated for the payment of COP debt service. The apportionment of
the ad valorem tax is pursuant to the Revenue Program of the Environmental Protection Agency and the State Water Resources Control board and in accordance with COP documents and Board policy.
2) Interest $19 million Interest earnings are generated from the investment of accumulated reserves consisting
of a cash flow/contingency, a capital improvement, a renewal/replacement, and a self-insurance reserve.
3) Other $33 million The Other General Income category is comprised of a variety of smaller dollar items.
Charges to Irvine Ranch Water District for Revenue Area 14’s share of the treatment
plant’s operating costs, capital costs, and equity are approximately $17M in FY 2009-10. Charges for collection, treatment, and disposal to the Santa Ana Watershed Protection
Authority (SAWPA) are approximately $7 million.
C) Debt – $120 million (25%)
1) Certificates of Participation (COP) Certificates of Participation (COPs) are the Sanitation District’s primary mechanism for
financing capital projects. COPs are repayment obligations based on a lease or installment sale agreement. COPs are not viewed as “debt” by the State of California, but rather a share in an installment arrangement where the District serves as the
purchaser. Expenditures The Sanitation District spends it funds on three activities:
FY 2009-10 % of
(in millions) Total
Expenditures: CIP, including Debt $ 311 67%
Treatment and Disposal Costs 108 23%
Central Agency Costs (including self-insurance) 48
A) Capital Improvement Program (CIP) – $311 million (67%)
10% Total $ 467
The District’s CIP can be divided into five distinct areas:
1) Secondary Treatment Facilities
2) Ground Water Replenishment 3) Treatment Plant Rehabilitation and Upgrades
4) Collections
5) Debt
Page 5
Related to the CIP are the Sanitation District’s debt service payments. Primarily, debt is issued
to support the capital program because the program is too large to be supported by a “pay-as-you-go” basis. Additionally, if the Sanitation District were able to fund these projects on a “pay-
as-you-go” basis, there would be an equity issue to be addressed, as current rate payers would
fund all of the costs of projects for which future rate payers would receive a portion of the benefits.
As previously mentioned, the Sanitation District issues debt in the form of Certificates of Participation (COPs). COPs are a form of lease revenue bond that permits the investor to
participate in a stream of lease payments, installment payments or loan payments relating to the acquisition or construction of specific equipment, land, or facilities.
B) Treatment and Disposal Costs – $108 million (23%) The Sanitation District allocates $108 million and 241 positions annually to perform the
operations at its two treatment plants and other related treatment activities. Activities include wastewater treatment processes, biosolids disposal, disinfection, and odor control.
Expenditures for the purchase of chemicals represent the largest non-salary related
component of the budget.
C) Other Central Costs – $48 million (10%)
The Sanitation District allocates $48 million or 10% of its resources to support activities not
directly charged to the CIP or Treatment and Disposal (Regional Assets, Technical Services,
and Administration).
Most central costs are for non-labor expenditures, such as property and general liability insurance, training, materials and supplies, and service agreements.
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