State of Connecticut Office of the State Comptroller
Deferred Compensation (Section 457) Program
Request for Proposals (RFP) - January 3, 1997
I. STATEMENT OF OBJECTIVES
The State of Connecticut, acting through the Office of the State Comptroller (OSC), is
soliciting proposed from firms qualified to serve as a third party administrator (TPA) for
its Section 457 Deferred Compensation Program (457 Program) during the period from July 1,
1997 to June 30, 2001.
OSC anticipates that during the course of the four year agreement it seeks to negotiate
the TPA selected will face two over-arching operational tasks, as follows:
- Phase 1. Transitioning the Existing 457 Program.
- The TPA will be responsible for transitioning the four authorized institutions of the
existing 457 Program into the new operational environment and, working with OSC, narrowing
the choice of investment alternatives to a reasonable and meaningful number.
- Phase 2. Implementation of Mutual Funds in the 457 Program.
- During the 1997 session of the Connecticut General Assembly, OSC intends to pursue
legislation which will revise the 457 Program so as to allow for direct participant
investment in mutual funds; as currently structured, the 457 Program limits investment
alternatives to insurance-style "annuity wraps" and life insurance products.
Assuming passage of this legislative initiative and its ratification by the Governor, the
TPA will be responsible for implementing the establishment mutual funds options in the 457
Program under OSC's direction and guidance.
In selecting a TPA and performing the two operational tasks discussed herein, it is
OSC's firm objective for there to be no budgetary impact on the State of Connecticut.
II. BACKGROUND INFORMATION
The 457 Program was established in 1974 in accordance with provisions of Public Act
73-578 (codified as Connecticut General Statutes, Section 5-264a). Section 5-264a has been
revised several times since 1973, but the benefit offered to state employees has not
changed substantially; a copy of Section 5-264a is attached hereto as Exhibit
"A". Under Internal Revenue Code, Section 457, state employees can enter
into agreements with their employer to defer payment of a defined portion of current
compensation until retirement or separation from service. The advantages offered to state
employees for participating in the 457 Program include the ability to defer paying income
tax on the deferred amount until it is paid or made available to them and, at the same
time, serve as a retirement income for their future.
As provided by the Connecticut General Statutes, the administration of the 457 Program
shall be under the direction of OSC, which is empowered to enter into contracts with state
employees to defer earned income and with other entities to provide the necessary
investment vehicles. In the past, OSC has only contracted with insurance companies to act
as authorized institutions for the 457 Program; currently, there are four such authorized
- Aetna Life Insurance and Annuity Company
- ITT Hartford Insurance Company
- Travelers Life Insurance Company
- Phoenix Home Life Mutual Insurance Company
The authorized institutions are responsible for explaining the advantages, as well as
any disadvantages, to state employees who may be considering participating in the 457
Program. The insurance companies maintain the records of all participants, provide
quarterly reporting to each participant, and are the investors of the funds in the 457
Program. Each of the authorized institutions offers a selection of investment
possibilities to the participants; however, these offerings are, by statute, limited to
insurance-style "annuity wraps" and life insurance products. Although OSC is
responsible for "due care" in selecting the providers approving the investment
vehicles, the participants assume the risk of any loss from decreases in the values of the
457 Program's assets. The State is liable to the participants for only the pro rata shares
of the market value of 457 Program assets.
As allowed under the Connecticut General Statutes, OSC is under contract with a private
corporation to assist with the administration and servicing of the 457 Program; this
entity, known as the Plan Consultant, is: Financial & Investment Services, Inc. of
Cromwell, Connecticut. The Plan Consultant is compensated under agreements it negotiates
with the four authorized institutions of the 457 Program. OSC anticipates that the Plan
Consultant's responsibilities will be assumed by the TPA and, for this reason, the
Financial & Investment Services will be terminated as a function of the RFP.
Set forth in Exhibit "B" are the asset values and number of 457
Program participants for the past four fiscal years. Exhibit "C"
allocates these asset values and participant members among the four authorized
institutions for the past three fiscal years.
As apparent from the growth in the number of participants reflected in Exhibits "B"
and "C", the 457 Program has been popular with state employees. However,
even with these increases in participation and asset value, the administration of the 457
Program has remained shared between OSC and the four authorized institutions and
relatively uncomplicated. OSC maintains a full-time staff of two who process the necessary
paperwork for contributions, distributions, and any changes ordered by participants; with
the advent of the TPA, OSC intends to assign both employees other duties within its
Retirement and Benefit Services Division. Additionally, a portion of the activities of two
OSC Managers is devoted to the 457 Program and typically involve such matters as hardship
withdrawals, review and approval of investment vehicles, compliance issues, and problem
resolution of a general nature. In recent years, the Plan Consultant has performed
specialized functions on an as needed basis.
III. TPA RESPONSIBILITIES
Set forth in Exhibit "D" to this RFP are the responsibilities OSC
intends to delegate to the TPA for the 457 Program; Exhibit "D" also
lists responsibilities OSC intends to delegate to Investment Advisors (including Special
Advisors) along with those it plans to retain.
In the text which follows, certain of the responsibilities OSC intends to delegate to
its TPA are highlighted and discussed in detail:
- A. Meetings with OSC
- The TPA will be required to meet with OSC representatives from time to time to report on
the status of the 457 Program, provide performance information as requested by OSC, and
prepare such written reports as OSC may reasonably require.
- B. Meetings with Employees
- The TPA will submit a proposed education program to OSC for prior approval. The TPA will
conduct regular education and enrollment meetings for employees (meaning "persons
eligible for participation in the 457 Program") around Connecticut in accordance with
the approved educational program, and will participate in meetings scheduled by state
departments and agencies as requested by OSC.
- C. Personnel
- The TPA will use licensed agents for enrolling participants (meaning "any employee
who has elected to participate in the 457 Program"), and will be responsible for
maintaining all licenses and registrations required in order for the TPA's personnel to
fulfill the duties required by this RFP.
- D. Telephone Services
- The TPA will maintain a toll-free telephone number with sufficient incoming lines for
the volume of inquiries from participants, as well as a service for hearing impaired
participants. The TPA will provide personnel to answer inquiries over the telephone and
shall provide an interactive voice response toll-free telephone system to enable
participants to obtain current, personalized information concerning their accounts, as
well as general information concerning the 457 Program. The interactive telephone system
will ensure access security of participant accounts. Information to be available through
the interactive telephone system shall include at the minimum:
- the participant's account balance for each investment vehicle;
- the participant's current payroll deduction amount and allocation election; and
- the current share value for each investment vehicle.
- Such system will be available at least twelve (12) hours per day on all business days.
Further, participants must be able to provide telephone authorization for transfers of
assets on a daily basis. The TPA will record on tape and retain for eighteen (18) months
all transfer instructions given by telephone. The TPA will advise all participants of the
availability of its toll-free numbers.
- E. Communication Materials and Forms
- Communication materials and forms respecting the 457 Program will be designed, produced
and distributed at the TPA's expense and will be approved in advance by OSC. Communication
materials to be provided by the TPA will include but are not limited to:
- a brochure explaining the 457 Program and investment alternatives for participants;
- materials relating to asset allocation and savings goals to assist participants in
selecting an appropriate investment mix;
- an explanation of how to read the statement of account;
- an explanation of the distribution options permitted under the 457 Program and the
applicable tax treatments; and
- other materials necessary to apprise employees and participants of the provisions of the
- The TPA will also prepare all forms necessary to administer the 457 Program.
- F. Policies and Procedures
- The TPA will prepare and maintain a current manual of policies and procedures governing
all aspects of the 457 Program including a copy of all communication materials and all
forms, and shall provide OSC with copies of such manual.
- G. Enrollment
- The TPA will enroll eligible employees in the 457 Program and process changes in
participation using forms prepared by the TPA and approved by OSC. Enrollment
responsibilities will include but not be limited to:
- educating employees regarding all aspects of the 457 Program and the effect of their
participation on their current take-home pay and their future retirement income;
- providing each participant with a copy of all necessary materials, including applicable
prospectuses and 457 Program documents;
- ensuring that all forms and authorizations submitted are complete and on file with the
- monitoring participants' elections and contributions to comply with any Internal Revenue
Code contribution limitations.
- The TPA will provide its personnel with access to all equipment reasonably necessary to
properly enroll and educate employees, including but not limited to laptop computers and
- H. Contributions
- The TPA will:
- process employee contributions consistent with the terms of the 457 Program and the OSC
- reconcile contribution amounts with OSC; and
- direct immediate investment of employee contributions in accordance with instructions
from each participant.
- I. Administration
- The TPA will perform all administrative and recordkeeping functions necessary to ensure
accurate accounting of the assets in the participants' accounts and to provide for the
efficient and prudent management of the 457 Program. Among other things, these functions
shall include reconciling participant accounts to investment advisor accounts.
- J. Records
- The TPA will establish and maintain records for the 457 Program containing such
information to enable the TPA to generate the reports to employer specified in Paragraph N
hereof and the participant reports specified in Paragraph O hereof.
- The TPA's 457 Program records and participant records will be maintained in accordance
with generally accepted accounting principles, the most recent Governmental Accounting
Standards Board Statements, the 457 Program documents, and the Internal Revenue Code and
the Regulations promulgated thereunder, all as in effect from time to time. Such records
shall be maintained in a format and on a medium mutually agreed upon by OSC and the TPA.
- The TPA will maintain contingency plans for system backup in the event of disaster or
- No records of participation in the 457 Program that are created or maintained by the TPA
may be destroyed by the TPA without the prior written approval of OSC.
- The TPA agrees that all records regarding the 457 Program shall be the property of OSC.
Upon expiration of the engagement pursuant to this RFP or in the event of its termination
for any reason, the TPA will provide the OSC records kept by the TPA pursuant to this
engagement (including without limitation, the tapes retained pursuant to Paragraph D
hereof). Such records shall be furnished to OSC within five (5) calendar days after OSC's
written request therefor, pursuant to reasonable written instructions given by OSC. The
TPA will also provide the OSC with a full written accounting of the status of
participants' accounts under the 457 Program.
- K. Plan Benefit Payments
- The TPA will disburse benefits from assets under the 457 Program to participants in
accordance with written instructions given by the participant and in compliance with the
457 Program and applicable requirements of the Internal Revenue Code, including
appropriate withholding taxes and reporting of distributions.
- Distributions will be effected on a monthly basis or more frequently as shall be
mutually agreed upon by the TPA and OSC. The TPA will offer direct deposit services to
participants electing periodic payments.
- In addition, the TPA shall develop a policy for distributions from small accounts in
accordance with the provisions of the Small Business Job Protection Act of 1996.
- L. Bank Accounts
- To facilitate benefit distributions, withdrawals and correction of errors, the TPA will
maintain one or more custodial bank accounts with financial institutions, which accounts
shall comply with all applicable requirements imposed on 457 plans. The TPA will provide
copies of bank statements for the accounts to OSC upon request.
- M. Transfer of Assets
- Funds must be transferred without charge and may be transferred from a provider only for
the following reasons:
- to move participant's monies to another provider;
- to distribute funds to participants or their beneficiaries;
- to correct errors; or
- to compensate the TPA for administrative fees in accordance with a method and amount
agreed upon in writing in advance by OSC and the TPA.
- N. Reports to Employer
- The TPA will provide the following reports to OSC and such additional reports as are
agreed to by the TPA and OSC from time to time. All reports shall be submitted in a format
and medium approved by OSC.
- Financial information required for reporting of deferred compensation plans as outlined
in the most recent applicable Governmental Accounting Standards Board Statement.
- Quarterly and fiscal year to date financial statements detailing beginning balance;
receipts (specifying new deferrals, transfers and investment earnings); and disbursements
(specifying benefit withdrawals, death benefit withdrawals, hardship withdrawals,
transfers out, market value adjustments, investment losses and all expenses charged).
- Quarterly 457 Program summary financial reports summarizing quarterly activity for the
entire 457 Program in aggregate total form, year to date activity, and inception to date
activity for the total of all investments, included in the 457 Program covering the
elements in Paragraph N 2 above.
- Quarterly participation status reports for the 457 Program and for the total 457 Program
- a. the number of participants actively deferring, number of participants
- receiving periodic distributions, number of inactive participants, and
- total participant accounts maintained by the TPA; and
- b. number of transfers within the 457 Program.
Quarterly distribution status reports
showing the number of participants and beneficiaries initiating distributions during the
quarter, and by reason (termination, retirement, hardship, death, age 70«).
Participants' quarterly statements in alphabetical order.
Quarterly reconciliation reports of the TPA's 457 Program records to investment
advisors' records providing in summary form, a statement as to whether there were any
discrepancies, and if so, identifying the discrepancies and the actions taken to resolve
Monthly performance reports for each investment vehicle, its benchmark for the same
period, peer group performance, and the difference between the vehicle's performance and
the benchmark performance
Annual reports of Internal Revenue Services (IRS) compliance activity including:
- number of participants and beneficiaries receiving distributions during the calendar
year; number of W-2 forms issued; number of W-2P forms issued; number of 1099 forms
issued; total taxes withheld and remitted to the IRS; and, if requested by OSC, copies of
- reports to OSC and providers detailing participants potentially exceeding annual
contribution limits and corrective action required prior to calendar year end;
- reports detailing name, last known address, last employing agency, social security
number, and account balance of inactive participants over age 70 who are not currently
receiving distributions complying with Internal Revenue Code, Section 401 (a) (9); and
- other reports as may be necessary to show compliance activity in regard to IRS
requirements enacted after the effective date of the engagement under this RFP.
- O. Participant Reports
- The TPA will provide to participants quarterly statements of their accounts in a format
mutually agreed to by the TPA and OSC. Statements shall show at a minimum:
- (a) 457 Program name;
- (b) the participant's name, address, social security number, date of birth,
- (c) the period covered by the statement;
- (d) reporting of beginning balance and ending balance;
- (e) withdrawals;
- (f) market appreciation/depreciation;
- (g) contributions calendar year to date; and
- (h) contributions from participant's enrollment to date.
- Where applicable, reporting will include the number of shares associated with each
transaction, the beginning and ending balance, and the share value. Statements will be
mailed to the participants within twenty-five (25) calendar days of the end of the
- In addition, the TPA shall provide participants with prompt written confirmation of all
transfers, and advance notice of potential noncompliance with any federal requirements.
The TPA will make reasonable efforts to maintain current addresses for all participants.
- P. Compliance with Internal Revenue Code
- The TPA recognizes that the 457 Program is intended to qualify under Section 457 of the
Internal Revenue Code and agrees to administer the Program in a manner consistent with the
applicable requirements of the such Code. The TPA shall be responsible for ongoing
- (a) the structure of the 457 Program;
- (b) contributions by each participant; and
- (c) benefits distributed to each participant.
The TPA will prepare documents and
forms necessary to comply with such requirements and, if necessary, to obtain approval
from appropriate federal agencies as may be required to ensure full compliance with the
laws and regulations governing the 457 Program.
- Q. Audit
- The TPA will annually present to OSC the results of a financial audit of the 457
Program, conducted by an independent certified public accountant acceptable to OSC. All
fees for the audit shall be borne by the TPA. The audit shall include a management letter,
financial report, observations, and recommendations.
- IV. MINIMUM QUALIFICATIONS
- In order to be considered, each firm responding to this RFP must, at a minimum, possess
the following qualifications:
- Organizational Experience
The firm must have been in operation for at least
five continuous years as of December 31, 1996.
- Professional Experience
The key professionals must have at least a three year
history while at the firm of providing administrative services for Section 457, Section
401(k), or Section 403(b) (collectively, the "Subject Product") plans as of
December 31, 1996.
- Plans Under Administrators
The firm must have a minimum of five (5) plans in
the Subject Product, each with at least 5,000 participants, in operation as of December
31, 1996. Preference may be given to firms with substantial experience in Section 457
If selected, the firm must be willing to include in its contract
with OSC the warranties contained in Exhibit "E" to this RFP.
- V. PROPOSAL SUBMISSION REQUIREMENTS
- Attached hereto as Exhibit "F" is a questionnaire which, upon
completion, will constitute each firm's response to this RFP. At your firm's option, you
may either affix your answers directly to the questionnaire, or generate a document which
restates its inquiries and contains your replies thereto. Regardless of how you decide to
proceed, each firm's submission may not exceed fifty (50) pages, exclusive of exhibits.
- At your firm's option, an executive summary may be included with your proposal.
- Each firm must submit an original plus five (5) copies of its proposal in loose-leaf
STATE OF CONNECTICUT
Retirement and Benefit Services Division
Office of the State Comptroller
55 Elm Street, Third Floor
Hartford, Connecticut 06106
Attention: Steven Weinberger, Division Director
- Firms who have questions regarding this RFP should submit them in writing to Mr.
Weinberger at the address set forth above no later than 4:30 p.m. on Friday, January 17,
1997. Answers to such questions will be transmitted on or before Monday, January 20, 1997.
No phone calls will be accepted relative to this RFP.
- Proposals must be received on or before 4:30 p.m. Friday, January 24, 1997.
- VI. SELECTION PROCESS AND SCHEDULE
Request for Proposals and Response
- January 3, 1997 Release of RFP by OSC
- January 17, 1997 Questions due at OSC
- January 20, 1997 OSC answers questions received
- January 24, 1997 Proposals due at OSC
- Review and Selection Schedule
- January 27 - February 7, 1997 Reading and Scoring or Proposals by Screening Committee
- February 10 - 21, 1997 Semi-Finalist Interviews1
- February 24 - 28, 1997 Finalist Interviews2
- February 28, 1997 TPA Selection3
- March 3 - April 14, 1997 Contract Negotiations
- July 1, 1997 TPA Conversion4
- Semi-Finalist Interviews. Firms selected as semi-finalists will be expected to make a
presentation to a four member Screening Committee, which is being assisted by
representatives from RogersCasey, at OSC offices in Hartford, Connecticut. Each
presentation will be followed by a question and answer period. The number of firms to be
selected for semi-final interviews has yet to be determined; however, the expectation is
that the number will not exceed four.
- Finalist Interviews. Firms selected for a final interview will be expected to make a
presentation, followed by a question and answer period, to the State Comptroller and
certain members of her staff at OSC Offices in Hartford, Connecticut. The number of
finalists to be selected for interviews has yet to be determined; however, the expectation
is that this number will not exceed two.
- Selection of the TPA is expressly conditioned upon a site visit by up to four OSC
representatives, to be conducted at a mutually agreeable date and time. All expenses
incurred by OSC in making the site visit shall be borne exclusively by the TPA and treated
as a cost of responding to this RFP.
- TPA Conversion. It is OSC's expectation that, following the successful conclusion of
contract negotiations, the TPA will engage in a work plan designed to make Phase 1 of this
RRP fully-operational on July 1, 1997.
- VII EVALUATION OF PROPOSALS
- Each proposal will be evaluated by a Screening Committee using the following criteria to
determine which contractor is most capable of implementing OSC's requirements, as follows:
- Contractor's experience with and ability to do the specific work, including experience
in the administration of Section 457 Programs.
- Contractor's understanding of the project's purpose and scope, as evidenced by the
proposed approach and the level of effort.
- Competitiveness of proposed cost.
- Availability and competence of personnel.
- Conformity with specifications contained herein.
- Demonstration of commitment to affirmative action by full compliance with the
regulations of the Commission on Human Rights and Opportunities.
- At the option of the Screening Committee, an oral presentation.
- VIII. RIGHTS RESERVED TO OSC
- OSC reserves the right to award in part, to reject any and all proposals in whole or in
part, to waive technical defects, irregularities and omissions if, in its judgement, the
best interest of the State will be served.
- IX INSTRUCTIONS TO CONTRACTORS
- Conformance - All responses to this RFP must conform to these instructions. Failure to
conform may be considered appropriate cause for rejection of the response.
- Delivery of Responses - RFP responses must be in sealed envelopes upon which a clear
indication has been made of the RFP reference title, as well as the date and time the
proposal is due. The name and address of the vendor must appear on the envelope. FAX
responses are not acceptable.
- Structure of Response - Contractors must structure the responses as outlined in this
- Exclusion of Taxes from Prices - The State of Connecticut is exempt from the payment of
excise, transportation, and sales taxes imposed by the Federal Government and the State.
Such taxes must be excluded from quoted prices.
- Signature and Responsible Persons - The proposal must be signed by an authorized
official. The proposal must also provide name, title, address, and telephone number for
individuals with authority to negotiate and contractually bind the contractor, and for
those who may be contacted for the purpose of clarifying the information provided.
- "Not to Exceed" Quotations - All cost estimates will be considered as
"not to exceed" quotations.
- X. TERMS AND CONDITIONS
- Any contractor responding to this RFP must be willing to adhere to the following
conditions and must so state in its submission:
- Acceptance or Rejection by the State - The state reserves the right to accept or reject
any or all proposals submitted for consideration. All proposals will be kept sealed and
safe until the deadline for submission has passed.
- Conformance with Statutes - Any contract awarded as a result of this RFP must be in full
conformance with statutory requirements of the State of Connecticut.
- Ownership of Proposals - All proposals in response to this RFP are to be the sole
property of the state, and subject to the provisions of Section 1-19 of the Connecticut
General Statutes (Freedom of Information).
- Ownership of Subsequent Products - Any product, whether acceptable or unacceptable,
developed under the contract awarded as a result of this RFP is to be the sole property of
the state unless stated otherwise in the RFP or contract.
- Availability of Work Papers - All work papers and data used in the process of performing
this project must be available for inspection by the State of Connecticut Auditors of
Public Accounts for a period of three (3) years or until audited.
- Timing and Sequence - Timing and sequence of events resulting from this RFP will
ultimately be determined by the state.
- Stability of Proposed Prices - Any price offerings from contractors must be valid for a
period of one hundred eighty (180) days from the due date of contractor proposals.
- Oral Agreements - Any alleged oral agreement or arrangement made by a contractor with
any agency or employee will be superseded by the written agreement.
- Amending or Canceling Requests - The state reserves the right to amend or cancel this
RFP, prior to the due date and time, if it is in the best interests of the state.
- Rejection for Default or Misrepresentation - The state reserves the right to reject the
proposal of any contractor which is in default of any prior contract or for
- State's Clerical Errors in Awards - The state reserves the right to correct inaccurate
awards resulting from its clerical errors.
- Rejection of Qualified Proposals - Proposals are subject to rejection in whole or in
part if they limit or modify any of the terms and conditions and/or specifications of the
- Contractor Presentation of Supporting Evidence - A contractor, if requested, must be
prepared to present evidence of experience, ability, service facilities, and financial
standing necessary to satisfactorily meet the requirements set forth or implied in the
- Changes to Proposal - No additions or changes to the original proposal will be allowed
after submittal. While changes are not permitted, clarification at the request of the
agency may be required at the contractor's expense.
- Collusion - By responding, the contractor implicitly states that the proposal is not
made in connection with any competing contractor submitting a separate response to the
RFP, and is in all respects fair and without collusion or fraud. It is further implied
that the contractor did not participate in the RFP development process, had no knowledge
of the specific contents of the RFP prior to its issuance, and that no employee of the
agency participated directly or indirectly in the contractor's proposal preparation.
- Expenses - Contractors who respond to this RFP, including semi-finalists and finalists,
will not be reimbursed by the State for any costs and expenses incurred in connection with
this process, such as travel expenses relating to an oral presentation and costs incurred
by OSC representatives on any site visits.
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