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Members

Eugene K. Canzano, Chairperson

John R. Mumma, Vice-Chairperson

Cliff Cannon, First Provisional Chair

Tom Moutes, Second Provisional Chair

Sangeeta Bhatia, Third Provisional Chair

Michael Amerian

William Raggio

Robert Schoonover

Margaret M. Whelan

Date: January 8, 2013 To: Board of Deferred Compensation

Administration From: Staff Subject: Staff Report – Completed & Pending Projects &

Activity Report Recommendation: That the Board of Deferred Compensation Administration receive and file the following information.

Activity Reports: Counter Activity Employee Benefits Division Staff has compiled the following results of Counter Activity flow for the month of December 2012. During the month of December, 226 participants visited the Employee Benefits Division to discuss their Deferred Compensation accounts with the Great-West representatives and/or staff. Following are counter activity results from July 2009 through December 2012:

0

50

100

150

200

250

300

350

400Counter Activity

Dec 2012 226 Participants

DEFERRED COMPENSATION PLAN

BOARD REPORT 13-09

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Accrued Leave Activity Staff has compiled the following results of Accrued Leave enrollment for the month of December 2012. During the month of December, 4 participants elected to enroll in Accrued Leave and $94,820 was contributed into the Plan from their Accrued Leave payouts. Following are accrued leave activity results from January 2009 to December 2012:

0

10

20

30

40

50

60Participants with Accrued Leave

Dec 2012 4 Participants

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Accrued Leave Deferral Amounts

Dec 2012 $94,820

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Hardship Activity Staff has compiled the following results of hardship processing with Great-West for the month of December 2012. During the month of December, 42 hardship cases were submitted to Great-West. There were 35 cases approved, 5 cases pending further documentation, and 2 cases that were denied. The dollar amount for hardships withdrawn from the plan in December 2012 was approximately $233,125.

Following are hardship activity results from January 2009 to December 2012:

Approved 35

Request Add. Info

5

Denied 2

Hardships Processsed December 2012

Prevention of Eviction/ Foreclosure

33

Illness/ Uninsured

Medical Expenses

5

No Supporting

Docs 2

Accident/ Uninsured Casualty

Loss 2

Hardship Reasons December 2012

0

10

20

30

40

50

60

70

80

Hardship Activity

Dec 2012 42 Hardships

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Loan Activity For Active Employees Staff has compiled the following results of new loans acquired by active employees for the month of December 2012. During the month of December, 501 active employees elected to obtain a new loan and $5,153,635 was withdrawn from the Plan for their loan payouts.

For Retirees or Terminated Employees In October 2012, the Plan introduced the availability of loans for participants who are retired or otherwise separated from City service. Participants electing this option may pay back the amount borrowed from their account in monthly installments, either by check or by automated payment from their bank account. Additionally, employees who have active loans may, upon retirement or separation of service, request conversion to a retiree loan in order to continue payments rather than requesting a loan offset. In December 2012, staff processed 24 new loan requests and 2 requests for loan conversion. To date, staff has processed a total of 62 requests for retiree loans and 8 requests for conversion.

250

300

350

400

450

500

550

600Active Loan Activity

Dec 2012 501 Loans

38

6

24 new loan

requests

2 loans converted

0

10

20

30

40

50

60

70

New LoanRequests

Loans Converted

Retiree Loan Count since Oct. 2012

Requested inDec. 2012

On-going count

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Deferral Tracking Staff has compiled the following results of bi-weekly deferral cash flows for the month of December 2012 for the City of Los Angeles and Department of Water and Power (DWP). During the month of December, the City and DWP deferred $11,039,227 into the Deferred Compensation Plan. This compares to $11,071,528 in December 2011, which constitutes a 0.3% decrease, year-over-year.

$5,000,000

$5,500,000

$6,000,000

$6,500,000

$7,000,000

$7,500,000

$8,000,000

Bi-Weekly Deferral Cash Flows

$11,039,227 deferred in

Dec 2012

$5,000,000

$5,500,000

$6,000,000

$6,500,000

$7,000,000

$7,500,000

$8,000,000

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Bi-Weekly Deferral Cash Flows YEAR-OVER-YEAR, BY PAY PERIOD

2010

2011

2012

Pay Period

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Roth Accounts The Roth deferral option was made available to participants starting July 2011, with actual deferrals being made by August 2011. For the month of December 2012, there were 37 new Roth accounts established. There are currently a total of 1,135 Roth accounts. This constitutes a 4% participation rate of the 28,529 employees contributing to the plan1. The chart below illustrates the number of new Roth deferral accounts since August 2011.

Other Updates Roth In-Plan Conversions – Legislation passed by Congress and signed into law by President Obama on January 2, 2013, expands the opportunity for Section 457 plan participants to convert pre-tax dollars into after-tax dollars. Prior to this legislation, this conversion feature was only available to participants upon separation from service. Now it will be available to active employee participants for plan sponsors adopting the feature into their plans. To be eligible for this feature, the participant must have an after-tax account in the Plan. Participants are taxed at the time of conversion. As an example, assume a participant has $100,000 pre-tax dollars in her account, and $1,000 after-tax. The participant has been working for 20 years and plans to work ten more. She decides to gradually convert her $100,000 pre-tax dollars into after-tax dollars in her remaining ten years with the City at a rate of approximately $10,000 per year.

1 There are 28,529 employees contributing to the Plan as of 9/30/2012 (Great-West Quarterly Report).

311

138

93

80 62

85

103

102 78

56 52

61 62

57 57 62

37

200

300

400

500

600

700

800

900

1000

1100

1200

Roth Accounts

New Accounts

Existing Accounts

Dec 2012 * 1,135 Total Roth * 37 New Roth

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Each $10,000 conversion amount is taxable for that year. $10,000 converted in 2013 adds $10,000 of taxable income for tax year 2013. In this example, if the participant maintains her conversion schedule, by the time she retires she'd have all after-tax dollars in her account and would not owe tax on any distributions once she begins withdrawing. Staff is presently working with Great-West to identify what recordkeeping issues need to be addressed to implement this feature for the City’s Plan. Among those is the question of whether participants have the option of paying the tax liability from their account balances or must pay for them separately. In addition, a Plan Document amendment would need to be approved by the Board in order to offer this benefit in the City’s Plan.

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PROJECT UPDATE (reflects project activity for period 12/01/12 through 12/31/12)

DCP

Legend:

G = Governance

C = Communications

P = Procurements/Contracts

A = Administration

COMPLETED PROJECTS: DECEMBER 2012

# STATUS PROJECT DUE DATE COMPLETED NOTES

1 Completed G Minutes 11-20-12 Meeting 12/31/12 12/31/12 N/A

2 Completed G Board Report - Retirement Calculator

12/31/12 12/31/12 N/A

3 Completed G Board Report - CA-DCPN Meeting February 2013

12/31/12 12/31/12 N/A

4 Completed G Board Report - Staff Report for December

12/31/12 12/31/12 N/A

5 Completed C 2013 Annual Limits - Flyer and Web

12/31/12 12/31/12 N/A

6 Completed C Meet Your Rep Online Calendar 01/31/13 12/31/12 N/A

PENDING PROJECTS

# STATUS PROJECT DUE DATE COMPLETED NOTES

1 PENDING G Minutes - 12/18/12 Meeting 01/31/13 Pending

2 PENDING G Board Report - RFP General Contracting Requirements

01/31/13 Pending

3 PENDING G Board Report - Strategic Plan Finalization and Update

01/31/13 Pending

4 PENDING G Board Report - SDBO Pre-Tax & After-Tax Account Separation

01/31/13 Pending

5 PENDING G Board Report - Budget for Plan Year 2013

01/31/13 Pending

6 PENDING G Board Report - Quarterly Budget Review for 09/30/12

01/31/13 Pending

7 PENDING G Board Report - Quarterly Communications Report

01/31/13 Pending

8 PENDING G Board Report - Board Member Attendance Review

01/31/13 Pending

9 PENDING G Board Report - Staff Report 01/31/13 Pending

10 PENDING C 4Q 2012 Newsletter 01/31/13 Pending

11 PENDING C DCP Bi-Monthly Newsletter 01/31/13 Pending

12 PENDING C DCP Participant Photos/Stats for Newsletter

01/31/13 Pending

13 Minutes - 1/15/13 Meeting 02/28/13

14 PENDING G Board Report - Staff Report 02/28/13 N/A

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15 PENDING G Board Report - Plan Document Revisions (Loans)

02/28/13 Pending

16 PENDING G Board Report - Historical Contribution History

02/28/13 Pending

17 PENDING G Board Report - Contractor Evaluation Policy

02/28/13 Pending

18 PENDING G Board Report - Covered Calls and Protective Puts w/in SDBO

02/28/13 Pending

19 PENDING G Board Report - DROP Mailing 02/28/13 Draft materials developed and now being revised

20 PENDING C Draft Citywide Memo re Marketing by Non-Contracted Financial & Benefit Services Providers

02/28/13 Pending

21 PENDING A Retirement Calculator - Develop Prototype w/Great-West

02/28/13 Pending

22 PENDING A Online Distribution Functionality 02/28/13 Great-West reviewing functionality

23 PENDING P Finalize Consulting Contract w/Mercer Consulting

02/28/13 Under Development

24 PENDING P Great-West Contract Amendment Extension PSP Services 2012-2016

02/28/13 Pending

25 PENDING C Board Report - Quarterly Communications Report

03/31/13 Pending

26 PENDING G Review of CA Governmental Plan - Demographic Files

03/31/13 Pending

27 PENDING C Board Report - EZ Enrollment Form

03/31/13 Pending

28 PENDING G Investments Committee Meeting: Investment Policy Statement - Termination

03/31/13 Pending

29 PENDING G Annual Report - DCP 03/31/13

30 PENDING G Annual Reports 2011 and 2012 - PSP

03/31/13 Pending

31 PENDING C Board Report - Social Media Options

03/31/13 Pending

32 PENDING C Online Distribution Communications Document

03/31/13 Pending

33 PENDING C Quarterly Communications/Admin Meeting

03/31/13 Pending

34 PENDING G Board Report - review of consistency of access to separating City employees

03/31/13 Pending

35 PENDING C Create Catch-Up Flyer Incorporating Roth

03/31/13 Pending

36 PENDING C Loan Highlights Flier Revisions 03/31/13 Pending

37 PENDING G Board Report - Contribution History & Rollovers

03/31/13 Pending

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38 PENDING G Board Report - SAS Form from Great-West

04/30/13 Pending

39 PENDING A Domestic Partners Research and Discussion with City Attorney and California Peers

04/30/13 Pending

40 PENDING C Revise Distribution Form 04/30/13 Pending

41 PENDING C Revise Enrollment Guide 04/30/13 Pending

42 G Board Report - Retirement/Pension System Retired Loan Payments

04/30/13 Pending

43 PENDING G Review and report back on City of New York financial advice program

05/31/13 Pending

44 PENDING G Board Report - Merril Lynch - Communication to Outside Vendors

05/31/13 Pending

45 PENDING G Beneficiary Addresses 05/31/13 Pending

46 PENDING G Review and report back on PIMCO hedge fund strategy

05/31/13 Pending

47 PENDING C Communications Plan: List of alternative DC publications and outlets (LACERS, Pensions, Union pubs, etc.)

05/31/13 Pending

48 PENDING G Board Report - Proxy Share Voting 05/31/13 Pending

49 PENDING C DROP Brochure Ad 05/31/13 Pending

50 PENDING C DROP Brochure 05/31/13 Pending

51 PENDING C Notification of Participants - Catch-Up Eligibility

05/31/13 Pending

52 PENDING C Pre-Audit Testing - Phase II 05/31/13 Pending

53 PENDING C Revise Pension Savings Plan Highlights

05/31/13 Pending

54 PENDING G Retirement Plan Summit 05/31/13 Pending

55 PENDING G Revisit Plan Audit 05/31/13 Pending

56 PENDING A PSP Account Consolidation 05/31/13 Pending

57 PENDING G Research adding other Plan type in order to increase savings opportunities (from 8/21/12 BDCA meeting)

05/31/13 Pending

58 PENDING G Statistical Project: Refined Count of Non-Contributing Participants

05/31/13 Pending

59 PENDING G Board Report - Transition Manager Procurement

05/31/13 Pending

60 PENDING G Deemed IRA Implementation 06/30/13 Pending

61 PENDING C Eddy 2013 Awards 06/30/13 Pending

62 PENDING C Online Enrollment Communications Document

06/30/13 Pending

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63 PENDING A Online Enrollment Functionality 06/30/13 Staff tested web functionality, errors identified; Great-West reviewing

64 PENDING C Website Conversion 06/30/13 Pending

Staffing Summary – Following is a summary of staff positions supporting the Deferred Compensation Plan:

Position Authority Incumbent Class

Est. Percent Reimbursed

by DCP Staff Member

Personnel

Chief Personnel Analyst Chief Personnel Analyst 20% Alejandrina Basquez

Senior Personnel Analyst II Senior Personnel Analyst II 60% Steven Montagna

Senior Personnel Analyst I n/a 100% Vacant

Management Analyst II Management Analyst II 90% Natasha Gameroz

Management Analyst II Personnel Analyst II 90% Esther Chang

Benefits Specialist (prior incumbent left under ERIP)

Clerk Typist 90% Claudia Guevara

City Attorney

Assistant City Attorney Assistant City Attorney 25% Curt Kidder

Legal Assistant Legal Assistant 40% Vicky Williams

Committee Membership

Plan Governance & Administrative Issues Committee

Eugene Canzano, Chair Cliff Cannon John Mumma Margaret Whelan

Investments Committee

John Mumma, Chair Sangeeta Bhatia Tom Moutes

Submitted by: __________________________________

Esther Chang Reviewed by: _______________________________ Steven Montagna Approved by: _______________________________ Alex Basquez

GRIST Report: Congress expands 401(k) in-plan Roth conversion opportunity By Valerie Grace and Paul Strella of Mercer’s WRG

Jan. 2, 2013

Fiscal cliff legislation (HR 8) headed for President Obama’s signature expands the in-plan

Roth conversion option to amounts not yet eligible for distribution. The new opportunity

applies to 401(k), 403(b) and governmental 457(b) plans, effective immediately. So, for

example, a plan may now permit active employees of any age to convert pretax 401(k)

accounts to Roth accounts. The revenue-raising provision in Section 1002 of HR 8 helps pay

for other aspects of the fiscal cliff deal.

What is an in-plan Roth conversion? In plans with a conversion feature, individuals may

elect to transfer funds from non-Roth accounts to a Roth account in the same plan.

Individuals are taxed at the time of conversion, but later distributions from the Roth account

are generally tax-free after age 59-1/2 if the account has been in place at least five years.

As a result, individuals escape tax on investment gains accruing after the conversion date

(GRIST #20110138, July 11, 2011).

Who is eligible? To qualify, individuals must have non-Roth accounts under an eligible

plan (discussed below) and satisfy the plan’s eligibility conditions for in-plan Roth

conversions. The law doesn’t impose any income limits. Until now, individuals couldn’t elect

an in-plan conversion unless they were already entitled to an eligible rollover distribution

from a non-Roth account. But under HR 8, individuals also may elect an in-plan conversion

for “any amount not otherwise distributable under the plan” (emphasis added).

Eligible individuals may include participants, surviving spouses, and current or former

spouses who are alternate payees under a qualified domestic relations order. In previous

years, nonspouse beneficiaries couldn’t elect in-plan conversions; it isn’t clear whether this

restriction will remain in place.

What plans may offer this option? The in-plan conversion option is available only to

401(k), 403(b) and governmental 457(b) plans that accept regular, ongoing Roth

contributions. However, a plan needn’t offer in-plan conversions merely because it accepts

regular Roth contributions. Thus, plan sponsors offering a regular Roth feature can decide

whether to offer an in-plan conversion option. If they do so, sponsors presumably retain

leeway to decide which accounts to make eligible for conversion, subject to any applicable

amendment deadlines, nondiscrimination requirements and recordkeeping constraints.