Employees’ Retirement System of Rhode Island (ERSRI) Request for Proposal for Actuarial Audit Services Issue Date: November 23, 2004 Paul J. Tavares, General Treasurer, and Chairperson, Retirement Board Frank J. Karpinski, Executive Director 40 Fountain Street, Providence, Rhode Island 02903 Employees’ Retirement System of Rhode Island Request for Proposal for Actuarial Services Executive Summary’ (Please Limit Response to One Page) Firm Name: ___________________________________________ Address: ___________________________________________ Telephone: Contact Person: Actuarial Team: ___________________________________________ Number of Public Defined Benefit Clients: __________________________ Average Number of Plan Assets: _________________________________ Why should the Employees’ Retirement System of Rhode Island retain your firm to provide actuarial audit services? Please summarize your firm’s strengths in the space provided. Page 2 of 14 Table of Contents__________________________________Page A. Introduction and Historical Background …………………………………………4 B. Scope of Services to Be Provided ………………………………………….…………5 C. Minimum Qualifications and Proposal Requirements ……………………..6 Transmittal Letter and Minimum Qualifications Understanding Professional Staff and Firm Methodology D. Fees for ...
Employees’ Retirement System of Rhode Island (ERSRI) Request for Proposal for Actuarial Audit Services IssueDate:November23,2004
Paul J. Tavares, General Treasurer, and Chairperson, Retirement Board Frank J. Karpinski , Executive Direct or 40 Fountain Street, Providence, Rhode Island 02903
Employees’ Retirement System of Rhode Island Request for Proposal for Actuarial Services Executive Summary’ (Please Limit Response to One Page) Firm Name: _________________________ __________________ ___________________________________________ Address: ___________________________________________ Telephone: ___________________________________________ Contact Person: ___________________________________________ ___ ________________________________________ Actuarial Team: Number of Public Defined Benefit Clients: __________________________ Average Number of Plan Assets: _________________________________ WhyshouldtheEmployees’RetirementSystemofRhodeIslandretainmyourfir to provide actuarial audit services? Please summarize your firm’s strengths in the space provided.
Minimum Qualifications and Proposal Requirements ……… … ..…6…… Transmittal Letter and Minimum Qualifications Understanding Professional Staff and Firm Methodology
FeesforServices……………………………………………………….….9………………
Table of Contents __Page ________________________________ A. B. C. D. E. F. G. H.
SubmissionofProposals………………………………………………1…1……………
EvaluationCriteria………………………………………………………1…2…………….
ERSRIBidScheduleofEvents…………………………………………13……………
MiscellaneousProvisions………………………………………………1…3……………
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Employees’RetiremeSnytstemofRhodeIsland A. Introduction and Historical Background The Employees’ Retirement System of Rhode Island (ERSRI) and the Municipal Employees’ Retirement System (MERS) are soliciting proposals from qualified firmstoprovideanauditoftheactaluacroinsultantforERSRI.ThisRequestforProposals is issued in accordance R wi e t g h u lation No. 3. Rules Concerning the Selection of Consultan , t a s copy of which has been attached to this document. TheEmployees’RetirementSystemisthemajorpeutibrliecmrentagencyinthestate of Rhode Island with $6 billion in pension assets. In addition to providing retirement, death, and disability benefits to Rhode Island state employees, it also provides benefits to Rhode Island public school teachers iacnidpapnatrst in over 110 municipal plans. The plan has just over 35,000 active employees and approximately 20,000 retirees. The state system began in 1936, with a teacher plan added on in 1949. Themunicipal, or MERS plan, was created in 1951. As stated inits Rhode Island General Laws, the general administration and responsibility for the proper operation of the retirement system is vested in a Retirement Board. One of its specific statutory duties is the selection of an actuary.RhodeIslandGeneralLa§w36-8-10providesthefollowing: “The retirement board shall secure the services of an actuary who shall be the actuarial advisor of the board and who shall make the actuarial computations and valuations required by chapters 8 to 10, inclusive. Additionally,RhodeIslandGeneralLaw’s§-83-612through1r4equireexperienceinvestigations and an annual valuation of the assets and liabilities of the Employees’ Retirement System. ConsistentwithRhodeIslandGeneralLaw§-38-63,theRetirementBoards i charged with the general administration and responsibility for the proper operation of the retirement system and making effective the provisions of chapters 8 10 of title 36. In its continuing efforts to carry out its fiduciary obligationsandmaintnaiacomprehensivesystemofchecksandbalances,theBoardfromtimetotimerequiresitsactuarialadviasuorditb e .d The 1949 Annual Report indicates A.A. Weinberg of Chicago was the consulting actuarytotheEmployees’RetirementSystem.Heretmhaeinaecdtuaryuntil1977 when the Martin E. Segal Company replaced Mr. Weinberg. Segal served until 1991, William M. Mercer Co., Inc., then was hired and served until 1997 when the current actuarial firm Gabriel, Roeder, Smith and Company (Formerly Watson Wyatt Worldwide) was hired. Consistent with Rhode Island General Law §36-8-10, Gabriel, Roeder, Smith and Company was recently rehired to serve as ERSRI’s actuarial advisor.
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B. Scope of Services to be Provided Thescopeoftheauditwillbelimitedtowtohelatrgestfunds,theEmployees’Retirement System and the Municipal Employees’ Retirement System. The purposeofthisauditisatoudittheworkofERSRI’scurrentactuary,Gabriel,Roeder, Smith and Company (GRS). The audit will review the most recent annualvaluationandexperiencestudyforERSReIxptroessanopinionandassure that the results presented are sound and reasonable. The ERSRI Board requests that the bid be on a fixed fee basis. Theauditshouldincludeauditingandcommentingonatshoenareblenessandappropriateness of the valuation methods, assumptions, certifications and conclusions of the consulting actuary GRS. The audit must include the following: 1. Determinationofwhetherthaectuarialmethods,considerationsandanalysesusedbtyheconsultingactuaryGRSinpreparingthemostrecentactuarial valuation are technically sound and conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board This determination will include: a. Anindepthreviewdananalysisofthevaluationresults,includingan evaluation of the data used for reasonableness and consistency as well as a review of mathematical calculations for completeness and accuracy. b. Verificationthatallappropriatebenefitshavebeenvanldueda valued accuratelyV.erification that the data provided by the system is consistent with data used by GRS. c. Evaluation of the actuarial cost method and actuarial asset valuation method in use and whether other methods would be more appropriate for ERSRaIs a whole or for particular funds. d. Verification of the reasonableness of the calculation of the unfunded actuarial accrued liability and the amortization period. e. A full replication of the most recent actuarial valuation for the Employees’ Retirement Symsteand the Municipal Employees’ Retirement System. 2. Determinationofwhetherthaectuarialmethods,considerationsandanalyses used by the consulting actuary GRS in preparing the most recent experience study are technically sound and conform to the a tpepropri Standards of Practice as promulgated by the Actuarial Standards Board. This determination will include: a. A review of the demographic and economic actuarial assumptions for consistency, reasonableness and compatibility.
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b. Afullreplication,reviewofhetdemographicandeconomicactuarial assumptions for consistency, reasonableness and compatibility of the most recent experience study for the Employees’ Retirement System and the Municipal Employees’ Retirement System. 3. Anopinionastowhetherthecotnisnuglactuary’sreportsconformtoappropriate Standards of Practice as promulgated by the Actuarial Standards Boardand is comprehensive. Any recommendations for improvement in the report presentation should be included. Thecomprehensivereviewdescriabbeodvewillresultinafinalwrittenreportand opinion containing the findings, recommendations and conclusions of the auditing actuary. GRS will be given the opportunity to prepare a written response,iftheysodesire.Theirresponsewillbeinicnlutdh e d final report submitted to the ERSRI Board. The auditing actuary will be required to present a formal presentation summarizing their written report to the ERSRI Board. C. Minimum Qualifications and Proposal Requirements Proposalsmustbeassucciansctpossiblewhileprovidinganaccuratepictureofthe firm’s ability to meet the needs of ERSRI in a thorough, accurate, responsive and cos-teffective manner. Each proposal must contain the following elements: TransmittalLetterandMinimumQualificantiso
Within the transmittal letter, the proposing firm must certify to the following minimum qualifications. 1. The firm is a professional actuarial firm that provides actuarial valuations, experience investigations, and pension consulting services. 2. TheprinicpalactuarywhowillberesponsiblefortheERSRIauditisa fellow of the Society of Actuaries and is an enrolled actuary. 3. The firm must agree not to enter into an engagement to provide actuarial and/or pension consulting services with any agency of the State of Rhode Island that involves the use of data and other information received from the Employees’ Retirement System and the Municipal Employees’ Retirement System, unless approved by the Retirement Board.
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4. Thelettermustbesignedbyanindividutahloraizuedtobindthefirm contractually and must state the name, title, address, phone number, fax and internet address of a contact person who is authorized to provide clarification of the proposal should it be necessary.
Understanding of the Project In this section, describe your understanding of the services covered by this RFP. Professional Staff and Firm Methodology
In this section, describe the experience of the individuals who will be assigned to the ERSRI account. Principal Actuar y
a. Identify the principal actuary by name and give the year such actuary became a Fellow or Associate of the Society of Actuaries and an enrolled actuary under Section 3042 of the Employees’ Retirement Income Security Act of 1974. b. Detailhowlongtheprincipalactuahriaevsebeeninvolvedinpensionconsultingandidentifythose-simzieddpublicretirementsystems(withmembershipsof3-01, 0 0 , 0 00) in which the actuary has worked as the principal actuary. Also, please state whether such work involved the production of yearly actuarial valuations. c. Please include the resume of the principal actuary with your proposal.
Other Professional Sta ff
Identify and describe the qualifications of professional staff that willbeavailableforworkasneeded.Pleaseprovidemaeroefsu actuarial credentials for each member of the professional staff including the length of time the staff person has worked for a major actuarial firm.
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Firm Methodology
Please provide ERSRI with information, not exceeding two pages, regardingyourapproachtothescopeofworkoutlinedinSectionB.Should you consider your approach to actuarial services to be different in any way, please describe those differences.
Firm History and Operations
Pleaseaddressthefollowingquestionsregardinfgirymo:ur1) How many years has the firm been providing actuarial services? 2) Please identify the location of the primary office that will provide services for ERSRI. 3) Describe the ownership structure of the firm, including therelationshipsofeachbranchoffoicethtebranchoffices and to the headquarters. Identify the individual who has overall responsibility for the firm’s operations. Please disclose any conflicts of interest that maiyn exist performing services to ERS. RI 4) Pleasedescribeanymaterialdevmeleonptsintheownership structure of your organization over the past three years. Describe any planned material changes in your organization in detail. 5) If the client contact person is other than the actuary, pleaseidentifywhowillbetheclientconetrascotnponthe ERSRI account?
Audit of Valuation, Experience Investigation, and Consulting Services
a. List current state pension system clients (Preferably in the mid-sized range) of the firm for whom you perform actuarial auditservices.Also,allfirmsouslhdsubmitapasttemplateor sample of a recent audit performed for either an actuarial valuation and / or an experience study.