On March 19, retired city employees filled council chambers to hear the proposed changes to the city’s retirement fund that could go into effect later this year, and made sure they were included in the discussion. City Manager Josué Salmerón and Director of Human Services Dawane Martinez first gave background for the issue. For more than two years, both received feedback from city staff and retirees about issues they were having with the fund. Although they couldn’t go into specifics of the complaints they received, the issues were significant enough that they utilized the city’s broker for Retirement and Healthcare Services – National Financial Partners Corporation (NFP) – to review how the fund is currently managed by Mission Square and find potential alternatives through a request for proposals (RFP) process. Through that RFP, six retirement funds applied and one was determined by NFP to be the best option on offer – Nationwide Retirement Plan Services.
Originally, the change was going to be discussed during council’s February 19 regular session, but the date was pushed out to allow employees to be briefed on the potential changes first and allow time for information to go out. Salmerón then introduced the NFP representatives present virtually to give a summary of their findings to council: Andrew Prevost, the RFP specialist and Ray Reeves, the senior advisor for the NFP team.
Prevost explained that NFP approached its analysis with the bottom line of finding the best return on investment at the lowest cost for city employees and retirees. Mission Square has managed the city’s retirement fund for over 30 years. However, lately Mission Square has lost major clients, including Virginia’s Retirement System, as well as Prince George’s County’s fund; this, in turn, has reduced Mission Square’s market share. The investment company’s recent operating changes have also caused its recordkeeping fees to increase. Mission Square’s fees are over $200K per year, whereas the average of its peer group is less than $65K. Because these recordkeeping fees come out of the retirement fund itself, this lowers the potential growth of those investments. Although Mission Square offered to lower its recordkeeping fees during the RFP, their reduced charges are still greater than Na-tionwide. By comparison, Nationwide is the largest provider of governmental plans and one of the largest companies overall – larger than companies like Starbucks or McDonald’s. NFP sees the scale of Nationwide and its structure as a private company as indicators of its stability and ability to consider long-term growth, as opposed to quarterly earnings. As Nationwide also ranks highly in the 2024 J.D. Power U.S. Retirement Plan Digital Experience Study (which measures customer satisfaction on digital platforms), NFP believes that changing to Nationwide will improve customer services for city employees and retirees, and NFP believes that changing how retirement plan options are presented will help improve decision-making.
Currently, investment options are broken out in nine categories, with some categories having multiple similar stock fund options. NFP sees this as a problem as it makes it harder to make a diversified investment portfolio, increasing risk. As an alternative, a proposed investment menu was shown with a greater amount of categories, with fewer sub-categories. For those who like how their investments are allocated among the current categories, they will be able to make a like-to-like transfer to funds. Councilmembers noted that this alternative was still hard to navigate and NFP said that this menu can be refined. Additionally, if council decides to go forward with changing how the retirement fund is managed, NFP would work with the City of Greenbelt and Nationwide to hold educational workshops and develop a communication plan to help retirement fund members navigate the change.
In the lengthy public comment period that followed, it was clear that the retirees present felt that the city had not done enough to include them in the discussion over the retirement fund. David Moran, former assistant city manager who retired in 2021, noted that he was not notified of the proposed changes, let alone asked for input. He believes that he and other retirees are major stakeholders, as collectively they hold 57 percent of the fund and are most immediately affected by the fund. Because the retirement fund is $71 million, far greater than the city’s budget or its American Rescue Plan Act funding, Moran believes that any decision by council regarding the fund warrants heavy public deliberation. William Smith also did not hear from the city about this worksession, but instead from his Mission Square advisor while he was enjoying his retirement in Florida; he traveled to Greenbelt so he could speak to this matter. Smith and other retirees also spoke highly of their experience with Mission Square. Former City Human Resources Director Mary Johnson, who retired four years ago, recalled how Mission Square solved her confusion on when and how she could retire. To provide some reassurance, Prevost explained that even if city council transitioned the fund management from Mission Square to Nationwide, retirees would be able to stay with Mission Square or transition to a completely different investment manager if they wanted. Based on comments from retirees and councilmembers, more information, including previous NFP presentations, will be publicized before the decision is made. At the time of writing, the session has not been announced, but should occur in the next months if the city wants to keep up with NFP’s proposed timeline, which would go into effect in the middle of this year.
