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Legislative Commission on Pensions and Retirement
Responses to Inquiries

Request for Proposal for Actuarial Services

RFP Questions and Answers

October 9, 2019


The LCPR received a number of questions in response to the Request for Proposal published on September 30, 2019. Those questions and the Commission's responses are contained below. Questions have been grouped by subject. Where multiple responding firms asked the same or very similar question, those questions have been consolidated into a single question with a single response.

Jump to questions on: Current Actuary/Contract Examples of Actuarial Work Contractual Terms
Liability/Indemnification Services Compared to Prior Attandance at Meetings Review of Factors
Legislation Cost Estimates Replications Performance in Minnesota Actuary Qualifications
Conflicts of Interest Hourly Rates

Current Actuary and Contract

What firm currently provides actuary services for the Commission? Why is the Commission issuing an RFP for actuarial services at this time?

  • The Commission does not currently have an actuary. The most recent actuary services were provided by Deloitte Consulting LLP. The Commission's contract with Deloitte expired on June 30, 2019.

How long has the current actuary worked for the Commission?

  • The Commission does not currently have an actuary. Deloitte Consulting LLP provided actuary services for the Commission from November 4, 2014, to June 6, 2019.

Has the current actuary been invited to respond to the RFP?

  • As noted above, the Commission does not currently have an actuary. The Commission's actuary until June 30, 2019, Deloitte Consulting LLP, would have received notice regarding this RFP and a link to the RFP through the notice published in the State Register on September 30, 2019.

For each year of the contract currently in place, can you specify what has been spent on the services sought under this RFP, differentiating between fixed fee and per hour charges?

Examples of Recent Actuarial Work

Please provide a copy of the most recent actuarial replication report, experience study review report, and actuarial valuation review report.

Contractual Terms - Appendix C: Actuarial Services Agreement

LCPR staff have concluded their analysis regarding the italicized provisions in Section 7 of the "Actuarial Services Agreement," which was attached to the RFP as Appendix C. Please see the revised version of Appendix C. NOTE: All references in the Q&As refer to the revised Appendix C (dated 10.9.2019).

The changes made to the original are the following:

  • Typographical errors have been corrected. These include re-numbering the subsections within Sections 1, 3, 9, and 10.
  • In Section 7, all italicized text is now regular font, the footnotes have been deleted, and subsection 7.6, titled "Government Data Practices Act," has been deleted. References to new exhibits E, F, and G have been inserted into subsections 7.2, 7.3, 7.4, respectively.
  • New exhibits E, F, and G have been inserted into the Section 7 Exhibits list on page 12.

Will the Commission entertain language that clarifies that the successful bidder may rely on the data provided by the Commission and is not responsible for data clean up or inaccurate data?

  • Yes, the Commission will consider such language.

Will the Commission entertain language clarifying that the insurance requirement could be edited?

  • The Commission is willing to consider language regarding any insurance requirement in the final agreement. The only insurance requirement appears at Section 7.2 of Appendix C and is the requirement that the Commission Actuary comply with Minnesota Statutes, section 176.182, which requires evidence of compliance with the workers' compensation insurance coverage requirement. The successful responding firm must provide such evidence as Exhibit E.

We noticed that Section 3.3 of Appendix C is missing. Is this intentional or a typographical error?

  • As noted above, this is a typographical error. This has been corrected in the revised Appendix C.

Similar to Deliverables, are services automatically accepted 30 or 60 days after delivery?

  • Section 4.7 of Appendix C provides that "Deliverables are deemed accepted by the Commission if not rejected in writing, within sixty (60) days of delivery." LCPR staff intends that services would also be automatically accepted 60 days after delivery and is willing to revise the contract to reflect this.

Are you willing to entertain changing the governing law to a more neutral state, e.g. State of New York?

  • No. The Commission is not willing to change the governing law provision at Section 10.5 of Appendix C and requires that Minnesota law govern the contract with its actuary.

For Requesting Services, would you accept an SOW rather than an email for our internal revenue recognition purposes?

  • We believe this question is referencing Section 4.1 of Appendix C (requiring that requests for services be made in writing) and Section 4.6 of Appendix C, which states, "any communication that is required to be in writing may be made via email." The Commission is willing to consider any reasonable method for communicating requests for services as long as it is workable and allows for the scope of the request to be clearly documented.

Liability and Indemnification

The Commission received a number of questions related to liability and indemnification. Those questions are listed together along with a single response.

Is the Commission willing to entertain a limitation on liability cap?

Is the Commission willing to entertain limiting vendor's indemnification obligation?

Are you willing to limit actuary's direct and indirect damages arising out of the contract?

Are you willing to limit actuary's indemnification obligation to third party claims caused by actuary's or actuary's personnel's gross negligence, willful misconduct, and fraudulent acts?

In Item 5.2.5, liability limits are mentioned as one of the ten evaluation criteria. No actuarial firm has unlimited assets; thus no actuarial firm can truly offer unlimited liability. All firms have an implicit limit. If a large firm requests an explicit limit of liability in the contract (which would not be applicable in the event of gross negligence, willful misconduct or fraud), would LCPR rank that firm lower in this evaluation criteria versus a small firm that offers "unlimited" liability but actually has a very small limit?

Our standard consulting agreement terms and conditions include some limitation on liability for mere negligence and from consequential damages. Is the Commission open to accepting mutually-agreeable contract terms, which include some limitation of liability on the work performed by the contracting actuarial firm?

  • The Commission prefers no limits on liability. However, the Commission is willing to consider limitations on liability other than for gross negligence, willful misconduct, and fraudulent acts. If a responding firm wishes to limit liability or its indemnification obligation, the responding firm is invited to include proposed limitation language along with the response to this RFP by the proposal submission deadline on October 25. The Commission will consider proposed limitations on liability as one of several factors listed in Section 5.2 of the RFP. In connection with any negotiation regarding liability or indemnification limits, Commission staff will consider adding a new provision regarding professional liability insurance coverage.

Services-Compared to Prior Contract

Are there any services requested in this RFP that are not covered in the current contract?

  • The Commission does not currently have a contract with an actuarial firm. Services performed under the contract that expired on June 30, 2019, that are not included in the services requested in this RFP are the services required to do a review of the load factors applied to actuarial liabilities to reflect the Combined Service Annuity and Coverage By More Than One Retirement System provisions in Minnesota Statutes.

Services-Attendance at Meetings

How many Commission meetings is it anticipated that the Retained Actuary will attend each year?

  • The Commission Actuary makes at least one presentation to the Commission at a meeting each regular legislative session, which typically runs from January to May. The Actuary may be asked to attend at least one additional Commission meeting to testify on a topic or be available to answer questions from members of the Commission.

Services-Review of Factors

How often are the factor tables updated and how many tables need to be reviewed?

  • During the five-year contract that expired on June 30, 2019, the Commission Actuary was asked to review only one set of factors, which were for the MSRS General Plan. The Actuary reviewed two tables, for early retirement and joint and survivor forms of payment. This review was done in late fall of 2016, and the fees for this work totaled $10,000. LCPR staff anticipates a greater need for review of factors in 2020 due to the recent completion of experience studies and adoption of new assumptions by the state's three largest pension plans (MSRS General, PERA General, TRA).

Services-Cost Estimates for Legislation

How many legislative cost estimates were reviewed or replicated each of the last four years?

  • The Commission requested a cost analysis only once in five years, during the 2017 legislative session, in connection with legislation that proposed multiple significant benefit reforms. The fees for this work totaled $25,000.

Services-Replications

When is it anticipated that data will be available for the replications each year?

  • Under the contract with the prior Commission Actuary, replication reports were due by the end of February. For the TRA replication, data was provided to the Commission Actuary by TRA or its actuary for the replication work at the end of November 2016. For the St. Paul Teachers replication, data was provided to the Commission Actuary by St. Paul Teachers or its actuary for the replication work in mid-January 2018. In both cases, the Commission Actuary was able to meet the February 28 deadline. When a fund or its actuary provided data late or the data was incomplete, LCPR staff worked with the Commission Actuary to establish a new due date, if requested by the Actuary. LCPR staff anticipates a similar flexible approach on deadlines when a delay in data delivery is outside the control of the Actuary.

Services-Performance in Minnesota

Section 5.2.6 of the RFP indicates that the Commission prefers firms with assigned personnel located in Minnesota. Does this include centralized services routinely performed at an out-of-state office?

  • The Commission prefers that all work is performed within the state of Minnesota. The Commission will consider firms that perform some or all of their work outside of the state of Minnesota. However, work performed for the Commission must not be performed outside of the United States.

Actuary Qualifications

The RFP indicates the Commission is looking for firms with "recent experience performing reviews of other actuarial firm's work." Does experience reviewing work performed for private sector plans and organizations meet the Commission's requirements?

  • The RFP lists two criteria under the heading at Section 5.1 of "Minimum Qualifications." The second criterion is the following: "The firm must have recent actuarial experience with defined benefit pension plans for public employees and recent experience performing reviews of other actuarial firm's work." We view this as embodying two separate requirements:
    1. recent actuarial experience with defined benefit pension plans for public employees, and
    2. recent experience performing reviews of other actuarial firm's work.
    A firm can satisfy the second requirement if its experience performing reviews of other actuarial firm's work is only in the private sector. The review of an actuarial firm's work on public employee pension plans is more relevant to the Commission's oversight role. However, the Commission will not disqualify a firm if its review work is limited to review of actuarial work performed on private sector defined benefit plans.

Actuary Conflicts of Interest

We prepare GASB 75 retiree medical actuarial valuations (OPEB) for many Minnesota cities, counties, and school districts. We also work with many fire relief associations on their GASB 68 pension valuations. Will the LCPR view these assignments as a significant conflict of interest with regards to the RFP's scope of services?

  • The Commission will need to receive full disclosure of the type of work performed by the Actuary for other Minnesota-based public employers and the identity of those public employers in order to make a determination as to whether there is any conflict of interest. LCPR staff anticipates that if the work for other public entities is to perform retiree medical actuarial valuations, the Commission would not view that engagement as a conflict of interest. The Commission has typically not asked its Actuary to perform work on actuarial valuations of firefighter relief association retirement plans. Similarly, staff anticipates that the Actuary's work on relief association plans will not be viewed as a conflict of interest. Whether the Actuary's governmental clients will view the Actuary's work for the Commission as a conflict of interest is a separate question, on which we have no opinion.

Actuary Hourly Rates

Would the Commission prefer hourly rates by staff level or would it prefer a composite rate for all activities?

  • Please provide hourly rates by staff level.