Minimum Qualifications

1. Extent of Actuarial Firm Prior Public Experience

   The firm has an extensive public sector client base, having been retained for actuarial or related services for approximately 150 public sector pension plans and entities. Has also performed special projects for approximately 60 public sector clients, including study of federal or state law applicable to public pensions; Social Security coverage issues, special cost studies, actuarial reviews; and projection/liability studies.

2. Prior Public Experience of Assigned Personnel

   Four identified firm personnel would be assigned to the account, plus numerous supporting staff. The four identified personnel are Fellows in the Society of Actuaries and all four have public pension plan experience.

3. Commitment to Accessibility

   Three of four firm personnel identified are located outside of the Twin Cities, with two in Milwaukee and one in Washington, DC. Most work will be done in Milwaukee. Assigned staff members are accessible within 24 hours by phone, and accessible for meetings within a few days.

4. Capability and Sufficiency of Personnel to be Assigned

   In addition to four identified personnel, firm would make two additional Fellows of the Society of Actuaries, four staff supervisors (two associations of the Society of Actuaries) and five actuarial assistants available to handle the account. Production work would be done in Milwaukee using professional staff located there. The firm claims willingness to devote additional staff as necessary to ensure timely and competent work products.

Actuarial Firm Information

1. Firm Structure, Operational Method, Communications

   Firm Structure: International firm with 35 offices in the United States. Owned by its principals, who are all Fellows of the Society of Actuaries or the Casualty Actuarial Society or professionals in related disciplines with comparable credentials. Employs 438 actuaries. Has Washington, DC, Research Office, which keeps local offices updated on pending legislation.

   Operational Method: Firm provides only fee-for-service business, without contingent fee arrangements, which the firm contends adds objectivity and independence. Uses profit center concept.

   Communications: Focuses on effective communication with non-actuarial audiences and attempts to anticipate the needs of clients.

2. Recentness of Prior Public Experience of Firm; Involvement with Public Officials

   Firm has substantial number of public pension plan clients. Sponsored preparation of a public pension text used by legislators, trustees, and actuarial candidates. Sponsors speakers at various public pension association meetings.

3. Function of Assigned Personnel; Relation to Prior Experience

   Firm proposes a continuation of the same structural arrangement used to date, at least initially. One actuary is assigned overall responsibility; another is a backup consultant who also functions as a special advisor, a third is the primary production supervisor and the fourth a local liaison person. Responsibility for presentations is with the overall responsible person. Responsibility for coordination with the Commission and the various pension plans is with the local liaison. All named persons have considerable prior public pension experience.

   While the structure seems largely unchanged from that currently used, the firm is indicating a shift in personnel over the course of the contract and possible contract extension period. Mr. Thomas Custis will be phasing into retirement; Mr. Hogan will transition into the lead consultant role. There is some ambiguity regarding the team in future years as Mr. Custis’ role is decreased.

4. Five Major References

   Six references are provided:

   1. Mr. Glenn Deck, Executive Director, Kansas Public Employees Retirement System

   2. Mr. Peter Vaughn. Executive Director, Maryland State Retirement and Pension Systems

   3. Mr. David Bailey, Deputy Director, Oregon Public Employees Retirement System

   4. Ms. Erin Sjostrom, State Retirement Director, Florida Retirement System

   5. Mr. Greg Cusack, Chief Benefits Officer, Iowa Public Employees Retirement System

   6. Mr. Steven Weinberger, Executive Director, State of Connecticut.

5. Particulars of Firm’s Valuation System

   Uses a package developed by Milliman’s Systems and Programming Group for use by Milliman actuaries. The development team included Mr. Custis. This system, Milliman USA’s Pension Valuation System (PVS), was developed in the early 1980s and has been upgraded several times. The system is described as flexible, produces all typical actuarial computations, handles select and ultimate salary and decrement assumptions, provides level dollar and level percentage calculations, gain and loss analysis, and handles all typical actuarial methods. Capable of closed and open group calculations, projection valuations. Data backup procedures in place with daily, weekly, and monthly tapes stored offsite. Past actuarial valuations and related data stored on network hard drives with backup.

Approach and Work Plan

1. Ability to Meet Service Timeframes

   The firm has been the actuary retained by the Legislative Commission on Pensions and Retirement for the last eleven years; expresses a continued commitment to meet timeframes.

2. Organization of Assigned Staff

   Staff is headed by a primary consultant, with a backup consultant/special advisor, a primary production supervisor, a local liaison person, plus production staff. Additional staff can be utilized if needed.

3. Location and Accessibility of Primary Personnel

   The primary consultant is in Milwaukee, Wisconsin, and most of the work would be done in Milwaukee. The primary consultant supervisor is in Milwaukee, with local liaison in Minneapolis. People are available by phone on short notice (within 24 hours) and meetings could be set up in a few days. Production work will be done in Milwaukee.

4. Plan for Coordinating Services with Commission and Funds

   The proposal describes the current process as it occurs with the Commission and the pension funds and indicates the firm’s commitment to provide services and work products with the timeframe needed, providing the firm receives quality data in a reasonable timeframe.

5. Primary Contact Person and Replacement Personnel

   The primary contact person is Thomas K. Custis, a Fellow in the Society of Actuaries. This would change in the second year, with Mr. Hogan becoming the primary contact person and assuming, on a gradual basis, the duties of Mr. Custis on this contract. Mr. Custis will remain as a consultant as needed.

Contacts and Fees

1. Proposed Costs

   1. Fixed Fee (Valuations; Experience Studies):

      Year 1	Year 2	Extension Year 1	Extension Year 2
      $205,000	$205,000	$265,000	$245,000

       

   2. Actuarial Studies Preliminary to Consolidation:

      Year 1	Year 2	Extension Year 1	Extension Year 2
      $170/hour	$170/hour	$175/hour	$175/hour

       

   3. Hourly Fees:

      	Year 1	Year 2	Extension Year 1	Extension Year 2
      Cost Estimates	$170/hour	$170/hour	$175/hour	$175/hour
      Meeting Attendance	$270/hour	$270/hour	$280/hour	$280/hour
      Design and Funding Advice	$270/hour	$270/hour	$280/hour	$280/hour
      Special Studies	$200/hour	$200/hour	$205/hour	$205/hour
      Other

       

2. Additional Fee-Related Items

   1. Current hourly rates for other clients for firm personnel assigned to account:

      Overall responsible person	$300-$360/hour
      Backup consultant/special advisor	$300/hour
      Production supervisor	$204/hour
      Local contact	$320/hour
      Other professional staff	$170-$420/hour
      Actuarial assistants	$90-$140/hour
      Technicians and clerical	$60-$110/hour

       

   2. Charging of out-of-pocket expenses:

      • Out-of-pocket expenses are included in above estimates.

   3. Charging computer expenses:

      • Normally billed at $20 per hour, but are built into above estimates.

   4. Charging development costs:

      • No additional development costs charged.

   5. Billing procedures:

      • Monthly billing for work completed during the prior month.

Communication Skills – Examples of Prior Work Product

Provided copies of the July 1, 2001, Teachers Retirement Association Actuarial Valuation and the Teachers Retirement Association Fund Experience Study 1996-2000.

Other Minnesota Public Pension Plan Relationships

Plan or Employer	Type of Consulting	Milliman USA Office/Staff
Bloomington Fire Relief Association	Ongoing Pension	Minneapolis/Pension
Minneapolis Employees Retirement Fund	Consulting	Minneapolis/Pension
League of Minnesota Cities Insurance Trust	P&C Consulting	Milwaukee/P&C
Minnesota Self-Insurers Security Fund	Health Insurance	Minneapolis/Health
Workers Comp Reinsurers Association	Workers Compensation	Minneapolis/Health
Minnesota Assigned Risk Plan	P&C Consulting	Minneapolis/Health
Minneapolis Teachers Retirement Fund	Projection Study	Milwaukee/Pension

Human Rights Affirmative Action Certificate

A certificate of compliance is included in the proposal, valid for two years beginning January 12, 2001.

Workers Compensation Coverage Compliance

Proposal claims they are in full compliance and are willing to provide whatever documentation is requested.

Comment:

Proposing limitation on the liability to $3 million or ten times their professional fees, whichever is greater.