Page 141 - DCAC May 2023 Files

Detailed description of the project
The County of San Mateo conducted a consultant RFP in 2021 as part of their ongoing due diligence to

prudently monitor service providers. The RFP process resulted in the hiring of a new consultant,
Innovest.

In addition to regular quarterly meetings, the County of San Mateo Deferred Compensation Advisory
Committee (DCAC) conducts a day-long annual retreat that focuses on committee education, plan
design, plan metrics and strategic goal development.

In 2022, one key initiative developed through this Annual Retreat was a comprehensive investment
menu evaluation that was conducted in a multi-phase project. The catalyst for the project was based
upon a thorough analysis of the investment menu, which indicated:

1) The number of investments offered were greater than average.
2) Very low utilization of certain investment options.
3) The ability to streamline and simplify the investment menu for participants (in consideration of
independent behavioral finance studies on the subject).
4) The need to remove investments linked to the plan’s prior consultant.
5) The potential to reduce overall investment management costs to participants.
6) The need for a thorough analysis of the plan’s target date funds and QDIA, which is a best
practice for plan fiduciaries.
7) The opportunity to provide ESG investment education to the Committee, along with an ESG
analysis of funds offered in the plan.

Phase One: Streamline Investment Menu
The first phase of the project included removing the Collective Investment Trust (CIT) arrangements that
were linked to the plan’s prior consultant and replace them with traditional mutual fund options. This
was completed very early in the year and provided participants access to more analytical data regarding
the fund holdings, characteristics, and other metrics. Additionally, a variety of investment menu changes
were recommended to remove sector-specific funds, streamline the investment menu, and simplify
participant investment decisions, as well as lower costs. Annually, these fund actions will save
participants approximately $100,000 in investment management expenses.

Phase Two: Index Fund Review
The second phase of the project included an evaluation of the index funds being offered in the core
investment menu. The index funds within the core investment menu account for a large portion (16%)
of participant account balances, and the Deferred Compensation Advisory Committee recognized that
there could be significant cost savings if the plan utilized lower cost options. The decision was made
to utilize the Fidelity index funds, which results in approximately 49% savings in investment
management expenses for those participants utilizing the index funds.
Phase Three: Target Date Fund Deep Dive

The third phase of the project was to perform a Deep Dive review of the plan’s target date funds to
ensure the DCAC members are familiar with relevant characteristics of the current fund suite and ensure
the Vanguard Target Date Funds remain a suitable option for plan participants. The Deep Dive included a
review of the glide path, portfolio management team, underlying holdings, fees & expenses, and asset