Page 6 - DCAC May 2024 Files

Summary of SAGIC Investment Issue

When the County’s plans were initially set up with Mass Mutual in 2016 fees were over collected.
There is a 34-basis point credit for the DC plans and a 90-basis point charge on the OBRA plans.
Mass Mutual mistakenly collected 90 basis points for the DC plans and credited 34 basis points to
the OBRA plans. Empower became aware of this error after the migration of the Mass Mutal
business and stopped the fee process while we investigated the source of errors and worked with
Mass Mutual on the history of the set up. Fees were correct for 1Q2024 and will be going forward.

As a result, as of 3/31/24, the Market Value is $11.4 million lower than it otherwise would have
been. This includes the impact of the corrected fees and the portfolio earnings that would have
been realized on those fees. Because the Market Value was understated, crediting rate
calculations were also understated. As of 3/31/24, the Book Value is $6.0 million lower than it
otherwise would have been.

These amounts can potentially change, based on the timing and nature of the correction. Returns
on the underlying portfolio (positive or negative) will adjust the $11.4 million Market Value
difference.

For example, if the portfolio experiences positive returns before the correction is made, the
amount of the correction will also increase. Conversely, if the portfolio experiences negative
returns, the amount of the correction will decrease.

The amount of the Book Value correction will increase over time until a correction is made. For
example, the amount of the Book Value correction increased from $5.7 million to $6.0 million from
12/31/23 to 3/31/24.

The 3 Scenarios discussed were:

• Increase the Market Value by $11.4 million. Participant balances will remain the same,
however they will grow at a higher rate going forward.
o This can be quickly implemented and the expected increase in the crediting rate is
~1.20%.
o The impact on illustrative participant balances is included in the attached
o The impact on the crediting rate may change based on the market conditions at the
time of the correction, but we do not expect material changes.

• Increase the Market Value by $11.4 million and increase existing participant balances by
$6.0 million.
o Participants would see an immediate increase to their balance as well as an
increased crediting rate of ~0.65%.
o Participant balances would be increased proportionally based on their balance on
the date of the correction. As of 3/31/2024, this would be an increase in the balance
of ~3.60% For example, if a participant had a balance of $10,000 their balance
would immediately increase to $10,360.
o The impact on illustrative participant balances is included in the attached.