IMPORTANT BID ADDENDUM

NORTH CAROLINA DEPARTMENT OF STATE TREASURER FINANCIAL OPERATIONS DIVISION JANET COWELL TREASURER FRAN LAWRENCE DEPUTY TREASURER / CFO IMPORTANT BID ADDENDUM THIS BID ADDENDUM DOES NOT HAVE TO BE RETURNED Bid Number: 07-S12023 Commodity: Recordkeeping and Communications Services for Supplemental Retirement Plans Addendum Number: 3 Using Agency: Treasurer Purchaser: Debra Clark Opening Date / Time: November 13, 2014 @ 2:30 PM ET INSTRUCTIONS: 1. This addendum is issued in response to questions submitted. Please see page 2 for questions and answers. 325 NORTH SALISBURY STREET, RALEIGH, NORTH CAROLINA 27603-1385 Courier #56-20-45 (Telephone: 919-508-5184) (Fax: 919-508-5970) www.nctreasurer.com

2 1. Have incumbents Prudential Retirement and Annuity Company been invited to rebid and are looking for one or two record keepers, one for each plan? We are seeking a single recordkeeper for the 401(k) and 457 plans. The incumbent was invited to rebid. 2. On page 27, Section IV, item P, (Confidentiality of Proposals), we would ask for clarification regarding the statement "In submitting its proposal the Bidder agrees not to discuss or otherwise reveal the contents of the proposal to any source outside of DST, government or private, until after the award of the contract." Please confirm that this provision is not intended to limit conversations with current or proposed subcontractors/partners in providing the requested scope of services? 3. The fees listed on page 17 indicate that the Recordkeeper receives two fees: A 7.9% recordkeeping fee and a 5.5% separate account fee. Is the 7.9% fee taken on all assets including the SVF? Is the 5.5% fee an additional fee taken in addition to the recordkeeping fee? Does the participant see two separate fees on their statement? 4. Since the recordkeeper is responsible for the Annual Benefit Statement costs, what is the current cost for Broadridge to produce the annual statement? 5. Can you specify if the current recordkeeper receives a fee to handle loans? If so, can you detail what those fees are? 6. Can you provide a sample of the current Annual Benefits Statement and Total Rewards Statement? Confirmed. This provision is not intended to limit conversations with proposed subcontractors or partners regarding providing the proposed requested services. The 7.9 bp fee is deducted on all assets, including stable value. The 5.5 bp fee is in addition to the 7.9 bp fee, and is deducted on all assets except stable value. The participants do not see two separate fees on their statements. The 5.5 bp fee is included in the expense ratio for the investment options. Approximately $165,000 There is a $60 loan initiation fee which is retained by the recordkeeper. There are no annual maintenance fees for loans. Please use the link provided on page 18 of the RFP to view the ABS user guide, which includes a sample ABS. The Total Rewards Statement is a potential future development. No sample is currently available.

3 7. Can the State provide additional detail on its vision for the selected provider to offer participant onsite services? 8. How many days of onsite education are currently provided? Is that number adequate? 9. Does the state require participant services in languages other than English? 10. How many of the participants currently receiving distributions are receiving periodic payments? 11. Please provide additional detail regarding the level of "white labeling" of the Plans' website will be required. Will co-branding of the websites be permitted? Must all participant web-based transactions be conducted on the Plans' website vs. the recordkeeper's public website? 12. Please provide the number of and a description of the each of the custom portfolios that the recordkeeper is to maintain. Please provide the Glidepath for each and any restrictions on participants trading outside of these Page 64 of the RFP provides the overview and expectations for communications services, including onsite services. Core seminar topics are also covered in this section, which should encompass DC, DB, Social Security, and other outside assets. Our goal is to make sure our members are leveraging all available resources toward a successful retirement. Bidders are encouraged to identify additional seminar topics that may be of value to participants. Statistics provided in the RFP include the number of dedicated representatives, and also the number of recent group and one-on-one meetings (page 21 of the RFP). These numbers are perceived to be adequate. Our desire is to achieve our goals of retirement readiness; therefore, bidders should submit a plan that will help us achieve our goals. The Cost Proposal also requests bidders to identify the incremental cost to add additional staff in the event that changes are desired in the future. This has not been listed as a requirement in the RFP, but the questionnaire includes questions regarding the bidders capability to provide materials in languages other than English. Please see the link below to the website for the Supplemental Retirement Board. The materials from the most recent Board meeting are posted on this website, and include the Prudential Second Quarter Administrative Report, which provides details on the types of distributions. https://www.nctreasurer.com/ret/pages/supplemental- Board.aspx The website should be branded for the NC Total Retirement Plans. While we understand that transactions are often conducted on the recordkeeper s website, bidders are requested to identify the level of NC branding they are capable of providing in response to the RFP. Pages 22-23 list the 14 custom portfolios currently used by the Plans, as well as the allocation of assets by manager. There are no participant trading restrictions in place. Please note the numbers of portfolios are subject to change as we evaluate additional options, including an income fund

4 portfolios. and additional age cohorts on the glide path. 13. Please confirm if the provider or the employer manages the contribution deferrals. How many of the participating employers will be using on-line salary deferral with feedback files to their payroll system? 14. Please confirm the desired transition date if the incumbent is not selected. 15. How are loans currently being repaid? (By ACH? Payroll deduction? Or Check?) What method of repayment is available to terminated/retired participants? 16. Please confirm the number of participants who have life insurance policies in the 457(b) plan, and if there are contributions being made to the policies. Please also advise which insurance company currently maintains life insurance policies. 17. Are deemed IRAs a part of the 457(b) plan? If so, please confirm the number of participants with deemed IRAs. 18. Please confirm whether the plans allow in-plan Roth Conversions. If yes, are the plans using the 2010 IRS regulations (which allow conversions only upon eligibility for distribution or 59 1/2) or the 2013 regulatory framework (which allow conversions while still working)? 19. The RFP indicates a preference to use a custodian of the choosing of the Plans. Will the Plans be willing to consider allowing the recordkeeper to use its standard custodian and develop a working interface between the Plans' custodian and the recordkeeper's custodian? 20. Can we use the current logo in our custom communication samples and finalist materials? The employers are responsible for sending contributions, but the recordkeeper does follow up with employers that are late with deferrals. Please see page 18 of the RFP for statistics regarding the number of employers and allocation of different contribution types. December 18, 2015, or other date as agreed to by the state and the successful bidder. Loans are generally paid via payroll deduction, by means of coupon books issued for retired participants, or during summer months for teachers for repayment by check. There are no life insurance policies in the NC 457 or NC 401(k) Plans. There is no deemed IRA product in place. In-plan Roth conversions are effective as of December 2010, as described in the Plan documents (link provided on page 19 of the RFP). Please see the questionnaire on page 51 of the RFP. Bidders are requested to confirm they will work with the custodian selected by the Plans (2.2.86), and can identify any constraints regarding firms with which they cannot work. Question 2.2.87 also invites bidders to identify their own ability to provide services, such as setting unit values and calculating performance. No

5 21. Do you have specific measurable goals in place to monitor the success of your retirement plan(s) or progress toward specific retirement plan goals (e.g., participation rates, income adequacy targets)? If so, what are they and how successful have you been in meeting those goals in the past? 22. What is your biggest area of concern regarding your retirement plans? 23. Please confirm that the count of unique participants is 266,578 based on the counts provided on page 21 of the RFP [(i.e. 49,792 457 accounts + 244,534 401(k) accounts) 27,748 with accounts in both plans]. 24. Is there a strategy for transitioning more employers to a form of electronic delivery for payroll files? If not, are they open to developing a strategy to transition during the term of the agreement? 25. Would you prefer to maintain the current relationship with Broadridge for the production of Annual Benefit Statements? 26. As you consider a Total Rewards Statement, would this potentially replace the Annual Benefits Statement being created in partnership with Broadridge today? 27. How important is integrating all benefits so your participants have one holistic view, i.e. retirement and health? 28. Will the State of North Carolina allow off shore activities for backroom processing? 29. Is there any flexibility in using a Contractors Performance Standards to meet the State s stated requests? Specific metrics are identified on page 15 of the RFP, including retirement readiness, participation, contribution levels, member satisfaction, etc. A key metric is for active participants to have 80% of pre-retirement income at age 62. Confirmed We recognize the increased efficiency with electronic transmission, and would consider strategies to increase electronic transmissions. Bidders should not assume that all files will be submitted electronically, but we would like to move in that direction during the term of the agreement. We are open to alternatives. If developed, a Total Rewards Statement would likely include information currently included in the Annual Benefits Statement, and would therefore replace it. This is something we would like to accomplish during the term of this agreement. Bidders must identify any services provided outside of the United States, but there is not a prohibition regarding services being provided outside the US. Bidders may identify exceptions to the performance standards for consideration by North Carolina.

6 30. Is there any flexibility to negotiate certain terms of contract terms and conditions? 31. Please provide a list of the source types in the Plans. Bidders may identify exceptions to the terms and conditions for consideration by North Carolina. NC 401(k) EE Pre-Tax Deferral ER Contribution (no distinction between non-elective and match; Court Cost in this Source as well) LEO Transfer Source Pre-Tax Rollover After-Tax Rollover Roth Roth Rollover In-Plan Roth Conversion (currently only available at distributable event) NC 457(b) EE Deferred Comp ER Deferred Comp Roth Roth Rollover 457 Roth Rollover non-457 Rollover 457 Rollover non-457 In-Plan Roth Conversion (currently only available at distributable event) 32. How likely are you to implement Investment Advice/Managed Accounts to help address increasing retirement readiness? What barriers would prevent you from adding this feature to the plan? 33. Do you feel it is important to offer participants a means in which to convert their DC balance to an income stream? If so, do you feel it should only be a guaranteed option or should there be flexibility for the participant to choose between guaranteed and non-guaranteed options? 34. Would you consider adding a Self- Directed Brokerage Window as part of Advice and managed account services will be considered, but may or may not be added during the term of the contract. The evaluation would likely include weighing the perceived benefits to participants and the cost. Distributions are summarized on page 17 of the RFP, and the NC Transfer Benefit is described in more detail on page 20. These options include both periodic payments and lifetime income. Additionally, bidders are invited to identify other annuity distribution products they can make available in response to the questionnaire (page 63). This is not being considered as part of this RFP, but the Board maintains the right to alter the investment lineup in the future.

7 this process? 35. What would you consider to be your participants top three financial issues/concerns? 36. Is participant financial wellness a defined strategy? If so, how would you define financial wellness and what steps are you currently taking to improve the overall financial well-being of your population? 37. Is it a concern if the chosen provider were to cross-sell other products or services to your participants during phone based or in person meetings and communications? 38. What percentage of your participants have provided an email address and/or expressed a preference for electronic communication? Retirement readiness is believed to be a key concern. Financial literacy is also a key objective for the Department of State Treasurer. Retirement readiness is a key metric for the Board. You may also observe resources available on the website supporting financial literacy at www.nctreasurer.com. The successful firm will not market or cross-sell any other products to participants without written approval in advance. Please see question 2.1.29 on page 43 of the RFP. The number of participants utilizing electronic statements is identified on page 21 of the RFP. 401(k) Plan = 134,000 members with an email address 457 Plan = 28,000 members with an email address 39. Do any materials need to be translated into other languages? 40. In section B. Communication Component, 1. Overview and Expectations, 1.6, you reference communicating Plan changes. Can you provide an idea of the frequency of plan changes based on your recent history? 41. In section B. Communication Component, 2. Technical Requirements, 2.2.6 you refer to leveraging all member data from the pension system in your enrollments, customer service, and other customer touch points. Are there any limitations that you place on how this information can be used to develop and target communications? 42. In section B. Communication Component, 2. Technical Requirements, 2.2.11 you refer to marketing the Plans to eligible municipal organizations that have not yet This is not a requirement, but the questionnaire requests bidders to identify their capability in this area. Plan changes have historically been communicated in quarterly newsletters (and on the website). Recent history indicates one change per year. There will be information sharing agreements executed in order for a bidder to have access to pension system information, which shall include limitations for using the data. Field employees spend significantly more time servicing participants than marketing to eligible municipal organizations that have not yet adopted the Plans. Establishing an allocation of time for this effort is anticipated to be part of the annual education and

8 adopted the Plans. How important is this goal compared to your other goals regarding retirement readiness for current participants? How often do you currently reach out to non-participating organizations? marketing plan. 43. What are you expectations for ongoing participant support through the call center? 44. Can you provide average call handle times? 45. What are the top 5 topics you receive calls about in the customer service center? 46. How is Customer Service provided today for Benefits? Please describe if the delivery model varies by population, geography or organizational unit. Does anyone require special handling? 47. What type of functionality (transaction and information) is currently available through the voice response system? 48. Do all participants have an email address and phone number on file? 49. Please provide more detail on the appointment process for the local walk-in support. How does a participant make an appointment? How long does an appointment typically last? What are the top 5 reasons participants utilize this service? How do you monitor and track quality/accuracy results for this service? 50. Does the call center receive emails from participants? If so, what is the annual volume and top 5 email topics? Call center support is intended to be adequate to meet participant needs, and has been included in the requested performance standards. Please see the link provided in response to question #10. The Second Quarter Administration Report includes details on average speed to answer and call abandonment statistics. Average call time is not available. This is not available. Customer service for the DC plans is provided by the recordkeeper. In addition, there are several Plan Sponsor and Employer Services outlined in the Administration Manual included as an exhibit to the RFP. The recordkeeper has identified one employee to handle participants with recurring client service issues. The current voice response system does have transaction functionality. No. See the response to question #38 for the number of email addresses. Walk-in center hours are Tuesday - Friday from 10:a.m - 2:p.m. and Mondays from 11:a.m. - 3: p.m. Appointments can be made by calling the local Raleigh Office. Meeting topics include account reviews, getting ready to retire, enrollment, contribution changes, incoming rollovers, and distribution options. Satisfaction is generally measured through participant surveys. Participants can submit questions through the website or via email, which are routed to the service center. Statistics for these emails are not available. 51. Does field HR play any role in supporting The current field representatives primarily respond to retirement plan questions, although the employer HR

9 retirement plan questions or helping with escalations? If so, please describe how this works. department would likely be the contact if a participant wished to escalate a concern.