Deferred Compensation Committee

Summary

This item is an action to approve the meeting minutes from the Deferred Compensation Committee meeting held on November 13, 2025. The minutes document discussions and actions taken regarding various aspects of the city's deferred compensation plan, including informational reports on quarterly plan performance and reviews, manager searches, and the self-directed brokerage account. Key actions included amending recommendations on fund watch statuses, replacing certain funds within the plan, and adding foreign securities to the self-directed brokerage account. The committee also established meeting dates for 2026 and recommended the City Council adopt a resolution to rename the committee and expand its role due to the adoption of an IRS 401(a) Deferred Compensation Plan.

Citizen Impact

Approval of these minutes is an administrative step that does not directly impact residents' finances or services. It ensures accurate record-keeping for the city's deferred compensation plan.

Confidence

high

Summary

This report provides an overview of the City of Santa Clara's 457B retirement plan performance for the fourth quarter of 2025, presented by Nationwide. The plan saw a slight increase in its ending balance, growing from $289,447,778 in Q3 to $294,238,600 in Q4. Key activities during the quarter included $5.22 million in contributions and $5.92 million in distributions. The report details changes in participant balances, loan activity, and Roth account usage, indicating a generally stable performance with a net loss of $4.64 million in investment gains/losses for the quarter.

Citizen Impact

This report is informational and details the performance of the city's 457B retirement plan for employees. There is no direct impact on residents' taxes or services as it pertains to employee retirement savings.

Confidence

high

Summary

This informational report from the Fiduciary Consulting Group reviews the City of Santa Clara's 457 Deferred Compensation Plan performance for the fourth quarter ending December 31, 2025. The plan's total market value is $322,362,842, serving 1,587 participants, with an average balance of $185,406.

Economic Overview: The U.S. economy expanded 4.3% on an annualized basis in Q3 2025. December's inflation rate (CPI-U) was 2.6%, and the unemployment rate was 4.4%. The Federal Reserve lowered interest rates by 0.25% in December (current range: 3.50%-3.75%), with 1-2 more cuts anticipated in 2026.

Market Performance: The plan saw strong overall returns, with a 18.11% Year-to-Date return and 9.36% annualized over five years. U.S. large-cap equities (S&P 500) returned 17.88% YTD, while international equities (MSCI ACWI ex USA) had a strong year with 32.39% YTD. Global real estate underperformed, and Chinese equities struggled. Notably, the S&P 500's 10-year trailing return of 14.8% is above its historical average of 10.3%.

Plan Specifics: The plan's total fees have decreased to 0.242% (from 0.314% in 2020). Three funds are on watch status: Sterling Capital Total Return Bond R6 (due to ownership change), Vanguard International Value Inv (scheduled for replacement due to underperformance), and Vanguard International Growth Adm (due to underperformance). The Vanguard International Value Fund is slated for replacement with the DFA International All-World ex-US Fund.

Citizen Impact

This report directly impacts City of Santa Clara employees participating in the 457 Deferred Compensation Plan, as their retirement savings grew by 18.11% in 2025. The reduction in overall plan fees to 0.242% means more of their contributions and investment gains are retained. Changes to underperforming international funds aim to improve future investment returns for participants.

Confidence

high

Summary

This document outlines the Investment Policy Statement (IPS) for the City of Santa Clara's 457 Deferred Compensation Plan. The IPS establishes guidelines for the Deferred Compensation Committee to select, monitor, and evaluate investment options for the plan, which is a voluntary, tax-deferred retirement savings vehicle for eligible city employees. The policy aims to provide a diverse range of investment options with varying risk and return characteristics, including at least one option focused on capital preservation. It also details the responsibilities of the Committee, plan participants, and any contracted experts like consultants or recordkeepers. The policy is to be reviewed annually and updated as necessary.

Citizen Impact

This policy directly impacts city employees participating in the deferred compensation plan by defining the framework for their retirement investment options, aiming to provide a diverse and cost-effective range of choices for their long-term savings.

Confidence

high

Summary

This item concerns the review and adoption of the By-Laws for the City of Santa Clara Deferred Compensation Committee. The Committee operates in an advisory capacity to the City Manager regarding the administration and investments of the City's 401(a) and 457(b) retirement plans for employees. The proposed by-laws outline the Committee's membership, which includes representatives from the City Auditor, Finance Director, and various city departments, all serving as volunteers appointed by the City Manager for four-year terms. The by-laws detail the Committee's fiduciary duties, which include advising on benefit delivery, investment diversification, and the selection/performance of third-party service providers. Meetings are to be held at least quarterly, with specific provisions for election of a Chair and Vice-Chair, quorum requirements, and recordkeeping. The by-laws also address vacancies, resignations, conflicts of interest, and indemnification for committee members, with amendments requiring both Committee vote and City Manager approval.

Citizen Impact

Residents who are city employees participating in the deferred compensation plans will be indirectly affected by the formalized structure and advisory duties of the committee, which oversees the prudent management and investment of their retirement funds.

Confidence

high