Acceptance of this recommendation by Orange County Commissioners resulted in approximately a $1 million savings per year for Orange County employees. I provided this document to Orange County Commissioners in 2008; therefore, the document is public information despite any license that the Slideshare form may indicate.

1. Simplifying Your Investment and Fiduciary Decisions
To: Sharon Donoghue, Deputy County Administrator
Orange County
Mark Fostier, Assistant Comptroller
Orange County Comptroller’s Office
From: Darlene Malaney, Senior Consultant
Herb Whitehouse, Chief Fiduciary Officer
Tim Nash, Senior Consultant
Date: August 28, 2008
Re: Review of the Orange County Sheriff’s Office RFP for
457(b) Deferred Compensation Services Providers
OVERVIEW:
As an initial step in conducting a thorough review of the Orange County (the County) 457
Deferred Compensation Plan, The Bogdahn Group (TBG) was asked to perform a due
diligence review of the Orange County Sheriff's Office (OCSO) competitive procurement
process. The purpose of this assignment is to determine the adequacy thereof, and whether
the procurement was conducted in a fair, open and impartial manner. Depending on the
results of this review, we hoped to test the viability of a path for the County to accelerate its
own positive change for County employees; viz., “piggy-backing” on the OCSO RFP and
OCSO’s positive experience with Vanguard during the transition and after.
Our written report describing the scope of our due diligence review and related findings is
presented below. The due diligence review is organized into four sections as listed below.
1. OCSO Advertisement and Distribution of a Request for Proposal (RFP)
2. OCSO Vendor List
3. Contents of the OCSO RFP
4. OCSO Evaluation of the Responses Received
Our conclusions and recommendations are presented at the end of this report.

2. August 28, 2008
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THE BOGDAHN GROUP’S DUE DILIGENCE FINDINGS
1. Advertisement and Distribution
We have verified the legal advertisement of OCSO’s RFP #132-08 (The RFP) in the
Orlando Sentinel on 4/30/06 and 5/4/06. The advertisement provided all necessary
information, including the submission deadline, delivery address, date the sealed bids
would be opened, and OCSO Procurement Department contact information. In addition,
the RFP was mailed to eighteen potential service providers on 5/1/06. The Advertisement
and RFP advised potential applicants of the Tuesday, May 16, 2006, submission deadline.
2 . Vendor list
The OCSO mailed the RFP to a diverse group of eighteen professional deferred
compensation service providers, which are listed below. We believe this was an adequate
distribution and that the OCSO obtained a satisfactory number of responses.
Potential Providers:
Mass Mutual Retirement Services
CPI Qualified Plan Consultants, Inc.,
Moreno, Peelen and Company
MetLife Resources,
Merrill Lynch
Smith Barney
Hummel, Voight Insurance
Dimensional Fund Advisors
Raymond James & Associates, Inc.
Vanguard
T. Rowe Price Retirement Plan Services,
Fidelity Investments
Nationwide Retirement Solutions
Morgan Stanley
John Hancock
The Hartford
ING Financial Services
CoAdvantage
3. Contents of the RFP
The RFP asked respondents to answer a wide variety of questions and to provide certain
detailed information and documentation to determine their qualifications and ability to
deliver the scope of services requested.
The RFP was organized into four main sections: Service, Cost, Investments, and Spanish
Addendum. A summary of each section is presented below.
Service - The RFP asked respondents to answer questions pertaining to their ability and
qualifications in performing administrative, operations, technology, documentation and

3. August 28, 2008
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reporting certain services, conversion and implementation services, investments, and
independent investment advice.
Cost - The RFP requested information about the following: plan costs, investment
expenses, employee costs, investment advisory services, fiduciary review and process, self
directed brokerage account, compensation to broker/agent or advisory.
Investments – The RFP provided a worksheet entitled “Mutual Fund Proposal”. The
worksheet allowed respondants to list recommended funds in the following categories:
Large Growth, Large Blend, Large Value, Mid Cap, Small Cap, Growth & Value, Specialty
Funds (REIT, etc.), International (Foreign) Stock, International Small, Emerging Markets,
Intermediate Bond, Intermediate Government, TIPS Short Bond, Money Market, Short
Government Bond, Stable Value, Life Cycle Funds. The worksheet requested that the
respondents provide the Morningstar asset class, ticker symbol, expense ratio, revenue
sharing(12b-1 fees), finders fee/sub-TA fees, and whether it was a propriety fund.
Spanish Addendum – The RFP requested information regarding the respondents Spanish
communication abilities.
The information requested was very comprehensive and provided OCSO with all the
necessary tools to make an informed decision.
4. Evaluation of the responses received and selection of Vanguard -
Based on reviewing OCSO evaluation documentation and confirming discussions with the
lead staff person for the OCSO evaluation process, TBG finds that the OCSO evaluation
process was thorough, fair, and produced not only a reasonable, but an excellent result for
the OCSO and the participants in the OCSO 457 Deferred Compensation Plan through the
selection of Vanguard and Dimensional Fund Advisors (a small cap fund subcontractor to
Vanguard)
More specifically, our review of the OCSO documentation included analysis of the
following:
o OCSO’s Comparison Chart of Proposals in Response to RFP#132-6
o OCSO’s Investment Advisory Summary
o OCSO’s Fiscal Chart of Basic Expenses
o RFP responses from the 13 service providers that submitted proposals
o Meetings, phone conversations and correspondence with Bernie Rice,
General Counsel, Orange County Sheriff’s Office
o Trust Agreement between OCSO and Vanguard Fiduciary Trust Company
o Declaration of Trust Establishing Vanguard Trust Company Retirement
Savings Trust
o Employer’s selection of Vanguard and DFA funds
o Employer’s fund mapping strategy

4. August 28, 2008
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o Holland & Knight letter confirming the OCSO deferred compensation plan
status as a governmental plan within the meaning of Section 818(a)(6) of the
Internal Revnue Code
o Vanguard Plan Provisions and Services Summary
o Vanguard Retirement Savings Trust Investment Authorization Form
Additional Advantages to Using Vanguard
The price that OCSO secured from Vanguard for its services was appropriate and
competitive for the OCSO Deferred Compensation Plan. However, using the same
Vanguard approach for the rest of Orange County also permits Vanguard to offer reduced
relationship pricing for very similar services in the same geographic location and amortized
over several thousand more participants.
The cost of the Vanguard program at OCSO is provided in four basic parts:
1. Investment fees for Vanguard funds ranging from 15 basis points (Vanguard 500 Index
Fund Investor Shares and Vanguard Total Stock Market Index Fund Investor Shares) to
56 basis points (Vanguard Mid-Cap Growth Fund).
2. Investment fees for DFA funds ranging from 27 basis points (DFA U.S. Large Value
Index) to 60 basis points (DFA Emerging Markets Value I).
3. A 25 basis point wrap fee payable to Vanguard on all assets invested in DFA funds.
4. An annual $60 per participant fee.
Vanguard has proposed providing OCSO and Orange County with the same level of
services and cost. However, at the initiation of the program the annual per participant fee
will be $50 instead of $60. In addition, as assets subject to the current vendors’ market
value adjustments and deferred surrender charges are transferred into the new program, the
annual per participant fee will be reduced to $27 according to the following schedule:
Assets Moved to Vanguard
$90,000,000 -- $119,999,999 $50 per participant
$120,000,000 -- $150,000,000 $42 per participant
Over $150,000,000 $27 per participant
We estimate that total cost per participant (excluding termination fees), even in the first
year of the new program, will be reduced by more than half of the current program costs.1
1
Attachment A compares the expenses of the current Nationwide, ING, and ICMA-RC programs to the expense that
would be available from piggy backing onto the OCSO RFP.
It is important to note that while The Bogdahn Group obtained detailed fee and expense disclosures from the current
vendors, that there is no expense disclosure for the Nationwide and ING fixed income accounts. These accounts
represent approximately 28% of the combined Nationwide and ING assets. Accordingly, The Bogdahn Group, in
consultation with Nationwide and ING, has estimated the cost of these investments at 100 basis points.
Vanguard costs are estimated on the assumption that participants allocate their investments consistent with the
allocations in the OCSO program.

5. August 28, 2008
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Transition Approach
Employee Communication
OCSO, with the dedicated support and direction from Vanguard, did a very good job in
communicating the deferred compensation plan changes to its employees. OCSO
communicated these changes to employees through hard copy correspondence, on-site
meetings, and a dedicated website. Examples of the various forms of communication
included:
o Frequently Asked Questions (and Answers) Handout – Created by OCSO
o “Your Retirement Plan is On the Move” handout provided by Vanguard –
this document outlined information about who Vanguard is, key dates, new
fund line-up and mapping, target retirement funds, Vanguard brokerage
option, Vanguard account services contact information, On-site group
meeting dates and locations, Individual meeting dates and locations, and
dedicated OCSO transition website portal.
o “Simplifying your Investment Decision” handout provided by Vanguard.
This document explains the various investment strategies, options and
services available to employees and provides a questionnaire to assist in
making this determination.
o “Vanguard Target Date Retirement Funds” brochure – this document
provided an overview of what target date funds are and how they can benefit
certain investors.
Vanguard will provide similar communications support for the County 457 Deferred
Compensation Plan.
Termination Fees and Expenses
At the time the OCSO RFP was issued, the contracts in place with ING and Nationwide
imposed transfer restrictions on certain funds. OCSO made prudent decisions with respect
to these issues, and acted with appropriate fiduciary care when it provided clear and
concise information outlining the charges that applied to each participant. OCSO gave
employees the choice of paying termination fees and moving to Vanguard immediately, or
participants could choose to leave the assets with ING or Nationwide until conditions were
met for transferring without penalty. OCSO had all unrestricted monies transferred to
Vanguard immediately, where participants benefited from significantly lower fees, a
simplified and improved fund line-up and no surrender charges, termination fees or market
value adjustments like the previous providers imposed.
Fund Mapping
While the same fund mapping process that Vanguard and OCSO implemented for the
Sheriff’s plan is a viable approach for the overall Orange County Plan, The Bogdahn Group
suggests a different approach; namely, mapping to portfolios.
The success of every defined contribution plan depends not only on the quality and cost of
the investment options made available to participants, but on whether participants put

6. August 28, 2008
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together an efficient portfolio. Portfolio investing is the core of modern portfolio theory,
and it allows participants to do more than simply trade risk for return. Efficient portfolios
reduce risk by way of the combination of funds used in order to obtain the greatest
expected return for a given level of risk.
Ordinary participants find this task of creating efficient portfolios impossible to execute,
and often hard to even comprehend as a concept. Accordingly, we would like to send an
effective message to participants about the value of portfolios by automatically mapping
every participant to an age appropriate Vanguard Target Fund, subject to the participant’s
right to direct the mapping of their investments to any fund or funds of their choice.
The Overall Evaluation of the Change to Vanguard
The Bogdahn Group collected extensive fee, expense, and conflict of interest information
from the current vendors serving the Orange County 457 Deferred Compensation Plan. We
have also met with each vendor. If we were to evaluate the current program on a scale
ranging from negative ten (-10) to positive ten (+10), we would place it at a negative seven
(-7) or negative eight (-8). Moving to the approach adopted by OCSO, at the more
favorable relationship pricing available, would move the program somewhere from a
positive six (+6) to a positive eight (+8).
A compelling case can be made for the urgency of making an immediate decision to adopt the
same program as OCSO – even at the same annual $60 per participant cost. We believe that it
would be a serious failure of fiduciary responsibility for the County to delay, even if that delay
would be in connection with doing a new RFP on the model that OCSO conducted. Participants
require the immediate cost reductions that “piggy backing” on the OCSO RFP will provide. But
The Bogdahn Group’s negotiation with Vanguard has resulted in annual fees that will be
signficantly less per participant. The Bogdahn Group is of the opinion that these fees are
reasonable for the assets and number of participants in the Orange County Plan.
CURRENT PROVIDER REVIEW
In addition to evaluating the OCSO procurement process, The Bogdahn Group conducted a
review of the current vendors providing services for Orange County. The review process
involved meeting with each provider, numerous telephone calls, emails, comprehensive
data requests, fee and conflict of interest disclosure. A summary of our findings is
presented below:
ICMA-RC
There are approximately 47 investment options available to plan participants under the
ICMA platform. The ICMA platform also provides mulitple offerings in most fund
categories. For example, there are sixteen funds in the large-cap space alone (6 large
blend, 4 large growth and 6 large value). This line-up also contains some funds of
questionable quality. For example, the Legg Mason Value fund, with a Morningstar Rating
of one star, and an expense ratio over 1%, has been in the bottom one percent vs. its peers
over the trailing year-to-date, one year, three year and five year time periods.

7. August 28, 2008
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ING Financial Advisors
There are currently over 100 investment options available to plan participants on the ING
platform. Having this many options is overwhelming for typical employees. ING provides
multiple choices in most every fund category. A strong case can be made regarding the
lack of oversight provided by ING in monitoring the quantity and quality of the investment
options it has in place under the current Orange County 457 Plan fund line-up. For
example, the ING OpCap Balanced Value fund, has a Morningstar Rating of one star and
has ranked in the bottom five percent vs. its peers over the trailing one, three and five year
periods. This OpCap fund also carries a very high expense ratio of 1.2 %.
Nationwide Retirement Solutions
There are approximately 45 investment options available to plan participants on the
Nationwide platform. The platform provides mulitple offerings in most fund categories.
For example, there are fifteen funds in the large-cap space alone (5 large blend, 5 large
growth and 5 large value). As explained later in this report, this is counterproductive to
participants. In addition, the quality of some funds offered is of concern. For example, the
Morgan Stanley Institutional Fund Trust has ranked in the lowest quartile vs. its peers over
the trailing one, three, five and ten year average time periods and has a Morningstar Rating2
of two stars.
Nationwide also appears to provide $600,000 to the Florida Association of Counties.3
The
Bogdahn Group is of the opinion that the financial support that Nationwide provides to the
Florida Association of Counties is a matter of fiduciary concern for a Florida county that is
a member of this Association. The financial support and the apparent conflict of interest
that may exist for Orange County decision makers should be addressed by legal counsel if
Orange County continues to use Nationwide as a vendor.
Adopting the core conclusions of the diligent RFP process conducted by OCSO would
immediately provide Orange County with a clear arms length vendor relationship, and
would remove even the appearance of a conflict of interest.
OVERVIEW OF CURRENT MULTI-PROVIDER STRUCTURE
High administration and investment fees reduce the ultimate level of retirement savings
available to participants. Multiple vendor structures are invariably more expensive than
single recordkeeper administrative platforms. While investment choices may utilize more
than one fund company, there should be only one point of contact for employees for all
aspects of the plan. Moreover, having a menu of investment choices that is selected not by
2
This is a proprietary Morningstar data point. Morningstar rates mutual funds from 1 to 5 stars based on how well
they've performed (after adjusting for risk and accounting for sales charges) in comparison to similar funds. Within
each Morningstar Category, the top 10% of funds receive 5 stars, and the bottom 10% receive 1 star. Funds are rated
for up to three time periods-three-, five-, and 10-years and these ratings are combined to produce an overall rating.
Funds with less than three years of history are not rated. Ratings are objective, based entirely on a mathematical
evaluation of past performance.
3
Florida Association of Counties Budget Proposal FY 2007/08.

8. August 28, 2008
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several vendors, but by a formal fiduciary process with professional assistance is a critical
component of an effective and well managed defined contribution plan.
Offering too many investment choices, as each of the current provider platforms do,
increases the complexity and confusion for participants. The result is that poor investment
decision are made. Academic studies definitively confirm that too many choices results in
poor outcomes for participants in general. A smaller, well-constructed and rational
investment menu is necessary when participants are permitted to direct their own
retirement investments..4
CONCLUSION
There are two important factors involved in making the decision to move to a single
provider. The first is timing. Orange County participants deserve an immediate change
that will move the program from a negative seven/eight (-7/-8) to a positive six to eight (+6
to+8). Making the decision to use the vendor and the approach already vetted by the OCSO
RFP gives Orange County decision makers the unique opportunity to make this decision
quickly and without undue delay. A second factor is confidence that the decision to change
to a single vendor will have a sucessful outcome. Again, Orange County can confidently
make a decision to use a vendor that has sucessfully managed a very similar transition right
here in Orange County. Not only is Vanguard’s experience with the OCSO transition very
transferable, but Orange County also has access to the advice and counsel of the very
competent team at OCSO that had oversight over the transition to Vanguard.
The key to the approach adopted by OCSO is the administrative, cost, and employee
communications advantages of a single vendor. Single vendor managed plans create
economies of scale that can deliver higher quality retirement plans at lower cost. Plan
structures that have multiple vendors offering independent administration and investment
services are more expensive than single vendor approaches. These higher costs will have a
direct and negative impact on participants’ accumulations, particularly over the long-run.
Multiple vendor approaches are also more difficult to manage and almost always result in
participants investing in less efficient investment portfolios; namely, portfolios that will
have lower expected returns for any given level of risk, or greater risk for the expected
returns.
4 C.f., April 2008, DEFINED CONTRIBUTION PENSION PLANS IN THE PUBLIC SECTOR: A BEST
PRACTICE BENCHMARK ANALYSIS, Roderick B. Crane, J.D., Director, Institutional Client Relations, Public
Sector Market TIAA-CREF, Michael Heller FSA, MAAA, EA, Vice President, Actuarial Consulting Services
TIAA-CREF, Paul Yakoboski, Ph.D., Principal Research Fellow TIAA-CREF Institute.

9. August 28, 2008
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It is our opinion that it is imperative that Orange County immediately move away from the
current multiple vendor approach. By adopting the same approach and using the same
vendor selected by the OCSO, Orange County can make this move immediately, without
the delay of beginning a new and largely duplicative RFP process.
For The Bogdahn Group:
____________________________
Herbert A. Whitehouse
Chief Fiduciary Officer