TRANSMITTAL LETTER FOR BOARD MEETING OF SEPTEMBER 18, 2025
COMMITTEE ON PENSION, HUMAN RESOURCES & CIVIL SERVICE
Mr. John P. Murray, Acting Executive Director
Title
Authorization to Amend the Investment Policy for the Metropolitan Water Reclamation District of Greater Chicago Deferred Compensation Plan and Trust and Metropolitan Water Reclamation District of Greater Chicago 401(a) Plan, effective October 1, 2025
Body
Dear Sir:
The Investment Policy for the District’s Deferred Compensation Plan and Trust (Plan) was first adopted in 1999 and has undergone various revisions over the years. Innovest Portfolio Solutions, LLC (Innovest) currently serves as the investment consultant for the Plan and assists the Deferred Compensation Committee (Committee) in its periodic review of the Investment Policy. Any recommended changes to the policy are brought to the Board of Commissioners, as Trustees of the Plan, for approval. The Investment Policy will also serve as the guiding document for the newly implemented Metropolitan Water Reclamation District of Greater Chicago 401(a) Plan.
In 2025, Innovest completed a review of the Investment Policy for the Plan and has recommended some changes to the Committee. The first recommendation made by Innovest is related to the description of the performance and risk expectations for the various investment option categories. The current version of the policy repeats this performance and risk information under each subcategory of investments (i.e., stable value option, fixed income, balanced, U.S. equities, international equities, lifecycle retirement funds). The recommended revision creates a new introductory subsection under Section II. Description of Current Investment Option Categories that outlines the performance and risk expectations to be applied to all the investment options. This eliminates the need to repeat these performance standards and streamlines the policy document.
Another recommendation made by Innovest was to modernize the policy language regarding lifecycle retirement funds, now called target-date funds. At the time of the last policy revision in 2015, lifecycle retirement funds were a relatively new investment option in the marketplace. The funds are now a common investment option included in most retirement plan menus, often serving as the default investment option for participants that do not make an investment selection at the time of enrollment. The recommended revisions update the description of these investment options and how they are to be evaluated to align with current language and practices in the retirement industry.
Finally, Innovest is recommending the addition of a new section to the policy to be titled Section V. Responsibilities. The purpose of this section is to communicate the responsibilities of the Committee and Board of Commissioners related to the administration and maintenance of the Investment Policy. It also outlines the roles and responsibilities of other parties appointed by the District to assist in the administration of the plan, such as the plan administrator (currently the Variable Annuity Life Insurance Company), the investment consultant (currently Innovest), the various mutual fund managers, and the custodian bank. It also provides a brief description of the participants’ responsibilities and ensures that these responsibilities will be communicated to participants. It should be noted that these roles and responsibilities are current practice for the District plan. These revisions are being recommended to more clearly communicate and document these practices within the written policy document.
A tracked changes version of the Investment Policy including the revisions above as well as some additional editorial changes is attached as a reference. Please note the title of the document has been revised to add the new Metropolitan Water Reclamation District of Greater Chicago 401(a) Plan.
The Deferred Compensation Committee requests that the Board of Commissioners, as Trustee for the Plans, approve the revisions to the Investment Policy for the Metropolitan Water Reclamation District of Greater Chicago Deferred Compensation Plan and Trust and the Metropolitan Water Reclamation District of Greater Chicago 401(a) Plan.
Respectfully Submitted, Marcelino Garcia, Chairman of Finance; Stephen J. Lux, Treasurer; Thaddeus J. Kosowski, Director of Human Resources
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for September 18, 2025
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