Attachment 3 - DRAFT Statement of Work.pdf

Pension Benefit Guaranty Corporation

Fixed Income Investment Services

Attachment 3: DRAFT Statement of Work

Last Updated: August 28, 2025

PART I – GENERAL

1. Background

The Employee Retirement Income Security Act of 1974 (ERISA) established Pension Benefit

Guaranty Corporation (PBGC) as a federal corporation to encourage the growth of defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at a minimum. Defined benefit pension plans promise to pay a specified monthly benefit at retirement, commonly based on salary and years on the job.

PBGC, a wholly owned United States Government corporation, administers the insurance program and termination process for most private-sector defined benefit pension plans that are tax-qualified under the Internal Revenue Code. PBGC is headed by a Director who reports to a

Board of Directors consisting of the Secretaries of Labor, Commerce, and Treasury, with the

Secretary of Labor as Chairman. PBGC receives no funds from general tax revenues for its

Single-Employer Program or the traditional multiemployer financial assistance program. PBGC collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives the assets of the pension plans it terminates.

The PBGC Investment Program is structured as a manager-of-managers program. No assets are managed internally. The PBGC exclusively uses institutional investment management firms to invest its assets, subject to PBGC’s oversight and consistent with the PBGC’s Investment Policy

Statement (IPS) as approved by the Board of Directors. PBGC’s investment program (Total

Fund) maintains two separate investment funds: the Revolving Fund and the Trust Fund. The

Revolving Fund (valued at approximately $60 billion as of 06/30/2025) receives all premium payments and is invested solely in “book-entry” U.S. Government securities held at the U.S.

Treasury. The Trust Fund (valued at approximately $70 billion as of 06/30/2025) receives assets from terminated plans. Trust Fund assets can be more flexibly invested than Revolving Fund assets, with most assets invested in investment grade debt obligations and equities. However, both have the same investment objectives.

2. Objective

PBGC seeks fixed income investments that provide a total rate of return that exceeds the benchmarks of their respective portfolios over a full market cycle, consistent with appropriate levels of risk.

3. Scope of Work

To facilitate the management of the Trust Fund assets, PBGC anticipates hiring multiple investment managers (hereinafter referred to as contractors) capable of managing fixed income assets across multiple fixed income strategies consistent with a specific set of investment guidelines.

The contractor shall be responsible for providing active investment management and related services for fixed income portfolios. The investment objective is to construct portfolios of fixed income assets that earn superior returns which exceed the respective portfolio benchmarks of these strategies, consistent with the risk parameters outlined in the investment guidelines for the respective portfolios. The portfolios shall be invested in one or more of the four Trust Fund fixed income strategies listed below:

Trust Fund Strategies:

• Core Fixed Income

• Credit Fixed Income

• Global Fixed Income

• Emerging Markets Debt

PBGC expects the award allocations to range from a minimum of US $250 million to a maximum of $3.0 billion for each strategy selected but makes no guarantee as to the size of any award. These allocations may change over time due to the investment results generated by the contractor and are determined at the discretion of PBGC. Investments of Trust Fund assets for these strategies may include fixed income and derivative products that are obligations of both domestic (U.S.) and non-U.S. issuers.

The contractor shall use its best efforts to:

• Select securities that are suitable and appropriate to the PBGC's mission;

• Select securities that are compliant with PBGC’s IPS; and

• Avoid securities of companies with underfunded pension plans that the PBGC is likely to terminate (the contractor shall devise a methodology for identifying such companies at risk, which is subject to review by PBGC).

4. Periods of Performance (Estimated)

The following are the estimated periods of performance, contingent upon PBGC providing the contractor a Notice to Proceed (NTP). (See Part I Section 7.1 for more information on the NTP.)

Base Period: September 30, 2026 – September 29, 2027

Option Year 1: September 30, 2027 – September 29, 2028

Option Year 2: September 30, 2028 – September 29, 2029

Option Year 3: September 30, 2029 – September 29, 2030

Option Year 4: September 30, 2030 – September 29, 2031

Option Year 5: September 30, 2031 – September 29, 2032

Option Year 6: September 30, 2032 – September 29, 2033

Option Year 7: September 30, 2033 – September 29, 2034

Option Year 8: September 30, 2034 – September 29, 2035

Option Year 9: September 30, 2035 – September 29, 2036

5. Place of Performance

The work will be performed off-site at the contractor’s offices. The contractor has the option to conduct in-person meetings and discussions with PBGC personnel at the contractor's expense.

The contractor will hold at least one semi-annual meeting virtually with PBGC at a predetermined time acceptable to both the contractor and PBGC. Meetings shall include but not be limited to a business update and portfolio performance and positioning. The contractor shall provide the appropriate personnel to address each area of review.

The contractor shall hold annual due diligence meeting in their office at a predetermined time acceptable to both the contractor and PBGC. Meetings shall include but not be limited to a business update, portfolio performance and positioning, and updates on various departments and functions such as legal, compliance, operations, client service, and both portfolio and enterprise risk. The contractor shall provide the appropriate personnel to address each area of review.

6. Contract Type

This is a fixed-rate, variable-quantity contract. The contractor’s fee is calculated by multiplying the assets under management for a specific financial product by the negotiated rate.

7. Transition-In and Transition-Out Periods

7.1 Transition-In Period. Upon contract award, the parties will negotiate in good faith to finalize the investment guidelines that will govern the management of the investment mandate. The contractor will work with

PBGC, its custodian, and its designated transition asset manager to facilitate the construction and funding of the investment mandate in a timely manner. Upon mutual agreement and execution of the investment guidelines, PBGC will issue the contractor an NTP, permitting performance to commence. Historically, the period between award and the start of performance is approximately three (3) months.

7.2 Transition-Out Period. Upon receiving notification from the contracting officer or contracting officer’s representative, the contractor shall coordinate with PBGC, its custodian, and its designated transition asset manager to facilitate the full or partial liquidation of the investment mandate in a timely manner.

8. Post-Award Conference and Periodic Progress Meetings

The contractor agrees to attend any post-award conference convened by PBGC. In addition, PBGC personnel may request to meet periodically with the contractor to review the contractor's performance. The contractor agrees to work with PBGC to schedule such meetings within a mutually agreeable timeframe. These meetings will be at no additional cost to the government.

PART II – TASKS

1. Investment Mandate

1.1 The contractor shall:

1.1.1 Provide active investment management services for fixed income portfolios that will, over a full market cycle, provide a total rate of return which exceeds the benchmark of the respective portfolio, consistent with appropriate levels of risk.

1.1.2 Maintain separate account formats for assets in the Trust Fund.

1.1.3 Strictly adhere to the requirements of the investment guidelines, which are incorporated by reference into this contract.

1.2 PBGC will determine the allocations for each product under this contract at the time of contract award and on an ongoing basis after award based upon its independent assessment of the contractor’s investment skill, ability, and results.

2. Investment Requirements

2.1 Investment Management – Process and Strategy. The contractor shall:

2.1.1 Use a highly structured investment process which incorporates, but is not limited to, at least four (4) of the following elements in the investment decision-making process:

2.1.1.1 Establishing an interest rate forecast for short term and long-term time periods;

2.1.1.2 Conducting yield curve analysis;

2.1.1.3 Determining the proper maturity and duration allocations;

2.1.1.4 Performing sector analysis and making sector investment decisions;

2.1.1.5 Conducting credit analysis of issuers; and/or

2.1.1.6 Selecting securities within the universe of permissible investments described in the PBGC investment guidelines.

2.1.2 Evaluate potential investments using disciplined, thorough investment analysis and due diligence.

2.1.3 Manage assets with full discretion, in accordance with PBGC’s IPS and the strategy’s investment objectives as defined in the Investment

Guidelines.

2.1.4 Employ the investment philosophy, styles, and strategies for which it was retained, unless otherwise agreed to through contract modification.

2.1.5 Provide PBGC, at no additional cost, access to any of the contractor's internal or external investment, market, and economic research training materials, support capabilities, and services made available to clients as part of the contractor’s regular commercial practice.

(These materials and services do not include proprietary models or information unique to the contractor's investment process.)

2.1.6 Remain accessible to communicate with PBGC’s Corporate

Investments Department (CID) during normal business hours and serve as a resource of economic and investment information and research to CID.

2.1.7 Keep PBGC fully informed of the rationale for investment decisions and changes in the portfolio under its management.

2.1.8 Provide other investment advisory services made available to clients as part of the contractor’s regular commercial practice at no additional cost to the Government.

2.1.9 Provide notification to PBGC of significant changes in personnel, ownership, resources, or firm direction as soon as practicable upon occurrence but not more than 30 calendar days thereafter.

2.1.10 Discharge its duties under this contract solely in the interest of

PBGC with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims.

2.1.11 Utilize best practices of the investment industry including, but not limited to, the standards issued by the Chartered Financial Analyst

Institute.

2.1.12 Notify PBGC within two (2) business days of learning of any potential or actual issue that could hinder the contractor’s ability to trade with full discretion on behalf of PBGC.

2.1.13 Maintain appropriate operational separation (i.e., a Chinese Wall) between trading and investment duties on behalf of PBGC portfolios and any engagement such as creditor committee representation which could affect the contractor’s full discretion to buy or sell in the marketplace.

2.1.14 Work closely with PBGC’s custodian bank to facilitate the efficient and timely recording of purchases, sales and other activities, reconcile securities and cash balances, and provide information necessary to calculate performance results.

2.1.15 As applicable, maintain records of its votes and report the results, at least annually, to PBGC. (PBGC will delegate its proxy voting authority to the contractor.)

2.2 Educational Conferences and Training Requirements.

2.2.1 The contractor shall provide PBGC with at least six (6) seats to any educational conference it may offer to clients. These seats shall be provided at no additional cost to the Government. This opportunity would include the cost of related meals offered as part of the formal conference program.

2.2.2 PBGC will not participate in any non-training or non-educational activities offered at these conferences including, but not limited to, golf, fishing, tours, and entertainment, as PBGC employees in their official capacities can neither pay for nor accept these items.

2.2.3 PBGC will pay the travel, lodging, per-diem, and other subsistence expenses (e.g., if meals are not offered to all attendees as part of the conference) for its employees who participate at such conferences.

2.2.4 PBGC will advise the contractor of its acceptance or declination of seats offered by the contractor.

2.3 Fidelity Bond, Cyber and Other Insurance Coverage Requirements. The contractor shall:

2.3.1 Have or acquire within 6 months of contract award a fidelity bond, with the PBGC as a loss payee, in the minimum amount of $5,000,000.00 with maximum deductible of $1,000,000.00.

2.3.1.1 The bond shall cover, at a minimum, losses due to

dishonest or fraudulent acts or omissions by the contractor.

2.3.1.2 The contractor shall provide proof of the existence of such a fidelity bond to PBGC upon contract award and then annually thereafter.

2.3.2 Have SEC-required fidelity bonds pursuant to 17 CFR § 270.17g

1, or acquire within 6 months of contract award errors and omissions coverage, or any other fiduciary coverage, in the minimum amount of

$10,000,000.00 with a maximum deductible of $1,000,000.00 per claim.

2.3.2.1 The policy shall cover, at a minimum, losses caused by errors, omissions, or negligent acts of the contractor.

2.3.2.2 The contractor shall provide proof of compliance upon contract award and then annually thereafter.

2.3.3 Have cyber and technology products and services liability insurance, or acquire within 6 months of contract award, with limits of not less than $5,000,000.00 for each wrongful act.

2.3.3.1 The contractor shall provide proof of the existence of such insurance to PBGC upon contract award and then annually thereafter.

2.4 Disaster Recovery Requirements. The contractor shall:

2.4.1 Have and maintain a disaster recovery plan, which includes critical business operations, computer systems, and telecommunications.

2.4.2 Test and/or update the plan at least annually.

2.4.3 Provide a copy of the annual test report to PBGC within 30 calendar days of completing the test.

2.4.4 Provide an updated copy of the plan within 60 calendar days of any revisions.

2.4.5 Include, at a minimum, the following information in the plan:

2.4.5.1 Emergency response procedures, including:

2.4.5.1.1 Step-by step instructions identifying explicit

techniques to be used for responding to various emergency situations;

2.4.5.1.2 Identification of disaster recovery teams; and

2.4.5.1.3 An organizational chart and list of key personnel

responsible for performing the disaster recovery actions as well as the priority of duties and lines of authority.

2.4.5.2 Backup site activation procedures, including:

2.4.5.2.1 Identification of the backup site location;

2.4.5.2.2 Identification of the backup site activation

process;

2.4.5.2.3 Identification of key personnel and the recovery

team(s) they support; and

2.4.5.2.4 If the backup site is operated by an organization

other than the contractor, a copy of the Alternative Site

Processing Agreement within 30 days after being added to the plan.

2.4.5.3 Primary site recovery procedures, including:

2.4.5.3.1 Instructions for accomplishing salvage operations;

2.4.5.3.2 A replacement acquisition strategy for hardware, software, telecommunications, etc.;

2.4.5.3.3 Facility reconstruction plans; and

2.4.5.3.4 Identification of personnel supporting the primary

site recovery and the team(s) they support.

2.4.5.4 Primary site reactivation/normalization, including:

2.4.5.4.1 Procedures to ensure a smooth transition from the

alternative processing site to the primary site; and

2.4.5.4.2 A list of teams performing the various functions

and the personnel assigned to those teams.

PART III – APPLICABLE PUBLICATIONS

PBGC Investment Policy Statement (current version)

(https://www.pbgc.gov/sites/default/files/documents/pbgc-investment-policy.pdf) https://www.pbgc.gov/sites/default/files/documents/pbgc-investment-policy.pdf

PART IV – DELIVERABLES

1. Description of Deliverables

1.1 The contractor shall provide preliminary monthly statements and reports, on or before the seventh business day following month end, which detail the following information:

1.1.1 Portfolio Comparison vs. the Benchmark Index – Results must include, but not be limited to, returns for the month, latest three months, calendar year to date, PBGC’s fiscal year to date (the fiscal year runs from

October 1 through September 30), and since inception. As the performance history expands, returns for one-year, two-year, three-year, five-year, and ten-year periods shall be provided, when applicable.

1.1.2 Holdings Report – including but not limited to a full listing of securities held by type or sector

1.1.3 Investment Summary – including but not limited to portfolio vs.

benchmark performance, performance over specified trailing time periods, trailing performance by year, specified risk calculations, and a narrative summary of performance.

1.1.4 Portfolio-level Characteristics – including but not limited to comparing portfolio and benchmark duration, spread duration, yield, quality, allocation by sector, and allocation by quality.

1.1.5 Performance Attribution – attribution based on both a relative return and absolute return against the specified benchmark including but not limited to attribution based on duration, sector, and industry over the trailing 3-month and one-year period. Also include commentary over both trailing periods.

1.1.6 Economic and Market Commentary – for the review period in arrears and forward-looking market outlook.

1.1.7 Derivatives Report - If the fund or separate account utilizes derivatives in the portfolio, provide a detailed report. PBGC will provide a template report and instructions as part of agreed-upon investment

1.1.8 Guideline Compliance Status Report – detailing the status of all guideline risk parameters being monitored for compliance against

1.2 The contractor shall provide monthly holdings data, electronic copy format to be determined, as required for the PBGC risk system, including detailed characteristics of securities. Provide details, as required, of OTC derivatives contracts to the Risk Management System vendor.

1.3 The contractor shall provide quarterly statements and reports that detail the following information (due within thirty calendar days after quarter end):

1.3.1 Portfolio Comparison vs. the Benchmark Index;

1.3.2 Investment Summary;

1.3.3 Portfolio-level Characteristics;

1.3.4 Performance Attribution;

1.3.5 Economic and Market Commentary;

1.3.6 Contract Compliance Certification Report – detailing all non-compliance events throughout the quarter which violated the investment guidelines (if there are internal constraints that are not stipulated in the investment guidelines and were violated during the quarter, provide those as well); and

1.3.7 Guideline Compliance Status Report .

1.4 The contractor shall provide annual statements and reports that detail the following information:

1.4.1 Evidence of fidelity bond, errors and omissions professional liability coverage, and cyber and technology insurance within 60 calendar days of renewal;

1.4.2 Revised Securities and Exchange Commission Form ADV Parts I and II, within 30 calendar days of revision, if an ADV is filed;

1.4.3 Policy on Creditors Committee participation and a record of those personnel who served on such committees where securities held in the

PBGC portfolio were involved; and

1.4.4 Revised Ethics Policy (within 30 calendar days of revision).

1.5 Upon request, the contractor shall provide PBGC other reports, research and publications it customarily provides to its clients.

1.6 The contractor shall provide copies of certain PBGC reports noted above to PBGC’s investment consultant as noted below in the Summary of

Deliverables.

1.7 The contractor may provide the above reports electronically and, as available, through secure online access to its website.

2. Summary of Deliverables

REPORT DESCRIPTION

METHOD OF

DELIVERY

DATE OF

COMPLETION/

DELIVERY

Reconciliation reports available to PBGC’s custodian

Via email to Custodian and Investment

Consultant

NLT 3 business days after month end.

Portfolio Comparison vs. the Benchmark Index

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Holdings Report

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Investment Summary

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Portfolio-level Characteristics vs. Benchmark

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Performance Attribution vs. Benchmark

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Economic and Market Commentary

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Derivatives Report – if the fund utilizes derivatives in the portfolio

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Guideline Compliance Status Report

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 7 business days after month end.

Contract Compliance Certification Report

Via email to Contracting

Officer’s Representative and Investment

Consultant

NLT 30 calendar days after quarter end

Quarterly Statements and Reports

Officer’s Representative and Investment

Consultant

NLT 30 calendar days after quarter end

Evidence of fidelity bond and errors and omissions professional liability coverage

Via email to Contracting

Officer’s Representative

NLT 60 calendar days after renewal

Evidence of cyber and technology products and services liability insurance

Officer’s Representative

NLT 60 calendar days after renewal

Revised Securities and Exchange Commission

Form ADV Parts I and II (if an ADV is filed.)

and Investment

Consultant

Within 30 calendar days of revision

Policy on Creditors Committee participation and list of participating personnel

Within 30 calendar days of revision

Revised Proxy Voting Policies and Procedures

Officer’s Representative

NLT 30 calendar days after revision

Revised Ethics Policy

NLT 30 calendar days after revision

A copy or summary of the annual disaster recovery test

Via email to Contracting

Officer’s Representative

Within 30 calendar days of completion of the test

A summary of changes to the revised disaster recovery plan (if revised)

Within 60 calendar days of the completion of the annual disaster recovery test

SSAE 18 (SOC 1) for the asset management subsidiary that manages the funds.

and Investment

Consultant

Within 30 days of availability