PBGC_RFP_16PBGC25R0050_Attachment_1_-_Statement_of_Work.pdf

CUSTODIAN BANKING SERVICES

REQUEST FOR PROPOSAL: 16PBGC25R0050

SECTION C - STATEMENT OF WORK

Table of Contents

1.0 BACKGROUND

2.0 INTRODUCTION

3.0 SCOPE OF WORK

3.1 CUSTODIAN BANK SERVICES

3.2 PROCEDURES, PROCESSES, AND POLICIES

3.3 CUSTODIAN BANK RESPONSIBILITES

4.0 INFORMATION TECHNOLOGY SECURITY REQUIREMENTS

5.0 INVESTMENT SERVICES AND SUPPORT

6.0 CUSTODIAN BANK SUPPORT

7.0 OTHER SERVICES

8.0 EXPENSE REIMBURSEMENT SERVICES

9.0 WEB PAGE FOR REPORT GENERATION AND CREATION

10.0 EDUCATIONAL CONFERENCES

11.0 CONTINUTITY OF OPERATIONS PLAN AND IT SECURITY

12.0 SPECIFIC DELIVERABLES/REQUIRED REPORTS

13.0 TRANSITION

CUSTODIAN BANKING SERVICES

REQUEST FOR PROPOSAL: 16PBGC24R0010

SECTION C - STATEMENT OF WORK

1.0 BACKGROUND

The Pension Benefit Guaranty Corporation (PBGC) is a government owned corporation. PBGC was established to protect the retirement income of individuals and their beneficiaries who are covered under certain private sectors, defined benefit pension plans as provided by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA). PBGC’s programs (1) encourage the continuation and maintenance of voluntary private pension plans for the benefit of the plan participants; (2) protect pension benefits in on-going pension plans; (3) ensure timely and uninterrupted pension benefits payments under Title IV- covered plans; and (4) maintain insurance premiums at the lowest level consistent with the PBGC Title IV obligations. PBGC engages in activities to preserve plans and protect participants by administering two separate insurance programs. As of 09/30/2023, the Multiemployer Program protects about 11.0 million workers and retirees in about 1,360 pension plans. The Single-Employer Program protects about 20.6 million workers and retirees in about 23,500 pension plans.

PBGC’s operations are financed by insurance premiums set by Congress and paid by sponsors of PBGC-insured defined benefit pension plans and by investment income. In addition, the Single-Employer Program is funded by assets from pension plans trusteed by PBGC and recoveries from the companies formerly responsible for the plans.

2.0 INTRODUCTION

PBGC’s organization relevant to Custodian Banking services is overseen by the Financial Operations Department (FOD) and Corporate Investments Department

(CID).

FOD resides within the Chief Financial Officer (CFO) group and administers and manages the Corporation’s financial and accounting programs and prepares the reports and financial statements for the Corporation. CID also resides within the CFO group and provides investment management services for plans assets trusteed by the PBGC and for other assets managed by the Corporation. The General Accounting Branch resides within the Controller Operations Division (COD) and administers the general accounting programs, and the Investment Accounting Branch (IAB) directs PBGC’s investment/trust accounting programs. Each of these groups reside within

FOD.

The investment management program is designed to provide efficient and effective management of PBGC’s assets received through (1) premium receipts from PBGC’s insurance program (PBGC Revolving Funds), and (2) trusteeship of terminated pension plans (PBGC Trust Funds).

The Revolving Fund which is valued at approximately $52.8B as of September 30, 2023, receives all premium payments, and is invested solely in “book-entry” U.S.

Government securities held at the U.S. Treasury. There are no Custodian Bank services required for this fund; however, performance measurement services are required.

The Trust Fund is valued at approximately $68.1B as of September 30, 2023, and receives assets from terminated plans. PBGC has become trustee for 5,129 plans as of September 30, 2023. Trust Fund assets can be more flexibly invested than Revolving Fund assets, such that possible asset classes include equities, debt obligations and real estate investment trusts.

The investment objectives of the Program reflect mid-term and long-term investment horizons and accommodate current and projected financial requirements of the PBGC. These objectives are to:

Satisfy existing liabilities and future claims when due.

Maximize funded status within a prudent risk framework that is informed by PBGC’s fixed obligations and asset composition of potential trusteed plans.

Utilize Liability Driven Investment (LDI) techniques to minimize the risk of future deficits.

Meet or exceed the performance benchmarks for the Program over three- and five-year time periods on a net of fee basis.

Diversify the investment assets base when useful for managing risk, taking into account that changes based on market-timing are inconsistent with the IPS.

Maintain liability-hedging and return-seeking assets according to the target asset allocations

PBGC Trust Funds require Custodian Bank services so that these trust assets acquired through plan trusteeships are commingled and kept separate for accounting and management purposes. The commingled account is divided by PBGC into portfolios which are managed by Investment Managers (“IM”) selected by the PBGC, including, but not limited to equity managers, fixed income managers, special situations managers, and real estate managers. Additionally, private market assets assumed from terminated and trusteed pension plans are also included; however, these investments were not initially selected by the PBGC.

A short-term holding account is used for receiving and disbursing funds and securities in the commingled account.

3.0 SCOPE OF WORK

To provide global master custody services for the safekeeping and asset servicing of plan assets. Global custody services include settlement, safekeeping, delivery, investment accounting, income collection, securities valuation, investment performance reporting, risk analytics, compliance reporting, short-term cash investments, and other services in connection with these investments. This requirement also calls for an on-site consultant to be located within the Corporate Investments Department of PBGC.

This Custodian Banking service requirement is for accounting and investment management services with respect to the Trust Fund or any asset directed by PBGC and consultant services in conjunction with the asset management responsibilities of PBGC.

Internal written procedures, policy and processes are also needed for the required services. Lastly, services include retention of assets, disaster recovery, education services, webpage access with report capability, and collection of any mortgages, notes, partnership interests, installment payouts, or investment liquidation.

All requirements of this SOW shall be performed using applicable U.S. Federal laws, regulations, U.S. Government directives, publications, and instructions, where mandated and approved.

3.1 CUSTODIAN BANK SERVICES

The Custodian Bank shall:

3.1.1 Provide full accounting services for all PBGC assets held in the Trust Fund by the Custodian Bank and all other transactions for PBGC in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

3.1.2 Not be responsible for any tax liabilities incurred by the trustee (PBGC).

3.1.3 Act as the central depository and nominee holder of the Trust Fund assets of the PBGC and as the transaction clearing component of the Trust Fund assets.

3.1.4 Provide administrative support for active managers, passive managers, standard transitions, and commingled accounts.

3.1.5 Collect all income and other payments with respect to the securities held hereunder, to which the PBGC shall be entitled, and shall credit such income and other payment subject to:

(a) Pre-determined income credit only applies to PBGC’s domestic assets held in the Custodian Bank safekeeping or assets on loan as part of the Custodian Bank proprietary Securities Lending Program, as of any relevant record dates. For all non-US markets, income shall be credited in local currency to PBGC’s accounts upon receipt.

(b) Pre-determined income credit shall not be provided on open or failing trades or positions on loan with third party agents.

(c) The following items are exceptions to pre-determined income credit and shall be paid on an actual or as collected basis:

(i) Income from private placement securities.

(ii) Income on bonds in default or that are suspected to present a risk of default or payment delay.

(iii) Income on derivatives, asset backed securities, auto loan receivables, collateralized mortgage obligations (“CMOs”), other mortgage-backed securities, zero coupon bonds, credit card receivables, American depository receipts (“ADRs”), options, futures, and non-security assets; and

(iv) Securities for which the amount of income and redemption cannot be calculated in advance of payable date or determined in advance of actual collection. This includes variable rate instruments and securities lacking valid asset identifiers.

3.1.6 Provide custody, income collection and receivable accounting for any mortgages, notes, partnership interests, installment payouts, and other similar assets.

3.1.7 Ad Hoc Services. Escrow Account Mortgages maintained on the books of the Custodian Bank shall require; an escrow account, (annual statement of escrow funding required to cover estimated escrow payments), payments of insurance, annual interest statements and payment of municipal taxes.

3.1.8 Check Processing Services. Provide check processing services whereby the Custodian

Bank will collect checks, which are deposited by 7:00 AM ET each business day.

Additionally:

(a) Only negotiable checks will be deposited into PBGC’s Demand Deposit account(s),

(b) The Custodian Bank will not process any cash, stock certificates, or items other than checks,

(c) Post-dated, stale-dated, undated and unsigned checks will be processed and deposited,

(d) Each business day, the Custodian Bank will inform PBGC of the total amount of deposits made to the account on that day, including an image of each check,

(e) Checks received with any letter or other communication will be deposited in the account and the Custodian Bank will deliver any such communication to PBGC for review.

3.1.9 Shall have the following accounting capabilities to provide:

(a) A double entry accounting system that includes a minimum of the following: Trade Date Accrual Accounting, Cash Basis Actual Settlement Date Accounting, and Cash Basis Contractual Settlement Date Accounting. In addition, functionality shall include accounting and reporting on derivatives financial transactions as well as the ability to provide financial summaries of derivative values (i.e. Notional, Fair Value, etc.).

(b) Tracking of funds, post trade-related and income-related cash, foreign currency values, download transaction reports, fail float, and overdraft facilities.

(c) Monthly aged receivable reports.

(d) Escrow accounts, annual escrow analyses including interest statements.

(e) Periodic escrow payments such as insurance and taxes.

(f) Separate recording of discounts and allowances for each receivable.

(g) Various securities, including mortgage-backed derivatives, index linked bonds, and bonds that do not mature at par and;

(h) A mutual fund accounting system that permits daily pricing with shares issued for each transfer.

3.1.10 Allow PBGC access to the Custodian Bank webpage to ensure access to standard reports as well as the ability to run ad hoc reports.

3.1.11 Have a designated point of contact for PBGC for inquiries. Custodian Bank personnel shall respond within two hours to inquiries identified as urgent, in the same manner as the request is made. If an urgent request is identified after 3:00 pm ET, Custodian Bank personnel shall provide a response by 10:00 am ETthe next business day, in the same manner as the request is made.

3.1.12 Provide a response to non-urgent follow-up inquiries within 24 hours.

3.1.12.1 Email daily status updates describing the progress related to closing the books at month, quarter and year end. (PBGC’s fiscal year is from1 October to 30 September.

3.1.13 The Custodian Bank shall provide an on-site consultant for custodial-related activities and client inquiries. This individual shall be responsible for the day-to-day interaction with the client, on both the investment (CID) and accounting (FOD) teams in the client’s office in Washington, D.C., ensuring deliverables of the client are disseminated accurately and in a timely manner. Prompt follow up on exception situations and facilitating timely problem resolution to mitigate risk is required.

3.1.14 The Custodian Bank shall process trade executions, post transactions to the accounting system, and make on-line transaction data available to PBGC.

3.1.15 Have the capability to value OTC (Over the Counter) and centrally cleared derivatives using pricing vendors who cover these instruments.

3.1.16 Maintain a transaction audit trail for the life of the contract and transfer it to the incumbent or subsequent contractor using a compatible format.

3.1.17 Provide services to execute and account for foreign exchange transactions. Provide time stamps for all Separately Managed Account Foreign Exchange Transactions, both negotiated and standing instruction.

3.1.18 Facilitate and service loans as agent and custodian. The services include, but are not limited to, recording and tracking loan positions, maintaining detailed accrual information per facility at a contract level, receiving all loan related cash flows including past due collection efforts, valuing portfolios based on client specific methodologies, providing daily cash availability, and storing loan related documents.

3.1.19 Maintain transaction files for the life of the contract and transfer the files to the incumbent or subsequent contractor using a compatible format.

3.1.20 Maintain correspondence and contractual documentation for seven years after the contract life expires.

3.1.21 Complete administrative tasks associated with foreign security registrations or re-registrations, stamps, duties, assessments, international telecommunications, stock change fees as necessary.

3.1.22 All Custody services used throughout the SOW shall apply to U.S. and foreign denominated securities and or investments.

3.2 PROCEDURES, PROCESSES, AND POLICIES

3.2.1 The Custodian Bank shall have written procedures for recurring custodian accounting support services:

(a) Either currently or no later than 90 days after contract award as described below:

(b) Pricing and maintaining holdings for alternative investments (private equity, real estate funds, etc.) including the frequency of pricing and pricing sources;

(c) Accessing and applying exchange rates for all types of transactions and position valuations;

(d) Tax lot accounting and reporting procedures including all purchase cost options using average cost for U.S. and non-U.S. securities;

(e) Establishing entitlements and automated accruals for dividends and interest posted to PBGC accounts;

(f) Calculating with accuracy and timeliness receipts of US and non-US income and capital changes reported by your depositories, agents, and sub-custodians;

(g) Monitoring and resolving income suspense and unclaimed income amounts; and

(h) Ensuring reported data is valid and accurate.

3.2.2 The Custodian Bank shall have a written process:

(a) To reverse accruals and correct any accounting errors including but not limited to correcting acquisitions, processing expense payments for trusteed plans upon - Date of Trusteeship (“DOTR”);

(b) To validate prices when using information from the supplemental sources and a policy for securities which are not traded daily, including those which are hard to value;

(c) To make available historical data. Historical accounting data shall be available on-line for PBGC’s current and prior fiscal year and additional history shall be restored for electronic or hardcopy access upon request;

and

(d) To reconcile and track the frequency of various reconciliations with depository, IMs, sub- custodian banks, and other Custodian Banks;

3.2.3 The Custodian Bank shall have a written policy:

(a) For each country in which clients invest (including the US), at a minimum crediting income payment in same day funds, interest and dividends, when payments are credited, and exceptions.

(b) For maintaining all necessary internal controls, including complete documentation on all custodian activities, and maintain records in accordance with GAAP, including double entry accounting.

3.2.4 The Custodian Bank shall make available all identified in this contract, written procedures, processes, and or policies to PBGC within 30 calendar days upon written request.

3.3 CUSTODIAN BANK RESPONSIBILITES

3.3.1 Provide information to prepare a Statement of Cash Flows as required under Topic 230, Statement of Cash Flows, with references to Topic 960- 205, Plan Accounting-Defined Benefit Pension Plans-Presentation of Financial Statements, paragraph 45-6 and Topic 962-205, Plan Accounting-Defined Contribution Pension Plans-Presentation of Financial Statements, paragraph 45-9; Topic 320, Investments-Debt and Equity Securities with 2 paragraphs referenced to Topic 942-320, Financial Services-Depository and Lending-Investments-Debt and Equity Securities, paragraphs 50-1 through 50-5; and Topic 220, Comprehensive Income.

3.3.2 Contact PBGC for guidance and or approval prior to all accruals write offs and nonrecurring or unusual accounting transactions.

3.3.3 Provide safekeeping of all segregated and commingled securities (in nominee name) and non-commingled assets (e.g. original notes receivable).

3.3.4 Resolve all income suspense transactions within 30 days after transactions suspends or provide valid reason for not resolving within 30 days.

3.3.4.1 Advise PBGC on all fiscal year end unclaimed and unresolved income transactions, prior to PBGC year-end reporting requirements.

3.3.4.2 Continue to report and communicate status for all unresolved suspense and unclaimed income amounts until resolution is reached.

3.3.5 Foreign Tax Filings. Subject to receipt of proper documentation from

PBGC, the Custodian Bank shall make the necessary filings in connection with obtaining tax exemptions and tax reclamations for PBGC in the foreign countries in which PBGC holds and trades securities.

3.3.6 Daily Valuation of Assets. Determine portfolio market value daily except for those assets waived by PBGC (e.g. insurance contracts, real estate funds, profit sharing).

3.3.7 Settlement of Portfolio Transactions. Arrange for timely settlement of portfolio transactions, including PBGC initiated trade, for PBGC’s “holding accounts.”

3.3.8 Settlement of Security Transactions. Settle security transactions on actual settlement date.

3.3.9 Upon receiving assets from interim custodians or other holders of PBGC assets, provide a daily report to PBGC identifying the date that the assets are received using PBGC specific documentation for backup. They shall be identified by plan, valued and assigned a unit price, shares issued, and a dollar value of shares issued and income per share is given for each transaction. When securities (assets in kind) are transferred from interim custodians, a detailed listing shall provide the list of securities including number of shares, security description, Committee on Uniform Securities Identification Procedures (CUSIP) number, and market value as of the date transferred to the PBGC Commingled Fund at the Custodian Bank.

3.3.10 Within one business day of receiving assets from interim custodian banks or other sources on behalf of PBGC, Custodian Bank shall assign a consecutive and unique numerical identifier to assets transferred to the Custodian Bank except when receiving hard to value assets, which may require more than one business day (but no more than three business days).

3.3.11 Process a liquidation of trust fund assets for any of the following:

a) Transfer of funds from PBGC commingled account for the payment of certain expenses incurred by plans that have been trusteed (DOTR).

b) Correction of previously issued acquisitions if an error has been made; and

c) Transfer from PBGC commingled account for Revolving Fund reimbursements.

3.3.12 Upon receiving written instructions, liquidate plan assets for the payment or reimbursement of expenses.

3.3.13 Provide a report of all acquisitions and liquidations received/processed for the accounting month by the second business day of the following month.

3.3.14 Financial Reporting Closing Process. Close the accounting books by the 9th business day of the month following the month that is to be closed and by the 7th business day of October for PBGC’s year-end, which is September 30th.

3.3.14.1 Compile data received from all PBGC IMs and a reconciliation of the net asset value (“NAV”) to determine if all differences are within the established tolerance level (+ or -3%).

3.3.14.2 Tolerance Assistance. Submit the NAV to an independent pricing source vendor for value determination when securities are out of tolerance (see 3.3.1.14.1) with a copy to PBGC. Based upon that reply, the Custodian Bank will adjust or keep the value. The Custodian shall submit an e-mail to the designated IAB manager or supervisor requesting permission to close the accounting books for the month when there are unresolved differences (securities out of tolerances) after the 6th business day of the following month.

3.3.14.2.1 Status Updates. Resolve any securities that are out of tolerances within one business day, or if the securities that are out of tolerance cannot be resolved, the Custodian Bank shall provide updates twice daily (noon and 4 p.m. ET) on progress following the month to be closed.

3.3.15 Provide a follow up e-mail when all securities that are out of tolerance are resolved.

3.3.16 Prepare on a monthly basis an Investment Holdings Report of all holdings, market values, applicable accruals, and any other data elements.

Classifications of these items are not final until reviewed and approved by PBGC. The report shall be prepared at both a detailed and summary level in a Microsoft Excel format and include only commingled funds.

3.3.17 Based on the approved classification report (Investment Holdings Report) the Custodian Bank shall prepare a Statement of Net Assets (Detailed Trial Balance) Report using PBGC’s general ledger account classifications on a monthly basis within one business day of receiving the approved classification from PBGC. The General Ledger classifications will be provided after the contract award.

3.3.17.1 Prepare on a monthly basis a reconciliation in an excel worksheet to ensure that the amounts agree on both the Statement of Net Assets and the Working Trial balance.

3.3.18 Prepare on a monthly basis an Other Income Report that displays in detail income and expense classified as “Other”, including, but not limited to, litigation income, commission expenses on derivatives, miscellaneous expenses, and any other income items that are not shown in detail on the monthly Investment Holdings Report.

3.3.19 Prepare on a monthly basis Earned Income Proof, Interest Receivable

Proof, Open Trades Proof, and Realized Gain and Loss Proof that display interest and dividend income, open trade sales and purchases, and realized gain and losses per PBGC general ledger account classifications to provide detail for line items on Statement of Net Assets report.

3.3.20 Prepare an IM Reconciliation report of NAV’s for each Investment Fund by the last business day of the following month for variances that are 3% or greater will be analyzed and resolved by the Custodian Bank and reported to PBGC.

3.3.21 Fair Value Holding Report preparation. Forward to PBGC a report listing all securities that did not generate a level 1, 2, or 3 from its system by the 9th business day following the end of each quarter. PBGC will code the securities and send them back to the Custodian Bank by the 10th business day.

3.3.21.1 Prepare a Fair Value Holding report by the 11th business day following the end of each quarter with all holdings reported in the monthly Investment Holdings Report, including all of the uncoded securities that were coded by PBGC. The report shall be prepared at both a summary and detailed level.

3.3.21.2 One business day after preparing the Fair Value Holding report the Custodian Bank will reconcile the report with the Statement of Net Assets Report. The Custodian Bank will send the final Fair Value Holding report to PBGC by the 12th business day of the month following the end of each quarter.

3.3.21.3 Within two business days of providing PBGC with the Fair Value

Holding report, the Custodian Bank shall forward to PBGC a Level 3 Roll Forward Report (Changes in Level 3 Assets and Liabilities).

3.3.22 On a quarterly basis, Custodian Bank will perform a reasonableness check on the Statement of Net Asset performing an analysis on the balance sheet and income statement account numbers comparing the balances from the current quarter to the previous quarter. Custodian Bank will provide an explanation of the variance if the absolute value change is $10,000,000 or greater and if the percentage change is equal to or greater than 150% (positive or negative).

4.0 INFORMATION TECHNOLOGY SECURITY REQUIREMENTS

4.1 Meet with PBGC Officials at least annually to review the security state of the Custodian Bank. The PBGC reserves the right to review any Security assessment results and visit/observe/review the Custodian Bank's operations upon request.

4.2 Notify PBGC two weeks in advance of any proposed changes to the

Custodian Bank's system(s) or its operational environment that might affect PBGC’s level of risk in a significant way; and support a subsequent security impact analysis for the proposed changes carried out under the guidance of the PBGC PBGC’s Chief Information Security Officer (CISO) and FOD.

5.0 INVESTMENT SERVICES AND SUPPORT

5.1 Provide an on-site (PBGC-CID) consultant. The on-site consultant will be allowed to telework in adherence to PBGC rules and procedures.

a) The on-site representative will work collaboratively with PBGC CID staff, third party custodians, and Custodian Bank operations to coordinate the timely transfer of all terminated plan assets to PBGC’s Custodian Bank custody account. The on-site representative will collaborate with CID staff to support areas including:

i. Transitions

ii. Account and country opening documentation

iii. Issue Resolution: Trade Settlements and Corporate Actions

iv. Performance Measurement and Analytics Report Coordination

v. Ad-hoc Requests and Training

vi. Custody Contract Compliance and Due Diligence Requests

vii. Fiscal Year-End closing support

viii. Maintenance of General Performance Standards

5.2 The Custodian Bank support shall include:

5.2.1.1 Ad Hoc Services: Investment management services may be needed for one or more of the following index funds: Russell 1000, Russell 2000, Russell 3000, Russell 1000 Growth, Russell 1000 Value, MSCI ACWI, MSCI ACWI IMI, MSCI ACWI ex US, MSCI ACWI ex US IMI, MSCI EAFE Index, MSCI Canada Index, MSCI Emerging Markets, MSCI World Ex US, MSCI Frontier Markets, MSCI EAFE Small Cap Equity, MSCI Canada Small Cap Equity, MSCI Emerging Markets Small Cap Equity, MSCI EAFE IMI, MSCI Canada IMI, MSCI Emerging Markets IMI, MSCI World Ex US IMI, MSCI World IMI, MSCI EAFE Value, MSCI EAFE Growth, US Real Estate Securities, Global Real Estate Securities, Global ex US Real Estate Securities, S&P 500 and Wilshire 4500.

In addition they shall offer the following funds: Short Term Investment Fund (STIF), US Aggregate, US Government/Credit, Intermediate US Government, Long US Government, Long US Government/Credit, 1-3 Year US Treasury, 3-10 Year US Treasury, Long US Treasury, US Mortgage Backed, US Asset Backed, High Yield Index, Intermediate US Credit, Intermediate Corporate, Long US Credit, Long US Corporate, Long US Non- Corporate, US Treasury Inflation Protected Securities, Global Aggregate, Global Aggregate (USD Hedged), Global Aggregate ex- US, World Broad Investment Grade, World Government ex- US, Issuer Scored Credit Index, Emerging Market Debt (i.e.

Corporates, Local, Hard Currency) Indices and the following exchange traded fund (“ETFs”): Fixed income and Emerging Markets Local Bond ETF. Note that if a Custodian lacks one or more of the above investment index funds, it will not preclude a Custodian from competing for this procurement.

5.2.1.2 Ad hoc Services. Transition Management Services. At the option of

PBGC, provide transition management services at the rates as submitted by the Custodian Bank. The contractor shall execute transition management as an agent including accepting delegated authority, via a letter of agreement to move assets among PBGC’s custodial accounts.

5.2.1.3 Ad hoc Services: At the option of PBGC, the Custodian Bank shall provide services for the pledging and receiving of margin collateral for compliance with the Uncleared Margin Rule (UMR).

5.2.1.4 Ad hoc Services. Act, upon written agreement through the

Custodian’s investment management division, as an IM for various Trust assets commingled at the Custodian Bank. The Custodian Bank may be authorized to use pooled or collective funds such as index funds as well as separately managed portfolios in this capacity.

5.2.1.5 Ad hoc Services. At the option of PBGC, the Custodian Bank shall provide securities lending services under a separate Securities Lending Agreement provided by the Custodian Bank and under the fee schedule as submitted by the Custodian Bank.

5.2.1.6 Support a minimum of two securities lending due diligence meetings per year, at least one of which will be on site at the Custodian Bank. The Custodian Bank should also support ad hoc reporting and industry trend discussions. PBGC also may use a securities lending consultant and requires that the Custodian Bank provide data for the consultant’s review of securities lending performance. The Custodian Bank shall review any output from the consultant to verify the accuracy of the output and to facilitate discussions with PBGC.

5.2.1.7 Support both a commingled and/or separate accounts for securities lending cash reinvestment.

5.2.1.8 Provide indemnification for any losses associated with lent securities, or trade fails as a result of inability to recall securities when PBGC is transitioning portfolios and has notified the Custodian Bank of the transition.

5.2.1.9 Custodian Bank Global Performance Measurement and Analytics shall generate deliverables (see section 12.0) and:

i. Provide performance measurement and analytics services for including the entire Trust Fund, its constituent portfolio accounts, PBGC’s Government Bond Portfolios comprised of U.S. government securities maintained at the U.S. Treasury Department, and representative capital markets indices; and

ii. Provide access to an on-line system that provides monthly returns at the manager, asset class, sector, industry and buy/hold security level and currency returns, as well as analytics and benchmark-relative performance attribution for each of PBGC’s combined and individual accounts and selected benchmark indices.

iii. Backload historical data sufficient to produce existing standard performance reports. Returns and analytics shall be available for all accounts, whether custodied internally or at another Custodian Bank, such as pooled funds and mutual funds. Information shall be reflective of currency hedging for internally custodied portfolios and shall be provided for externally custodied portfolios, if available.

5.2.1.10 Provide monthly audited returns and analytics information after the audited accounting reports are received at PBGC per the time frames in Section 12.0. Electronic communication, whereby data is resident at the Custodian Bank, is the preferred mode of access.

5.2.1.11 Provide returns, characteristics and performance attribution analyses at the total portfolio/account level, asset class level, economic sector level, industry level and security level for historical time periods (such as trailing 12 months, fiscal year to date, quarter to date, and month to date) and allow for analysis by country/region of market exposure and currency. All analysis shall be benchmark relative.

5.2.1.12 Calculate monthly account/composite returns both gross and net of

IM fees. Separate account management fees are not currently paid from the custody account, which necessitates a manual adjustment by the Custodian Bank performance measurement group for the fee accrual.

5.2.1.13 Allow electronic transmission of returns and analytics that can be read under standard Windows-based applications (such as Excel, Word, Adobe, etc.) and the ability to produce color charts and graphs from the Custodian Bank application.

5.2.1.14 Provide trade cost monitoring services or capabilities including, at a minimum, quarterly reporting for the designated accounts in the programs (equity and fixed income), sub-sets of accounts and over shorter time frames, as well as custom reporting capabilities.

Quarterly reporting includes a meeting with CID staff discussing the reports in which the custodian bank highlights trends, outliers, and major conclusions of the quarterly reports.

5.2.1.15 Provide enhancements or additions to current performance related products and services at no additional cost to PBGC.

5.2.1.16 Ad hoc Services. At the option of PBGC, the Custodian Bank shall provide a compliance solution that monitors investment guidelines prescribed from any source.

5.2.1.17 On a daily basis, credit income and trade settlements to accounts and manage the investment of both income and principal excess cash balances. Cash balances equaling or in excess of $1.00, including U.S. dollars and foreign currency deposits that have been repatriated into U.S. dollars, shall automatically be swept into a short-term investment fund or equivalent daily, thereby ensuring that all cash of PBGC is invested overnight. The short-term investment fund or equivalent shall be comprised of securities that are consistent with the following list. Permissible investments in the short-term investment fund include:

(a) US Treasury notes, bills, and bonds;

(b) Other obligations issued by the U.S. Government, its agencies or instrumentalities;

(c) Corporate debt obligations (including commercial paper of U.S. and foreign companies);

(d) Instruments of U.S. and foreign banks, including time deposits (including Eurodollar Time Deposits) certificates of deposit (including Eurodollar and Yankee Certificates of Deposit) and banker’s acceptances;

(e) Supranational and sovereign debt obligations (including obligations, of foreign government subsidiaries); Asset-backed trusts;

(f) Repurchase Agreements;

(g) Funding Agreements;

(h) Money market mutual funds subject to SEC Rule 2a-7; and

(i) Short term collective investment funds and registered or private investment companies investing principally in fixed income or other debt securities, and which have investment guidelines consistent with the above.

6.0 CUSTODIAN BANK SUPPORT

The Custodian Bank shall provide:

6.1 Monthly, quarterly and annual holdings-based account security, sector and portfolio level analytics including:

6.1.1 Fixed-income performance attribution, vis-à-vis the benchmark index or other benchmarks specified by PBGC, which considers, at a minimum, the magnitude of parallel yield curve shifts, changes in the shape of the yield curve (twist/butterfly), convexity and sector and security selection.

6.1.2 Economic sector analysis showing month/quarter-beginning weight and monthly/quarterly returns and attribution for each sector.

6.1.3 Country of market exposure and/or currency analysis showing month/quarter-ending and beginning weights and monthly/quarterly returns and attribution for each country/currency.

6.1.4 Fixed-income economic, maturity, and credit quality using the middle rating for a split-rated sector analysis showing month/quarter-beginning weights and monthly/quarterly returns and attribution for each sector. Average weights shall be made available to PBGC. If only 2 of the 3 credit ratings agencies rate the bond, then the lower of the 2 ratings shall apply.

6.1.5 Call-adjusted duration, convexity, yield-to-maturity, current yield, average coupon, average years to maturity, average credit quality (using the middle rating for a split-rated bond) latest 12- month turnover, and number of issues in the portfolio for fixed income. If only 2 of the 3 credit ratings agencies rate the bond, then the lower of the 2 ratings shall apply.

6.2 Security, sector, asset class, and portfolio-level graphs and charts including:

6.2.1 Portfolio level growth-of-a-dollar charts while on-line, at the portfolio, security, sector, and asset class-level.

6.2.2 Portfolio, asset class, and sector-level Trust Universe Comparison Service (TUCS) Universe comparison (returns, asset allocation, etc.) histograms which include benchmark indices. While histograms are currently available for returns, asset allocation and characteristics universes, additional charts shall be made available to PBGC, when introduced.

6.2.3 Histograms for equity style classifications, individual managers, etc. shall be made available to PBGC, when introduced.

6.2.4 Portfolio level TUCS Universe risk/return scatter plots that include benchmark indices.

6.3 Quarterly TUCS “regular” and “style analysis” books. TUCS reports shall include each account/segment/total compared to its respective benchmark index or indices.

6.4 Quarterly TUCS Master Trust reports.

6.5 An internal control structure and accounting (manual and automated) system that is sufficiently adequate to ensure successful SSAE 18 annual certifications.

6.6 Services for Non-Commingled assets provided they are in the safekeeping of the Custodian Bank. These assets shall be accounted for and reported separately and not included in the commingled Trust.

6.7 The Custodian Bank shall perform quality checks for accuracy and timely performance measurement and analytics data and reporting on PBGC portfolios on a monthly and quarterly basis.

7.0 OTHER SERVICES

7.1 Independent IMs. The Custodian Bank shall, with respect to assets within PBGC trusteed plans which are not under control of independent IMs:

7.1.1 Inform government of any new/emerging service and/or

additional reports the Custodian Bank makes available to any client subject to applicable fees for services not specifically provided for in this Contract and as provided for in the menu-based pricing schedule. Examples of this include new reporting per emerging FASB requirements, new reporting per PBGC/ERISA requirements, etc. If applicable, PBGC will modify the contract as needed.

7.1.2 Assist through the use of in-bank specialists and correspondent bank relationships in valuing securities, real estate holdings and other not readily liquid assets accruing to PBGC through terminated plans. Provide referral assistance in PBGC’s efforts to liquidate these assets.

7.1.3 Assist in the transfer of assets from terminated/trusteed plans to the PBGC designated non- commingled account(s), commingled fund and/or holding account held by the Custodian Bank.

Provide daily reporting confirming such transfers and accurate valuation for the commingling process. Maintain complete documentation and controls on all transfers. The plans’ case numbers are to be included with all recorded acquisitions/liquidations and included in the appropriate reports.

7.1.4 Maintain suspense file on pending transfers, and projects involving the Custodian Bank’s assistance on the above items.

7.1.5 Appointment and Termination of IM. At any time PBGC may appoint one or more IMs to manage the investment of all or any portion of the assets of the PBGC. In such event, the PBGC shall notify the Custodian Bank in writing of the appointment of such IM, and of the portion of the PBGC’s assets over which the IM may exercise its authority. The PBGC similarly shall notify the Custodian Bank in writing of the termination of the appointment of any IM.

7.1.6 The Custodian Bank, in performing its duties under this Contract, shall be entitled to rely upon Proper Instructions from the IM, with such limitations as the PBGC and the Custodian Bank by written agreement provide. In the absence of such limitations, the Custodian Bank shall accept Proper Instructions from the PBGC if no Investment Manager had been appointed.

8.0 EXPENSE REIMBURSEMENT SERVICES

8.1 Wire funds based on PBGC written instruction from the PBGC commingled account on a periodic basis for expenses paid by PBGC’s Revolving Fund for all costs determined to be expenses of the Trust Fund.

8.2 Not pay any expenses or make any reimbursements unless directed to do so in writing by duly authorized designated PBGC officials. Such expenses may include, at a minimum, the following:

8.2.1 Compensation of money managers;

8.2.2 Compensation of such third parties as may be employed to facilitate Trust Fund asset transfers to the Custodian Bank;

8.2.3 Expenses associated with evaluations, appraisals, etc.;

8.2.4 Expenses associated with securities transactions;

8.2.5 Expenses incurred by Custodian Bank pursuant to agreed upon fee schedule;

and

8.2.6 Expenses incurred by pension plans prior to commingling of the plans’ assets.

8.3 Maintain complete documentation of activities related to expense reimbursement services.

9.0 WEB PAGE FOR REPORT GENERATION AND CREATION

9.1 Provide secure, web-based access to all applicable applications including report creation and generation.

9.2 Allow PBGC to create custom reports from the data elements available;

9.3 Access-Prior Business Day. Provide on-line access for all portfolio transactions, holdings data and market values (updated daily for publicly traded securities) with transactions, holdings and market values as of the prior business day;

9.4 Allow PBGC to authorize and fulfill transfers (1) internally from one

PBGC account to another PBGC account and (2) external transfers to third party entities;

9.5 Include both wire transfers and in-kind security transfers, although the latter will generally be internal PBGC account transfers:

9.6 Allow external wire transfers related to capital calls concerning the PBGC’s private market assets as well as payment of third-party expenses payable to actuaries, IMs, and other parties that were acting as service providers to terminated and trusteed defined benefit plans;

9.7 System shall allow for effective security and compliance controls that set certain protocols for transfers (e.g., dollar limits set by individual; multiple authorizations).

9.8 Include the ability to upload source documents that authorized individuals will review prior to approving, a tracking capability that is easily searchable for auditing procedures.

9.9 Historical accounting data. Make available on-line for PBGC’s current and prior fiscal year and additional history shall be restored for electronic or hardcopy access upon request.

10.0 EDUCATIONAL CONFERENCES

10.1 Provide the PBGC with up to six slots in any relevant educational conferences it may offer to its clients in a given year. This would include the cost of related meals offered as part of the formal conference program.

Non-training or non-educational activities offered at the conference including, but not limited to, golf, fishing, tours, entertainment, etc., would not be included, as PBGC can neither pay for nor may as individual employees accept these items.

10.2 PBGC shall pay its own travel, lodging, per diem, and other subsistence expenses (e.g. if meals are not offered to all attendees as part of the conference) for attendees at such conferences. PBGC will advise the Custodian Bank of its acceptance or declination of such slots offered.

10.3 Hours of operation for the on-site consultant. The workday is eight hours, not including a thirty-minute lunch. The core hours are the designated period of the day when the contractor is required to be present for work or in an approved absence status. The core hours are 10 a.m. - 2:30 p.m. Monday – Friday.

11.0 CONTINUTITY OF OPERATIONS PLAN AND IT SECURITY

11.1 Maintain a Contingency Plan that is in compliance with NIST

Special Publication 800-34 Rev.1, Contingency Planning Guide for Federal Information Systems for the FOD and CID systems and related processes.

11.2 Make the Contingency Plan available to PBGC and its auditors, assessors and/or consultants upon request by PBGC.

11.3 Provide on a quarterly basis updated succession and

delegation orders for the PBGC Continuity of Operations Plan

(“COOP”).

11.4 Provide on a quarterly basis an updated COOP contact list.

11.5 Upon request support PBGC in annual COOP testing exercises.

PBGC will provide up to two weeks advance notification of the timing of any planned COOP activities. Support may include point-to-point testing of PBGC COOP scenarios:

(a) PBGC sends data to the Custodian Bank’s primary site from PBGC’s alternate site,

(b) PBGC sends data to the Custodian Bank’s alternate site from PBGC’s alternate site, and/ or

(c) PBGC sends data to the Custodian Bank’s alternate site from

PBGC’s primary site.

11.6 Upon request, support PBGC’s COOP – Subsequent to award, PBGC will provide additional specific guidance to the Custodian Bank regarding COOP.

11.7 Employ commercially reasonable security measures and

safeguards to prevent access to PBGC information by unauthorized persons, and guard against the destruction, loss, or unauthorized alteration of PBGC information. The contractor will not be reimbursed for costs associated with the security measures, safeguards, and COOP.

11.8 The Custodian Bank shall:

11.8.1 Have or develop and maintain a disaster recovery plan, which includes critical business operations, computer systems, and telecommunications. Such plan must be tested at least annually and updated if necessary.

11.8.2 Provide an annual copy of the COOP test report to the PBGC

COR within 30 calendar days of the completion of the test.

11.8.3 A copy of the current and/or revised plan must be provided to the PBGC within 60 days of the completion of the test.

11.8.4 The disaster recovery plan must include, but not be limited to, the following:

11.8.4.1 Emergency response procedures, including:

11.8.4.2 Step-by-step instruction identifying explicit

techniques to be used for responding to various emergency situations;

11.8.4.3 Identification of disaster recovery teams;

11.8.4.4 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, and

11.8.5 Backup site activation procedures which identify:

11.8.5.1.1 Backup site location (to include address and contact information); and

11.8.5.1.2 Backup site activation processes.

11.9 If the backup site is operated by an organization other than the Custodian Bank, a copy of the Alternative Site Processing Agreement shall be provided to the PBGC within 30 days after being added to the plan or at the same time as the current and/or revised plan, whichever is earlier. Backup site activation procedures must contain a list of key personnel and the recovery teams(s) they support.

11.10 Primary site recovery procedures, including:

11.10.1 Instructions for accomplishing salvage operations;

11.10.2 A replacement acquisition strategy for hardware, software, telecommunications;

11.10.3 Facility reconstruction plans; and

11.10.4 Identification of personnel supporting the primary site recovery and the teams(s) they support.

11.11 Primary site reactivation/normalization, including:

a) Procedures to ensure a smooth transition from the alternative processing site to the primary site; and

b) A list of teams performing the various functions and the personnel assigned to those teams.

12.0 SPECIFIC DELIVERABLES/REQUIRED REPORTS

12.1 FOD and CID prepare monthly, quarterly and annual financial reports as described below. These reports are prepared in accordance with the GAAP in the United States of America and U.S. Governmental Accounting guidelines.

12.2 These reports are to be made available to PBGC electronically (Custodian Bank reporting web site) according to the dates outlined in the matrix below to PBGC by the 2nd business day after the closing of the month following the month, quarter, etc. being reported unless otherwise indicated in the SOW or agreed to by both parties. Reports generated by the Custodian must contain the data elements as displayed in the appropriately referenced Exhibits on the report matrix located in this SOW. Reports are submitted via access to the vendor’s report website, and upon PBGC’s request, via e-mail. Unless noted otherwise, all reports are monthly.

12.3 The web-based reports should consist of composite reports, which are consolidated reports consisting of various IMs. These reports should also include individual reports for each IM. PBGC currently utilizes the services of IMs that are responsible for the day-to-day management of assets held in PBGC’s commingled fund. Assets held in the non-commingled accounts are managed by special situation managers and PBGC’s current Custodian Bank.

12.4 Reporting Requirements are described in attachment 1.

12.5 NOTE: Where applicable, a detailed description is given for the content of the report by listing or describing the data elements that are needed in the report. Reports which do not have a detailed description should be prepared as shown in the exhibits or in an agreed upon format. Exhibits may not be included for all reports. Where exhibits are not included, the Custodian Bank shall agree upon a format with the COR.

13.0 TRANSITION

13.1 The contractor shall assist PBGC in both (Transition-In and Transition-Out phases of this contract should the incumbent contractor not be selected. The contractor shall:

13.1.1 Work with PBGC’s incumbent contractor to transition the current custodian banking services to the Contractor.

13.1.2 Work with any future contractors in transitioning custodian banking services over at the end of the contract. The Contractor must submit a Transition Out plan 60 calendar days prior to contract expiration.

13.1.3 The contractor shall provide PBGC a Transition Plan for both Transition In and Transition-Out phases.