Merced County (Calif.) Employees' Retirement Association's board on Thursday will consider a staff proposal to begin custody contract negotiations with Northern Trust, which was the second-place finalist in an RFP process in 2016, board meeting materials said.
The $680 million pension fund's board previously rehired Bank of New York Mellon (BK) and voted on Nov. 17 to extend BNY Mellon's contract for another six months to June 30, 2017, to allow time for legal review and negotiations for the new contract.
Plan administrator Kristen Santos said in a memo to the pension fund's board of trustees that BNY Mellon “bid on that RFP with the understanding that the draft contract that was included in the RFP contained contract terms acceptable to MCERA. However, the contract that was included in the RFP was substandard for custodial banking services; specifically the fiduciary standard of care language was non-existent, as were numerous other important terms.”
Ms. Santos said in the memo that BNY Mellon is “insisting on the RFP contract language.” MCERA had drawn up a new contract, which was rewritten by BNY Mellon to more closely match the RFP contract, Ms. Santos said. She added that the pension fund and BNY Mellon “are very far apart from reaching an agreement on acceptable terms.”
Ms. Santos's proposal is to see whether Northern Trust would agree to a contract similar to MCERA's new contract and if so, begin negotiations, and notify BNY Mellon of its termination by March 30.
Ms. Santos could not be immediately reached to provide further information.