SR-6-G (78)
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MAY 2 5 1999
PERSONNEL KB PC F \PERSON\MISC\COUNCIL\STAFFRPT\COUNCI35
Council Meetmg May 25, 1999 Santa MonIca, California
TO Mayor and City Council
FROM CIty Staff
SUBJECT RecommendatIon to Authorize City Manager to Negotiate and Execute an
Agreement with Aon ConsultIng to ProvIde Employee Benefits Consulting
Services
INTRODUCTION
This report recommends that the City Council authonze the City Manager to negotIate and
execute a contract for employee benefits consulting services from Aon Consultmg for an
amount not to exceed $75,000 In each of Fiscal Years 1998-1999 through 2000-2001
BACKGROUND
The CIty contracts for employee benefIts consultmg servIces to IdentIfy earners and to
secure the best possible rates for health Insurance, savings plans, retIrement plans and
related employee benefits Issues Aon Consulting provides such services The firm was
chosen through a competItive process and was selected based on its range of services
and expertIse In the area of public sector employee benefits
Ongoing full-service consultmg for health and welfare benefit plans Includes the followmg
servIces renewal negotiations with carners, contract reView, claims/servIce assistance with
vendors, legislative updates and mterpretatlon, reVJew of Form 5500 filJngs, client
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meetmgs, vendor mterface (correspondence and meetings), plan design consultmg,
employee benefits strategic planmng, financIal analysIs, claim experience analysIs and
reportmg, plan marketmg, and general consulting services relatmg to City health and
welfare benefit plans
In the past, the services provided by benefits consulting firms have typIcally not exceeded
the $50,000 lImIt placed on profeSSIonal servIce agreements whIch do not reqUIre CIty
Council approval In FY98-99, Aon Consultmg performed a comprehensive review of the
CIty's health and welfare plans, negotIated contract renewals with certam eXisting carners,
and marketed the CIty'S long term disabIlity plan and the CIty'S life msurance plan (both the
employer provided plan and the voluntary plan) The services provided by Aon resulted
In a substantial savmgs to the City As a result of Aon's comprehensive review of the CIty's
Insurance claim experience, which resulted m the marketmg of the City'S Long Term
Dlsablhty and life Insurance plans, and their subsequent negotiations with the vanous
Insurance camers, the City Will expenence a premium savings of approximately $983.000
over the next three years compared to the premIums which would othelWlse have been
charged to the City
Due to the comprehensive nature of the work performed by Aon Consultmg, the total
charges for thelf servIces Will total $75,000 for FY98-99
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Due to the need for a long-term strategic planning approach to the City's health and
welfare plans, which WIll Include the development of new and/or revised employee benefits
packages and Will focus on the optimization of cost containment measures, It IS desirable
to maintain a relationship with the consulting firm for a minimum of three years The total
amount required to pay for projected employee benefits consulting services Will be more
than $50,000 but not more than $75,000 per fiscal year for both FY99-00 and FYOQ-01
BUDGET/FINANCIAL IMPACT
The Aon Consulting contract Will be charged to budget account number 01-700-274-00000-
5506-00000 ThiS fiscal year's expenditures for professional services Will be offset by the
savings In Insurance premiums alone It cannot, however, yet be determined how much
future savings WIll result from other benefit plan modifications recommended by Aon
ConsultIng
RECOMMENDA liON
It IS recommended that the City Council authorize the City manager to negotiate and
execute a contract for employee benefits consulting services from Aon Consulting In an
amount not to exceed $75,000 for FY98-99, FY99-01 and FYOO-01
Prepared by Karen Bancroft, Director of Personnel
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