SR-021208-1G~_
~;,Yof City Council Report
Santa Monica
City Council Meeting: February 12, 2008
Agenda Item: t ^G
To: Mayor and City Council
From: Karen Bancroft, Director of Human Resources
Subject: Modification to Contract #8041 with the Hartford Life Insurance for
Employee Insurances
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute an amendment to Contract Number 8041 (CCS) with The Hartford Life
Insurance Company.
Executive Summary
The Hartford Life Insurance Company provides City employees with life insurance and
long term disability insurance benefits in accordance with negotiated contracts and
memorandums of understanding. The Human Resources Department is requesting to
amend the Hartford contract for 2007 from $615,000 to $678,000. For calendar year
2008, the Human Resources Department is requesting an increase of the total contract
amount to $830,000.
Discussion
The City entered into an agreement with The Hartford Life insurance company in
January 2002 to provide the above benefits at a guaranteed rate for three years. This
resulted in a total savings of $165,000 over the previous carrier (UNUM). The cap
placed on the City's expenditures by City Council for this coverage was $615,000 per
calendar year. As a result of increasing benefits for some bargaining units and a
change in the demographics of the City, aone-time amendment to the contract was
made to cover an overage for FY2003-2004. The City then received a rate decrease in
2005, which enabled the City to continue to incur expenses under the $615,000 for
calendar years 2005 and 2006.
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The cost of premiums are based on eligible employees' earnings and on the number of
employees in bargaining units that receive life insurance and long term disability
insurance benefits. Since 2004 the City's employees' census and earnings has
increased with a corresponding increase in premiums. In order to provide continued
coverage for life and long-term disability insurance benefits for employees the Human
Resources Department is requesting an enhancement of $63,000 for calendar year
2007 resulting in a total contract amount of $678,000 and an increase of $152,000 for a
total contract of $830,000 for calendar year 2008. The increase in premiums reflects an
increase in the number and earnings of employees and changes in Memorandums of
Understanding with the employee bargaining units. In addition the rates for long term
disability are experiencing a 20.7% increase over the rates that were in effect in 2007.
Contractor/Consultant Selection
Each year, AON Consulting Services, Inc., the City's employee benefits consultant,
conducts an analysis of the premium renewals and goes out to bid whenever the City's
experience under a plan does not warrant the premium increase quoted by the carrier or
if AON believes, based on their knowledge of the industry and other carriers, that a
better premium rate might be obtained by the City. Based on AON's analysis, the
premium rates quoted by The Hartford Life Insurance Company for the 2007 and 2008
calendar years are warranted based on the City's experience for each type of coverage
provided by The Hartford.
Financial Impacts & Budget Actions
The estimated annual premiums for the Hartford Life Insurance Company for contract
year 2007 are $678,000. Sufficient funds are included in the FY 2007-08 budget to
cover the increase in costs. The estimated annual premiums for 2008 will be $830,000.
Any adjustments needed to the FY 2008-09 Budget will be included during the budget
process.
Prepared by: Karen Bancroft, Director of Human Resources
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Forwarded to Council:
of Human R~so4rces Gity Manager
Reference
Amendment to
Contract No. 8041
(ccs).