sr-032409-1h~®
~;tyaf City Council Report
- Santa Monica -
City Council Meeting: March 24, 2009
Agenda Item: 1-}~
To: Mayor and City Council
From: Donna C. Peter, Director of Human Resources
Subject: Authorization to Increase Council Threshold for Payment to The Hartford
Life Insurance Company for Employee Insurances
Recommended Action
Staff recommends that the City Council approve payment of annual premiums for the
Group Benefit Plan 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 that
Council approve payment of the estimated annual premium of $1,187,000 for calendar
year 2009.
Background
Group term life insurance, accidental death and dismemberment (AD&D), and long term
disability (LTD) coverage, as well as optional dependant life insurance, are currently
provided to all permanent City employees as part of an overall benefits package
detailed in the Memorandums of Understanding between the City and the various
bargaining units. The Hartford Life Insurance Company was selected in January 2002 to
provide the above benefits at a guaranteed rate for three years. 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 increase 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 $615,000 for calendar years 2005 and 2006.
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Discussion
For calendar years 2007 and 2008, premiums increased significantly to $830,000 and
$887,000, respectively. Rates for calendar year 2009 are also expected to increase.
Premiums are subject. to variables, but are primarily based on eligible employees'
earnings and on the number of employees in bargaining units that receive life insurance
and long term disability insurance benefits. As the City's employees' census changes
and earnings increase there are corresponding increases in premiums.
In order to provide continued coverage for life and long-term disability insurance
benefits for employees, staff is requesting an enhancement of $300,000 for calendar
year 2009 resulting in a total premium amount of $1,187,000. A significant reason-for
the increase is primarily due to negotiations that commenced and resulted in a new
agreement with the United Transportation Union, Local 1785, (UTU) in 2008. Per the
terms and conditions of the new agreement, the City agreed to provide for city-paid long
term disability insurance coverage to give UTU parity with the City's other non-sworn
bargaining units.
Contractor/Consultant Selection
The City uses Gallagher Benefits Services, Inc., an insurance brokerage, to act as the
City's agent in negotiating the best. rates for the City. Each year, Gallagher Benefits
Services, Inc. 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 Gallagher believes, based on its knowledge of the industry
and other carriers, that a better premium rate might be obtained by the City. Based on
Gallagher's analysis, .the premium rates quoted by The Hartford Life Insurance
Company for the 2008 and 2009 calendar years are warranted based on the City's
experience for each type of coverage provided by The Hartford.
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Financial. Impacts & Budget Actions
The estimated annual premium for the Hartford Life Insurance Company for 2009 is
$1,187,000. Sufficient funds are included in the FY2008-09 through FY2009-10 budget
authority as follows:
• 01274.51197E (Life/Accident/Death and Dismemberment)
• 01274.51197E (Long-term Disability)
• 41655.51197E (Long-term Disability -Motor Coach Operators)
Budget authority for subsequent years will be included in each annual proposed City
budget,
Prepared by:
Grace Quitzon, Administrative Analyst -Human Resources
Approved:
Donna C. Peter
Director of Human Resources
Forwarded to Council:
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P mont Ewell
City Manager
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