sr-102709-1kCity Council Meeting: October 27, 2009
Agenda Item: I'~
To: Mayor and City Council
From: Donna C. Peter, Director of Human Resources
Subject: Authorization to Pay Annual Premiums to Prudential Insurance Company
of America for Employee Insurances
Recommended Action
Staff recommends that the City Council approve payment of annual premiums for the
City's group life and- long-term .disability insurance plan with Prudential Insurance
Company of America (Prudential).
Executive Summary
As part of the renewal process for the various lines of employee group health and
welfare insurance benefits, the City's insurance broker, Gallagher Insurance Services,
solicited proposals for the City's Life and Long Term Disability insurance coverage. The
existing provider, Hartford Life Insurance, had proposed a 25% rate increase for the
January 1, 2010 renewal, which necessitated the need to go out to the market for this
coverage.
Prudential offered the most competitive rating structure and proposed rates are
guaranteed for three years and are lower than other competing insurance companies.
Prudential will provide 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 City Council
approve payment of the estimated annual premium of $1,200,000 for calendar years
2010 through 2012.
Background
Group term life insurance, accidental death and dismemberment (AD&D), and long term
disability (LTD) coverage, as well as optional dependent 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 City's current insurance provider, The Hartford Life Insurance
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Company, was selected in 2002 to provide the above benefits through the end of
calendar year. 2009. Premiums are subject to variables, including claims experience,
eligible employee earnings, and the number of employees in bargaining units that
receive life insurance and long term disability insurance benefits.
Discussion
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 as
appropriate. Bid specifications were prepared for the 2010 insurance renewals by
Gallagher Benefit Services and a Request for Proposal was sent to the following
insurance carriers: Aetna, CIGNA, Prudential, Unum and The Hartford. Based on
Gallagher's analysis, Prudential offered the most competitive rating structure by
proposing to match in-force LTD rates and supplemental life rates and. to reduce the
basic life/AD&D rates. In addition, Prudential's proposed rates are guaranteed for three
years and are lower than other competing insurance companies.
In order to provide continued coverage for life and long-term disability insurance
benefits for employees, staff recommends that City Council approve the estimated
annual premium of $1,200,000 for calendar years 2010 through 2012 to Prudential.
Prudential requires an initial premium deposit in the amount of $96,295, which will be
credited towards the first month's premium. Subsequent payments are billed and paid
monthly.
Financial Impacts & Budget Actions
The estimated annual premium for Prudential for 2010 through 2012 is $1,200,000.
Sufficient funds are included in the 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)
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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
to Council:
Pont Ewell
C y Manager
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