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SR 11-28-2017 3I City Council Report City Council Meeting: November 28, 2017 Agenda Item: 3.I 1 of 4 To: Mayor and City Council From: Donna Peter, Director, Human Resources Department Subject: Authorization to execute an agreement with PlanSource Benefits Administration, Inc. Recommended Action Staff recommends that the City Council authorize the City Manager to execute an agreement with PlanSource Benefits Administration, Inc., ("PlanSource") a Florida- based company, to continue to provide a benefits administration system, for the City of Santa Monica. This recommended award is made as an exception to the competitive bidding process pursuant to Section 2.24.080(d) after considering the vendor's specific expertise, unique background to provide the needed services, and City's interest in avoiding unnecessary expense and delay. The proposed agreement is for an amount not to exceed $75,000 for the first year, with two additional one-year renewal options in an amount not to exceed $80,000 for each additional year, for a total amount not to exceed $235,000 with future funding contingent on Council budget approval. Executive Summary The City currently contracts with an outside vendor for on-line tracking and reporting of staff benefits that facilitates compliance with Federal obligations under the Affordable Care Act (ACA). In order to remain in compliance with the ACA guidelines and to provide uninterrupted benefits services to employees, staff recommends an exception to the competitive bidding process for a new contract with PlanSource Benefits Administration Inc.to extend that relationship in an amount not to exceed $235,000 over a three-year period. The contract will allow PlanSource to continue to provide a benefits administration system to the City of Santa Monica, with key reporting tools, and cost savings from subsidies that are exclusive to PlanSource. Background The City contracts with over 10 different vendors to offer comprehensive benefits to staff, which includes various types of insurance coverages for eligible staff members 2 of 4 and their dependents. Additionally, beginning in 2015, the ACA established new regulations which required employers to report the detailed information on employee benefits enrollment to the IRS on a monthly basis. One of the main functions of PlanSource is to track and report employee benefits in accordance with the ACA. On September 29, 2015, the City Council approved the City Manager to execute a Professional Services Agreement with PlanSource after a thorough selection process with the City’s third party insurance broker, Arthur J. Gallagher & Co. In 2015, the City also switched life insurance and long term disability carriers. Aetna was selected to be the new provider. As a result of this new agreement, Aetna subsidizes a portion of the fees from PlanSource. Aetna pays $1.25 per employee, per month which results in an average saving of $3,600 per month, or $43,200 per year for the City. Discussion The City began implementation of the PlanSource on-line benefit administration system two years ago in preparation for open enrollment. As part of the implementation process, employees’ benefits data were extracted from the City’s PeopleSoft system. It took a year and a half to extract and validate the benefits data for over 2,500 employees. After implementation of the new system, the City was able to establish electronic file feeds between the PlanSource system and the various insurance carriers. The weekly file feeds update the carriers with employee demographics and elections, which allows for more accurate billing. The file feeds provide better employee experience as carrier files are updated in real-time and ensures employees timely access to services through the insurance carriers. This system serves as an accurate real-time record of employee benefit elections. The new ERP system, Tyler Munis, does not have the capability to update the carriers directly. The current contract with PlanSource was scheduled to expire September 30, 2017. Human Resources staff submitted a modification to extend the contract expiration date by two months. The new expiration date is November 30, 2017, which allows the agreement to remain in force while seeking Council’s approval. Since the implementation of the PlanSource system, the City has streamlined and automated employee related transactions to ensure that the City is in compliant with the reporting 3 of 4 regulations of the ACA. Failing to meet ACA deadlines imposed by the IRS, could result in the City incurring penalties up to thousands of dollars. A change in vendors would also result in a delay of ACA reporting requirements. The ACA requires employers to report the following information every month to the IRS: identify all full time employees working 30 hours or more, determine if the minimum essential health coverage providing minimum value was offered, and if the offer was made to dependent children and spouses, and the employee’s premium contribution to the lowest cost employee- only plan. Employers are required to capture this information on the 1094C and 1095C tax forms that are legally required to be mailed to all employees by January 31st of the following year. Tax forms for plan year 2017 must be distributed to employees no later than January 31, 2018 and electronically submitted to the IRs no later than March 31, 2018. The information necessary to prepare and transmit the forms is currently maintained and validated in PlanSource. PlanSource has an established secure electronic connection with the IRS in which the data can be transmitted in accordance with the ACA. Vendor Selection Staff recommends PlanSource to furnish and deliver the benefits administration system as an exception to the competitive process. The purchase is available from a single source because the compatibility of the PlanSource system with the City of Santa Monica is crucial. PlanSource is the only vendor that is equipped to generate the legally required 1094C and 1095C tax forms in time for the upcoming deadline. Given the amount of time it takes to extract and validate data from the City’s current payroll system, the City would not be able to produce the 2017 ACA required tax forms in time for the January 31 deadline. Additionally, continuing to work with PlanSource would allow the City to maintain the subsidy provided by Aetna. The subsidy provided by Aetna is specific to PlanSource and cannot be extended to other companies. This cost savings is not guaranteed with other vendors. Financial Impacts and Budget Actions The agreement to be awarded to PlanSource Benefit Administration, Inc. is for an amount not to exceed $235,000. Funds in the amount of $75,000 are available in the 4 of 4 FY 2017-2018 budget in the Human Resources Department. The agreement will be charged to 01253.533580. Future year funding is contingent on Council budget approval. Prepared By: Donna Peter, Director Approved Forwarded to Council Attachments: A. PlanSource Staff Report 9.29.2015 City Council Report City Council Special Meeting: September 29, 2015 Agenda Item: 3.H 1 of 3 To: Mayor and City Council From: Donna Peter, Director, Human Resources Department Subject: Authorization to execute an agreement with Plan Source Benefits Administration, Inc. Recommended Action Staff recommends that City Council authorize the City Manager to execute a two year professional services agreement with PlanSource Benefits Administration, Inc., a Florida-based company, to provide a benefits administration program, in an amount not to exceed $150,000, with future year funding contingent on Council budget approval. Executive Summary In an effort to streamline and automate employee benefit related transactions and ensure the City is compliant with the reporting regulations of the Affordable Care Act (ACA), staff recommends implementing a benefits administration system. Staff recommends that these services be provided by PlanSource Benefits Administration, Inc. at a cost not to exceed $150,000 over a two-year period. Background The City offers a comprehensive benefits program to staff which includes a variety of types of insurance coverages for eligible employees and their dependents. The City contracts with over ten different vendors to provide these benefits. Currently, the City does not have any benefits administration software to manage benefit related transactions. Most benefit related transactions are performed manually and entered into multiple systems in a variety of ways. Recently, Federal law has imposed significant reporting requirements for employee benefits on large employers. Beginning in 2015, the ACA requires employers to report the following information for each month of the calendar year to the IRS: identify all full time employees (as-needed or permanent) working 30 hours or more, whether minimum essential health coverage providing minimum value was offered, whether the offer was made to dependent children and spouses, whether the offer was affordable, and the employee’s premium contribution to 2 of 3 the lowest cost employee-only plan. A benefits administration program would allow the City the ability to manage enrollment, billing, compliance and ongoing administration of employee benefits in one system, thus saving time, decreasing the margin for errors and increasing productivity. Discussion After an evaluation of current processes in the Human Resources Benefits Division, it was determined that a benefits administration program would better assist in managing the high volume of employee benefit related transactions and provide a mechanism to ensure accurate reporting compliant with the ACA. After interviewing and viewing two demonstrations by companies recommended by the City’s third party insurance broker, Arthur J. Gallagher & Co., PlanSource was selected. BenefitsOne, the technology platform offered through PlanSource, would provide the following services to the City: the ability to manage benefits and eligibility on-line with intuitive cloud-based technology, automate the creation and distribution of Forms 1094-C and 1095-C as required by the ACA, generate, adjust and reconcile carrier bills, ability to customize reports and workflows, provide a portal for employees to enroll in and access their benefits from any computer or mobile device any time of day or night, and connect with 3rd party systems to exchange and update employee benefits information with insurance carriers and the City’s payroll system. The implementation of BenefitsOne would provide staff with a secure cloud based environment to process and manage daily benefit related transactions with more efficiency and accuracy and the ability to cure long standing inefficiencies derived from manual and antiquated processes. The PlanSource/BenefitsOne system will integrate with the HR/Payroll modules of the City’s new Enterprise Resource Planning (ERP) system, once that system is fully implemented, should there remain a need for a separate benefits administration system. Staff is requesting authorization for the City Manager to execute a two year agreement through September 30, 2017. Vendor Selection The City’s third party fee-based insurance broker, Arthur J. Gallagher & Co. solicited proposals from vendors to provide a benefits administration program. The proposals 3 of 3 were analyzed by Gallagher. Based on the recommendation by Gallagher, Human Resources staff viewed two demonstrations and selected PlanSource Benefits Administration Inc. PlanSource was recommended based on their experience providing benefits administration services, their established relationships with benefit vendors with whom the City currently contracts with, and their competitive pricing. Financial Impacts and Budget Actions The agreement to be awarded to PlanSource Benefit administration, Inc. is for an amount not to exceed $150,000. Funds are available in the FY 2015-16 budget in the Human Resources Department. The agreement will be charged to account 01252.533580. Future year funding is contingent on Council budget approval. Prepared By: Tatiana Morrison, Executive Administrative Assistant Approved Forwarded to Council Attachments: REFERENCE – AGREEMENT NO. 10589 (CCS)