SR 12-18-2018 3R
City Council
Report
City Council Meeting: December 18, 2018
Agenda Item: 3.R
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To: Mayor and City Council
From: Christina Winting, Acting Director of Human Resources, Human Resources
Department
Subject: P & A Group - New Vendor for Flexible Spending Account Administration
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a professional services agreement with P&A Group, a New York-based
company, in an amount not to exceed $275,000 (includes 10% contingency) for
administration of the City’s Flexible Spending Account, Dependent Care Account,
Section 125 Cafeteria Plan, COBRA and Retiree Billing over a five-year period, with two
one-year renewal options for $60,000 each, which includes a 10% contingency and fee
changes after the five-year period.
Summary
Like many employers, the City offers Flexible Spending Accounts, Dependent Care
Accounts, a Section 125 Cafeteria Plan, COBRA and Retiree Billing as part of employee
benefit plans. The current provider of these benefits, PlanSource (formerly NGE), has
been unable to provide these services at a satisfactory level. As such, staff requested
that the City’s insurance broker, Alliant Insurance Services, Inc. (Alliant), solicit
proposals for a new vendor to provide these services. A Request for Proposals (RFP)
was conducted and based on their ability to provide the scope of services and a five-
year rate guarantee, P&A Group was selected. P&A Group offers a more
comprehensive administration of these programs, which will result in a reduction of
errors and compliance issues and a more positive overall employee experience.
Discussion
The City currently offers Flexible Spending Accounts, Dependent Care Accounts, a
Section 125 Cafeteria Plan, COBRA and Retiree Billing as part of the employee benefits
plan to its miscellaneous (non-safety) employees, the participants of the Executive Pay
Plan, and the Santa Monica Firefighters, Local 1109 (IAFF). Additionally, members of
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the Santa Monica Police Association (POA) also participate in the Flexible Spending
and Dependent Care Accounts. The City uses Alliant, a fee-based insurance
brokerage, to act as the City’s agent in negotiating the best benefit plans and rates for
the City. Alliant is responsible for conducting an annual analysis of the premium
renewals and goes out to bid as appropriate. PlanSource has been contracted with the
City since November 2015 to improve the high volume of administration of benefits to
City employees. The quality of service provided by PlanSource has been less that
satisfactory. For example, they failed to provide non-discrimination testing and
frequently billed retirees incorrectly which resulted in utilizing extensive City staff time to
investigate complaints and make corrections with PlanSource. This unsatisfactory
quality of service provided by PlanSource prompted staff to request that Alliant solicit
proposals for the City’s Flexible Spending Account, Dependent Care Account, Section
125 Cafeteria Plan, COBRA and Retiree Billing administration. A Request for Proposals
(RFP) was conducted by Alliant in August 2018.
Contractor/Consultant Selection
As our broker, Alliant prepared the bid specifications and conducted the procurement on
the City’s behalf. The following companies responded to the RFP:
1. PlanSource
2. P&A Group
3. Discovery Benefits
4. BCC
5. Optum
Based on Alliant’s evaluation and analysis, P&A Group emerged as the preferred
vendor based on cost and ability to provide the full scope of requested services. P&A
Group’s overall rate structure for the first year is projected to result in an overall savings
to the City of 30% or $7,038 in Flexible Spending and Dependent Care Account costs,
which would mitigate a rise in costs due to an increase in billing based on a higher
number of employees retiring each year and anticipated increase enrollment in FSA and
Dependent Care Accounts Services with PlanSource will terminate on December 31,
2018 and the transition to P&A Group will become effective January 1, 2019.
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Financial Impacts and Budget Actions
Staff seeks authority to award a contract with P&A Group.
Contract
Request Amount FY 2018-19 Account # Total Contract Amount
01130004.534590
01130004.529230
Total $275,000
Future year funding is contingent on Council budget approval.
Prepared By: Tatiana Morrison, Executive Administrative Assistant
Approved
Forwarded to Council
REFERENCE:
Agreement No. 10791
(CCS)