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SR 12-18-2018 3R City Council Report City Council Meeting: December 18, 2018 Agenda Item: 3.R 1 of 3 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 2 of 3 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. 3 of 3 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)