Contract: Hartford Life and Accident Insurance Company for SRIP II Long- Term Disability Insurance and Basic Life and AD&D Insurance

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1 Office of the City Manager December 16, 2014 To: From: Honorable Mayor and Members of the City Council Christine Daniel, City Manager Submitted by: David Abel, Acting Director of Human Resources Subject: Contract: Hartford Life and Accident Insurance Company for SRIP II Long- Term Disability Insurance and Basic Life and AD&D Insurance RECOMMENDATION Adopt two Resolutions: 1) Authorizing the City Manager to execute a contract and any amendments with Hartford Life Accident Insurance Company (Hartford) to provide Long-Term Disability (LTD) Insurance at the reduced premium rate of $0.173 for every $100 of active participants covered salaries for most non-sworn employees for three (3) years effective January 1, 2015 through December 31, 2017, for a total contract amount not to exceed $379,200. 2) Authorizing the City Manager to execute a contract and any amendments with Hartford to provide Basic Life and Accidental Death and Dismemberment (AD&D) Insurance at the premium rate of $0.060 per $1,000 of coverage for eligible employees for Basic Life insurance, $0.034 AD&D per $1,000 of coverage for eligible employees for AD&D insurance, and Supplemental Life Insurance for three (3) years, from January 1, 2015, through December 31, 2017, for a total contract amount not to exceed $207,000. FISCAL IMPACTS OF RECOMMENDATION The contracts with Hartford will result in a decreased City cost of approximately $233,400 over the term of the contracts ($212,400 for the LTD insurance and $21,000 for the Life and AD&D insurance). Funding is available and paid out of the Payroll Deduction Trust Fund. The projected LTD Insurance expenditures are as follows: 1/1/15 to 6/30/15... $63,200 7/1/15 to 6/30/16... $126,400 7/1/16 to 6/30/17... $126,400 7/1/17 to 12/31/17... $63,200 Total Expense Budget for Contract... $379, Milvia Street, Berkeley, CA Tel: (510) TDD: (510) Fax: (510) manager@cityofberkeley.info Website:

2 Contract: Hartford Life and Accident Insurance Company for SRIP II Long-Term Disability Insurance and Basic Life and AD&D Insurance December 16, 2014 The projected Life and AD&D Insurance expenditures are as follows: 1/1/15 to 6/30/15... $34,500 7/1/15 to 6/30/16... $69,000 7/1/16 to 6/30/17... $69,000 7/1/17 to 12/31/17... $34,500 Total Expense Budget for Contract... $207,000 Budget Code: Contract Management System CMS No. E3D3C CURRENT SITUATION AND ITS EFFECTS On July 1, 2007, the City contracted with Cigna to provide LTD insurance and Basic Life and AD&D insurance, covering all eligible benefited employees, and paid for by the City; and Supplemental Life Insurance, which is voluntary and paid for by the employee through payroll deductions. LTD Insurance: The City currently pays a LTD insurance premium of $0.270 for every $100 of active participants covered salaries for most non-sworn employees for a total annual premium of $197,200. Human Resources staff worked with the City s benefits broker, Keenan & Associates, to solicit proposals from other carriers. Staff reviewed proposals and found that Hartford s proposal to provide the same level of coverage for a reduced premium of $0.173 for every $100 of active covered salary, for an estimated total annual premium of $126,400, a decrease of $70,800 (almost 36%) from the prior year. This will result in an estimated savings to the City of $70,800 a year, or $212,400 over the life of the three (3) year contract. Life and AD&D Insurance: The City currently pays a premium of $0.090 for Basic Life insurance and $0.022 per $1,000 for AD&D coverage, for a total annual premium of $76,000. Hartford proposed to offer the same level of coverage for a reduced premium of $0.060 per $1,000 of coverage for eligible employees for Basic Life insurance and $0.034 per $1,000 for AD&D coverage, for an estimated total annual premium of $69,000, a decrease of $7,000 (over 16%) from the prior year. This will result in an estimated savings to the City of $7,000 a year, or $21,000 over the life of the three (3) year contract. For employees who purchase Supplemental Life and AD&D insurance coverage above the City-provided level, the cost for the AD&D coverage will increase from $0.022 per $1,000 of AD&D coverage to $0.034 per $1,000 of AD&D coverage (a $0.012 increase per $1,000). The Supplemental Life and AD&D insurance costs are age-rated, so the increase cost will be different based on each employee s age. For example: a 35 year old employee with $100,000 in supplemental life and AD&D insurance will see an increase from $14.20 per month to $19.00 per month, while a 40 year old employee with the same amount of coverage will see an increase from $17.80 per month to $26.20 per month. Human Resources notified each employee of the 2015 anticipated increases and provided them with an opportunity to amend or cancel their coverage. Currently there are 207 employees who purchase Supplemental Life and AD&D insurance. Page 2

3 Contract: Hartford Life and Accident Insurance Company for SRIP II Long-Term Disability Insurance and Basic Life and AD&D Insurance December 16, 2014 BACKGROUND Beginning with labor agreements negotiated in Fiscal Year 1996, the City agreed to pay the premium costs for LTD coverage for most non-sworn employees. The only exceptions are the 20 remaining active employees in the Supplementary Retirement and Income Plan I (SRIP I) program and employees represented by the International Brotherhood of Electrical Workers, Local 1245, who elected to have their members pay for the LTD premiums. The LTD benefit provides monthly disability benefit payments to eligible employees who are unable to work for more than 90 days due to disability. The LTD benefit provides monthly disability benefits equal to 60% of the single highest year salary prior to determination of total disability less any offsets, including disability benefits the participant receives under the Social Security Act, the California State Disability Insurance Program, worker s compensation benefits, and the California Public Employees Retirement System. Basic Life and AD&D Insurance is provided by the City to all eligible employees. Unrepresented employees and employees represented by Service Employees International Union (SEIU), Local 1021 Maintenance and Clerical Chapter receive $25,000 in coverage. Members of Local One, International Brotherhood of Electrical Workers, Local 1245; SEIU, Local 1021 Community Services and Part-Time Recreation Leaders Association Units; and Assistant Fire Chief and Battalion Chief all receive $50,000 in coverage. Members of the Berkeley Police Association and Berkeley Firefighters Association/I.A.F.F. Local 1227 receive $100,000 in coverage. Eligible employees also have the option to purchase up to $300,000 of Supplemental Life, which is voluntary and paid for by the employee through payroll deduction. ENVIRONMENTAL SUSTAINABILITY There are no identifiable environmental effects or opportunities associated with the subject of this report. RATIONALE FOR RECOMMENDATION The LTD insurance and the Basic Life and AD&D Insurance are mandated employee benefits under the collective bargaining agreements. ALTERNATIVE ACTIONS CONSIDERED Other carriers were solicited for their proposals, but the proposal from Hartford was the lowest. Over the three (3) year term of the combined contracts, the City anticipates a total estimated savings of over $233,400. CONTACT PERSON David Abel, Acting Director of Human Resources, Human Resources, Attachments: 1. Resolution - Long-Term Disability Insurance Page 3

4 Contract: Hartford Life and Accident Insurance Company for SRIP II Long-Term Disability Insurance and Basic Life and AD&D Insurance December 16, Resolution - Basic Life and AD&D Insurance Page 4

5 RESOLUTION NO. ##,###-N.S. CONTRACT: HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY FOR LONG-TERM DISABILITY INSURANCE WHEREAS, the City of Berkeley provides Long-Term Disability (LTD) Insurance as a mandated employee benefit under collective bargaining agreements with most nonsworn employee bargaining organizations; and WHEREAS, the City must contract with a company which administers LTD Insurance; and WHEREAS, Hartford Life and Accident Insurance Company was selected through a competitive bidding process; and WHEREAS, Hartford Life and Accident Insurance Company will provide LTD Insurance coverage at the premium rate of $0.173 for every $100 of active participants covered salaries for most non-sworn employees effective January 1, 2015 through December 31, 2017; and WHEREAS, funds are available in the current budget under budget code , and the contract has been entered into the City contract database and assigned CMS No.E3D3C. NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that the City Manager is authorized to execute a contract and any amendments with Hartford Life and Accident Insurance Company to provide LTD insurance for a total contract amount not to exceed $379,200 for the period January 1, 2015, through December 31, BE IT FURTHER RESOLVED that a record signature copy of said contract and any amendments to be on file in the Office of the City Clerk.

6 RESOLUTION NO. ##,###-N.S. CONTRACT: HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY FOR BASIC LIFE AND AD&D INSURANCE WHEREAS, the City of Berkeley provides Basic Life and Accidental Death & Dismemberment (AD&D) Insurance as a mandated employee benefit under the collective bargaining agreements with all of the employee bargaining organizations; and WHEREAS, the City must contract with a company which administers Basic Life and AD&D Insurance; and WHEREAS, Hartford Life and Accident Insurance Company was selected through a competitive bidding process; and WHEREAS, Hartford Life and Accident Insurance Company will provide Basic Life and AD&D Insurance at the premium rate of $0.060 per $1,000 of coverage, and AD&D Insurance at the premium rate of $0.034 per $1,000 of coverage for eligible employees, and voluntary Supplemental Life Insurance coverage effective January 1, 2015 through December 31, 2017; and WHEREAS, funds are available in the current budget under budget code , and the contract has been entered into the City contract database and assigned CMS No.E3D3C. NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that the City Manager is authorized to execute a contract and any amendments with Hartford Life and Accident Insurance Company to provide Basic Life and AD&D Insurance for a total contract amount not to exceed $207,000 for the period January 1, 2015, through December 31, BE IT FURTHER RESOLVED that a record signature copy of said contract and any amendments to be on file in the Office of the City Clerk.