Agenda #: 5.5
Meeting Date: November 15, 2022
TO: Honorable Mayor and Members of the City Council
FROM: Daniel Fox, City Manager
TITLE: AMENDMENT TO THE CITY OF DIAMOND BAR FRINGE BENEFITS FOR FY 2022-2023.
STRATEGIC
GOAL: Open, Engaged & Responsive Government
RECOMMENDATION:
Adopt Resolution No. 2022-56 Amending City of Diamond Bar Fringe Benefits for FY 2022-23.
FINANCIAL IMPACT:
The cost to implement the $100 per month benefit allotment increase is approximately $45,675 for the remainder of FY 2022/23. These costs can be paid for with existing budgeted resources for FY 2022/23 due to salary savings from vacant positions.
BACKGROUND:
Through the City Council’s adopted Strategic Plan, the prioritization of high-performing staff was identified as one of the key objectives. In order to carry out the Council’s vision of that objective, an “Employer of Choice” (EOC) initiative was developed by City staff.
The EOC initiative is a broad framework of policies, programs and approaches that will make the City of Diamond Bar a desirable employer to work for in the public sector. One such foundational philosophy of the EOC initiative is to attract and retain top employee talent. In order for the City to be a competitive in the job market, it must evaluate its compensation and benefits package from time to time.
Each year, the City Council adopts the Compensation and Benefits Plan for the fiscal year which includes employee positions, salary ranges and benefits during the annual budget adoption process. This process typically takes place in June of every year.
During this fiscal year’s budget review process, there were questions raised whether or not the City provided monthly benefit allotment was sufficient given recent increases to healthcare premiums. At that time, City staff could not respond to what the 2023 healthcare rates would be since the City’s benefits open enrollment process takes place between September – October of each year. It is during the benefits open enrollment period that the healthcare premium rates for medical, dental and vision insurance are made available to benefit participants for the following calendar starting January 1st.
Although rates are effective January 1st of every year, participants pre-pay one month ahead for their healthcare benefits starting in December.
ANALYSIS:
The healthcare premiums are made up of three insurances: medical, dental and vision.
Benefit plan participants can choose from a variety of healthcare maintenance organizations (HMO) or preferred provider organizations (PPO) for both medical and dental insurance for themselves and eligible dependents. For vision insurance, there is only one option which has a broad provider network for plan participants. Over the years, dental and vision insurance rate increases have been very minimal. In fact, dental and vision premiums have not gone up over the last five years. However, monthly premiums for medical insurances have seen an approximate 47% increase in the past nine years which is consistent with national trends.
Since 2014, the medical premiums have risen on average approximately $456 per month across all plan designs (both HMO’s and PPO’s) and coverage levels when compared to the 2023 rates. The City’s benefit allotment increased from $1,120 in July 2014 to $1,470 in July 2022 for non-exempt employees and $1,150 to $1,500 respectively for exempt and City Council Members. This represents a $350 per month increase during that time period. This analysis reveals an approximate difference of $106 per month between the given benefit allotment and healthcare premiums.
There are two reasons why the City has fallen behind the average increase. The first reason can simply be attributed to timing. The City operates its annual budget on a fiscal year period commencing July 1st and ending on June 30th of the following year. The City staff typically makes recommendations to the City Council to change the benefit allotment amount in June of every year. By contrast, healthcare rates coincide with a calendar year and rate increases go into effect the following January of each year. City staff typically receive the new rates in early fall for the open enrollment season which takes place between mid-September to mid-October each year, after the budget has been adopted by the City Council. The second reason for the gap is that the City did not recommend any increases to the monthly benefit allotment amount during the FY 2020/21 budget adoption process due to the economic uncertainty of the COVID-19 pandemic.
It is recommended that City Council approve a $100 per month increase to the monthly benefit allotment for all benefitted classifications of employment, including executive management positions, and members of the City Council to keep up with corresponding health premium rate increases. A $100 monthly benefit allotment increase would result in full-time non-exempt staff receiving $1,570 and full-time exempt staff and City Council Members receiving $1,600 to be used towards health benefits. City staff is recommending the effective date of the benefit allotment increase be December 1, 2022 since the City pre-pays one month ahead for healthcare insurance premiums.
LEGAL REVIEW:
The City Attorney has reviewed and approved the Resolution as to form.
PREPARED BY:
REVIEWED BY:
Attachments:
1. 5.5.a Resolution No. 2022-56
2. 5.5.b “Exhibit A” Benefits Plan effective December 1, 2022