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6 DATE: June 16, 2025
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Diane Pitman, Administrative Services Director
DEPARTMENT: Administrative Services
SUBJECT: THREE-YEAR CONTRACT TO LWP CLAIMS SOLUTIONS, INC.
IN THE AMOUNT OF $260,000 FOR WORKERS
COMPENSATION THIRD PARTY ADMINISTRATION
RECOMMENDATION
It is recommended that the City Council adopt the attached resolution approving a three-year professional services agreement with LWP Claims Solutions, Inc. to provide Workers Compensation Third Party Administration in an amount not to exceed $260,000 and authorize the City Manager to execute the agreement.
EXECUTIVE SUMMARY
The City’s current Workers’ Compensation claim administration is handled by Cities Group Joint Powers Authority (Cities Group). City Council provided staff direction to withdraw from the Cities Group and request proposals for a third-party administrator.
Staff evaluated all proposals and recommends a three-year agreement with LWP Claims Solutions, Inc. (LWP) for an amount not to exceed $260,000.
BACKGROUND/ANALYSIS
Foster City joined Cities Group in 1978 to provide third party administration for workers’ compensation claims. After a year of reviewing the administration of Workers’ Compensation claims for Foster City, it was recommended that Foster City withdraw from the Cities Group and hire an independent third-party administrator. The new administrator will ensure that Human Resources staff are involved in the employee
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6 claims processing, that claims are approved or denied in a timely manner, employees receive medical care and treatment so that they can return to work, and that any claim litigation or settlements are handled by the City. Any settlements over $50,000 will be brought to the City Council for approval.
Staff provided Cities Group a withdrawal notice on November 14, 2024. On January 6, 2025, the City Council approved a request for proposal (RFP) for Workers Compensation Third-Party Administrator. The RFP asked for respondents to provide a cost proposal for new claims only and a cost proposal assuming all existing claims are transitioning to third-party administrator. Seven (7) proposals were submitted and all seven (7) firms were interviewed by an evaluation committee including the Administrative Services Director, Human Resources Manager, Human Resources Analyst and an expert consultant with over 35 years of experience in Workers Compensation administration. Staff recommends approving a contract with LWP based on their response and approach to workers compensation claims management. LWP was determined to be the most qualified and responsive third-party administrator. LWP charges an annual fee for their comprehensive workers compensation claims management services. The attached cost proposal outlines the annual fee for a three- year period and other potential costs.
Based on the submitted proposal and interview, staff is recommending awarding the services contract to LWP.
The Cities Group Board has held regular meetings to discuss Foster City’s withdrawal and the impact to Cities Group. According to the Cities Group by-laws, the withdrawal will become effective July 1, 2025. In addition, staff petitioned the Cities Group Board to let Foster City transition any existing workers compensation claims to the new third- party administrator. On June 10, 2025, the Cities Group Board approved a resolution that will transition all existing Foster City claims to the new third-party administrator.
California Environmental Quality Act
The approval of the award of contract to LWP is not subject to review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as this is not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment.
FISCAL IMPACT
Transitioning workers compensation administration to a new third-party administrator will result in cost savings when compared to prior years with Cities Group. The total amount for the three-year contract is $260,000. The proposed FY 2025-26 budget 9 2
6 includes funds for professional services ($120,000 for FY 25-26) in anticipation of this contract being approved. No additional appropriation is needed at this time.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 – Resolution
Attachment 2 – Agreement
Attachment 3 – LWP Claims Solutions, Inc. Response to Request for Proposal Attachment 4 – LWP Claims Solutions, Inc. Cost Proposal