City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: December 2, 2024
Report #:2409-3470
TITLE
Approval of Professional Services Contract Number C25191563 with Navia Benefits Solutions Inc. in an Amount Not to Exceed $179,730 as the City of Palo Alto’s Administrator for City Employee Benefit Services of Flexible Spending Account (FSA), Transportation Spending Account (TSA), Lifestyle Plan and Consolidate Omnibus Budget Reconciliation Act (COBRA) for a Period of Five Years; CEQA Status – Not a Project.
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or their designee to execute Contract No. C25191563 (Attachment A), with Navia Benefits Solutions Inc., to provide administration services for the City’s Flexible Spending Account (FSA), Transportation Spending Account (TSA), Lifestyle Plan and Consolidate Omnibus Budget Reconciliation Act (COBRA) for a term of five years and a total amount not-to-exceed $179,730.
BACKGROUND
Flexible Spending Account (FSA)
The City offers a flexible benefit plan that enables employees to pay certain expenses on a pre- tax basis in accordance with IRS rules. Employees can allocate pre-tax funds to either a Healthcare FSA plan or a Daycare FSA plan. The Healthcare FSA plan allows expenses for medical, dental and vision to be paid using pre-tax dollars. Whereas the Daycare FSA plan allows major childcare expenses, such as daycare, camps, babysitting, and preschool, to be paid using pre-tax dollars. Employees who enroll in either the Healthcare Flexible Spending Account (FSA) or the Daycare FSA plan select an annual contribution amount for one or both plans. This elected amount is deducted from their paycheck on a pre-tax basis throughout the calendar year. They can then use these funds to pay for eligible expenses which the administrative services provider confirms meet eligibility requirements.
Transportation Spending Account (TSA)
The City also provides commuter benefits (TSA) for employees to elect annually. Employees receive a monetary incentive if they utilize commuter benefits such as carpooling, bike, transit,
and vanpool. The administrative services provider processes eligible receipts and reimburses employees. Monetary incentive provided under commuter benefit amount is negotiated with employee groups.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
COBRA provides employees and their families who lose their health benefits with the option to continue receiving group health coverage through their employer. The City is legally obligated to issue prompt notification to affected employees and their family members, outlining their COBRA rights and the necessary steps to maintain their group health benefits if they choose to do so. Under COBRA, eligible employees and their family members may extend their group health benefits for up to 18 additional months by covering the full cost of the coverage. Human Resources (HR) staff informs the administrative services provider when a former City employee and/or their family members need COBRA documentation promptly mailed and processed to ensure no gaps in medical or dental coverage.
FSA, TSA and COBRA administration are currently handled by one provider, Navia Benefits Solutions.
ANALYSIS
Procurement Process
A request for proposals (RFP) was issued by the City’s benefit broker, Alliant, on behalf of the City, after it was determined that Alliant’s RFP competitive solicitation process is in alignment with the City’s. Alliant conducted a targeted approach, reaching out to four known FSA, TSA, Lifestyle Plan, and COBRA providers. The solicitation period was posted for 15 days, and 3 proposals were received. The solicitation closed on June 21, 2024.
Table 1: Summary of Request for Proposal
Proposal Description
Request for Proposal for
COBRA/FSA/Commuter and Lifestyle Benefit
Proposed Length of Project 5 years
Number of Vendors Notified 4
Number of Proposal Packages Downloaded 3
Total Days to Respond to Proposal 15
Pre-Proposal Meeting No
Pre-Proposal Meeting Date N/A
Number of Proposals Received 3
Proposal Price Range $34,000 to $42,000 per year
Public Link to Solicitation N/A
The proposals were evaluated and determined to be responsive to the criteria in the RFP. The City evaluated RFP responses based on each respondent's ability to provide excellent customer service, provide efficient services and showcase technology which enhanced both the participant and employer experience. Human Resources staff reviewed the proposals from Navia Benefits Solutions (Navia), Priselac & Associates (P&A), WEX Health. After reviewing all submissions against the three main objectives that the City had for this RFP, staff recommends to continue services with our current provider, Navia. Navia’s proposal was superior for its exceptional customer service, enhanced technology options and competitive pricing.
Navia has served as the City's administrator for FSA and TSA since 2016 and assumed the role of City’s COBRA administrator in 2022. Navia has consistently met or exceeded customer service needs for both plan participants and staff administration managing these benefits. They offer multiple contact methods, an online platform, and mobile app enable participants to easily submit Healthcare and Daycare FSA claims and receive assistance. COBRA notices are sent on time, participants can set up ongoing payments through an online portal, and both participants and staff benefit from dedicated support for any inquiries. Accurate administrative of benefits can be tedious, Navia assigns a dedicated point of contact to address and resolve any concerns related to the administration of these benefits and multiple options for processing and updating employee enrollments. This scale of flexibility is important to support major updates through processes like open-enrollment while still supporting the weekly on and offboarding of individual staff throughout the year.
While preparing for this RFP, staff also included a new requirement for a Lifestyle Plan. Lifestyle Plan enables employers to offer reimbursement for various activities, such as gym membership, wellness programs, activities that promote health and a positive environment at the workplace, Childcare Assistance and much more. Currently, the City offers some of these benefits and may look to increase flexibility in the future. Benefits currently offered such as childcare assistance and gym membership reimbursements are currently administered through manual processes by staff in various departments including Human Resources and Administrative Service payroll.
Transitioning to a service provider for a cost of $4,000, will allow for knowledgeable staff resources to be focused on more strategic initiatives.
FISCAL/RESOURCE IMPACT
The proposals from all providers presented comparable annual costs, ranging from $34,000 to $42,000. Navia will continue to provide their services with no change to their current cost. The annual cost for Navia will be $36,000 and is recommended to continue administering these services due to their expertise and quality service.
Funds for the recommendations in this report to approve a contract for FSA, TSA, COBRA and Lifestyle plan administration services are included in the FY 2025 Adopted Operating Budget of the General Benefits Fund. Expenses in this fund are proportionally allocated out to departments. Funding for future years will be subject to City Council approval through the annual budget process. The current cost for administration of City of Palo Alto’s FSA, TSA and COBRA benefit, adjusted to account for projected population and enrollment changes is $32,000 annually; the new recommended contract maintains this annual cost for current services. Additional $4,000 in annual cost for the Lifestyle Benefit will be incorporated into this contract, as this is a new service.
STAKEHOLDER ENGAGEMENT
As a benefit service provider, employees will continue to interact with the current provider, providing a smooth continuity of services. Implementation of new services will be coordinated with partners such as Administrative Services and other to align business practices and ensure both continuity and opportunities for improvement in current processes.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because approval of this contract for benefit administration services is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5).
ATTACHMENTS
Attachment A: Navia Benefits Solutions Inc., Contract C25191563.
APPROVED BY:
Sandra Blanch, Human Resources Director