Summary:
In 2014, the City transitioned its self-funded, self-administered Long Term Disability (LTD) plan to a fully-insured plan with existing Life and Disability carrier, Standard Insurance Company (The Standard). As part of the transition, LTD beneficiaries with a date of disability on or after January 1, 2014 are covered under Standard’s fully-insured plan, while LTD Beneficiaries with a date of disability prior to January 1, 2014 remain in the City’s self-funded plan.
The Standard administers both plans through the City Contract for Group Term Life, Accidental Death and Dismemberment (AD&D), Short Term Disability (STD) and Long Term Disability (LTD) Insurance, RFP17-0276, approved by Council on August 8, 2017.
The City recently requested a proposal from The Standard to assume full financial responsibility and liability for the 37 claims remaining in the City’s self-funded plan. The Standard’s proposed fee of $1,127,000 (Assumption Fee) to be paid by the City to The Standard on October 1, 2018 is below the net present value of future benefits for those claims, calculated by the actuarial firm contracted by the City (Gabriel, Roeder, Smith, & Co). As such, City staff recommends that the City accept The Standard’s proposal.
Monthly benefit payments for LTD Beneficiaries remaining in the City’s self-funded plan are paid from the City’s Disability Income Trust, which was established prior to 2014 when the LTD plan was self-funded and self-administered. Once the LTD Beneficiaries currently in the City’s self-funded plan are transitioned to the fully-insured policy with The Standard, the material purpose of this Trust will no longer exist since all benefit payments will be paid directly from The Standard. Accordingly, City staff further recommends that the City seek judicial approval to dissolve the Trust. There are currently sufficient funds in the Trust to pay the Assumption Fee. Per Article 4.02 of the attached City Resolution dated September 10, 2012 establishing the Disability Income Trust, remaining assets held in the Trust may be returned to the City once all liabilities and obligations of the Disability Income Plan with respect to each and every Beneficiary have been satisfied and all administrative expenses are paid. Upon termination of the Trust, the remaining balance in the Trust, less the Assumption Fee, will be returned to the City.
M/WBE and VBE Participation Plans for employee benefit contracts are not applicable. |
Recommended Action:
Approval of the Assumption Agreement and Authorization for the Chief Procurement Officer to execute the Assumption Agreement with The Standard, and execute such other forms and documents related thereto, subject to review by the City Attorney’s Office, and authorization for the City to seek judicial approval to dissolve the City of Orlando Disability Income Trust dated September 10, 2012. |