November 9, 2004

SUBJECT:      Renewal of Vision Insurance Contract for Calendar Years 2005 and 2006

REPORT IN BRIEF

This report recommends the renewal of the vision benefit contract between City of Sunnyvale and Vision Service Plan Inc. (VSP) through the City Advantage Plan (CAP) Pool at a rate reduction of 4.7% effective January 1, 2005. The rates are guaranteed for two full calendar years through December 31, 2006.

BACKGROUND

As part of its benefits’ package the City of Sunnyvale provides all represented full-time, regular part-time, confidential and management employees and City council with a comprehensive vision benefit through Vision Service Plan (VSP).

Last year, Council approved a change of broker, Driver Alliant, which provided the City with savings in several insurance plans.  Driver Alliant was asked to market and provide premium quotes for this benefit plan.  Driver Alliant has access to a pool for the same current benefit level through the same provider, VSP.  One of the advantages of being in a pool is that lower rates can be offered, usually through savings in the administrative function, although individual experience is always a very important factor in the setting of premiums.

EXISTING POLICY

Legislative/Management, Sub-element Policy 7.3D.1a – Maintain a competitive pay and benefits package for employees.

The current Memoranda of Understanding for SEA, PSOA, COA and SEIU and Salary Resolution for unrepresented employees and Council, also contain provisions to provide this benefit to eligible employees and Council.

DISCUSSION

After thorough review of the VSP proposal and two other more costly alternatives, Driver Alliant has recommended a two-year renewal agreement with VSP through the CAP Pool. The favorable City experience with the plan and the pool capability has allowed for the cost to be reduced for the next 24 months.

FISCAL IMPACT

The total fiscal impact is an estimated savings of $6, 367 per year or a total of $12,734 for the next two years. Funding for this expenditure is provided in the Benefits Fund, and the cost of the contract renewal has been provided for in the Fiscal Year 2004/05 and 2005/2006 Budgets in Program 784.

CONCLUSION

It is concluded that is beneficial for the City and its employees to renew this contract with VSP through the CAP Pool with the same level of benefits and a reduced premium for a period of two calendar years.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office

ALTERNATIVES

1.      Authorize renewal of the vision insurance contract with VSP through the CAP Pool for a term of two years, realizing savings while keeping the current benefit levels.

2.      Do not authorize renewal of the contract and direct broker to seek other quotes. 

RECOMMENDATION

Staff recommends adoption of Alternative #1: Authorize renewal of the vision insurance contract with VSP through the CAP Pool for a term of two years, realizing savings while keeping the current benefit levels.

Reviewed by:

Mark Gregersen, Director, Human Resources

Prepared by: Myriam Castaneda, Human Resources Supervisor

Approved by:

Amy Chan

City Manager