HomeMy WebLinkAboutStaff Report 4326
City of Palo Alto (ID # 4326)
Policy and Services Committee Staff Report
Report Type: Meeting Date: 12/10/2013
City of Palo Alto Page 1
Council Priority: City Finances
Summary Title: Benefits Audit
Title: Year-end Update to Benefits Audit
From: City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that the Policy and Services Committee review and comment on the
attached report updating the status of audit recommendations from the December 11,
2012 benefits audit. This is an informational report and no action is required.
Executive Summary
The City Auditor’s Office completed an audit of employee health benefits administration
on December 11, 2012 in accordance with the Fiscal Year (FY) 2012 Annual Audit Work
Plan. The audit determined that the Human Resources Department needs to increase
controls over health benefits administration to ensure that health premiums,
administrative fees, and retiree reimbursements are calculated and paid accurately for
eligible active and retired employees in accordance with applicable labor agreements,
laws, and regulations. This report provides an update on the steps Human Resources
has taken in the past year to address the recommendations in the report
Background
For both active and retired employees, the City participates in the health program
administered by the California Public Employees’ Retirement System (CalPERS). As a
member of this program, the City receives access to the numerous health plans offered
by CalPERS. However, CalPERS controls all of the plan offerings, design, and rules and
regulations for administration of the program.
City of Palo Alto Page 2
Under the current CalPERS medical administration structure for active employees,
CalPERS bills the entire premium cost to the City, and the City deducts the negotiated
employee share of health premium payments from employees’ paychecks (currently
10% of the total cost up to the amount of the second highest plan).
The payment process for retiree benefits is significantly more complicated. The City
currently administers several levels of benefits for eligible retirees, depending on the
retiree’s hire date, retirement date, and the employee group (any of seven unions or
the management and professional non-represented).
When the City changed its medical benefit structure in 2011, CalPERS required the City
to make several administrative changes. The new administrative process resulted in
several changes that affected the billing process for retiree medical benefits. Under the
new billing arrangement, the majority of the premium cost is deducted from retirees’
pension checks and the City is responsible for calculating and reimbursing retirees for
the cost of the applicable benefit. The City has contracted with an outside vendor since
late 2011 for overall administration of the retiree reimbursement program.
Discussion
A. Overview of Audit Findings
Given the complexity of the reimbursement program, Human Resources requested that
the Auditor’s Office complete a focused review in 2012 and make recommendations for
improvements and potential efficiencies in medical benefit administration. The Auditor’s
findings focused on five key areas:
1. Retiree reimbursements were not accurately calculated;
2. CalPERS billing was not adequately monitored;
3. The vendor contract for reimbursement processing was not adequately
monitored;
4. HR did not maintain sufficient documentation to verify dependent eligibilty; and
5. Personally identifiable information was not adequately protected or controlled.
B. Completed Recommendations
City of Palo Alto Page 3
Of 20 recommendations, 18 are now complete. Staff prepared a comprehensive
manual, “Retiree Medical Reimbursement Procedural Guidelines,” that addresses a vast
majority of the recommendations. Details on the status of the action plan are described
in Attachment A, “Report on Status of Audit Recommendations.” Examples of specific
provisions in the Guidelines (Attachment B) that address key recommendations include:
An index that clearly organizes health eligibility requirements for active
employees and retirees in all bargaining units;
A requirement to download and securely email CalPERS health reports to the
outside vendor on a monthly basis;
Methodology for (1) reconciling the CalPERS billing with the vendor’s
reimbursement report, which staff and the vendor review in a monthly
teleconference, and (2) comparing CalPERS billing with the City’s SAP data;
New recordkeeping procedures for payment instructions that staff sends to the
vendor;
A procedure for handling vendor checks that remain uncashed; and
Procedures for reviewing vendor invoices to ensure accuracy and performance of
services consistent with the contract scope.
C. In-Process Recommendations and Next Steps
The remaining two recommendations remain in process because they require ongoing
review as the guidelines are implemented, or because they require staff to identify and
implement new systems. For example:
A review of previous retiree records is in process and scheduled to be completed
by December 31, 2013.
Staff has reviewed the vendor contract scope to ensure that it accurately reflects
the retiree tiers and the services that the vendor provides, and a contract
amendment with an updated scope of services is expected to be executed on or
around December 13, 2013.
Conclusion
In the 2.5 years since the current retiree medical premium contribution model was
implemented, staff has made significant progress learning how to work with the
CalPERS system to pull and manipulate the appropriate data. The Auditor’s
recommendations and the steps Human Resources has taken to implement those
City of Palo Alto Page 4
recommendations have added important checks and balances, and resulted in increased
efficiency through better automation.
Attachments:
A: Report on the Status of Audit Recommendations as of December 4, 2013
B: Retiree Medical Reimbursement Procedural Guidelines
Attachments:
-: Attachment A: Report on Status of Audit Recommendations as of December 4,
2013 (PDF)
-: Attachment B: Retiree Reimbursement Procedural Guidelines (PDF)
Finding Title Finding Rec #Recommendation Rating
Current
Status
Original
Target Date Target Date City Manager's Action Plans
1-A (1)Establish clear, documented procedures to ensure
the accuracy of the Reimbursement Report.
Significant Completed 3/31/2013 N/A Recommendation reported as completed.
Written procedures on the Retiree Medical Reimbursement Report process will be created.
Dec. 2013 Management Update: Procedures have been created and documented.
1-A (2)Establish a methodology for reconciling the CalPERS
billing to the Reimbursement Report and perform a
monthly reconciliation to identify, track, and follow up
on any discrepancies. Create and maintain common
data fields among key data sources to facilitate such
reconciliation in an accurate, complete, and efficient
manner.
Significant Completed 1/31/2013 N/A Recommendation reported as completed.
HR staff will request additional resources to establish an automated methodology for reconciling the CalPERS
billing to the HR Reimbursement Report, including a common data field between CalPERS and EBS.
Dec. 2013 Management Update: EBS has developed methodology, including a common data field between
CalPERS and EBS, to reconcile the CalPERS billing to the Reimbursement Report. Adjustments and
discrepancies are identified, tracked, and notated on a EBS monthly report. City staff reviews the EBS monthly
report during monthly teleconferences to review retroactive transactions and notes.
1-A (3)Establish criteria and a methodology for addressing,
recording, and reviewing retroactive transactions in
the Reimbursement Report.
Significant Completed 1/31/2013 N/A Recommendation reported as completed.
A methodology for recording and reviewing the monthly retroactive transactions will be developed.
Dec. 2013 Management Update: Procedures have been created and documented. On a monthly basis, the
CalPERS Health Event Notification Report is downloaded and securely emailed to EBS. This report indicates
events that require retroactive transactions such as adding/deleting dependents, becoming Medicare eligible, and
moving.
Eligibility criteria for retiree health benefits were not clearly
defined and documented. FY 2011 Comprehensive Annual
Financial Report (CAFR) note disclosure and the retiree
health eligibility information provided to the City’s actuarial firm
were inaccurate. The effective implementation date of retiree
health tiers is not clearly communicated to stakeholders.
1-B Enhance current procedures to ensure that the
Retiree Medical Tier Matrix is maintained accurately,
completely, and in an organized manner along with a
complete set of the labor agreements, resolutions,
and CalPERS letters.
Consider making the Tier Matrix available to all
business partners and stakeholders to ensure that
the eligibility criteria are clearly communicated to all
parties.
Significant Completed 1/31/2013 N/A Recommendation reported as completed.
Current process for maintaining Retiree Medical Tier Matrix will be improved and organized so it is available on HR
intranet site for business partners. Labor Agreements are currently available on HR internet site.
Dec. 2013 Management Update: Staff created an index to accurately and thoroughly organize documentation
related to health information for eligible active employees and retirees for all bargaining units and non-represented
employee groups. This will be maintained as changes are adopted by Council in order to accurately maintain the
Retiree Medical Matrix. A complete set of labor agreements, resolutions, CalPERS letters, and an updated Retiree
Medical Matrix are posted on the City's intranet site. Labor agreements and the Matrix are also available on the
City's website and will be updated no later than 30 days after Council adoption. In addition, the Chief People
Officer will communicate any changes and updates to the Retiree Medical Matrix to the Administrative Services
Department.
1-C (1)Establish procedures for determining the health tier
for each retiree and maintaining a complete and
accurate record of retiree health tiers.
Significant In Process 2/28/2013 12/31/2013 A written procedure for documenting health tier as soon as a new retiree appears on CalPERS billing will be
documented.
Dec. 2013 Management Update: Procedures have been established for determining and documenting the health
group for retirees. In addition, a review of previous retiree records is being conducted and will be completed by
12/31/13.
1-C (2)Ensure that the tier determination is based on the hire
date, retirement date, and employee group at the
time of retirement as recorded in SAP and based on
the Retiree Medical Tier Matrix.
Significant Completed 3/31/2013 N/A Recommendation reported as completed.
Review retirees who separated prior to SAP implementation in 2003 to ensure they are accurately recorded on
Retiree Medical Tier Matrix.
Dec. 2013 Management Update: Procedures have been established for determining and documenting the health
group for retirees. Employee group will be confirmed in SAP and the CalPERS system to ensure accuracy and
consistency between the two systems. Retirees whose records are not maintained in SAP are assumed to have
retired prior to January 2004.
Retiree reimbursements were not accurately calculated.
Retroactive transactions are not consistently documented and
processed to ensure the accuracy and completeness of the
adjustments to the reimbursements.
Eligibility criteria for retiree health benefits have not always
been accurately applied in the calculation of retiree
reimbursements.
Finding 1: Retiree
reimbursements were
not accurately
calculated
Report on the Status of Audit Recommendations as of December 4, 2013 1 of 4
Finding Title Finding Rec #Recommendation Rating
Current
Status
Original
Target Date Target Date City Manager's Action Plans
2-A (1)Enhance the current procedures to ensure that any
changes in employment affecting the employee’s
health eligibility status are accurately and consistently
recorded in both SAP and CalPERS system in a
timely manner.
Significant Completed 3/31/2013 N/A Recommendation reported as completed.
HR process for promotions will be updated to include recording changes in SAP as well as CalPERS system until
such time that two systems are integrated.
Dec. 2013 Management Update: PSO procedures for promotions and any changes in employment affecting the
employee's health eligibility status have been updated to include recording changes in SAP as well as the
CalPERS system until such time that the two systems are integrated and duplicative entry is no longer necessary.
Staff corrected SAP health record errors found during the audit, and created a quarterly exception report to
compare data in SAP and the CalPERS system to maintain accuracy.
2-A (2)Verify the accuracy of the CalPERS system record by
comparing to the SAP record for each employee at
the time of retirement to ensure accurate billing by
CalPERS.
Significant Completed 3/31/2013 N/A Recommendation reported as completed.
Quarterly process for reviewing CalPERS billing to ensure accurate billing will be established as well as
determining appropriate internal or external resources to accomplish this review.
Dec. 2013 Management Update: Monthly procedures have been established to include confirmation of the
employee group in SAP and CalPERS system for each employee at the time of retirement.
2-B (1)Establish procedures for providing CalPERS with
clear, written instructions for the employer share
calculation on a regular basis.
Significant Completed 12/31/2012 N/A Recommendation reported as completed.
Although written instructions were provided in past, to ensure accuracy, HR staff will provide annual instructions to
the CalPERS to ensure calculations are clearly understood.
Dec. 2013 Management Update: PSO procedures have been established to provide annual instructions to the
CalPERS health division to ensure calculations are clearly understood.
2-B (2)Establish monitoring procedures to ensure that the
City instructions are followed by systematically
reviewing the methodology applied to calculate the
employer share.
Significant Completed 1/31/2013 N/A An automated methodology for reviewing the CalPERS billing calculations will be established.
Dec. 2013 Management Update: This function has been outsourced to EBS. PSO staff annually provides EBS
with a spreadsheet containing the calculation of the reimbursement amount for each health plan based on retirees'
health groups. CalPERS billing information is provided to EBS monthly. EBS developed a methodology to
compare information from the City and CalPERS to ensure the accuracy of the CalPERS billing and the
reimbursement amount.
HRD is paying for services it is not receiving.3-A Review the EBS contract to ensure the adequacy of
the contract terms and accuracy and clarity of the
scope of services including the retiree tier definition.
Establish monitoring procedures to ensure the
contract terms remain adequate and any changes in
the scope of services are documented and properly
authorized in accordance with the terms and
conditions under the contract.
Significant In Process 12/31/2012 12/13/2013 HR staff will review the EBS contract with vendor to ensure contract accurately reflects retiree tier definitions and
services that can be provided given limitations in access to CalPERS records. Periodic review of contract to
ensure scope of services remains accurate will be conducted.
Dec. 2013 Management Update: PSO reviewed the contract, revised the scope of services, and requested
ASD's Purchasing and Contract Administration Division to execute the contract amendment by 12/13/13.
Monitoring procedures have been established and the contract terms will be reviewed on an annual basis.
3-B (1)Establish recordkeeping procedures for maintaining
monthly Reimbursement Reports and additional
payment instructions provided to EBS along with
adequate supporting documentation.
Useful Completed 1/31/2013 N/A Recommendation reported as completed.
Recordkeeping procedures for any payment instructions and adjustments provided to EBS will be established.
Dec. 2013 Management Update: Recordkeeping procedures for any payment instructions and adjustments
provided to EBS have been outlined in internal staff procedural guidelines.
3-B (2)Establish review procedures to ensure accuracy and
completeness of retiree reimbursements prior to
instructions being provided to EBS for payment.
Significant Completed 12/31/2012 N/A Recommendation reported as completed.
Review process will be established to ensure retiree reimbursement instructions are complete prior to submitting to
EBS for payment.
Dec. 2013 Management Update: Review procedures have been established.
Finding 3: HRD has
not effectively
administered the EBS
contract
Payment instructions to EBS are provided without adequate
supporting documentation resulting in an overpayment of at
least $2,148.
Finding 2: CalPERS
billing was not
adequately monitored
The Human Resources Department (HRD) did not always
update the CalPERS system when a change in employee
group was recorded in SAP.
Duplicate active employee records in the CalPERS system
went undetected resulting in the City making overpayments to
CalPERS. CalPERS did not have the correct formula to
calculate the employer share.
Report on the Status of Audit Recommendations as of December 4, 2013 2 of 4
Finding Title Finding Rec #Recommendation Rating
Current
Status
Original
Target Date Target Date City Manager's Action Plans
3-B (3)Request EBS to provide monthly and annual
reconciliations of their check register to the
Reimbursement Reports and to notify the City of any
exceptions noted during the month.
Significant Completed 11/31/2012 N/A Recommendation reported as completed.
HR staff will request monthly reconciliation of check register and notification to City of any exceptions noted.
Dec. 2013 Management Update: PSO staff requested EBS to provide a monthly reconciliation of the check
register and to notify the City of any exceptions noted. In July 2013, EBS transitioned to a new system, making a
new report available online for PSO staff to review returned, voided, and reissued checks on a monthly basis. The
report is also discussed during a monthly teleconference meeting.
3-B (4)Establish procedures for reviewing the monthly
reconciliations and tracking and following up on any
discrepancies including returned, voided,
reissued checks in a timely manner. If the exceptions
require corrective actions, they should be
documented and related written communication to
EBS be maintained.
Significant Completed 2/28/2013 N/A Recommendation reported as completed.
Procedures will be established for reviewing monthly reconciliation reports, including follow up on any
discrepancies and documenting corrective action.
Dec. 2013 Management Update: Procedures have been established. The reconciliation report is reviewed
monthly during a teleconference meeting and any discrepancies are reviewed. Documentation outlining issues
and corrections are filed electronically and also noted on a summary report.
HRD was not aware that 20 checks issued in 2011 remained
uncashed.
3-C Work with ASD to establish procedures for handling
uncashed EBS checks. Based on the procedures,
formalize the EBS procedures for notifying the City of
the returned or uncashed checks and how to handle
them.
Significant Completed 2/28/2013 N/A Recommendation reported as completed.
HR will work with ASD to establish a procedure for EBS notification of uncashed checks and steps to follow in such
circumstances.
Dec. 2013 Management Update: Staff worked with ASD to create a stale dated check procedure. Steps for
handling uncashed EBS checks have been established.
HRD process for ensuring required 1099 tax forms are
received by applicable retirees was not always complete or
accurate.
3-D Establish a methodology for EBS to follow and require
specific supporting documentation to be provided to
HRD for review. Identify review criteria and establish
procedures to verify the accuracy and completeness
of the EBS services provided for Form 1099
issuance.
Significant Completed 12/31/2012 N/A Recommendation reported as completed.
Recordkeeping procedures will be established to ensure EBS accurately issues 1099 forms to retirees who have
not submitted Substantiation forms and at the same time, accurately documents forms received.
Dec. 2013 Management Update: A methodology and recordkeeping procedures have been established to
ensure EBS accurately issues 1099 forms to retirees who do not submit the Substantiation form. Review
procedures have also been established to verify the accuracy of 1099 issuance and related invoices.
Inadequate review of EBS invoices left invoicing errors
undetected.
3-E Establish procedures to review EBS invoices to
ensure the accuracy of the EBS billing. Review
should include reconciliation of the invoice to the
actual services provided.
Significant Completed 2/28/2013 N/A Recommendation reported as completed.
Procedure for reviewing EBS invoices will be created to ensure accuracy of EBS billing and completion of
services.
Dec. 2013 Management Update: A procedure for reviewing EBS invoices by the PSO Assistant Director or
appropriate designee has been created to ensure accuracy of EBS billing, including reconciliation with checks and
ACH transactions completed and other services within the contract scope. Invoice copies are maintained in an
electronic file.
Finding 4: Required
documentation to
verify the eligibility of
dependents was not
always available
Required documentation to verify the eligibility of dependents
for enrollment was not always available.
4 Improve dependent eligibility verification procedures
to ensure that required supporting documentation is
obtained, reviewed, and maintained in accordance
with the CalPERS Circular Letter No. 600-045-12.
Significant Completed 4/30/2013 N/A Recommendation reported as completed.
Verification procedures will be reviewed and improved to ensure that required supporting documentation is
obtained and if not, medical insurance will be cancelled promptly.
Dec. 2013 Management Update: A procedure document was provided to PSO staff and a review was completed
to ensure verification documentation is obtained and filed in accordance with CalPERS Circular Letter No. 600-045-
12. If supporting documentation is not received, dependents will not be enrolled in the health benefit plan. In
addition, each Business Partner team will review a sample of the employee benefits files on a quarterly basis.
Finding 3: HRD has
not effectively
administered the EBS
contract (continued)
Payment instructions to EBS are provided without adequate
supporting documentation resulting in an overpayment of at
least $2,148. (continued)
Report on the Status of Audit Recommendations as of December 4, 2013 3 of 4
Finding Title Finding Rec #Recommendation Rating
Current
Status
Original
Target Date Target Date City Manager's Action Plans
Finding 5: Personally
Identifiable
Information (PII) has
not been adequately
protected and
controlled
PII has not been adequately protected and controlled.5 Take applicable steps recommended by the NIST
Guide to appropriately maintain the confidentiality of
PII.
Significant Completed 6/30/2013 N/A Recommendation reported as completed.
The NIST guidelines have been reviewed with HR staff. An internal policy will be created.
Dec. 2013 Management Update: The NIST guidelines have been reviewed with PSO staff and a meeting was
held with the City's IT Security Manager. PSO has established a privacy policy specific to the department, which
was distributed and discussed at a staff meeting on 12/3/13.
Report on the Status of Audit Recommendations as of December 4, 2013 4 of 4
December 2013
1
Retiree Medical Reimbursement Procedural Guidelines
The Retiree Reimbursement program was established to reimburse eligible retirees for certain
healthcare premium deductions on their PERS pension checks that are caused by billing administration
procedures for medical premiums between the City of Palo Alto and CalPERS.
Included in this document are process procedures for the following:
how the City determines the amount of reimbursement paid to a retiree,
the distribution of checks to be completed by the third party administrator,
how to ensure accuracy of retiree reimbursements, and
how to handle uncashed checks in accordance with stale dated check procedure.
Background
I. City of Palo Alto
The City contracts for medical insurance with CalPERS by bargaining unit or non-represented
employee group. Each City of Palo Alto bargaining group (SEIU, MGMT, PAPOA, PMA, IAFF, FCA,
UMPAPA) have their own agreement for medical insurance. As Memoranda of Agreements (MOAs)
are negotiated with bargaining units the City notifies CalPERS via resolution in accordance to their
administrative rules as to the amount CalPERS should bill the City of Palo Alto for retiree medical
benefits within that bargaining unit. The resolution establishes how the City is billed for medical
insurance for all active employees as well as retirees within each specific bargaining unit or non-
represented employee group. Through negotiations over last 20 years, the City has established
various groups of retiree medical benefits. These benefits vary by hire date, retirement date and
bargaining unit or non-represented employee group. For that reason, as benefits have changed for
active employees, the City has needed to establish procedures to administer retiree health benefit
in accordance with the MOAs and Compensation Plan.
II. CalPERS
The CalPERS Health Benefits Program is governed by the Public Employees Medical and Hospital
Care Act (PEMHCA). CalPERS establishes which medical plans will be offered to employees as well
as the monthly medical premiums. The medical premiums are established annually and the new
rates are announced by CalPERS each year, generally in summer. The City of Palo Alto provides for
medical insurance for all of its eligible active employees and retirees through the CalPERS system.
CalPERS maintains the enrollment through their computer system My|CalPERS and invoices Palo
Alto on a monthly basis for the medical premium. The premium billing is based on the contribution
amount that has been established in the resolutions approved by City Council for each of the City’s
December 2013
2
bargaining units as well as the non-represented Management/Professional group.
III. Employee Medical Contributions
In 2011, the City of Palo Alto established an employee medical plan contribution share requiring
active employees and future retirees to begin paying a certain percentage of the cost of their
medical insurance. When the City presented this new benefit design to CalPERS, we were informed
that the City would need to change the billing arrangement with CalPERS. Due to the large number
of medical plan codes that exist in the CalPERS plan design, CalPERS could not administratively
support the City’s new benefit contribution design. Instead, CalPERS required the City to set the
City’s monthly premium payment at the “minimum contribution” amount.
The “minimum contribution” is a fixed dollar amount set by CalPERS on an annual basis per
Government Code Section 22892 (b) (1). This is the minimum dollar that CalPERS can bill an agency
for medical premium. The City changed the billing arrangement with CalPERS by adoption of
resolutions for each bargaining unit and employee group. Active employees did not see any change
by this action, but it did affect all retirees enrolled in medical insurance. CalPERS bills the City at the
“minimum contribution” amount; the remainder of the cost of the premium is then deducted from
the retiree’s monthly pension. The City established a retiree reimbursement program utilizing a
third-party administrator, Employee Benefits Services (EBS). EBS reimburses retirees on a monthly
basis based on their level of retiree medical benefit.
Reimbursement Program – Retiree Medical Matrix/Maintenance
The City of Palo Alto reimburses retirees based on the retiree medical benefit in place upon the date of
an employee’s retirement. Currently Palo Alto has four groups of retiree medical benefits for its
retirees. The description of each group is identified on the Retiree Medical Matrix attached.
The matrix will require timely maintenance and updating if a new level of benefits or new bargaining
groups is established. (Labor agreements and the Matrix are also available on the Internet and Intranet
sites and will be updated no later than 30 days after Council adoption. In addition, the Chief People
Officer will communicate any changes and updates to the Retiree Medical Matrix to Administrative
Services Department.)
Scope of Services
The third party administrator, currently Employee Benefits Services (EBS) is responsible for all scope and
services as outlined below:
1. Administration of the retiree reimbursement program including reviewing the monthly CalPERS
invoice, calculating and processing reimbursements in a timely manner but paid no later than the
1st of each month.
2. Ability to offer reimbursement through direct deposit.
3. Distribution of retiree reimbursement on a monthly basis either by check or direct deposit as
December 2013
3
requested by retiree.
4. Provide retirees with telephonic customer service between regular business hours.
5. Demonstrate a commitment to customer service by being able to explain reimbursement
structure to retirees and thorough follow up phone calls or email to retirees when needed.
6. Provide the City of Palo Alto with an assigned team with Primary and Secondary contact.
7. Maintain good communication with City staff and meet with staff annually to review the program
and as needed to review progress and procedures.
8. Provide monthly reimbursement reports, including notes describing any adjustments or
discrepancies and quarterly report of uncashed checks.
9. Maintaining agreement with CalPERS for access to view limited retiree health benefit
information.
10. Mail and receive substantiation forms, reconcile receipt of forms and provide tracking report.
11. At close of year, issue 1099’s to all affected retirees, if applicable and provide report.
12. Provide any other documentation to the City’s satisfaction for audit purposes to substantiate
proper handling of funds.
13. Send invoice on a monthly basis via email to: Sandra Blanch, Assistant Director,
sandra.blanch@cityofpaloalto.org and Tarun Narayan at tarun.narayan@cityofpaloalto.org
Note: In order to ensure the scope of services remains accurate, an annual review of the contract terms
should be conducted.
Setting of Reimbursement Amounts
The monthly retiree reimbursement is determined based on the cost of the monthly healthcare
premium, the bargaining group of the retiree, the hire date of the retiree, the retirement date of the
retiree, and the set “minimum contribution” amount. Medical premiums are set on an annual basis.
CalPERS publishes these premiums via Circular Letter usually during the summer for the following
calendar year. CalPERS also announces the annual “minimum contribution” through a Circular Letter.
Before the end of each calendar year, the CalPERS medical rates spreadsheet needs to be updated with
the new rates announced by CalPERS. For an example of the reimbursement calculations please refer to
the file located at: S:\HRD\BENEFITS\RetireeReimbursements\2013\2013 Calpers medical rates.xlsx.
December 2013
4
The rates should be downloaded from myCalPERS in the excel version. Once the rates are downloaded,
the reimbursement amounts must be calculated for each tier using the minimum contribution deduction
and the appropriate employee/ employer split. Then, this spreadsheet needs to be provided to EBS as a
guide for reimbursement implementation. Starting in 2014, EBS will be in charge of calculating the
reimbursement amounts using our Retiree Medical Matrix.
As a reminder, for most of the City’s bargaining groups, CalPERS charges the employer the “minimum
contribution” on a monthly basis and bills the retiree the remainder of the cost of the monthly premium.
Currently, there is only one bargaining unit (PAPOA) whose retiree medical rates are still set at Group 2.
The only retirees under this bargaining unit that are currently receiving a reimbursement from EBS are
those who have retired under Group I benefits. Group I is assumed to have retired prior to January 2004
(employee retirement dates are not recorded in SAP prior to this date).
Monthly Administration
The monthly medical bill becomes available on the CalPERS website the 15th of each month. This bill
includes both active and retired employees. Staff separates the retired employees from the active
employees on the billing statement. Currently this is not a process that the third party can download.
The bill is accessed through the CalPERS website on My|CalPERS. Click on the “Reporting” tab then click
on “Billings and Payments.” Scroll down to “Health Premium Deduction” and click on “View Invoice
History.” Click on the link under “Receivable ID” for the current’s month’s health premium bill. On the
next screen, click on “View Billing Roster.” On the next screen, click “Download Roster.” The Monthly
Employer Billing Roster will appear and should be saved as an Excel report. All monthly billing
statements are saved on the S-drive under: S:\HRD\BENEFITS\RetireeReimbursements\2013.
Downloading Health Event Notification Report
The CalPERS “Health Event Notification Report” will be downloaded on a monthly basis and emailed to
EBS. This report lists reasons for retroactive transactions such as enrollment into Medicare,
adding/deleting dependents, change in residence location, etc.
Documenting Health group for new retirees
EBS will also need any new retiree enrollments for the month with the retiree’s address, social security
number, hire date and applicable retirement Group determined by referring to matrix as a guide. A
sample report is located at:
S:\HRD\BENEFITS\RetireeReimbursements\2013\EBS new enrollments 03_2012.xls.
In addition to documenting new retiree enrollments, employee group will be confirmed in SAP and
My/CalPERS to ensure it is correct.
The monthly bill and the new enrollment report should be uploaded onto the EBS secured website by
the 16th of each month. The secured website can be accessed using the following link:
https://ftpsecure.ebsbenefits.com/cityofpaloalto
Username is: XXXXXXXX
December 2013
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Password is: XXXXXXXX
Instructions on how to use the EBS secured website are located at:
S:\HRD\BENEFITS\RetireeReimbursements\New EBS FTP How to.
EBS has established a monthly payment calendar outlining the issuance dates for the direct deposit
payments and the check payment. All payments are designed to be received on or before the 1st of the
month in order to coincide with the retiree’s CalPERS pension payment.
Reimbursement Reports and Check Register reconciliation
EBS will create the “Billing Summary Report” and email by last day of each month (unless City informed
otherwise) which will be filed on the S-drive in file titled, S:\HRD\Benefits\EBSBillingSummaryReports.
The report will be reviewed with EBS during monthly teleconference meeting to discuss any retroactive
transactions (outside of the usual health events prompting reason for change), following up on any
discrepancies, and reviewing notes and any other questions. The billing summary will reflect funds
identified on CalPERS bill, checks and ACH totals posted to retiree accounts, funds paid by City and
Admin fees.
EBS will provide monthly reconciliation of check register and note any discrepancies which will be
identified on the monthly Payment Detail Report under the “Reports” tab available on:
https://ebsbenefitsclient.1h1ondemand.com .
Payment Instructions and Adjustments
Any instructions for special payments or adjustments will be documented and filed on
S:HRD\BENEFITS\RetireeReimbursments\2013 Payment Instructions and Adjustments.
PSO Assistant Director will copy HR Administrator who will cross check all adjustments instructions.
Procedures for Uncashed Checks
EBS will provide the City with a list of un-cashed checks every 6 months or as requested. EBS and the
City will attempt to reissue any un-cashed checks to the recipients on a timely basis. Any stale-dated
checks will be handled according to Retiree Reimbursement Stale Dated Check procedure document.
Monthly Invoice review
EBS will issue invoices once the monthly CalPERS statement has been reconciled and checks and direct
deposits have been distributed. EBS issues three invoices: One for the Direct Deposit reimbursement, a
second for Checks, and a third for the Administration fees. The EBS invoices will be reviewed on a
monthly basis for discrepancies against the CalPERS medical premium statement. The monthly billing
summary should reflect the same number of ACH and check transactions as on the invoice. Payments to
EBS will be authorized by Sandra Blanch. Invoices will be filed on the S-drive on:
S: /HRD/Benefits/Retiree Reimbursement/EBS Billing Statements. Payment will be issued by the
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Treasury Department via Electronic Fund Transfer (EFT).
Quarterly Review
An exception report is created to ensure active employees enrolled in My/CalPERS are accurately
identified in correct employee group.
The PSO department generates a “Health Event Notification and Billing” report each month from
CalPERS. The report includes name, CalPERS ID and medical group (aka employee group) for active and
retired employees.
The department maintains a daily log, which includes promotions and reclassifications processed via PAF
(Personal Action Form) each month in SAP, including any change in employee group.
Both reports are formatted in Excel.
In order to verify that the SAP record matches CalPERS records, promotions and reclassifications listed in
the Daily Log can be compared to the Health Statement and Billing Report.
Discrepancies that result from this comparison will be noted and forwarded to the business partner
group responsible for the employee’s department for correction prior to the next month’s retiree
reporting cycle to EBS.
The future goal is to create an automated report in Spinifex which will compare data in SAP and
My/CalPERS using CalPERS ID number.
Annual Notification to CalPERS
Communication confirming health benefits administration will be emailed to CalPERS in November on an
annual basis.
Please see sample in S drive under S:\HRD\BENEFITS\RetireeReimbursements\AnnualnoticetoCalPERS
Substantiation Forms and 1099 process
The purpose of this substantiation form is to document the amount of the coverage paid by the city
under the reimbursement process and avoid tax consequences on the retiree health reimbursement
amount. The City is required to provide a Form 1099 for any reimbursement amounts not listed on the
substantiation form.
The Substantiation Form is completed and issued by EBS to all retirees that received payment during the
tax year. Retirees are required to review the form for accuracy, sign and return the form to EBS before
the determined return date, usually late December. Any retiree not returning the Substantiation Form
will receive a Form 1099 to report their reimbursements on their income taxes.
EBS will track Substantiation Forms received from retirees and will issue 1099 forms to retirees who do
not submit the required Substantiation Form. The Substantiation Forms are filed on the EBS secured
website.
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RECONCILIATION OF SUBSTANTIATION DOCUMENTS
1. City will review report identifying 1099’s issued
2. Confirm retiree names who did not submit substantiation form; these names should be
identified on list of retirees who were issued 1099 forms
3. Total units of substantiation forms sent out by EBS should match count of retirees on billing
summary report; additionally, the units of 1099s sent out by EBS should match the units on the
invoice.
Attachment A
Group matrix