1993-010ALL0041D
ORDINANCE NO. 93 - 0/0 .
AN ORDINANCE ACCEPTING COMPETITIVE BIDS AND AUTHORIZING THE MAYOR
TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS, AND
CANADA LIFE ASSURANCE COMPANY RELATING TO FULLY INSURED LONG TERM
DISABILITY INSURANCE; AUTHORIZING THE EXPENDITURE OF FUNDS
THEREFOR; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City has solicited, received and tabulated com-
petitive bids for the purchase of fully insured long term disabil-
ity insurance in accordance with the procedures of state law; and
WHEREAS, the City Manager and his designee have received and
recommended that the bid described below is the lowest responsible
bid for the purchase of such insurance as described in the request
for Bid No. 1422 and Bid Submission Form; and
WHEREAS, the City Council has provided in the City Budget for
the appropriation of funds to be used for the purchase of the in-
surance policies and coverages approved and accepted herein; NOW,
THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION I. That the bid of Canada Life Assurance Company re-
lating to fully insured long term disability insurance is hereby
accepted and approved as being the lowest responsible bid.
SECTION II. That the Mayor is authorized to execute the agre-
ement between the City of Denton, Texas and Canada Life Assurance
Company, which is attached hereto and made a part hereof.
SECTION III. That the City Council hereby authorizes the ex-
penditure of funds in the manner and amount as specified in the ag-
reement.
SECTION IV. That this ordinance shall become effective immed-
iately upon its passage and approval./
PASSED AND APPROVED this the/9' day of dylf , 1993.
CONTRACT BETWEEN THE CITY OF DENTON, TEXAS
AND CANADA LIFE ASSURANCE COMPANY
That this agreement, made and entered this 19thday of
JANUARY , 1993, by and between the City of Denton, Texas, a muni-
cipal rocoration located in Denton County, Texas and incorporated
as a home rule city under the Constitution of the State of Texas,
hereinafter referred to as "City", and Canada Life Assurance Com-
pany, a corporation with offices at 6201 Powers Ferry Road, Suite
450, Atlanta, Georgia, hereinafter referred to as "Contractor."
WITNESSETH:
That the parties hereto, in consideration of the covenants and
agreements herein contained to be kept and performed by both par-
ties, do hereby agree, covenant and contract as follows:
I.
City hereby agrees to purchase from Contractor and Contractor
hereby agrees to sell to City fully insured disability insurance in
accordance with City's Scope of Specifications & Instructions, Bid
Submission Form, Sample Contract and other documents constituting
City's "Request for Bid No. 1422"; Contractor's Bid referred to as
"This Group Insurance Program;" and Group Policy Number H.58485
which are hereby made a part of this contract and incorporated
herein for all purposes.
II.
The parties agree this policy of insurance shall become ef-
fective February 1, 1993, at the rates contained in Contractor's
bid for Plan 1 dated October 5, 1992, contained in Contractor's
Bid, and unless earlier cancelled pursuant to the terms of this
contract, shall terminate at midnight on January 31, 1995.
III.
Should a conflict arise between the terms and provisions of
the City's "Request for Bid No. 1422" (including but not limited to
the sample contract contained therein) and Contractor's Bid (in-
cluding but not limited to Policy No. H.58485 contained therein),
the terms and provisions of City's Request for Bid No. 1422 will
prevail.
IV.
The Director of Human Resources or such other agent designated
by the City Manager is hereby authorized to carry out the terms of
this agreement in behalf of City and MTTTnN cnnwTN shall
be the agent authorized by Contractor to carry out the terms of
this agreement in behalf of Contractor unless Contractor advises
city in writing of a substitute agent. Contractor represents that
it has the authority to execute and carry out the terms of this
contract.
EXECUTED this 15th day of JANUARY 15 , 1993, A.D.
CITY OF DENTON, TEXAS CANADA LIFE ASSURANCE COMPANY
By:
ATTE
By:
Ti le ISTRICT GROUP MANAGER
ATTE
By: By:
J N FE WALTERS.
Y S ETARY
APPROVED AS TO LEGAL FORM:
DEBRA A. DRAYOVITCH, CITY ATTORNEY
By:
ALL003FE
PAGE 2
DATE: JANUARY 19, 1993
CITY COUNCIL REPORT
TO: Mayor and Members of the City Council
FROM: Lloyd V. Harrell, City Manager
SUBJECT: BID # 1422 - LONG TERM DISABILITY INSURANCE
RECOMMENDATION: We recommend this bid be awarded to the lowest bidder Canada
Life Assurance Company in the approximate amount of $6,680.00 per month or
$80,160.00 per year over the three year contract commitment.
SUMMARY: This bid is for the long term disability insurance program to cover all
regular full time employees of the City of Denton.
BACKGROUND: Memorandum prepared by Tom Klinck, Director Human Resources
and Tabulation sheet.
PROGRAMS, DEPARTMENTS OR GROUPS AFFECTED: Human Resources Department
and Employees of the City of Denton.
FISCAL IMPACT: Budget funds.
tfully submitted:
speeckw-wal
Lloyd V. Harrell,
City Manager
Approved:
Name: Tom Shaw, C.P.M.
Title: Purchasing Agent
agenda.332
DATE: 1/19/93
CITY COUNCIL REPORT FORMAT
TO: Mayor and Members of the City Council
FROM: Lloyd V. Harrell, City Manager
SUBJECT: Award of Long-Term Disability Contract to Canada Life Assurance
Company to provide Coverage for City Employees
RECOMMENDATION:
It is staff's recommendation that the City Council approve a contract with
Canada Life Assurance Company (Canada Life) to provide long-term disability
insurance coverage for City employees. This recommendation is based upon
the results of staff's analysis of the bids submitted by nine (9) insurance
companies, using the following five (5) criteria:
1. Insurance premium rates per $100 of payroll,
2. Overall cost and/or savings for the period of the guaranteed rate,
3. A.M. Best, and Standard and Poor's Rating of company,
4. Contract provisions, and compliance with bid specifications, and
5. Three favorable references.
Canada Life maintained favorable ratings in all five criteria. Its bid was
the lowest of the three low bids evaluated by staff. Compared with our
current costs, we show in the attached exhibit that the City could save,
approximately $37,565 over the 24 months that the Canada Life's rate is
guaranteed.
SUMMARY:
The City's long-term disability benefit is currently provided through North
American Life Assurance Company (North American Life). In September, 1992,
we rebid our long-term disability insurance to ensure that the program
remains cost effective. Staff solicited bid responses for a contract that
would provide for a 60% basic monthly earning up to a maximum of $5,200; a
90-day waiting period; and, a minimum benefit of $50 per month. Nine (9)
insurance companies submitted bids. Of these 9 companies, Canada Life
provided the most favorable rate, and fulfilled the specifications of our
bid.
To insure that disability benefits are not in excess of 100% of pre-
disability earnings, our long-term disability plan, under the contract with
Canada Life, will continue to coordinate benefit reductions with Social
Security and the City's retirement programs. However, benefits paid by the
Firemen's Relief and Retirement Fund (Fire Pension Fund) cannot be reduced
by Social Security benefits. In order to minimize the potential liability
to the City inherent in the requirements of the Fire Pension Fund law,
Canada Life has agreed to grandfather a clause in their current contract,
which requires that any disability benefits a Fire Fighter is eligible to
receive will not be used to off-set disability benefits less than 70%. It
is staff's recommendation that we continue to self-fund the monthly
January 19, 1993
Memo to City Council on Long-Term Disability Insurance Program
Page 2 of 3
difference between the 70% long-term disability reduction and the maximum
benefits payable to Fire Fighters under the Fire Pension Fund. This funding
mechanism was approved by City Council in 1989. Fortunately, we have not
had any long-term disability claims from the Fire Fighters in the past three
years.
BACKGROUND:
The City has provided employees with long-term disability benefits since
October, 1978. In 1989, the City rebid and awarded the contract for long-
term disability coverage to North American Life. Since the program was
placed with North American Life, we have had 16 claims, and paid
approximately $102,771 in benefits through December, 1992. Currently, we
have 12 open (on-going) claims.
In keeping with our commitment to Council to evaluate our contacts
periodically (every three years) to insure that our benefit programs are
cost effective, we rebid the long-term disability insurance in September.
As shown in the Exhibit, Canada Life submitted the lowest bid. Based upon
our analysis, Canada Life's rate is very competitive, and its ability to
fulfill its claims and service obligations is rated "superior." We have
contacted the three references furnished by Canada Life to discuss their
experiences with the company. We inquired of the company's performance in
the following three service areas:
o Claims adjudication and turn-around time,
o Responsiveness to staff's and employees' inquires, and
o Knowledge of reporting and disclosure laws governing disability
income benefits.
In all three items, Canada Life was rated "excellent." Thus, it is our
recommendation that the contract for long-term disability insurance be
awarded to Canada Life.
PROGRAMS. DEPARTMENTS OR GROUP AFFECTED:
The long-term disability insurance program covers all regular full-time
employees in all City departments. Currently, 735 employees are covered on
the program.
FISCAL IMPACT:
We are budgeted at $.46 per $100 of payroll for the current fiscal year
(1992/93). By awarding the contract to Canada Life, our cost will be
reduced by 23% during the eight (8) months period (February 1 to September
30, 1993) remaining in this budget year. As shown in the Exhibit, during
this period, the City could save approximately $12,522. It is estimated
January 19, 1993
Memo to City Council on Long-Term Disability Insurance Program
Page 3 of 3
that the City would save approximately $37,565 from the Canada Life's
contract within a period of 24 months. To insure that our program properly
funds the benefit requirements of the Fire Pension Fund, staff recommends
that we earmark $15,000 from this savings to supplement the funding for
potential disability claims from Fire Fighters.
Lloyd V. Harrell
City Manager
Prepared by:
A jfJL-4~4
mas W. li Director
Human Reso ces
tty McKean, 7xecutive Director
nicipal Serv ces and Economic Development
Exhibit
ccmltd92.prn rev. 12/29/92
prep. 12/23/92 3:40 p.m.
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