DATE: December 5, 2017
SUBJECT:
Title
RESOLUTION AUTHORIZING THE DISTRICT TO GRANT INDEMNITY TO OPTUM BANK, INC. PURSUANT TO AN AGREEMENT WITH OPTUM BANK TO PROVIDE EMPLOYEE HEALTH SAVINGS ACCOUNT ENROLLMENTS AND CONTRIBUTIONS
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EXECUTIVE SUMMARY:
The San Diego Unified Port District (District) is adding an option to its benefits package for full time employees that utilizes Health Savings Accounts (HSA). Staff believes this provides a beneficial medical insurance coverage option for employees and the District. Optum Bank, Inc. (Optum Bank) has been selected as the financial institution to administer the HSAs. While the accounts are employee-owned, the District provides Optum Bank with enrollment information and forwards employee payroll contributions to Optum Bank for their accounts. The proposed agreement with Optum Bank for this arrangement contains indemnification provisions which require San Diego Unified Port Board of Port Commissioners (Board) approval. Given that the risk is limited and the arrangement is beneficial, staff is recommending that the Board approve the agreement with Optum Bank and grant the requested indemnity.
RECOMMENDATION:
Recommendation
Adopt a Resolution Authorizing the District to Grant Indemnity to Optum Bank, Inc. Pursuant to an Agreement with Optum Bank, Inc. to Provide Employee Health Savings Account Enrollments and Contributions
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FISCAL IMPACT:
This agenda item has no fiscal impact.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A Port with an innovative and motivated workforce.
DISCUSSION:
The District provides full-time employees with medical insurance benefits as part of their benefits package. For 2018, the District is adding a new plan option, a high deductible PPO plan, which employees may elect. Staff expects that this new option can provide a lower-cost coverage alternative for some employees. If elected by an employee, this plan is accompanied by a Health Savings Account (HSA).
An HSA is a tax-advantaged bank account that is owned by the employee and may be used to pay for eligible medical care expenses. The employer and employee may contribute funds to the account up to annual limits defined by the Internal Revenue Service (IRS). The District has chosen Optum Bank as the financial institution to administer the HSA accounts that will be accompany the new high deductible health plan. As a subsidiary of United Healthcare (UHC), the current medical plan provider, Optum Bank offers automated and streamlined processes to coordinate the HSA with the medical plan and make it easier for employees to access and use their accounts.
Employees will have the ability to contribute to their accounts via pre-tax payroll deductions. Although the accounts are employee-owned, the District will be providing initial enrollment information to Optum Bank as well as forwarding employee contributions from payroll, so an agreement is required for these arrangements.
The agreement also includes an indemnification provision requiring the District to indemnify Optum Bank. Specifically, the agreement requires the District to indemnify and hold harmless Optum Bank against any claims or liabilities Optum Bank may incur as a result of the District’s failure to comply with its obligations under the Agreement, Optum Bank’s acts or omissions in reliance on the information, data, or authorizations received from the District, acts or omissions based on instructions or directions received from the District, or errors caused by incomplete, inaccurate or untimely information provided by the District.
The risk involved is limited as the agreement addresses enrollment information provided to Optum Bank and the forwarding of account contributions. The enrollment information to be provided includes basic demographic and contact information which Optum Bank will use to contact the employee to complete the process to establish the bank account. The account contributions are limited to specific amounts each year by the IRS. For 2018, these limits are $3,450 for a single employee enrolled in the plan, or $6,900 for an employee with any dependents enrolled.
Although Optum Bank is requiring indemnification, the risk is reasonable as it requires the District be responsible for the information it submits and the accounts are beneficial to employees and a key part of the plan design for the new medical plan option. Therefore, staff is recommending that the Board authorize the District to grant indemnity to Optum Bank pursuant to an agreement with Optum Bank to provide employee HSA enrollments and contributions.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved the agenda sheet and proposed agreement as presented to it for form and legality.
Environmental Review:
The proposed Board action does not constitute a “project” under the definition set forth in California Environmental Quality Act (CEQA) Guidelines Section 15378 because it will not have a potential to result in a direct or indirect physical change in the environment and is, therefore, not subject to CEQA. No further action under CEQA is required.
In addition, the proposed Board action allows for the District to implement its obligation under the Port Act. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
Finally, the proposed Board action does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section1.a. of the District’s Coastal Development Permit Regulations. Therefore, issuance of a Coastal Development Permit or exclusion is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Eric Lawrence
Senior Benefits & Compensation Analyst, Human Resources
Attachment(s):
Attachment A: Health Savings Account Enrollment and Contribution Agreement with Optum Bank