Search

City of Nashua
Office of the Chief Financial Officer

229 Main Street - Nashua, NH 03060 Fax tao 48003993
TO: Mayor Jim Donchess
Finance Committee f) b
FROM: John Griffin, Chief Financial Officer \
DATE: June 14, 2016
SUBJECT: Internal Revenue Service Audit

The purpose of this communication is to notify the Finance Committee that over the course of the past nine
months, Financial Services has been undergoing a randomly selected audit with the Internal Revenue Service
(IRS). The objective of the audit was to review all Accounts Payable transactions for calendar years 2013 and
2014 in an effort to monitor compliance in the following two areas:

* Proper classification of Employees vs. Independent Contractors
* Proper treatment of taxable fringe benefits to employees

During the audit, the IRS noted a number of Accounts Payable vendor payments to individuals performing the
following services:

3s City Camp Counselors
City Game Officials

e Cable TV Videographers
School Tutors

The IRS determined that the individuals performing the above services in 2013 should not be classified as
vendors and should to be treated as employees subject to withholding and employment taxes.

The IRS also examined employee reimbursements and concluded that wellness reimbursements for gym dues
made during 2013 and 2014 to Police Department employees are a taxable fringe benefit and are also subject
to withholding and employment taxes.

The audit findings result in a total tax payment due to the IRS in the amount of $19,473.72. No penalties or
interest will be assessed and no additional taxes will be imposed for 2014, 2015 and 2016 provided that the
City agrees to comply with the reclassification requirements.

Sufficient funds are available within FY2016 departmental budgets, account #52100 FICA/Medicare taxes, to
cover the additional tax due.

FINANCE COMMITTEE

JUNE 15, 2016

7:00 PM Aldermanic Chamber

ROLL CALL

PUBLIC COMMENT

COMMUNICATIONS

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

From:
Re:

Dan Kooken, Purchasing Manager
To Approve Contract Award for Healthcare Stop Loss Insurance (Value: $750,692)
Department: Human Resources; Fund: Benefits Self Insurance Fund

Dan Kooken, Purchasing Manager
Nashua City Wide Telecom Project (Value: $2,200,000); Department: 122 information
Technology Fund: Bond; Activity Classification: 71 Equipment

Dan Kooken, Purchasing Manager
NTS Fixed Route CNG Bus Procurement (Value $3,966,832); Department: 186 Nashua
Transit Fund: Grant Funds; Account Classification: 81 Major Capital Outlay

Dan Kooken, Purchasing Manager

Engineering Services for New Canal Pedestrian Bridge Project (Value $109,862)
Department: 181 Community Development; Fund: NNDOT Tap Grant

Account Classification: 53 Professional And Technical Services

Dan Kooken, Purchasing Manager
Purchase of PakFlatt 4-Station Voting Booths (Value: $52,994); Department: City Clerk
Fund: Wages Full Time

Dan Kooken, Purchasing Manager

Award Contract for Brick Repointing at Nashua Public Library (Value: $39,444)
Department: 179 Nashua Public Library; Fund: General Fund; Account
Classification: 54 Property/Building

Dan Kooken, Purchasing Manager
Pictometry Contract (Value: $104,217}; Department: 134 GIS; Fund: General Fund
Operating Budget; Accounting Classification: 54 Property Equipment

Dan Kooken, Purchasing Manager

Renewal of Medical Director Contract for F¥17 (Value: $10,800); Department: 172,
Community Health; Fund: General Fund $2,800; Account Classification: 55 Other Services
Department: 172 Community Health; Fund: Community Health Grant Std/Hiv $8,000
Account Classification: 55 Other Services

Dan Kooken, Purchasing Manager

Renewal of Animal Control Services Contract for FY17 (Value: $99,081)
Department: 171 Community Services; Fund: General Fund; Account Classification:
56 Community Expenses

Dan Kooken, Purchasing Manager
Traffic Detection Repairs And Replacement Along Main Street (Value: $26,120)
Department: 161 Streets; Fund: General; Activity: Main Street

From:

Re:

From:

Re:

From:

Re:

From:

Re:

From:

Re:

From:

Re:

Dan Kooken, Purchasing Manager
Concord Street Crosswalk Improvements (Value: $34,658); Department: 161 Streets
Fund: Street Department Prior Year, Crosswalk Improvements Escrow

Dan Kooken, Purchasing Manager
Citywide Infiltration/Inflow Analysis — Amendment #2 (Value: $23,709); Department: 169,
Wastewater, Fund: Wastewater; Activity: Inflow And Infiltration

Dan Kooken, Purchasing Manager

Capacity Management Operation and Maintenance for Sewer Collection System
(Value: Not To Exceed $200,000); Department: 169 Wastewater; Fund: Wastewater
Activity: CSO Consent Decree Projects

Dan Kooken, Purchasing Manager

FEMA Hazardous Mitigation Grant — Purchasing of Survey Equipment (Value: $54,168)
Department: 169 Wastewater; Fund: Wastewater; Activity: FEMA Hazard Mitigation $46,600
Department: 160 Admin & Engineering; Fund: General; Account Classification: 61 Supplies

& Materials $2000; Department: 169 Wastewater; Fund: Wastewater; Activity: Sewer Structures
$5,568

Dan Kooken, Purchasing Manager
Pump Station Upgrades Design Services — Phase II — 30% Design (Value: $479,051)
Department: 169 Wastewater; Fund: Wastewater; Activity: Pump Station Upgrades

Dan Kooken, Purchasing Manager
Purchase Of Mobile Lift Columns (Value: $22,039); Department: 161 Streets; Fund: General
Account Category: 71, Equipment

UNFINISHED BUSINESS — None

NEW BUSINESS — None

TABLED IN COMMITTEE

From:

Re:

Dan Kooken, Purchasing Manager
Contract Award for Single Stream Recycling (Value: Not-to-Exceed $249,925); Department:

168 Solid Waste; Fund: Solid Waste; Account Classification: 55 Other Contracted Services
¢ Tabled - 6/1/16

DISCUSSION

RECORD OF EXPENDITURES

PUBLIC COMMENT

NON-PUBLIC SESSION

ADJOURNMENT

S) THE CITY OF NASHUA ‘The Gate City"

Financial Services

Purchasing Departement

June 8, 2016
Memo #16-158

TO: MAYOR DONCHESS
FINANCE COMMITTEE

SUBJECT: TO APPROVE CONTRACT AWARD FOR HEALTHCARE STOP LOSS INSURANCE

(VALUE: $750,692)
DEPARTMENT: HUMAN RESOURCES; FUND: BENEFITS SELF INSURANCE FUND

Please see attached communication from Thomas DeLacey, Principal Consultant, Workplace Benefits
Solutions (WBS) dated June 6, 2016 for information related to this contract award. —

Bay way of background, the WBS solicited several firms to bid on the Stop Loss insurance with deductible
levels of $250,000 and $350,000, WBS has recommended that the City renew Stop Loss insurance with
HCC at the higher $350,000 deductible level. HCC was selected for several reasons. 1) the City does
not have to fill out additional disclosure forms relative to any claims we may know about (i.e., a $600,000
claim just materialized). 2) as HCC is the incumbent, there is no risk of any items falling through the
cracks during a transition period. 3) we have worked with HCC in the past and have a higher comfort
level with their ability to integrate data with both Anthem and Harvard.

The Human Resources Director, Chief Financial Officer and the Purchasing Department recommend
awarding this contract fo HCC in an amount of $750,692.

Respectfully,

Dan Kooken
Purchasing Manager

Cc: L Budreau J Griffin

229 Main Street « Nashua, New Hampshire 03061 « Phone (603) 589-3330 » Fax (603) 589-3344

THE CITY OF NASHUA “The Gate City’

Financial Services

Purchasing Department

June 8, 2016
Memo #16-158

TO: MAYOR DONCHESS
FINANCE COMMITTEE

SUBJECT: TO APPROVE CONTRACT AWARD FOR HEALTHCARE STOP LOSS INSURANCE
(VALUE: $750,692)
DEPARTMENT: HUMAN RESOURCES; FUND: BENEFITS SELF INSURANCE FUND

Please see attached communication from Thomas DeLacey, Principal Consultant, Workplace Benefits
Solutions (WBS) dated June 6, 2016 for information related to this contract award.

Bay way of background, the WBS solicited several firms to bid on the Step Loss insurance with deductible
levels of $250,000 and $350,000. WBS has recommended that the City renew Stop Loss insurance with
HCC at the higher $350,000 deductible level. HCC was selected for several reasons. 1) the City does
not have to fill out additional disclosure forms relative to any claims we may know about (i.e., a $600,000
claim just materialized). 2) as HCC is the incumbent, there is no risk of any items falling through the
cracks during a transition period. 3) we have worked with HCC in the past and have a higher comfort
level with their ability to integrate data with both Anthem and Harvard.

The Human Resources Director, Chief Financial Officer and the Purchasing Department recommend
awarding this contract to HCC in an amount of $750,692.

Respectfully,

Dan Kooken
Purchasing Manager

Ce: L Budreau J Griffin

jaz9 Main Street | Nashua, New Hampshire 03061 » Phone (603) 589-3330 » Fax (603) 589-3344

ae er

Employee Benefit Advisors

June 6, 2016

Mr. Larry Budreau
Director of Human Resources
City of Nashua NH

Re; Stop Loss

Stop loss insurance is purchased by self-funded medical plans to help smooth out the risk of large
unpredictable claims. Stop loss comes in two forms, Individual (or Specific) and Aggregate. Individual
Stop Loss (ISL) is where the stop loss carrier pays for all claims that are paid on an individual that exceed
a certain threshold {$250,000 for the City of Nashua} in a plan year. Aggregate Stop Loss insurance pays
for all claims in excess of the aggregate attachment point for the entire plan in a given plan year. The
aggregate attachment point is usually set at 125% of the plans expected claims. Aggregate Stop Loss
payments are very rare as large plans (over 1000 lives} rarely if ever hit the aggregate stop loss
threshold. The City of Nashua does not purchase Aggregate Stop loss insurance but the City does
purchase Individual Stop Loss Insurance.

As stated above, individual stop loss insurance is purchased to smooth out the unpredictable nature of
large claims that can easily exceed $500,000, $1,000,000 or more for an individual with any number of
ailments including Cancer, End Stage Renal Disease, Congestive Heart Failure, Blood Disorders
(Hemophilia) and such things as premature birth or serious accidents. It is impossible to predict the
number and severity of these incidents in advance. Additionally, medical and genetic technology gains
make cost for future treatments more expensive and more unpredictable.

According to the 2015 SunLife stop loss survey, the frequency of $1,000,000 claims have increased by
over 1000% from 2010 to 2014. 71% of those claims were from dependent children, while the cost of
bone marrow /stem cell transplants increased 177% from 2011 to 2014.

Private and Public employers typically turn to medical stop loss insurance to cover this unpredictable
risk in the same way you may turn to stop loss in a self-funded property insurance policy. Stop loss
allows for predictability in the budgeting process for unpredictable expenses.

However, very large employers, generally over 5,000 employees have been known to increase ISL limits
to reduce their premium. This reduction in premium has a corresponding increase in claims exposure.
Entities with significant operating capital or claim reserves are able to absorb this additional claim
liability. Even larger firms over 10,000 employees may forego stop loss insurance all together. They are
prepared to take on the additional risk by putting funds aside or are able to manage the risk through
operating income. Typically private employers will not want to set millions of dollars aside in a claim

EDUCATION

BS, Industrial Engineenng,
Georgia Institute of
Technology

MARK HOMRICH

VICE PRESIDENT, ANALYTICS & DIGITAL SOLUTIONS

As Vice President of Analytics and Digital Solutions for iParametrics, Mark Homrich oversees
the application of advanced analytics, machine learning techniques, and business process
automation to Public Assistance projects to shorten response times, improve performance,

and achieve greater cost efficiency. Mark has over 30 years of experience in consulting,

product development, product management, project management, and business development

across of a variety of functional domains and industries, including, recently, over | | years of
experience managing marketing, product development, and project management for a vanety
of technical disciplines for Siemens Digital Industnes Software. While at Siemens, in his role as
Director of Product Management, Mark led the development of several new products and

solutions. Mark combines deep management experience with an entrepreneurial mindset in

order to address old challenges in new ways.

EXPERIENCE

« Georgia Regional Mountain Commission.
VP, Analytics and Digital Solutions.
Supported the analysis of COVID-19
impact to business enterprises in the
thirteen counties in the region

= Siemens Digital Industries Software,
Alpharetta, GA. Director, Product
Management — Applications and Industry
Solutions, Responsible far managing the
complete lifecycle of a variety of business
applications and solutions for on
premises and Cloud deployment,
including analytics, workflow, program
and project management, collaboration,
document management, and others.
Authored business proposals to obtain
corporate funding, developed strategic
partnerships, and supported key
customers.

Planview, Inc. VP of Business
Development and Solution Architects.
Led a national team of solution architects
to provide pre- and post-sales support to
customers, Implemented a business
development program to expand
relationships with consulting firms,
systems integrators, and technology firms
with the objective to grow the business
and penetrate new industries, including
the public sector.

reserve to cover the possibility of multiple large claim hits in one year, they would rather put that
money to work in their business.

WBS has managed the City of Nashua stop loss program for six years. In those six years the City has run
a 72% loss ratio; about 7 to 12 percent higher than industry targets. {Loss ratio is the comparison of
claims paid by the insurer to premiums received by the insurer.) The City has run very favorably over
the last four years (F¥13-FY16) with about a 50% loss ratio. Prior to that the loss ratio in FY 11 was 172%
and FY 12 was 107%. Asa testament to the unpredictability of claims, a $600,000+ claim just
materialized within the last two weeks.

The bottom-line is that WBS does not recommend eliminating stop loss insurance because you have
paid in more than you have received in reimbursements. That is a basic tenant of insurance. We do not
purchase stop loss to beat the insurance company, we purchase it to mitigate risk and smooth out our

experience for budgeting.

If the City’s desire is to reduce expenses by taking on additional risk | would recommend increasing the
specific deductible to $350,000. That will reduce the premium by about 25% on top of the negotiated
15% reduction we have on the table for the current $250,000 ISL. Given the healthy claim reserve fund
the City has accumulated in the last 5 years | think the additional risk is reasonable.

Sincerely,

Thomas G. DeLacey~
Principal Consultant

Workplace Benefit Solutions
a HUB International Company

Stop Loss Comparison for City of Nashua
For Effective Date: July 1, 2016 - June 30, 2017
ae Second Pass
Single 765 June 7, 2016
Two Person 607
Family 665
Total 2237
Curent | WBS Est | Renewal Proposed Options
¢ > . i 1 [RAE SURAACE = a
UD . #% HCC ese! Msc (ys onge 2 | oom: (SY QBE sen a VOVA
. crises | BEE | Maric REZ | “NOPTUM | = OED ons ~
faternational 2 AHO nes Coun us
ny “$250,000 "= srs, $350,000 5. yp ~~: $380,000 . | - $380 000-..
i Aaa a “242 Spec 30-4 > 242 Spec "242 Spec: | - 24/12 Soac
Individual Stop Loss Single $ 1855 $§ 20,41 10,58 - $ 13.25] $ 17.15/93 . $ - $ 13.321 $ -
Farnily $ 63.00 § 69.30 § 37.00 | $ - $ 35.64] 5 32.80) - $ - $ 35.23 | $
PEPM $ 47.80 $ 52.58 $§ 27.951 $ - $ 27.98] $ 27.45|$ - $ - $ 27,.74|$ -
Annual Premium $ 1,283,121 § 1,411,433 4 750,692 | §$ -1$ 751,180 | $ 736,816 | $ -1$3 -|§ 744,580 | $ -
Percent Change 10.0% 44.5% ) -100,0% -41,5% -42.6% -100,0% -100.0% 42.0% ~100,0% |
Additional Liability $ - $ - 4 . $ - ¥ - $ - $ - $ - $ - $
Total Premium and Liability $ 1,283,121 $ 1,411,433 $ 750,692 | § -|§ 751,180 | $ 736,816 | $ -1§ -1$ 744,680 | $ “
Parcant Changs 70.0% 41.5% -100.0% . 41.5% 42.8% -100.0% -100.0% 42.0% -100.0%
Carer notes (see $250k fab)
HCC
Optum
Serkey
Symatra
Munich Re
OBE
HM Life
Voya
Guardian
Sun Life
Reliance Standard

AIG

Stop Lass Comparison for: City of Nashua
For Effective Date: July 1, 2016 - June 30, 2017
Second Fass
leingle 785 June 7, 2016
Two Person 607
Family 865
Total 2237
Curent | WBS Est | Renewal Proposed Options
_, ae ' TUR ANSURANCE =< i :
\ &2 HCC fseRKLeY | fy" Murch REE | Sopra: A QBE fe « | VOVA
internatiSned™ iotower isk [ea tatnelints itm | MUTWORTE Se | OPTUM | tere as Pines
Baneéi ; iO | SeS0 "| = $250,000 = |= 260,000. _. $250,500 _
senplaess navies 2uH2 Spec | 242 Spec “942 Spec’ -} © 24712 Spec - } - 242 Spac
Coste:
Individual Stop Loss Single $ 7855 $§ 20.47 $ 15.70|$ 23.06] 3 19.67) 24.72) 5 26.23] $ 24.13) § 22.62) $ 24.39
Family f 63.00 ¢ 69.30 ¢ 54.53 | 5 66.67] ¢ 49.88) § 46.9715 67,98) ¢ 87,04; $ 56.3414 68.95
PEPM $ 47.80 $ 52.58 $ 41.25 |$ 51,761 % 39.51 | ¢ 40.86) 5 49.7513 52.371 $ 44.81) $3 53.71
Annual! Pramium $ 1,283,121 $ 1,411,433 $ 1,107,344|$ 1,369,360/$ 1,060,733/$ 1,091,936 ]$ 1,335,606]$ 1,405,708)$ 1,202,841;$ 1,441,833
Percent Cha 10.0% -13,7% 8.3% -17.3% -14.9% 4.1% 9.6% -6.4% 12.4% |
Vitae Be
Additional Liability $ - § . g . $ - $ $ - $ $ - |# - £ -
Total Premium and Liability $ 1,283,121 $ 1,411,433 $ 1,107,344)$ 1,389,350! § 1,060,733] $ 1,091,936 )$ 1,335,606) $ 1,405,708] $ 1,202,841|$ 1,441,833
Percent Change 10.0% ~13,.7% 6.3% ~77.3% -14.9% 4.1% 9.8% -6,3% 12.4%
Camer notes
HCG FIRM pending laser
Opium Pending underwriting
Berkioy Panding underniting
Symete Pending undermlting
Munich Re FIRM until 6/30/2016
Q5E Pending undarwriting - FIRM fer $500k only
HM Life FIRM until 45/2018
Voya FIRM until 6/30/2018
Guardar Not competitive
Sun Life Net competitive
Revance Standard Not competitive
AIG Nat competitive