Item - 2008.AU6.3

The objective of this audit was to assess whether cost containment opportunities exist in City sponsored employee benefit plans, to review procedures in place to manage and control services provided under the benefit administrator’s contract and to determine if opportunities exist for improving future benefit administrator contracts. Our audit included a review of employee benefit related practices and procedures in place during the period January 1, 2005 to June 30, 2007 for active and retired employees of the City (excluding the Agencies, Boards and Commissions). We focused on cost containment strategies related to employee benefit costs and claims analysis, claims processing, quality assurance and improvements in monitoring the benefit administrator’s performance.

Our review indicates that the City Benefits and Employee Services Section of the Pension, Payroll and Employee Benefits Division administer benefit plans in a diligent, effective and efficient manner.

Our review identified a number of issues related to increasing employee benefit costs and provides general information related to future benefit costs. Management is very much aware of the challenges facing them in this regard and have undertaken a number of initiatives to reduce employee benefit costs.

In this report, we have provided three high level recommendations related to cost reduction and containment, and management of the contract with the third party administrator.