Agenda Item AGENDA STAFF REPORT ASR Control 26-000120
MEETING DATE:	04/14/26
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	County Executive Office (Approved)
Department contact person(s):	Kim Derrick (714) 834-2564
	Lauren Pierson (714) 834-5376

Subject: Extension of Contract for Benefits Administration Services with Alight Solutions

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: N/A

Annual Cost: FY 27-28: $4,360,568
FY 28-29: $3,933,026
FY 29-30: $4,043,926

Staffing Impact:

No

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: See Financial Impact Section	County Audit in last 3 years: No
Levine Act Review Completed: Yes

Prior Board Action: 2/11/2025 #28, 2/26/2019 #39

RECOMMENDED ACTION(S):

Authorize the Chief Human Resources Officer or designee to execute Amendment Number Five to the Contract with Alight Solutions, LLC for Benefits Administration Services, effective July 1, 2027, through June 30, 2030, for an estimated cost of $12,337,520 for three years, for a revised cumulative estimated contract amount of $34,658,601.

SUMMARY:

Approval of Amendment Number Five will allow the County to continue to provide administration of health and welfare benefits for active and retired employees, and eligible dependents as required under the various Memorandums of Understanding (MOU) and the Affordable Care Act (ACA).

BACKGROUND INFORMATION:

Approval is requested for Amendment Number Five to the Contract with Alight Solutions, LLC (Alight) for Benefits Administration Services to extend the contract from June 30, 2027, to June 30, 2030, for a total contract term of ten years and three months.

Under this contract, Alight provides benefits administration services to County of Orange employees, retirees and their eligible dependents, which includes a call center staffed with a designated team of call representatives to assist County employees and retirees. The call center currently manages approximately an average of 23,000 participant phone calls annually, nearly 380,000 web log-ins, and processes over 34,000 enrollment events annually for the County. Alight coordinates with all the County’s health and welfare benefit providers and the employee and retiree payroll systems for enrollment and payroll deductions. The key services provided under the contract include the following:

• Manage individual benefits eligibility determination and enrollment processing for employees, retirees, and their eligible dependents.

• Provide an enrollment and benefits information web platform available 24/7 via desktop and mobile devices.

• Operate a customer service call center with a team designated to the County consisting of seven Tier I and nine Tier II representatives.

- Tier I representatives address standard health and welfare topics such as inquiries relating to new hire enrollments, COBRA, terminations, and flexible spending accounts.

- Tier II representatives can address all topics that Tier I representatives can handle specialized topics such as the retiree benefits processing, County Couples (Employee Married to Employee), leaves of absence, and Medicare questions and enrollments.

• Coordinate plan enrollments and eligibility files via electronic interfaces for:

- Five Employee health plans

- 10 Retiree health plans

- Two Flexible Spending Accounts

- Two Judges’ PERS Reimbursement programs

- Life Insurance and Accidental Death and Dismemberment Insurance plans

- Short- and Long-Term Disability plans

- Dental Insurance

- Vision Insurance

- Optional Benefit Plan

• Oversee claims processing for expenses incurred under the Health Care and Dependent Care Flexible Spending Accounts according to IRS guidelines.

• Partner with AOCDS and Union First to administer benefits and payroll for those in certain classifications where health is not provided through County.

• Apply employee service hours according to the Retiree Medical Plan Document for Calculated Grants, Frozen Grants, and Retiree Medical Lump Sum.

• Partner with OCERS to process premium deductions and reimbursements to retirees monthly.

• Administer COBRA, including all notifications, billings, and premium collection and remittance to the County, and detailed reporting.

• Determine full-time employee eligibility for offers of coverage and perform state reporting in compliance with the ACA.

• Provide direct billing services for individuals to pay for health plan premiums in situations such as unpaid leave of absence, COBRA, and new retirees prior to automated pension deductions established.

• Administer Open Enrollment, including programming for new programs and benefits changes, and ensure that the online platform and call center are equipped to support potentially thousands of elections per day.

• Manage the County Couples (Employee Married to Employee) program to ensure benefits are correctly in place for eligible participants based on changing statuses and various qualified life events.

• Execute Qualified Medical Child Support Orders and maintain Power of Attorney orders.

• Provide Dependent Verification Services to ensure compliance with IRS guidelines for Section 125 health plans.

• Provide Medicare Verification Services to ensure that eligible Medicare retirees are receiving the correct plan rates and Grant, as applicable.

Board approval of this amendment allows Human Resource Services (HRS)-Employee Benefits to provide the required benefits coverage and to support employees in their enrollment and access to benefits through technology and quality service.

The Contractor’s performance has been confirmed as satisfactory. This agreement has 33 Performance Guarantees measured quarterly and ten measured annually, that the County monitors. As a demonstration of confidence and a commitment to meeting the County’s standards for accuracy and quality, the Contractor has placed 15 percent of their fees at risk should they fail to meet the County’s performance standards. See Attachment C, for a summary of Alight’s Performance Guarantee.

This contract includes subcontractors. See Attachment B for information regarding subcontractors and the Contract Summary Form.

HRS has verified there are no concerns that must be addressed in respect to the Contractor’s ownership/name, litigation status, or conflicts with County interests. The Orange County Preference Policy is not applicable to this contract award.

Rationale to Extend Contract for Three Years

HRS is proposing a three-year contract extension with Alight beyond the original contract term to align benefits administration with the implementation of the County’s new Enterprise Resource Planning (ERP) system and to minimize disruption to employees, retirees, and their dependents.

As the County’s benefits third-party administrator (TPA), Alight processes more than 34,000 enrollment events annually and relies on daily data exchanges with the ERP system to ensure accurate benefits administration and compliance with applicable laws and County MOUs. Changing the benefits TPA during the ERP implementation would significantly increase complexity, cost, and operational risk, including potential data integrity issues that could expose the County to financial and regulatory impacts. The Deloitte ERP Implementation team has assessed the introduction of a new TPA for benefits administration as a high-impact risk to the schedule, resulting in added cost and resources needed for ERP implementation.

Extending the Alight contract allows the ERP implementation to stabilize before issuing a benefits administration TPA Request for Proposal (RFP), thereby reducing risk and cost to the County. As part of the proposed extension, HRS has negotiated a cost reduction and contractual credit with Alight, and the delayed RFP will further defer expenses within the current budget.

The County’s benefits consultant, Mercer Health and Benefits, has reviewed this approach and supports a longer-term contract with a benefits TPA due to the complexity of the County’s benefit programs, including multiple bargaining units and retiree health plans. Mercer advises that contract terms of seven to ten years are common and appropriate for counties with similar population and complex benefit structures. Given the County’s unique plan designs, a longer-term contract also allows sufficient time for a TPA to fully implement and stabilize operations, enabling the County to realize the intended efficiencies, service improvements, and long-term value of the arrangement.

Estimated Savings for Three-Year Contract Extension:

Health and Welfare Services	$286,385.00
Contract Credit	$ 45,000.00
Total	$331,385.00

Estimated Expenses Deferred:

TPA Implementation	$3,100,000.00
Mercer Consulting (RFP)	$ 150,000.00
Total	$3,250,000.00

Dependent Verification Services

Dependent re-verification audits are a proven cost-control measure that reduces unnecessary claims expenses. A dependent re-verification audit can yield significant savings that can help maintain sustainable benefit costs without reducing benefits for eligible members. It is estimated that the average annual cost to cover a dependent is $4,500. In addition to cost savings, the audit will strengthen plan compliance and promote fairness for all employees. Employee Benefits is planning to conduct a dependent re-verification audit in 2027, consistent with industry best practices for periodic eligibility review.

According to Mercer, large employers typically conduct dependent re-verification audits every three to five years; the County’s last audit was in 2010. Due to potential eligibility changes from divorce or dissolution of domestic partnerships, a re-verification audit will include legal spouses, registered domestic partners, and stepchildren, excluding biological and adopted children. This approach aligns with Alight’s best-practice strategy, which has historically identified five to seven percent ineligible dependents.

This amendment includes revised rates for One-time Dependent Audit Services, which have not been adjusted since 2019. Over the last seven years Alight has made enhancements to improve the dependent verification process by streamlining the employee experience, increasing automation, and strengthening communications. Web pages have been improved to provide clearer directions for employees to ensure complete and appropriate documentation is submitted the first time, reducing employee frustration and escalation during the process. Their improved communications are provided timelier and with targeted messaging to reduce confusion and the need for follow-up. Collectively, these improvements increase efficiency, compliance, and employee satisfaction while reducing administrative burden and escalations. These enhancements have resulted in improved metrics for Alight’s book of business. 90 percent of users are verifying their dependents successfully the first time compared to just under 80 percent, prior to the recent changes. Additionally, the call volume across clients has reduced by about 15 percent on average.

To demonstrate confidence in achieving a high return on investment, Alight placed 100 percent of fees at risk for a re-verification audit. Employee Benefits negotiated this guarantee, under which Alight agreed to waive all fees if the total cost savings are less than 500 percent of the audit’s total cost.

Estimated Employee Count Subject to change based on when audit commences	Rate Per employee covering dependent	Total Estimate Fees
7,418	$20.84	$154,591.12

Ineligible Dependent Percentage	Ineligible Dependent Count	Estimated Annual Cost Savings Per Ineligible Dependent	Total Estimated Annual Cost Savings
Two	148	$4,500	$ 660,000
Three	220	$4,500	$ 990,000
Four	296	$4,500	$1,332,000
Five	370	$4,500	$1,665,000

FINANCIAL IMPACT:

Appropriations for this proposed Amendment will be included in Budget Control 056 as part of the budgeting process for future years. The estimated three-year cost of this contract is $12,337,520. The costs are offset 100% by benefits administration revenue from the County departments, Courts and Special Districts. The estimated cost for FY 2027-28 is $4,360,568, which includes the cost related to the reconfiguration required due to changes implemented by the new ERP system and a $45,000 renewal credit. The estimated cost of FY 2028-29 is $3,933,026, and FY 2029-30 is $4,043,926. These estimated costs are aligned with the projections included in the County Budget Finance Office’s five-year Strategic Financial Plan.

The contract contains termination language that allows the County to terminate the contract with cause at any time and without cause language that allows the County to renegotiate the fees should the population size change by more than ten percent.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A – Amendment Number Five to Contract with Alight Solutions, LLC
Attachment B – Contract Summary Form
Attachment C – Alight Performance Guarantee Summary