Agenda Item AGENDA STAFF REPORT ASR Control 25-000403
MEETING DATE:	05/20/25
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
	Melvin Chua (714) 834-2778

Subject: Approve Contract with Gallagher Benefit Services, Inc. dba HealthInvest

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: N/A

Staffing Impact:

# of Positions:

Sole Source: No

Current Fiscal Year Revenue: N/A

Funding Source: N/A	County Audit in last 3 years: No
Levine Act Review Completed: Yes

Prior Board Action: 12/20/2022 #S33A

RECOMMENDED ACTION(S):

Authorize the County Procurement Officer or Deputized designee to execute Contract with Gallagher Benefit Services, Incorporated doing business as HealthInvest for administration of the Health Reimbursement Arrangement program, effective July 1, 2025, through June 30, 2028, renewable for two additional one-year terms.

Authorize the Chief Human Resources Officer or designee, as Plan Administrator, to administer the Health Reimbursement Arrangement Plan on behalf of the County, as authorized by the Plan Documents, and authorize the same to negotiate and execute underlying agreements necessary for the proper functioning as required by the Plan.

SUMMARY:

Approval of Contract with Gallagher Benefit Services, Inc. dba HealthInvest to provide administrative services for the Health Reimbursement Arrangement program.

BACKGROUND INFORMATION:

The Health Reimbursement Arrangement (HRA) program was established in 2007 for employees of the Association of Orange County Deputy Sheriffs (AOCDS). In 2009, the Association of County Law Enforcement Managers (ACLEM) was approved by the Board of Supervisors (Board) to participate in the HRA program. In 2016, the Orange County Attorneys Association (OCAA) was approved by the Board to participate in the HRA program. For theses bargaining units, the County contributes a percentage of salary into the HRA.

In 2022, the Board approved transitioning Orange County Employees Association (OCEA) members and unrepresented employees from the Retiree Medical Grant to the HRA. In addition, the Board authorized the Chief Human Resource Officer to enter into agreements, similar to those stated in the OCEA side letter, with bargaining units who were not participating in the County HRA. By the end of 2023, all remaining County of Orange employees and Special Districts were transitioned to the HRA.

Existing County employees with at least one year of service were given the option to either freeze their Retiree Medical Grant or roll the value of their grant into the HRA. Employees with less than one year of service and new employees were enrolled directly into the HRA. In addition, the County started making bi-weekly HRA contributions each pay period effective June 16, 2023.

The HRA is an account funded by the County on an employee’s behalf. The funds in the HRA can be used to pay for qualified medical expenses after they retire or leave County service. Qualified medical expenses include post-tax insurance premiums for any health plans, including non-County sponsored health plans, out-of-pocket costs for doctor visits, prescriptions, hospital stays and more. The HRA balance is tax-free and rolls over year to year. HRA balances can be invested in different funds to help grow the amount of money, tax-free, in the HRA.

As of the quarter ended December 31, 2024, the HRA program had 24,571 participants with total assets of $385,446,555; with an average participant balance of $15,687. The County’s current HRA administrator is MissionSquare Retirement (MissionSquare). MissionSquare’s contract expires on June 30, 2025, and, in anticipation of the contract expiration, HRS issued Request for Proposal (RFP) number 017-202406-MC on September 11, 2024. The RFP closed on October 9, 2024, and the County received five responsive proposals from the following vendors:

Gallagher Benefit Services, Inc. dba HealthInvest / Empower Retirement*

MissionSquare Retirement

Teachers Insurance and Annuity Association of America

Total Administrative Services Corporation

Voya Retirement Insurance & Annuity Company

* Gallagher Benefit Services, Inc. dba HealthInvest submitted a proposal in partnership with Empower Retirement, the County’s current administrator for the Defined Contribution Plan.

RFP Evaluation Process:

An RFP evaluation committee was established consisting of five members, which included a representative from the Retiree Employees Association of Orange County (REAOC), a representative from Treasurer-Tax Collector, a representative from CEO-Finance and two representatives from HRS/Employee Benefits. A County Deputy Purchasing Agent (DPA) attended all committee meetings to monitor the selection process.

The evaluation committee was charged with selecting a proposal that best meets the needs of the County based on the following criteria:

Claims Administration

Cybersecurity

Implementation/Transition

Investment Services and Trust Administration

Organization, Staff Qualifications, and Relevant Experience

Participant Communications and Customer Service Capability

Plan Administrative

The evaluation process consisted of two phases:

Phase I:

The committee evaluated each proposal in accordance with the pre-determined criteria outlined above and independently scored each proposal. The members of the evaluation committee met to discuss their individual observations, comments and scores for each criterion in the four proposals. The DPA documented the committee member’s scores and established a rank order for the proposals.

Phase II:

The three highest scoring vendors were selected as finalists and requested to make an oral presentation to the evaluation committee. Following the finalist interview, the evaluation committee discussed their individual observations, comments and scores for each criterion in the three presentations. The DPA documented the committee member’s scores.

Phase III:

In compliance with the County Procurement Office Guidelines, following the Phase I and Phase II evaluation and scoring by the evaluation committee, the DPA removed the High and Low scores, then calculated the adjusted totals and assigned the scores for cost for each proposal. See Attachment A for the final scoring summary.

In addition, members of the County’s CEO / OC Information Technology (OCIT) / Enterprise Privacy & Cybersecurity office reviewed the cybersecurity compliance questionnaires to ensure the vendors met minimum acceptable standards for cybersecurity.

RFP Scoring:

The table below represents the collaborative scoring effort made by the committee and is the basis for the HRS recommendation. Based on the evaluation results, Gallagher Benefit Services, Inc. dba HealthInvest (HealthInvest) received the highest overall evaluation score as shown below:

PROPOSER	FINAL SCORE
Gallagher Benefit Services, Inc. dba HealthInvest/ Empower Retirement	887
MissionSquare Retirement	834
Voya Retirement Insurance & Annuity Company	622
Total Administrative Services Corporation	311
Teachers Insurance and Annuity Association of America	305

The Notice of Intent to Award was posted on March 24, 2025 and no protests were received.

Contract Scope and Language

Under the Scope of Services for this contract, the recommended HRA administrator will assist the County in the management and administration of the HRA program, provide a diverse offering of investment options, monitor investment performance and present timely reports and results to the County. For active employees, the HRA administrator will provide program management, responsive customer service, an on-site education plan and a customized website with online tools and investment education for County participants. For retired participants, HealthInvest will provide responsive customer service, claims processing and timely payment of health care claims from participant accounts and/or participant debit cards. HealthInvest maintains individual participant accounts and ensures that all transactions and activities are in compliance with Internal Revenue Service regulations and the HRA Plan Document.

HealthInvest has over 30 years of public-sector experience serving over 1,300 employers with over 250,000 HRA plan participants and close to $2 billion in assets under its administration. HealthInvest is a U.S.-based organization with a focus on building retirement security for the public sector. Department staff have conducted due diligence review of the contractor. Reference checks were satisfactory and completed with the County of Riverside, San Diego City Employees Retiree Medical Trust, and the University of Washington regarding similar projects.

HealthInvest’s partnership with Empower Retirement, the County’s current Defined Contribution Plan (DC) administrator, will offer enhanced benefits to all employees by offering a single sign-on from the employee’s Empower account to their HRA account, access to investment advice from the Empower retirement plan advisors that includes the employee’s HRA plan assets, and the ability to see both their HRA and DC balances when they log into their Empower account.

HealthInvest’s proposed contract contains a number of enhancements and pricing reductions from the current contract. The reductions in the fees are generally related to the growth of the HRA program over the last five years ($110,000,000 to $385,446,555) and HealthInvest’s desire to become the County’s preferred vendor. The proposed contract has reduced participant fees and includes $90,000 per year in administrative funding The administrative funding will be held in a separate HealthInvest account to reimburse the County for administrative costs incurred in overseeing and maintaining the HRA program. HealthInvest’s proposed contract also has a number of performance guarantees and customer satisfaction measures, including a quarterly account management report card and an account management satisfaction guarantee.

The contract before your Board contains language modifications to the County’s model contract, including revisions which have been approved by HRS, County Counsel and Risk Management. The proposed contract contains the County’s standard indemnification language. The Orange County Preference Policy is not applicable to this contract award. This contract includes subcontractors. See Attachment D for information regarding subcontractors and Contract Summary Form.

An analysis was completed to determine the contract provides the County with persons specially trained, experienced, expert and competent to perform the special services in accordance with the law.

Performance Guarantees

HealthInvest commits to meeting the County’s HRA Administration, customer service, account management and net promoter score standards by placing up to $45,000 at risk should they fail to meet the contract standards.

FINANCIAL IMPACT:

There is no financial impact to the County in the administration of the HRA program. All HRA administrative fees are borne by plan participants.

HealthInvest participant and asset fees, as negotiated under this contract, are very competitive and represent a reduction in fees compared to the current HRA contract. The proposed asset-based fees are reduced from 19 basis points to 13 basis points (a basis point is 1/100th of one percent). Based on the December 31, 2024, HRA data, HealthInvest’s HRA asset-based fee will lower annual program administrative expenses by $231,268, or approximately $9.41 per participant.

In addition to lower HRA participant fees and the asset-based fee reduction, HealthInvest has guaranteed their annual participant fees for three years with an option for the County to renew at the guaranteed rates for two additional one-year periods. HealthInvest’s proposed contract contains $90,000 in administrative funding to reimburse the County for costs it incurs overseeing and maintaining the program.

The Contract includes provisions allowing HRS Employee Benefits to terminate the Contract, reduce the level of services, and/or renegotiate the levels of services provided, as necessary.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Final Scoring Sheet
Attachment B - Contract MA-017-25010155
Attachment C - Risk Assessment Form
Attachment D - Contract Summary Form