1. City of Hampton Virginia Local Disability Program Wells Fargo Insurance October 9, 2013

2. Background  Recent legislation (SB 498) created the Virginia Local Disability Program (VLDP)—a disability benefit for political subdivision and school employees who will be covered under the new VRS Hybrid Retirement Plan.  The Virginia Retirement System (VRS) governs the VLDP program.  VRS is moving from a defined benefit to a defined contribution retirement plan. The new plan is referred to as a hybrid plan.  The current retirement plan includes disability retirement benefits. The new hybrid plan does not. Wells Fargo Insurance 1

3. Eligibility for the Hybrid Plan and the new VLDP?  All employees hired on or after 1/1/2014.  All employees rehired on or after 1/1/2014 will only be eligible for the new hybrid plan (unless a rehired Plan 1 or Plan 2 member did not take a refund of their member contribution account).  All current employees will continue in the existing VRS plan. However, they will have a one-time opportunity to opt-in to the hybrid plan (election window January 1 through April 30, 2014).  Hazardous duty employees covered under enhanced benefits are exempt and will continue to be covered under VRS Disability Retirement.  State employees eligible for the Hybrid Retirement Program will be covered under the Virginia Sickness and Disability Program. Wells Fargo Insurance 2

4. Self funded Unum will provide the medical management under VLDP Short-Term Disability Fully insured Unum will provide the medical management under VLDP Long-Term Disability Included under VLDP plan but optional if you opt-out Long-Term Care Benefits under the VLDP Disability Plan Wells Fargo Insurance3

5.  OPT IN to the VLDP Disability Plan  OPT OUT of the VLDP Disability Plan Notify VRS by November 1, 2013. Choose another plan – Must provide comparable coverage for long- term and short-term disability plans (but not long-term care). To ensure that our employees are offered the most suitable option, the City of Hampton is reviewing 2 alternative plans that offer comparable coverage (providing a higher level of benefit than what is required in several areas, but not including the optional long term care component). Options – IRREVOCABLE Election Must make election by November 1, 2013 Wells Fargo Insurance 4

6. Recommendations Wells Fargo Insurance 5 Our recommendation is to opt out of the State’s VLDP and offer a comparable City program. The decision to participate or opt out of the State’s VLDP is irrevocable. Our recommendation is based on the following : 1)Comparable plans offered by other companies in the marketplace provide lower overall premiums and they are guaranteed for a longer period of time ; 2)Under the state’s program, they would control the pricing and selection of vendors ; 3)Comparable plans offer options to eliminate the one-year waiting period for the short-term disability program that would apply under the state’s program; and 4)Comparable plans offer enhanced return-to-work provisions that go above and beyond those offered under the state’s program.

7. What Are Others Doing?  Leaning towards OPT OUT of VLDP: York Suffolk HRSD Gloucester SPSA Hampton City Schools Loudoun Rockingham Newport News Schools  Leaning towards OPT IN to VLDP: Virginia Beach Chesapeake Wells Fargo Insurance 6

8. Recommended Next Steps  City Council approve the resolution to opt out of the State offered VLDP plan prior to the November 1, 2013 deadline.  City staff complete procurement requirement to establish a City of Hampton Local Disability plan with comparable coverage.  City will conduct a Paid Time Off (PTO) analysis to determine the appropriate time off benefits for new employees eligible for the new short-term disability plan. Wells Fargo Insurance 7