A dispute over fees has led the agency that administers the health plans for teachers and state employees to cancel its contract with the company that administers the employees' health savings accounts, the agency's director said Friday.
In a related move, a state panel on Friday recommended that the health plans cover an expected $223,500 in fees associated with transferring the accounts to a different company.
Chris Howlett, director of the state Department of Finance and Administration's Employee Benefits Division, said state officials notified San Mateo, Calif.-based WageWorks last week that they were canceling the state's contract with the company, effective Dec. 31.
The move came after the benefits division failed to resolve a dispute about fees that WageWorks planned to begin charging Jan. 1 in connection with the health savings accounts held by about 13,000 public school and state employees.
When WageWorks took over the contract at the beginning of this year, it told the division that it would charge only a monthly administrative fee of $1.90 per account, Howlett said.
On Feb. 26, however, Bank of New York Mellon, the investment firm that is the custodian of the WageWorks accounts, notified state and school employees that it would begin charging a monthly $2 administrative fee, effective April 1, on accounts with balances under $5,000.
The firm also said it would charge a $16 fee for employees who transfer their account to a different bank.
A WageWorks attorney told lawmakers earlier this year that even her company was surprised when Bank of New York Mellon began charging the fees.
WageWorks agreed to cover the fees for the rest of the year, but Howlett said he wasn't able to reach an agreement with the company on how the fees should be handled next year.
After discussions with three other potential vendors, Howlett said, state officials entered an "emergency" contract with Little Rock-based DataPath to administer the accounts starting Jan. 1.
DataPath, which had administered the accounts before losing the contract to WageWorks last year, will charge the Employee Benefits Division an administrative fee of $2.25 per account, Howlett said.
The division will solicit bids for a new contract and hopes to award one by August, he said.
On Friday, the benefits subcommittee of the State and Public School Life and Health Insurance Board recommended that the health plans cover the $16 fee to transfer accounts from WageWorks to DataPath for employees who have a balance of at least $100.
Howlett said he expects the transfer fees to total $223,500.
Although no subcommittee members voted against the recommendation, one, Shelby McCook, abstained after questioning why the plans should be involved in administering the accounts.
"Our main challenge and charge by law is to offer health insurance, and we step off out here into all this crap and sign contracts, and this is what it causes: $223,000 for nothing," McCook said.
The plans cover about 45,000 school employees and 26,000 state employees in addition to retirees, and employees' and retirees' spouses and dependents.
Howlett said employees can keep their WageWorks accounts, but those who do will have to pay WageWorks' fees of $3.95 a month starting next year.
The subcommittee's recommendation will go to the full board, which meets Thursday.
In addition to the health savings accounts, DataPath will also take over the administration of the state and school employees' flexible spending accounts as part of the same contract.
Both types of accounts allow employees to accumulate money that is not subject to income taxes as long as it's spent on health care.
The WageWorks contract includes accounts available to state employees and employees of most school districts, although some districts have contracts with other companies to administer the accounts, Howlett said.
A Section on 12/10/2016