A state board voted Thursday to seek a legal opinion before it decides whether to cover fees being charged to about 14,000 state and public school employees after a state agency canceled its contract with the company that manages their health savings accounts.
The approximately $223,500 in fees -- $16 per account -- will be charged by an investment firm to employees who transfer their accounts from the management of San Mateo, Calif.-based WageWorks to Little Rock-based DataPath.
A subcommittee of the State and Public School Life and Health Insurance Board recommended last week that the board authorize the use of health plan funds to pay the fees after the Department of Finance and Administration's Employee Benefits Division canceled its contract with WageWorks and entered an "emergency" contract with DataPath.
The division notified WageWorks on Nov. 30 that it was canceling its contract with that company, effective Dec. 31, after it was unable to resolve a dispute over the transfer fees, as well as a monthly administrative fee of $2 for accounts with balances of less than $5,000. Both fees are charged by Bank of New York Mellon, which is the custodian of the WageWorks accounts.
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, Employee Benefits Division Director Chris Howlett has said.
But on Feb. 26, Bank of New York Mellon notified state and school employees that it would begin charging the additional fees effective April 1.
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. He said DataPath has assured state officials that it won't charge any other fees, including transfer fees.
The state will solicit bids for a new contract in August, he said.
On Thursday, the insurance board voted unanimously to seek an opinion from the state attorney general's office on the board's options before deciding whether to pay the transfer fees.
The board manages the health plans covering about 45,000 school employees and 26,000 state employees in addition to retirees, and employees' and retirees' spouses and dependents.
Board members questioned why the plans should pay the fee when a Finance and Administration Department attorney had determined the fees put WageWorks in violation of its contract.
"I don't want to be held responsible for giving away $223,000 without what I feel like is an official authorization by somebody ordering me to do that," board member Shelby McCook said.
Howlett said the board's Benefits Subcommittee decided against filing a lawsuit over the contract that "could potentially tie us up in court for years."
He said Thursday that he hoped to obtain the opinion from the attorney general's office within days and call a special board meeting next week to revisit the fee issue.
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.
Addressing the board, state Sen. Eddie Joe Williams, R-Cabot, who has a daughter who is a public school teacher, suggested that the board enter a contract with Consolidated Admin Services, which is based in Williams' hometown and submitted the second-ranked bid for the health savings account contract last year.
If the state rebids the contract in August, and a company besides DataPath wins, state and school employees will have to transfer their accounts for a third time in less than two years, he noted.
"We are totally confusing everyone out there," Williams said.
Metro on 12/16/2016