HomeMy WebLinkAbout2008-065 RESOLUTION NO 2008-065
am A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ATASCADERO
ADOPTING FLEXIBLE SPENDING ACCOUNTS FOR EMPLOYEES WHO
RECEIVE BENEFITS
The City of Atascadero (Employer) hereby resolves
SECTION I , That the form of Cafeteria Plan including a Depended Care Flexible Spending
Account and Health Flexible Spending Account effective January 1, 2009, presented to this meeting is
hereby approved and adopted and that the duly authorized agents of the Employer are hereby authorized
and directed to execute and deliver to the Administrator of the Plan one or more counterparts of the Plan
SECTION 2 , That the Administrator shall be instructed to take such actions that are deemed
necessary and proper in order to implement the Plan, and to set up adequate accounting and administrative
procedures to provide benefits under the Plan
SECTION 3 , That the duly authorized agents of the Employer shall act as soon as possible to
notify the employees of the Employer of the adoption of the Cafetena Plan by delivering to each
employee a copy of the summary description of the Plan in the form of the Summary Plan Description
presented to this meeting, which form is hereby approved.
am SECTION 4 , That the undersigned further certifies that attached hereto as Exhibits A and B,
respectively, are true copies of the City of Atascadero Flexible Benefits Plan and the Summary Plan
Descnption approved and adopted in the foregoing resolutions
On motion by Council Member Fonzi and seconded by Council Member Kelley, the foregoing Resolution
is hereby adopted in its entirety by the following roll call vote
AYES Council Members Clay, Fonzi, Kelley, O'Malley and Mayor Beraud
NOES None
ABSENT None
ADOPTED December 9, 2008
*..
696811 1
City of Atascadero
Resolution No. 2008-065
Page 2 of 3
CITY OF ATASCADERO
B y
EllllennBBeraud, Mayor
ATTEST
Marcia McClure Torgerson, C.M.
City Clerk
APPRO D AS FORM.
Brian Pienk, City Attorney
irr
City of Atascadero
Resolution No. 2008-065
Page 3 of 3
ow
EXHIBIT A
EXHIBIT B
Due to the length of Exhibits A and B, they are not included as attachments, but may be
viewed in their entirety in the Office of the City Clerk.
�wr
RESO No. 2008-065 Exhibit A _
CITY OF ATASCADERO FLEXIBLE BENEFITS PLAN
AND ALL SUPPORTING FORMS HAVE BEEN PRODUCED FOR
CITY OF ATASCADERO
Copyright 2008 SunGard
All Rights Reserved
CITY OF ATASCADERO FLEXIBLE BENEFITS PLAN
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY...................................................................................................................3
2.2 EFFECTIVE DATE OF PARTICIPATION.......................................................................3
2.3 APPLICATION TO PARTICIPATE................................................................................. 3
2.4 TERMINATION OF PARTICIPATION............................................................................4
2.5 TERMINATION OF EMPLOYMENT...............................................................................4
2.6 DEATH..........................................................................................................................4
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 SALARY REDIRECTION...............................................................................................5
3.2 APPLICATION OF CONTRIBUTIONS...........................................................................5
3.3 PERIODIC CONTRIBUTIONS.......................................................................................5
ARTICLE IV
BENEFITS
4.1 BENEFIT OPTIONS.......................................................................................................6
4.2 HEALTH FLEXIBLE SPENDING ACCOUNT BENEFIT.................................................6
4.3 DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT BENEFIT...............................6
4.4 HEALTH INSURANCE BENEFIT...................................................................................6
4.5 DENTAL INSURANCE BENEFIT...................................................................................7
4.6 GROUP -TERM LIFE INSURANCE BENEFIT................................................................7
4.7 VISION INSURANCE BENEFIT.....................................................................................7
4.8 PRESCRIPTION DRUG COVERAGE BENEFIT............................................................7
4.9 NONDISCRIMINATION REQUIREMENTS....................................................................8
ARTICLE V
PARTICIPANT ELECTIONS
5.1 INITIAL ELECTIONS.....................................................................................................9
5.2 SUBSEQUENT ANNUAL ELECTIONS..........................................................................9
5.3 FAILURE TO ELECT.....................................................................................................9
5.4 CHANGE IN STATUS....................................................................................................9
ARTICLE VI
HEALTH FLEXIBLE SPENDING ACCOUNT
6.1 ESTABLISHMENT OF PLAN.......................................................................................13
6.2 DEFINITIONS..............................................................................................................13
6.3 FORFEITURES............................................................................................................14
6.4 LIMITATION ON ALLOCATIONS.................................................................................14
6.5 NONDISCRIMINATION REQUIREMENTS..................................................................14
6.6 COORDINATION WITH CAFETERIA PLAN................................................................14
6.7 HEALTH FLEXIBLE SPENDING ACCOUNT CLAIMS.................................................15
6.8 DEBIT AND CREDIT CARDS......................................................................................16
ARTICLE VIII
BENEFITS AND RIGHTS
8.1 CLAIM FOR BENEFITS...............................................................................................21
8.2 APPLICATION OF BENEFIT PLAN SURPLUS............................................................23
ARTICLE IX
ADMINISTRATION
9.1 PLAN ADMINISTRATION............................................................................................23
9.2 EXAMINATION OF RECORDS....................................................................................24
9.3 PAYMENT OF EXPENSES..........................................................................................24
9.4 INSURANCE CONTROL CLAUSE..............................................................................24
9.5 INDEMNIFICATION OF ADMINISTRATOR.................................................................24
ARTICLE VII
DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT
7.1
ESTABLISHMENT OF ACCOUNT...............................................................................17
7.2
DEFINITIONS..............................................................................................................17
7.3
DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS..........................................19
7.4
INCREASES IN DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS ................19
7.5
DECREASES IN DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS...............19
7.6
ALLOWABLE DEPENDENT CARE REIMBURSEMENT..............................................19
7.7
ANNUAL STATEMENT OF BENEFITS........................................................................19
7.8
FORFEITURES............................................................................................................19
7.9
LIMITATION ON PAYMENTS......................................................................................19
7.10
NONDISCRIMINATION REQUIREMENTS..................................................................19
7.11
COORDINATION WITH CAFETERIA PLAN................................................................20
7.12
DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT CLAIMS...............................20
ARTICLE VIII
BENEFITS AND RIGHTS
8.1 CLAIM FOR BENEFITS...............................................................................................21
8.2 APPLICATION OF BENEFIT PLAN SURPLUS............................................................23
ARTICLE IX
ADMINISTRATION
9.1 PLAN ADMINISTRATION............................................................................................23
9.2 EXAMINATION OF RECORDS....................................................................................24
9.3 PAYMENT OF EXPENSES..........................................................................................24
9.4 INSURANCE CONTROL CLAUSE..............................................................................24
9.5 INDEMNIFICATION OF ADMINISTRATOR.................................................................24
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 AMENDMENT..............................................................................................................24
10.2 TERMINATION............................................................................................................25
ARTICLE XI
MISCELLANEOUS
11.1
PLAN INTERPRETATION............................................................................................25
11.2
GENDER AND NUMBER.............................................................................................25
11.3
WRITTEN DOCUMENT...............................................................................................25
11.4
EXCLUSIVE BENEFIT.................................................................................................25
11.5
PARTICIPANT'S RIGHTS............................................................................................25
11.6
ACTION BY THE EMPLOYER.....................................................................................26
11.7
EMPLOYER'S PROTECTIVE CLAUSES.....................................................................26
11.8
NO GUARANTEE OF TAX CONSEQUENCES............................................................26
INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS..........................................26
11.9
11.10
FUNDING....................................................................................................................26
11.11
GOVERNING LAW......................................................................................................27
11.12
SEVERABILITY...........................................................................................................27
11.13
CAPTIONS..................................................................................................................27
11.14
CONTINUATION OF COVERAGE (COBRA)...............................................................
27
11.15
FAMILY AND MEDICAL LEAVE ACT(FMLA)..............................................................27
11.16
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA)........... 27
EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
11.17
UNIFORM SERVICES
27
(USERRA)..................................................................................................................
11.18
COMPLIANCE WITH HIPAA PRIVACY STANDARDS................................................27
HIPAA ELECTRONIC SECURITY STANDARDS
......................29
11.19
COMPLIANCE WITH
CITY OF ATASCADERO FLEXIBLE BENEFITS PLAN
INTRODUCTION
The Employer has adopted this Plan effective January 1, 2009, to recognize the
contribution made to the Employer by its Employees. Its purpose is to reward them by providing
benefits for those Employees who shall qualify hereunder and their Dependents and
beneficiaries. The concept of this Plan is to allow Employees to choose among different types of
benefits based on their own particular goals, desires and needs. The Plan shall be known as
City of Atascadero Flexible Benefits Plan (the "Plan").
The intention of the Employer is that the Plan qualify as a "Cafeteria Plan" within
the meaning of Section 125 of the Internal Revenue Code of 1986, as amended, and that the
benefits which an Employee elects to receive under the Plan be excludable from the
Employee's income under Section 125(a) and other applicable sections of the Internal Revenue
Code of 1986, as amended.
ARTICLE I
DEFINITIONS
1.1 "Administrator" means the individual(s) or corporation appointed by the
Employer to carry out the administration of the Plan. The Employer shall be empowered to
appoint and remove the Administrator from time to time as it deems necessary for the proper
administration of the Plan. In the event the Administrator has not been appointed, or resigns
from a prior appointment, the Employer shall be deemed to be the Administrator.
1.2 "Affiliated Employer" means the Employer and any corporation which is a
member of a controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which is under
common control (as defined in Code Section 414(c)) with the Employer; any organization
(whether or not incorporated) which is a member of an affiliated service group (as defined in
Code Section 414(m)) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Treasury regulations under Code Section 414(0).
1.3 "Benefit" or "Benefit Options" means any of the optional benefit choices
available to a Participant as outlined in Section 4.1.
1.4 "Cafeteria Plan Benefit Dollars" means the amount available to Participants to
purchase Benefit Options as provided under Section 4.1. Each dollar contributed to this Plan
shall be converted into one Cafeteria Plan Benefit Dollar.
1.5 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.6 "Compensation" means the amounts received by the Participant from the
Employer during a Plan Year.
1.7 "Dependent" means any individual who qualifies as a dependent under an
Insurance Contract for purposes of that Contract or under Code Section 152 (as modified by
Code Section 105(b)).
1.8 "Effective Date" means January 1, 2009.
1.9 "Election Period" means the period immediately preceding the beginning of
each Plan Year established by the Administrator, such period to be applied on a uniform and
nondiscriminatory basis for all Employees and Participants. However, an Employee's initial
Election Period shall be determined pursuant to Section 5.1.
1.10 "Eligible Employee" means any Employee who has satisfied the provisions of
Section 2.1.
An individual shall not be an "Eligible Employee" if such individual is not reported
on the payroll records of the Employer as a common law employee. In particular, it is expressly
intended that individuals not treated as common law employees by the Employer on its payroll
records are not "Eligible Employees" and are excluded from Plan participation even if a court or
administrative agency determines that such individuals are common law employees and not
independent contractors.
1.11 "Employee" means any person who is employed by the Employer. The term
Employee shall include leased employees within the meaning of Code Section 414(n)(2).
1.12 "Employer" means City of Atascadero and any successor which shall maintain
this Plan; and any predecessor which has maintained this Plan. In addition, where appropriate,
the term Employer shall include any Participating, Affiliated or Adopting Employer.
1.13 "Grace Period" means, with respect to any Plan Year, the time period ending on
the fifteenth day of the third calendar month after the end of such Plan Year, during which Medical
Expenses and Employment -Related Dependent Care Expenses incurred by a Participant will be
deemed to have been incurred during such Plan Year.
1.14 "Insurance Contract" means any contract issued by an Insurer underwriting a
Benefit.
1.15 "Insurance Premium Payment Plan" means the plan of benefits contained in
Section 4.1 of this Plan, which provides for the payment of Premium Expenses.
1.16 "Insurer" means any insurance company that underwrites a Benefit under this
Plan.
1.17 "Key Employee" means an Employee described in Code Section 416(1)(1) and
the Treasury regulations thereunder.
1.18 "Participant" means any Eligible Employee who elects to become a Participant
pursuant to Section 2.3 and has not for any reason become ineligible to participate further in the
Plan.
1.19 "Plan" means this instrument, including all amendments thereto.
1.20 "Plan Year" means the 12 -month period beginning January 1 and ending
December 31. The Plan Year shall be the coverage period for the Benefits provided for under
this Plan. In the event a Participant commences participation during a Plan Year, then the initial
coverage period shall be that portion of the Plan Year commencing on such Participant's date of
entry and ending on the last day of such Plan Year.
1.21 "Premium Expenses" or "Premiums" mean the Participant's cost for the
Benefits described in Section 4.1.
4
1.22 "Premium Expense Reimbursement Account" means the account established
for a Participant pursuant to this Plan to which part of his Cafeteria Plan Benefit Dollars may be
allocated and from which Premiums of the Participant shall be paid or reimbursed. If more than
one type of insured Benefit is elected, sub -accounts shall be established for each type of
insured Benefit.
1.23 "Salary Redirection" means the contributions made by the Employer on behalf
of Participants pursuant to Section 3.1. These contributions shall be converted to Cafeteria Plan
Benefit Dollars and allocated to the funds or accounts established under the Plan pursuant to
the Participants' elections made under Article V.
1.24 "Salary Redirection Agreement" means an agreement between the Participant
and the Employer under which the Participant agrees to reduce his Compensation or to forego
all or part of the increases in such Compensation and to have such amounts contributed by the
Employer to the Plan on the Participant's behalf. The Salary Redirection Agreement shall apply
only to Compensation that has not been actually or constructively received by the Participant as
of the date of the agreement (after taking this Plan and Code Section 125 into account) and,
subsequently does not become currently available to the Participant.
1.25 "Spouse" means "spouse" as defined in an Insurance Contract for purposes of
that Contract or the legally married husband or wife of a Participant, unless legally separated by
court decree.
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder as of the date he
satisfies the eligibility conditions for the Employer's group medical plan, the provisions of which
are specifically incorporated herein by reference.
2.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the first day of
the month coinciding with or next following the date on which he met the eligibility requirements
of Section 2.1.
2.3 APPLICATION TO PARTICIPATE
An Employee who is eligible to participate in this Plan shall, during the applicable
Election Period, complete an application to participate and election of benefits form which the
Administrator shall furnish to the Employee. The election made on such form shall be
irrevocable until the end of the applicable Plan Year unless the Participant is entitled to change
his Benefit elections pursuant to Section 5.4 hereof.
An Eligible Employee shall also be required to execute a Salary Redirection
Agreement during the Election Period for the Plan Year during which he wishes to participate in
this Plan. Any such Salary Redirection Agreement shall be effective for the first pay period
beginning on or after the Employee's effective date of participation pursuant to Section 2.2.
Notwithstanding the foregoing, an Employee who is eligible to participate in this
Plan and who is covered by the Employer's insured Benefits under this Plan shall automatically
become a Participant to the extent of the Premiums for such insurance unless the Employee
elects, during the Election Period, not to participate in the Plan.
2.4 TERMINATION OF PARTICIPATION
A Participant shall no longer participate in this Plan upon the occurrence of any
of the following events:
(a) Termination of employment. The Participant's termination of
employment, subject to the provisions of Section 2.5;
(b) Death. The Participant's death, subject to the provisions of
Section 2.6; or
(c) Termination of the plan. The termination of this Plan, subject to
the provisions of Section 10.2.
2.5 TERMINATION OF EMPLOYMENT
If a Participant's employment with the Employer is terminated for any reason
other than death, his participation in the Benefit Options provided under Section 4.1 shall be
governed in accordance with the following:
(a) Insurance Benefit. With regard to Benefits which are insured, the
Participant's participation in the Plan shall cease, subject to the Participant's right
to continue coverage under any Insurance Contract for which premiums have
already been paid.
(b) Dependent Care FSA. With regard to the Dependent Care
Flexible Spending Account, the Participant's participation in the Plan shall cease
and no further Salary Redirection contributions shall be made. However, such
Participant may submit claims for employment related Dependent Care Expense
reimbursements for claims incurred through the remainder of the Plan Year in
which such termination occurs and submitted within 90 days after the end of the
Plan Year, based on the level of the Participant's Dependent Care Flexible
Spending Account as of the date of termination.
(c) COBRA applicability. With regard to the Health Flexible
Spending Account, the Participant may submit claims for expenses that were
incurred during the portion of the Plan Year before the end of the period for which
payments to the Health Flexible Spending Account have already been made.
Thereafter, the health benefits under this Plan including the Health Flexible
Spending Account shall be applied and administered consistent with such further
rights a Participant and his Dependents may be entitled to pursuant to Code
Section 4980B and Section 11.14 of the Plan.
2.6 DEATH
If a Participant dies, his participation in the Plan shall cease. However, such
Participant's spouse or Dependents may submit claims for expenses or benefits for the
remainder of the Plan Year or until the Cafeteria Plan Benefit Dollars allocated to each specific
benefit are exhausted. In no event may reimbursements be paid to someone who is not a
spouse or Dependent. If the Plan is subject to the provisions of Code Section 4980B, then those
provisions and related regulations shall apply for purposes of the Health Flexible Spending
Account.
4
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 SALARY REDIRECTION
Benefits under the Plan shall be financed by Salary Redirections sufficient to
support Benefits that a Participant has elected hereunder and to pay the Participant's Premium
Expenses. The salary administration program of the Employer shall be revised to allow each
Participant to agree to reduce his pay during a Plan Year by an amount determined necessary
to purchase the elected Benefit Options. The amount of such Salary Redirection shall be
specified in the Salary Redirection Agreement and shall be applicable for a Plan Year.
Notwithstanding the above, for new Participants, the Salary Redirection Agreement shall only be
applicable from the first day of the pay period following the Employee's entry date up to and
including the last day of the Plan Year. These contributions shall be converted to Cafeteria Plan
Benefit Dollars and allocated to the funds or accounts established under the Plan pursuant to
the Participants' elections made under Article V.
Any Salary Redirection shall be determined prior to the beginning of a Plan Year
(subject to initial elections pursuant to Section 5.1) and prior to the end of the Election Period
and shall be irrevocable for such Plan Year. However, a Participant may revoke a Benefit
election or a Salary Redirection Agreement after the Plan Year has commenced and make a
new election with respect to the remainder of the Plan Year, if both the revocation and the new
election are on account of and consistent with a change in status and such other permitted
events as determined under Article V of the Plan and consistent with the rules and regulations
of the Department of the Treasury. Salary Redirection amounts shall be contributed on a
pro rata basis for each pay period during the Plan Year. All individual Salary Redirection
Agreements are deemed to be part of this Plan and incorporated by reference hereunder.
3.2 APPLICATION OF CONTRIBUTIONS
As soon as reasonably practical after each payroll period, the Employer shall
apply the Salary Redirection to provide the Benefits elected by the affected Participants. Any
contribution made or withheld for the Health Flexible Spending Account or Dependent Care
Flexible Spending Account shall be credited to such fund or account. Amounts designated for
the Participant's Premium Expense Reimbursement Account shall likewise be credited to such
account for the purpose of paying Premium Expenses.
3.3 PERIODIC CONTRIBUTIONS
Notwithstanding the requirement provided above and in other Articles of this Plan
that Salary Redirections be contributed to the Plan by the Employer on behalf of an Employee
on a level and pro rata basis for each payroll period, the Employer and Administrator may
implement a procedure in which Salary Redirections are contributed throughout the Plan Year
on a periodic basis that is not pro rata for each payroll period. However, with regard to the
Health Flexible Spending Account, the payment schedule for the required contributions may not
be based on the rate or amount of reimbursements during the Plan Year.
5
ARTICLE IV
BENEFITS
4.1 BENEFIT OPTIONS
Each Participant may elect any one or more of the following optional Benefits:
(1) Health Flexible Spending Account
(2) Dependent Care Flexible Spending Account
In addition, each Participant shall have a sufficient portion of his Salary
Redirections applied to the following Benefits unless the Participant elects not to receive such
Benefits:
(3) Health Insurance Benefit
(4) Dental Insurance Benefit
(5) Group -Term Life Insurance Benefit
(6) Vision Insurance Benefit
(7) Prescription Drug Coverage Benefit
4.2 HEALTH FLEXIBLE SPENDING ACCOUNT BENEFIT
Each Participant may elect to participate in the Health Flexible Spending Account
option, in which case Article VI shall apply.
4.3 DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT BENEFIT
Each Participant may elect to participate in the Dependent Care Flexible
Spending Account option, in which case Article VII shall apply.
4.4 HEALTH INSURANCE BENEFIT
(a) Coverage for Participant and Dependents. Each Participant
may elect to be covered under a health Insurance Contract for the Participant, his
or her Spouse, and his or her Dependents.
(b) Employer selects contracts. The Employer may select suitable
health Insurance Contracts for use in providing this health insurance benefit,
which policies will provide uniform benefits for all Participants electing this
Benefit.
(c) Contract incorporated by reference. The rights and conditions
with respect to the benefits payable from such health Insurance Contract shall be
determined therefrom, and such Insurance Contract shall be incorporated herein
by reference.
R
4.5 DENTAL INSURANCE BENEFIT
(a) Coverage for Participant and/or Dependents. Each Participant
may elect to be covered under the Employer's dental Insurance Contract. In
addition, the Participant may elect either individual or family coverage under such
Insurance Contract.
(b) Employer selects contracts. The Employer may select suitable
dental Insurance Contracts for use in providing this dental insurance benefit,
which policies will provide uniform benefits for all Participants electing this
Benefit.
(c) Contract incorporated by reference. The rights and conditions
with respect to the benefits payable from such dental Insurance Contract shall be
determined therefrom, and such dental Insurance Contract shall be incorporated
herein by reference.
4.6 GROUP -TERM LIFE INSURANCE BENEFIT
(a) Coverage for Participant only. Each Participant may elect to be
covered under the Employer's group -term life Insurance Contract.
(b) Employer selects contracts. The Employer may select suitable
group -term life Insurance Contracts for use in providing this group -term life
insurance benefit, which policies will provide benefits for all Participants electing
this Benefit on a uniform basis.
(c) Contract incorporated by reference. The rights and conditions
with respect to the benefits payable from such group -term life Insurance Contract
shall be determined therefrom, and such group -term life Insurance Contract shall
be incorporated herein by reference.
4.7 VISION INSURANCE BENEFIT
(a) Coverage for Participant and/or Dependents. Each Participant
may elect to be covered under the Employer's vision Insurance Contract. In
addition, the Participant may elect either individual or family coverage.
(b) Employer selects contracts. The Employer may select suitable
vision Insurance Contracts for use in providing this vision insurance benefit,
which policies will provide uniform benefits for all Participants electing this
Benefit.
(c) Contract incorporated by reference. The rights and conditions
with respect to the benefits payable from such vision Insurance Contract shall be
determined therefrom, and such vision Insurance Contract shall be incorporated
herein by reference.
4.8 PRESCRIPTION DRUG COVERAGE BENEFIT
(a) Coverage for Participant and/or Dependents. Each Participant
may elect to be covered under the Employer's Prescription Drug Coverage
Contract.
7
(b) Employer selects contracts. The Employer may select suitable
prescription drug coverage for use in providing this benefit, including, but not
limited to, if applicable, by -mail services and prescription drug cards, which will
provide uniform benefits for all Participants electing this Benefit.
(c) Contract incorporated by reference. The rights and conditions
with respect to the benefits payable from such prescription drug coverage
contract shall be determined therefrom, and such Contract shall be incorporated
herein by reference.
4.9 NONDISCRIMINATION REQUIREMENTS
(a) Intent to be nondiscriminatory. It is the intent of this Plan to
provide benefits to a classification of employees which the Secretary of the
Treasury finds not to be discriminatory in favor of the group in whose favor
discrimination may not occur under Code Section 125.
(b) 25% concentration test. It is the intent of this Plan not to provide
qualified benefits as defined under Code Section 125 to Key Employees in
amounts that exceed 25% of the aggregate of such Benefits provided for all
Eligible Employees under the Plan. For purposes of the preceding sentence,
qualified benefits shall not include benefits which (without regard to this
paragraph) are includible in gross income.
(c) Adjustment to avoid test failure. If the Administrator deems it
necessary to avoid discrimination or possible taxation to Key Employees or a
group of employees in whose favor discrimination may not occur in violation of
Code Section 125, it may, but shall not be required to, reduce contributions or
non-taxable Benefits in order to assure compliance with this Section. Any act
taken by the Administrator under this Section shall be carried out in a uniform
and nondiscriminatory manner. If the Administrator decides to reduce
contributions or non-taxable Benefits, it shall be done in the following manner.
First, the non-taxable Benefits of the affected Participant (either an employee
who is highly compensated or a Key Employee, whichever is applicable) who has
the highest amount of non-taxable Benefits for the Plan Year shall have his
non-taxable Benefits reduced until the discrimination tests set forth in this Section
are satisfied or until the amount of his non-taxable Benefits equals the
non-taxable Benefits of the affected Participant who has the second highest
amount of non-taxable Benefits. This process shall continue until the
nondiscrimination tests set forth in this Section are satisfied. With respect to any
affected Participant who has had Benefits reduced pursuant to this Section, the
reduction shall be made proportionately among Health Flexible Spending
Account Benefits and Dependent Care Flexible Spending Account Benefits, and
once all these Benefits are expended, proportionately among insured Benefits.
Contributions which are not utilized to provide Benefits to any Participant by
virtue of any administrative act under this paragraph shall be forfeited and
deposited into the benefit plan surplus.
FV
ARTICLE V
PARTICIPANT ELECTIONS
5.1 INITIAL ELECTIONS
An Employee who meets the eligibility requirements of Section 2.1 on the first
day of, or during, a Plan Year may elect to participate in this Plan for all or the remainder of
such Plan Year, provided he elects to do so on or before his effective date of participation
pursuant to Section 2.2.
Notwithstanding the foregoing, an Employee who is eligible to participate in this
Plan and who is covered by the Employer's insured benefits under this Plan shall automatically
become a Participant to the extent of the Premiums for such insurance unless the Employee
elects, during the Election Period, not to participate in the Plan.
5.2 SUBSEQUENT ANNUAL ELECTIONS
During the Election Period prior to each subsequent Plan Year, each Participant
shall be given the opportunity to elect, on an election of benefits form to be provided by the
Administrator, which spending account Benefit options he wishes to select. Any such election
shall be effective for any Benefit expenses incurred during the Plan Year which follows the end
of the Election Period. With regard to subsequent annual elections, the following options shall
apply:
(a) A Participant or Employee who failed to initially elect to participate
may elect different or new Benefits under the Plan during the Election Period;
(b) A Participant may terminate his participation in the Plan by
notifying the Administrator in writing during the Election Period that he does not
want to participate in the Plan for the next Plan Year;
(c) An Employee who elects not to participate for the Plan Year
following the Election Period will have to wait until the next Election Period before
again electing to participate in the Plan, except as provided for in Section 5.4.
5.3 FAILURE TO ELECT
With regard to Benefits available under the Plan for which no Premium Expenses
apply, any Participant who fails to complete a new benefit election form pursuant to Section 5.2
by the end of the applicable Election Period shall be deemed to have elected not to participate
in the Plan for the upcoming Plan Year. No further Salary Redirections shall therefore be
authorized or made for the subsequent Plan Year for such Benefits.
With regard to Benefits available under the Plan for which Premium Expenses
apply, any Participant who fails to complete a new benefit election form pursuant to Section 5.2
by the end of the applicable Election Period shall be deemed to have made the same Benefit
elections as are then in effect for the current Plan Year. The Participant shall also be deemed to
have elected Salary Redirection in an amount necessary to purchase such Benefit options.
5.4 CHANGE IN STATUS
(a) Change in status defined. Any Participant may change a Benefit
election after the Plan Year (to which such election relates) has commenced and
make new elections with respect to the remainder of such Plan Year if, under the
facts and circumstances, the changes are necessitated by and are consistent with
9
a change in status which is acceptable under rules and regulations adopted by the
Department of the Treasury, the provisions of which are incorporated by reference.
Notwithstanding anything herein to the contrary, if the rules and regulations
conflict, then such rules and regulations shall control.
In general, a change in election is not consistent if the change in status is
the Participant's divorce, annulment or legal separation from a Spouse, the death
of a Spouse or Dependent, or a Dependent ceasing to satisfy the eligibility
requirements for coverage, and the Participant's election under the Plan is to
cancel accident or health insurance coverage for any individual other than the one
involved in such event. In addition, if the Participant, Spouse or Dependent gains
or loses eligibility for coverage, then a Participant's election under the Plan to
cease or decrease coverage for that individual under the Plan corresponds with
that change in status only if coverage for that individual becomes applicable or is
increased under the family member plan.
Regardless of the consistency requirement, if the individual, the individual's
Spouse, or Dependent becomes eligible for continuation coverage under the
Employer's group health plan as provided in Code Section 4980B or any similar
state law, then the individual may elect to increase payments under this Plan in
order to pay for the continuation coverage. However, this does not apply for
COBRA eligibility due to divorce, annulment or legal separation.
Any new election shall be effective at such time as the Administrator shall
prescribe, but not earlier than the first pay period beginning after the election form
is completed and returned to the Administrator. For the purposes of this
subsection, a change in status shall only include the following events or other
events permitted by Treasury regulations:
(1) Legal Marital Status: events that change a Participant's legal
marital status, including marriage, divorce, death of a Spouse, legal
separation or annulment;
(2) Number of Dependents: Events that change a Participant's number
of Dependents, including birth, adoption, placement for adoption, or death
of a Dependent;
(3) Employment Status: Any of the following events that change the
employment status of the Participant, Spouse, or Dependent: termination
or commencement of employment, a strike or lockout, commencement or
return from an unpaid leave of absence, or a change in worksite. In
addition, if the eligibility conditions of this Plan or other employee benefit
plan of the Employer of the Participant, Spouse, or Dependent depend on
the employment status of that individual and there is a change in that
individual's employment status with the consequence that the individual
becomes (or ceases to be) eligible under the plan, then that change
constitutes a change in employment under this subsection;
(4) Dependent satisfies or ceases to satisfy the eligibility requirements:
An event that causes the Participant's Dependent to satisfy or cease to
satisfy the requirements for coverage due to attainment of age, student
status, or any similar circumstance; and
10
(5) Residency: A change in the place of residence of the Participant,
Spouse or Dependent, that would lead to a change in status (such as a
loss of HMO coverage).
For the Dependent Care Flexible Spending Account, a Dependent
becoming or ceasing to be a "Qualifying Dependent" as defined under Code
Section 21(b) shall also qualify as a change in status.
(b) Special enrollment rights. Notwithstanding subsection (a), the
Participants may change an election for accident or health coverage during a
Plan Year and make a new election that corresponds with the special enrollment
rights provided in Code Section 9801(f). Such change shall take place on a
prospective basis, unless otherwise required by Code Section 9801(f) to be
retroactive.
(c) Qualified Medical Support Order. Notwithstanding subsection
(a), in the event of a judgment, decree, or order (including approval of a property
settlement) ("order") resulting from a divorce, legal separation, annulment, or
change in legal custody which requires accident or health coverage for a
Participant's child (including a foster child who is a Dependent of the Participant):
(1) The Plan may change an election to provide coverage for the child
if the order requires coverage under the Participant's plan; or
(2) The Participant shall be permitted to change an election to cancel
coverage for the child if the order requires the former Spouse to provide
coverage for such child, under that individual's plan and such coverage is
actually provided.
(d) Medicare or Medicaid. Notwithstanding subsection (a), a
Participant may change elections to cancel accident or health coverage for the
Participant or the Participant's Spouse or Dependent if the Participant or the
Participant's Spouse or Dependent is enrolled in the accident or health coverage of
the Employer and becomes entitled to coverage (i.e., enrolled) under Part A or Part
B of the Title XVIII of the Social Security Act (Medicare) or Title XIX of the Social
Security Act (Medicaid), other than coverage consisting solely of benefits under
Section 1928 of the Social Security Act (the program for distribution of pediatric
vaccines). If the Participant or the Participant's Spouse or Dependent who has
been entitled to Medicaid or Medicare coverage loses eligibility, that individual may
prospectively elect coverage under the Plan if a benefit package option under the
Plan provides similar coverage.
(e) Cost increase or decrease. If the cost of a Benefit provided
under the Plan increases or decreases during a Plan Year, then the Plan shall
automatically increase or decrease, as the case may be, the Salary Redirections
of all affected Participants for such Benefit. Alternatively, if the cost of a benefit
package option increases significantly, the Administrator shall permit the affected
Participants to either make corresponding changes in their payments or revoke
their elections and, in lieu thereof, receive on a prospective basis coverage under
another benefit package option with similar coverage, or drop coverage
prospectively if there is no benefit package option with similar coverage.
A cost increase or decrease refers to an increase or decrease in the
amount of elective contributions under the Plan, whether resulting from an action
taken by the Participants or an action taken by the Employer.
11
(f) Loss of coverage. If the coverage under a Benefit is significantly
curtailed or ceases during a Plan Year, affected Participants may revoke their
elections of such Benefit and, in lieu thereof, elect to receive on a prospective
basis coverage under another plan with similar coverage, or drop coverage
prospectively if no similar coverage is offered.
(g) Addition of a new benefit. If, during the period of coverage, a
new benefit package option or other coverage option is added, an existing benefit
package option is significantly improved, or an existing benefit package option or
other coverage option is eliminated, then the affected Participants may elect the
newly -added option, or elect another option if an option has been eliminated
prospectively and make corresponding election changes with respect to other
benefit package options providing similar coverage. In addition, those Eligible
Employees who are not participating in the Plan may opt to become Participants
and elect the new or newly improved benefit package option.
(h) Loss of coverage under certain other plans. A Participant may
make a prospective election change to add group health coverage for the
Participant, the Participant's Spouse or Dependent if such individual loses group
health coverage sponsored by a governmental or educational institution,
including a state children's health insurance program under the Social Security
Act, the Indian Health Service or a health program offered by an Indian tribal
government, a state health benefits risk pool, or a foreign government group
health plan.
(i) Change of coverage due to change under certain other plans.
A Participant may make a prospective election change that is on account of and
corresponds with a change made under the plan of a Spouse's, former Spouse's
or Dependent's employer if (1) the cafeteria plan or other benefits plan of the
Spouse's, former Spouse's or Dependent's employer permits its participants to
make a change; or (2) the cafeteria plan permits participants to make an election
for a period of coverage that is different from the period of coverage under the
cafeteria plan of a Spouse's, former Spouse's or Dependent's employer.
Q) Change in dependent care provider. A Participant may make a
prospective election change that is on account of and corresponds with a change
by the Participant in the dependent care provider. The availability of dependent
care services from a new childcare provider is similar to a new benefit package
option becoming available. A cost change is allowable in the Dependent Care
Flexible Spending Account only if the cost change is imposed by a dependent
care provider who is not related to the Participant, as defined in Code Section
152(a)(1) through (8).
(k) Health FSA cannot change due to insurance change. A
Participant shall not be permitted to change an election to the Health Flexible
Spending Account as a result of a cost or coverage change under any health
insurance benefits.
12
ARTICLE VI
HEALTH FLEXIBLE SPENDING ACCOUNT
6.1 ESTABLISHMENT OF PLAN
This Health Flexible Spending Account is intended to qualify as a medical
reimbursement plan under Code Section 105 and shall be interpreted in a manner consistent
with such Code Section and the Treasury regulations thereunder. Participants who elect to
participate in this Health Flexible Spending Account may submit claims for the reimbursement of
Medical Expenses. All amounts reimbursed shall be periodically paid from amounts allocated to
the Health Flexible Spending Account. Periodic payments reimbursing Participants from the
Health Flexible Spending Account shall in no event occur less frequently than monthly.
6.2 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan, the terms below have the
following meaning:
(a) "Health Flexible Spending Account" means the account
established for Participants pursuant to this Plan to which part of their Cafeteria
Plan Benefit Dollars may be allocated and from which all allowable Medical
Expenses incurred by a Participant, his or her Spouse and his or her Dependents
may be reimbursed.
(b) "Highly Compensated Participant" means, for the purposes of
this Article and determining discrimination under Code Section 105(h), a
participant who is:
(1) one of the 5 highest paid officers;
(2) a shareholder who owns (or is considered to own applying the
rules of Code Section 318) more than 10 percent in value of the stock of
the Employer; or
(3) among the highest paid 25 percent of all Employees (other than
exclusions permitted by Code Section 105(h)(3)(B) for those individuals
who are not Participants).
(c) "Medical Expenses" means any expense for medical care within
the meaning of the term "medical care" as defined in Code Section 213(d) and as
allowed under Code Section 105 and the rulings and Treasury regulations
thereunder, and not otherwise used by the Participant as a deduction in
determining his tax liability under the Code. "Medical Expenses" can be incurred
by the Participant, his or her Spouse and his or her Dependents.
A Participant may not be reimbursed for the cost of other health coverage
such as premiums paid under plans maintained by the employer of the
Participant's Spouse or individual policies maintained by the Participant or his
Spouse or Dependent.
A Participant may not be reimbursed for "qualified long-term care
services" as defined in Code Section 7702B(c).
13
(d) The definitions of Article I are hereby incorporated by reference to
the extent necessary to interpret and apply the provisions of this Health Flexible
Spending Account.
6.3 FORFEITURES
The amount in the Health Flexible Spending Account as of the end of any Plan
Year (and after the processing of all claims for such Plan Year pursuant to Section 6.7 hereof)
shall be forfeited and credited to the benefit plan surplus. In such event, the Participant shall
have no further claim to such amount for any reason, subject to Section 8.2.
6.4 LIMITATION ON ALLOCATIONS
Notwithstanding any provision contained in this Health Flexible Spending
Account to the contrary, no more than $3,500 may be allocated to the Health Flexible Spending
Account by a Participant in or on account of any Plan Year.
6.5 NONDISCRIMINATION REQUIREMENTS
(a) Intent to be nondiscriminatory. It is the intent of this Health
Flexible Spending Account not to discriminate in violation of the Code and the
Treasury regulations thereunder.
(b) Adjustment to avoid test failure. If the Administrator deems it
necessary to avoid discrimination under this Health Flexible Spending Account, it
may, but shall not be required to, reject any elections or reduce contributions or
Benefits in order to assure compliance with this Section. Any act taken by the
Administrator under this Section shall be carried out in a uniform and
nondiscriminatory manner. If the Administrator decides to reject any elections or
reduce contributions or Benefits, it shall be done in the following manner. First,
the Benefits designated for the Health Flexible Spending Account by the member
of the group in whose favor discrimination may not occur pursuant to Code
Section 105 that elected to contribute the highest amount to the fund for the Plan
Year shall be reduced until the nondiscrimination tests set forth in this Section or
the Code are satisfied, or until the amount designated for the fund equals the
amount designated for the fund by the next member of the group in whose favor
discrimination may not occur pursuant to Code Section 105 who has elected the
second highest contribution to the Health Flexible Spending Account for the Plan
Year. This process shall continue until the nondiscrimination tests set forth in this
Section or the Code are satisfied. Contributions which are not utilized to provide
Benefits to any Participant by virtue of any administrative act under this
paragraph shall be forfeited and credited to the benefit plan surplus.
6.6 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive Benefits under
this Health Flexible Spending Account. The enrollment under the Cafeteria Plan shall constitute
enrollment under this Health Flexible Spending Account. In addition, other matters concerning
contributions, elections and the like shall be governed by the general provisions of the Cafeteria
Plan.
14
6.7 HEALTH FLEXIBLE SPENDING ACCOUNT CLAIMS
(a) Expenses must be incurred during Plan Year. All Medical
Expenses incurred by a Participant, his or her Spouse and his or her Dependents
shall be reimbursed during the Plan Year subject to Section 2.5, even though the
submission of such a claim occurs after his participation hereunder ceases; but
provided that the Medical Expenses were incurred during the applicable Plan
Year. Medical Expenses are treated as having been incurred when the
Participant is provided with the medical care that gives rise to the medical
expenses, not when the Participant is formally billed or charged for, or pays for
the medical care.
(b) Reimbursement available throughout Plan Year. The
Administrator shall direct the reimbursement to each eligible Participant for all
allowable Medical Expenses, up to a maximum of the amount designated by the
Participant for the Health Flexible Spending Account for the Plan Year.
Reimbursements shall be made available to the Participant throughout the year
without regard to the level of Cafeteria Plan Benefit Dollars which have been
allocated to the fund at any given point in time. Furthermore, a Participant shall
be entitled to reimbursements only for amounts in excess of any payments or
other reimbursements under any health care plan covering the Participant and/or
his Spouse or Dependents.
(c) Payments. Reimbursement payments under this Plan shall be
made directly to the Participant. However, in the Administrator's discretion,
payments may be made directly to the service provider. The application for
payment or reimbursement shall be made to the Administrator on an acceptable
form within a reasonable time of incurring the debt or paying for the service. The
application shall include a written statement from an independent third party
stating that the Medical Expense has been incurred and the amount of such
expense. Furthermore, the Participant shall provide a written statement that the
Medical Expense has not been reimbursed or is not reimbursable under any
other health plan coverage and, if reimbursed from the Health Flexible Spending
Account, such amount will not be claimed as a tax deduction. The Administrator
shall retain a file of all such applications.
(d) Grace Period. Notwithstanding anything in this Section to the
contrary, Medical Expenses incurred during the Grace Period, up to the
remaining account balance, shall also be deemed to have been incurred during
the Plan Year to which the Grace Period relates.
(e) Claims for reimbursement. Claims for the reimbursement of
Medical Expenses incurred in any Plan Year shall be paid as soon after a claim
has been filed as is administratively practicable; provided however, that if a
Participant fails to submit a claim within 90 days after the end of the Plan Year,
those Medical Expense claims shall not be considered for reimbursement by the
Administrator.
15
6.8 DEBIT AND CREDIT CARDS
Participants may, subject to a procedure established by the Administrator and
applied in a uniform nondiscriminatory manner, use debit and/or credit (stored value) cards
("cards") provided by the Administrator and the Plan for payment of Medical Expenses, subject
to the following terms:
(a) Card only for medical expenses. Each Participant issued a card
shall certify that such card shall only be used for Medical Expenses. The
Participant shall also certify that any Medical Expense paid with the card has not
already been reimbursed by any other plan covering health benefits and that the
Participant will not seek reimbursement from any other plan covering health
benefits.
(b) Card issuance. Such card shall be issued upon the Participant's
Effective Date of Participation and reissued for each Plan Year the Participant
remains a Participant in the Health Flexible Spending Account. Such card shall
be automatically cancelled upon the Participant's death or termination of
employment, or if such Participant has a change in status that results in the
Participant's withdrawal from the Health Flexible Spending Account.
(c) Maximum dollar amount available. The dollar amount of
coverage available on the card shall be the amount elected by the Participant for
the Plan Year. The maximum dollar amount of coverage available shall be the
maximum amount for the Plan Year as set forth in Section 6.4.
(d) Only available for use with certain service providers. The
cards shall only be accepted by such merchants and service providers as have
been approved by the Administrator.
(e) Card use. The cards shall only be used for Medical Expense
purchases at these providers, including, but not limited to, the following:
(1) Co -payments for doctor and other medical care;
(2) Purchase of drugs;
(3) Purchase of medical items such as eyeglasses, syringes,
crutches, etc.
(f) Substantiation. Such purchases by the cards shall be subject to
substantiation by the Administrator, usually by submission of a receipt from a
service provider describing the service, the date and the amount. The
Administrator shall also follow the requirements set forth in Revenue Ruling
2003-43 and Notice 2006-69. All charges shall be conditional pending
confirmation and substantiation.
(g) Correction methods. If such purchase is later determined by the
Administrator to not qualify as a Medical Expense, the Administrator, in its
discretion, shall use one of the following correction methods to make the Plan
whole. Until the amount is repaid, the Administrator shall take further action to
ensure that further violations of the terms of the card do not occur, up to and
including denial of access to the card.
(1) Repayment of the improper amount by the Participant;
16
(2) Withholding the improper payment from the Participant's wages or
other compensation to the extent consistent with applicable federal or
state law;
(3) Claims substitution or offset of future claims until the amount is
repaid; and
(4) if subsections (1) through (3) fail to recover the amount, consistent
with the Employer's business practices, the Employer may treat the
amount as any other business indebtedness.
ARTICLE VII
DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT
7.1 ESTABLISHMENT OF ACCOUNT
This Dependent Care Flexible Spending Account is intended to qualify as a
program under Code Section 129 and shall be interpreted in a manner consistent with such
Code Section. Participants who elect to participate in this program may submit claims for the
reimbursement of Employment -Related Dependent Care Expenses. All amounts reimbursed
shall be paid from amounts allocated to the Participant's Dependent Care Flexible Spending
Account.
7.2 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan the terms below shall have
the following meaning:
(a) "Dependent Care Flexible Spending Account" means the
account established for a Participant pursuant to this Article to which part of his
Cafeteria Plan Benefit Dollars may be allocated and from which
Employment -Related Dependent Care Expenses of the Participant may be
reimbursed for the care of the Qualifying Dependents of Participants.
(b) "Earned Income" means earned income as defined under Code
Section 32(c)(2), but excluding such amounts paid or incurred by the Employer
for dependent care assistance to the Participant.
17
(c) "Employment -Related Dependent Care Expenses" means the
amounts paid for expenses of a Participant for those services which if paid by the
Participant would be considered employment related expenses under Code
Section 21(b)(2). Generally, they shall include expenses for household services
and for the care of a Qualifying Dependent, to the extent that such expenses are
incurred to enable the Participant to be gainfully employed for any period for
which there are one or more Qualifying Dependents with respect to such
Participant. Employment -Related Dependent Care Expenses are treated as
having been incurred when the Participant's Qualifying Dependents are provided
with the dependent care that gives rise to the Employment -Related Dependent
Care Expenses, not when the Participant is formally billed or charged for, or pays
for the dependent care. The determination of whether an amount qualifies as an
Employment -Related Dependent Care Expense shall be made subject to the
following rules:
(1) If such amounts are paid for expenses incurred outside the
Participant's household, they shall constitute Employment -Related
Dependent Care Expenses only if incurred for a Qualifying Dependent as
defined in Section 7.2(d)(1) (or deemed to be, as described in Section
7.2(d)(1) pursuant to Section 7.2(d)(3)), or for a Qualifying Dependent as
defined in Section 7.2(d)(2) (or deemed to be, as described in Section
7.2(d)(2) pursuant to Section 7.2(d)(3)) who regularly spends at least 8
hours per day in the Participant's household;
(2) If the expense is incurred outside the Participant's home at a
facility that provides care for a fee, payment, or grant for more than 6
individuals who do not regularly reside at the facility, the facility must
comply with all applicable state and local laws and regulations, including
licensing requirements, if any; and
(3) Employment -Related Dependent Care Expenses of a Participant
shall not include amounts paid or incurred to a child of such Participant
who is under the age of 19 or to an individual who is a Dependent of such
Participant or such Participant's Spouse.
(d) "Qualifying Dependent" means, for Dependent Care Flexible
Spending Account purposes,
(1) a Participant's Dependent (as defined in Code Section 152(a)(1))
who has not attained age 13;
(2) a Dependent or the Spouse of a Participant who is physically or
mentally incapable of caring for himself or herself and has the same
principal place of abode as the Participant for more than one-half of such
taxable year; or
(3) a child that is deemed to be a Qualifying Dependent described in
paragraph (1) or (2) above, whichever is appropriate, pursuant to Code
Section 21(e)(5).
(e) The definitions of Article I are hereby incorporated by reference to
the extent necessary to interpret and apply the provisions of this Dependent Care
Flexible Spending Account.
M
7.3 DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS
The Administrator shall establish a Dependent Care Flexible Spending Account
for each Participant who elects to apply Cafeteria Plan Benefit Dollars to Dependent Care
Flexible Spending Account benefits.
7.4 INCREASES IN DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS
A Participant's Dependent Care Flexible Spending Account shall be increased
each pay period by the portion of Cafeteria Plan Benefit Dollars that he has elected to apply
toward his Dependent Care Flexible Spending Account pursuant to elections made under Article
V hereof.
7.5 DECREASES IN DEPENDENT CARE FLEXIBLE SPENDING ACCOUNTS
A Participant's Dependent Care Flexible Spending Account shall be reduced by
the amount of any Employment -Related Dependent Care Expense reimbursements paid or
incurred on behalf of a Participant pursuant to Section 7.12 hereof.
7.6 ALLOWABLE DEPENDENT CARE REIMBURSEMENT
Subject to limitations contained in Section 7.9 of this Program, and to the extent
of the amount contained in the Participant's Dependent Care Flexible Spending Account, a
Participant who incurs Employment -Related Dependent Care Expenses shall be entitled to
receive from the Employer full reimbursement for the entire amount of such expenses incurred
during the Plan Year or portion thereof during which he is a Participant.
7.7 ANNUAL STATEMENT OF BENEFITS
On or before January 31 st of each calendar year, the Employer shall furnish to
each Employee who was a Participant and received benefits under Section 7.6 during the prior
calendar year, a statement of all such benefits paid to or on behalf of such Participant during the
prior calendar year.
7.8 FORFEITURES
The amount in a Participant's Dependent Care Flexible Spending Account as of
the end of any Plan Year (and after the processing of all claims for such Plan Year pursuant to
Section 7.12 hereof) shall be forfeited and credited to the benefit plan surplus. In such event,
the Participant shall have no further claim to such amount for any reason.
7.9 LIMITATION ON PAYMENTS
Notwithstanding any provision contained in this Article to the contrary, amounts
paid from a Participant's Dependent Care Flexible Spending Account in or on account of any
taxable year of the Participant shall not exceed the lesser of the Earned Income limitation
described in Code Section 129(b) or $5,000 ($2,500 if a separate tax return is filed by a
Participant who is married as determined under the rules of paragraphs (3) and (4) of Code
Section 21(e)).
7.10 NONDISCRIMINATION REQUIREMENTS
(a) Intent to be nondiscriminatory. It is the intent of this Dependent
Care Flexible Spending Account that contributions or benefits not discriminate in
19
favor of the group of employees in whose favor discrimination may not occur
under Code Section 129(d).
(b) 25% test for shareholders. It is the intent of this Dependent Care
Flexible Spending Account that not more than 25 percent of the amounts paid by
the Employer for dependent care assistance during the Plan Year will be
provided for the class of individuals who are shareholders or owners (or their
Spouses or Dependents), each of whom (on any day of the Plan Year) owns
more than 5 percent of the stock or of the capital or profits interest in the
Employer.
(c) Adjustment to avoid test failure. If the Administrator deems it
necessary to avoid discrimination or possible taxation to a group of employees in
whose favor discrimination may not occur in violation of Code Section 129 it may,
but shall not be required to, reject any elections or reduce contributions or
non-taxable benefits in order to assure compliance with this Section. Any act
taken by the Administrator under this Section shall be carried out in a uniform
and nondiscriminatory manner. If the Administrator decides to reject any
elections or reduce contributions or Benefits, it shall be done in the following
manner. First, the Benefits designated for the Dependent Care Flexible Spending
Account by the affected Participant that elected to contribute the highest amount
to such account for the Plan Year shall be reduced until the nondiscrimination
tests set forth in this Section are satisfied, or until the amount designated for the
account equals the amount designated for the account of the affected Participant
who has elected the second highest contribution to the Dependent Care Flexible
Spending Account for the Plan Year. This process shall continue until the
nondiscrimination tests set forth in this Section are satisfied. Contributions which
are not utilized to provide Benefits to any Participant by virtue of any
administrative act under this paragraph shall be forfeited.
7.11 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive Benefits under
this Dependent Care Flexible Spending Account. The enrollment and termination of participation
under the Cafeteria Plan shall constitute enrollment and termination of participation under this
Dependent Care Flexible Spending Account. In addition, other matters concerning contributions,
elections and the like shall be governed by the general provisions of the Cafeteria Plan.
7.12 DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT CLAIMS
The Administrator shall direct the payment of all such Dependent Care claims to
the Participant upon the presentation to the Administrator of documentation of such expenses in
a form satisfactory to the Administrator. However, in the Administrator's discretion, payments
may be made directly to the service provider. In its discretion in administering the Plan, the
Administrator may utilize forms and require documentation of costs as may be necessary to
verify the claims submitted. At a minimum, the form shall include a statement from an
independent third party as proof that the expense has been incurred and the amount of such
expense. In addition, the Administrator may require that each Participant who desires to receive
reimbursement under this Program for Employment -Related Dependent Care Expenses submit
a statement which may contain some or all of the following information:
(a) The Dependent or Dependents for whom the services were
performed;
20
(b) The nature of the services performed for the Participant, the cost
of which he wishes reimbursement;
(c) The relationship, if any, of the person performing the services to
the Participant;
(d) If the services are being performed by a child of the Participant,
the age of the child;
(e) A statement as to where the services were performed;
(f) If any of the services were performed outside the home, a
statement as to whether the Dependent for whom such services were performed
spends at least 8 hours a day in the Participant's household;
(g) If the services were being performed in a day care center, a
statement:
(1) that the day care center complies with all applicable laws and
regulations of the state of residence,
(2) that the day care center provides care for more than 6 individuals
(other than individuals residing at the center), and
(3) of the amount of fee paid to the provider.
(h) If the Participant is married, a statement containing the following:
(1) the Spouse's salary or wages if he or she is employed, or
(2) if the Participant's Spouse is not employed, that
(i) he or she is incapacitated, or
(ii) he or she is a full-time student attending an educational
institution and the months during the year which he or she
attended such institution.
(i) Grace Period. Notwithstanding anything in this Section to the
contrary, Employment -Related Dependent Care Expenses incurred during the
Grace Period, up to the remaining account balance, shall also be deemed to
have been incurred during the Plan Year to which the Grace Period relates.
0) Claims for reimbursement. If a Participant fails to submit a claim
within 90 days after the end of the Plan Year, those claims shall not be
considered for reimbursement by the Administrator.
ARTICLE VIII
BENEFITS AND RIGHTS
8.1 CLAIM FOR BENEFITS
Insurance claims.
by
Insurancen Contra t(s) shall be made o the I�nsu forBenefits
underwritten
Insurer. If the Insurer denes any
21
claim, the Participant or beneficiary shall follow the Insurer's claims review
procedure.
(b) Dependent Care Flexible Spending Account or Health Flexible
Spending Account claims. Any claim for Dependent Care Flexible Spending
Account or Health Flexible Spending Account Benefits shall be made to the
Administrator. For the Health Flexible Spending Account, if a Participant fails to
submit a claim within 90 days after the end of the Plan Year, those claims shall
not be considered for reimbursement by the Administrator. For the Dependent
Care Flexible Spending Account, if a Participant fails to submit a claim within 90
days after the end of the Plan Year, those claims shall not be considered for
reimbursement by the Administrator. If the Administrator denies a claim, the
Administrator may provide notice to the Participant or beneficiary, in writing,
within 90 days after the claim is filed unless special circumstances require an
extension of time for processing the claim. The notice of a denial of a claim shall
be written in a manner calculated to be understood by the claimant and shall set
forth:
(1) specific references to the pertinent Plan provisions on which the
denial is based;
(2) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation as to why such
information is necessary; and
(3) an explanation of the Plan's claim procedure.
(c) Appeal. Within 60 days after receipt of the above material, the
claimant shall have a reasonable opportunity to appeal the claim denial to the
Administrator for a full and fair review. The claimant or his duly authorized
representative may:
(1) request a review upon written notice to the Administrator;
(2) review pertinent documents; and
(3) submit issues and comments in writing.
(d) Review of appeal. A decision on the review by the Administrator
will be made not later than 60 days after receipt of a request for review, unless
special circumstances require an extension of time for processing (such as the
need to hold a hearing), in which event a decision should be rendered as soon as
possible, but in no event later than 120 days after such receipt. The decision of
the Administrator shall be written and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, with
specific references to the pertinent Plan provisions on which the decision is
based.
(e) Forfeitures. Any balance remaining in the Participant's
Dependent Care Flexible Spending Account or Health Flexible Spending Account
as of the end of the time for claims reimbursement for each Plan Year and Grace
Period (if applicable) shall be forfeited and deposited in the benefit plan surplus
of the Employer pursuant to Section 6.3 or Section 7.8, whichever is applicable,
unless the Participant had made a claim for such Plan Year, in writing, which has
been denied or is pending; in which event the amount of the claim shall be held
1►A
in his account until the claim appeal procedures set forth above have been
satisfied or the claim is paid. If any such claim is denied on appeal, the amount
held beyond the end of the Plan Year shall be forfeited and credited to the benefit
plan surplus.
8.2 APPLICATION OF BENEFIT PLAN SURPLUS
Any forfeited amounts credited to the benefit plan surplus by virtue of the failure
of a Participant to incur a qualified expense or seek reimbursement in a timely manner may, but
need not be, separately accounted for after the close of the Plan Year (or after such further time
specified herein for the filing of claims) in which such forfeitures arose. In no event shall such
amounts be carried over to reimburse a Participant for expenses incurred during a subsequent
Plan Year for the same or any other Benefit available under the Plan; nor shall amounts
forfeited by a particular Participant be made available to such Participant in any other form or
manner, except as permitted by Treasury regulations. Amounts in the benefit plan surplus shall
be used to defray any administrative costs and experience losses or used to provide additional
benefits under the Plan.
ARTICLE IX
ADMINISTRATION
9.1 PLAN ADMINISTRATION
The operation of the Plan shall be under the supervision of the Administrator. It
shall be a principal duty of the Administrator to see that the Plan is carried out in accordance
with its terms, and for the exclusive benefit of Employees entitled to participate in the Plan. The
Administrator shall have full power to administer the Plan in all of its details, subject, however, to
the pertinent provisions of the Code. The Administrator's powers shall include, but shall not be
limited to the following authority, in addition to all other powers provided by this Plan:
(a) To make and enforce such rules and regulations as the
Administrator deems necessary or proper for the efficient administration of the
Plan;
(b) To interpret the Plan, the Administrator's interpretations thereof in
good faith to be final and conclusive on all persons claiming benefits by operation
of the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan and to receive benefits provided by
operation of the Plan;
(d) To reject elections or to limit contributions or Benefits for certain
highly compensated participants if it deems such to be desirable in order to avoid
discrimination under the Plan in violation of applicable provisions of the Code;
(e) To provide Employees with a reasonable notification of their
benefits available by operation of the Plan;
(f) To approve reimbursement requests and to authorize the payment
of benefits;
(g) To appoint such agents, counsel, accountants, consultants, and
actuaries as may be required to assist in administering the Plan.
23
Any procedure, discretionary act, interpretation or construction taken by the
Administrator shall be done in a nondiscriminatory manner based upon uniform principles
consistently applied and shall be consistent with the intent that the Plan shall continue to comply
with the terms of Code Section 125 and the Treasury regulations thereunder.
9.2 EXAMINATION OF RECORDS
The Administrator shall make available to each Participant, Eligible Employee
and any other Employee of the Employer such records as pertain to their interest under the Plan
for examination at reasonable times during normal business hours.
9.3 PAYMENT OF EXPENSES
Any reasonable administrative expenses shall be paid by the Employer unless
the Employer determines that administrative costs shall be borne by the Participants under the
Plan or by any Trust Fund which may be established hereunder. The Administrator may impose
reasonable conditions for payments, provided that such conditions shall not discriminate in favor
of highly compensated employees.
9.4 INSURANCE CONTROL CLAUSE
In the event of a conflict between the terms of this Plan and the terms of an
Insurance Contract of an independent third party Insurer whose product is then being used in
conjunction with this Plan, the terms of the Insurance Contract shall control as to those
Participants receiving coverage under such Insurance Contract. For this purpose, the Insurance
Contract shall control in defining the persons eligible for insurance, the dates of their eligibility,
the conditions which must be satisfied to become insured, if any, the benefits Participants are
entitled to and the circumstances under which insurance terminates.
9.5 INDEMNIFICATION OF ADMINISTRATOR
The Employer agrees to indemnify and to defend to the fullest extent permitted
by law any Employee serving as the Administrator or as a member of a committee designated
as Administrator (including any Employee or former Employee who previously served as
Administrator or as a member of such committee) against all liabilities, damages, costs and
expenses (including attorney's fees and amounts paid in settlement of any claims approved by
the Employer) occasioned by any act or omission to act in connection with the Plan, if such act
or omission is in good faith.
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 AMENDMENT
The Employer, at any time or from time to time, may amend any or all of the
provisions of the Plan without the consent of any Employee or Participant. No amendment shall
have the effect of modifying any benefit election of any Participant in effect at the time of such
amendment, unless such amendment is made to comply with Federal, state or local laws,
statutes or regulations.
24
10.2 TERMINATION
The Employer is establishing this Plan with the intent that it will be maintained for
an indefinite period of time. Notwithstanding the foregoing, the Employer reserves the right to
terminate this Plan, in whole or in part, at any time. In the event the Plan is terminated, no
further contributions shall be made. Benefits under any Insurance Contract shall be paid in
accordance with the terms of the Insurance Contract.
No further additions shall be made to the Health Flexible Spending Account or
Dependent Care Flexible Spending Account, but all payments from such fund shall continue to
be made according to the elections in effect until 90 days after the termination date of the Plan.
Any amounts remaining in any such fund or account as of the end of such period shall be
forfeited and deposited in the benefit plan surplus after the expiration of the filing period.
ARTICLE XI
MISCELLANEOUS
11.1 PLAN INTERPRETATION
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. This Plan shall be read in its entirety and not severed except as
provided in Section 11.12.
11.2 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender in all cases
where they would so apply, and whenever any words are used herein in the singular or plural
form, they shall be construed as though they were also used in the other form in all cases where
they would so apply.
11.3 WRITTEN DOCUMENT
This Plan, in conjunction with any separate written document which may be
required by law, is intended to satisfy the written Plan requirement of Code Section 125 and any
Treasury regulations thereunder relating to cafeteria plans.
11.4 EXCLUSIVE BENEFIT
This Plan shall be maintained for the exclusive benefit of the Employees who
participate in the Plan.
11.5 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute an employment contract between the
Employer and any Participant or to be a consideration or an inducement for the employment of
any Participant or Employee. Nothing contained in this Plan shall be deemed to give any
Participant or Employee the right to be retained in the service of the Employer or to interfere
with the right of the Employer to discharge any Participant or Employee at any time regardless
of the effect which such discharge shall have upon him as a Participant of this Plan.
25
11.6 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required to
do or perform any act or matter or thing, it shall be done and performed by a person duly
authorized by its legally constituted authority.
11.7 EMPLOYER'S PROTECTIVE CLAUSES
(a) Insurance purchase. Upon the failure of either the Participant or
the Employer to obtain the insurance contemplated by this Plan (whether as a
result of negligence, gross neglect or otherwise), the Participant's Benefits shall
be limited to the insurance premium(s), if any, that remained unpaid for the
period in question and the actual insurance proceeds, if any, received by the
Employer or the Participant as a result of the Participant's claim.
(b) Validity of insurance contract. The Employer shall not be
responsible for the validity of any Insurance Contract issued hereunder or for the
failure on the part of the Insurer to make payments provided for under any
Insurance Contract. Once insurance is applied for or obtained, the Employer
shall not be liable for any loss which may result from the failure to pay Premiums
to the extent Premium notices are not received by the Employer.
11.8 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Administrator nor the Employer makes any commitment or guarantee
that any amounts paid to or for the benefit of a Participant under the Plan will be excludable
from the Participant's gross income for federal or state income tax purposes, or that any other
federal or state tax treatment will apply to or be available to any Participant. It shall be the
obligation of each Participant to determine whether each payment under the Plan is excludable
from the Participant's gross income for federal and state income tax purposes, and to notify the
Employer if the Participant has reason to believe that any such payment is not so excludable.
Notwithstanding the foregoing, the rights of Participants under this Plan shall be legally
enforceable.
11.9 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or reimbursements under the
Plan that are not for a permitted Benefit, such Participant shall indemnify and reimburse the
Employer for any liability it may incur for failure to withhold federal or state income tax or Social
Security tax from such payments or reimbursements. However, such indemnification and
reimbursement shall not exceed the amount of additional federal and state income tax (plus any
penalties) that the Participant would have owed if the payments or reimbursements had been
made to the Participant as regular cash compensation, plus the Participant's share of any Social
Security tax that would have been paid on such compensation, less any such additional income
and Social Security tax actually paid by the Participant.
11.10 FUNDING
Unless otherwise required by law, contributions to the Plan need not be placed in
trust or dedicated to a specific Benefit, but may instead be considered general assets of the
Employer. Furthermore, and unless otherwise required by law, nothing herein shall be
construed to require the Employer or the Administrator to maintain any fund or segregate any
amount for the benefit of any Participant, and no Participant or other person shall have any
claim against, right to, or security or other interest in, any fund, account or asset of the Employer
from which any payment under the Plan may be made.
26
11.11 GOVERNING LAW
This Plan is governed by the Code and the Treasury regulations issued
thereunder (as they might be amended from time to time). In no event shall the Employer
guarantee the favorable tax treatment sought by this Plan. To the extent not preempted by
Federal law, the provisions of this Plan shall be construed, enforced and administered according
to the laws of the State of California.
11.12 SEVERABILITY
If any provision of the Plan is held invalid or unenforceable, its invalidity or
unenforceability shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provision had not been included herein.
11.13 CAPTIONS
The captions contained herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, enlarge or describe the scope or intent of the Plan, nor
in any way shall affect the Plan or the construction of any provision thereof.
11.14 CONTINUATION OF COVERAGE (COBRA)
Notwithstanding anything in the Plan to the contrary, in the event any benefit
under this Plan subject to the continuation coverage requirement of Code Section 4980B
becomes unavailable, each Participant will be entitled to continuation coverage as prescribed in
Code Section 498013, and related regulations. If during the Plan Year, the Employer employs
fewer than twenty (20) employees on a typical business day, this Section shall not apply.
11.15 FAMILY AND MEDICAL LEAVE ACT (FMLA)
Notwithstanding anything in the Plan to the contrary, in the event any benefit
under this Plan becomes subject to the requirements of the Family and Medical Leave Act and
regulations thereunder, this Plan shall be operated in accordance with Regulation 1.125-3.
11.16 HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA)
Notwithstanding anything in this Plan to the contrary, this Plan shall be operated in
accordance with HIPAA and regulations thereunder.
11.17 UNIFORM SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
(USERRA)
Notwithstanding any provision of this Plan to the contrary, contributions, benefits
and service credit with respect to qualified military service shall be provided in accordance with
the Uniform Services Employment And Reemployment Rights Act (USERRA) and the regulations
thereunder.
11.18 COMPLIANCE WITH HIPAA PRIVACY STANDARDS
(a) Application. If the Health Flexible Spending Account under this
Cafeteria Plan is subject to the Standards for Privacy of Individually Identifiable
Health Information (45 CFR Part 164, the "Privacy Standards"), then this Section
shall apply.
27
(b) Disclosure of PHI. The Plan shall not disclose Protected Health
Information to any member of the Employer's workforce unless each of the
conditions set out in this Section are met. "Protected Health Information" shall
have the same definition as set forth in the Privacy Standards but generally shall
mean individually identifiable information about the past, present or future
physical or mental health or condition of an individual, including information about
treatment or payment for treatment.
(c) PHI disclosed for administrative purposes. Protected Health
Information disclosed to members of the Employer's workforce shall be used or
disclosed by them only for purposes of Plan administrative functions. The Plan's
administrative functions shall include all Plan payment functions and health care
operations. The terms "payment" and "health care operations" shall have the
same definitions as set out in the Privacy Standards, but the term "payment"
generally shall mean activities taken to determine or fulfill Plan responsibilities
with respect to eligibility, coverage, provision of benefits, or reimbursement for
health care.
(d) PHI disclosed to certain workforce members. The Plan shall
disclose Protected Health Information only to members of the Employer's
workforce who are authorized to receive such Protected Health Information, and
only to the extent and in the minimum amount necessary for that person to
perform his or her duties with respect to the Plan. "Members of the Employer's
workforce" shall refer to all employees and other persons under the control of the
Employer. The Employer shall keep an updated list of those authorized to receive
Protected Health Information.
(1) An authorized member of the Employer's workforce who receives
Protected Health Information shall use or disclose the Protected Health
Information only to the extent necessary to perform his or her duties with
respect to the Plan.
(2) In the event that any member of the Employer's workforce uses or
discloses Protected Health Information other than as permitted by this
Section and the Privacy Standards, the incident shall be reported to the
Plan's privacy officer. The privacy officer shall take appropriate action,
including:
(i) investigation of the incident to determine whether the
breach occurred inadvertently, through negligence or deliberately;
whether there is a pattern of breaches; and the degree of harm
caused by the breach;
(ii) appropriate sanctions against the persons causing the
breach which, depending upon the nature of the breach, may
include oral or written reprimand, additional training, or termination
of employment;
(iii) mitigation of any harm caused by the breach, to the
extent practicable; and
(iv) documentation of the incident and all actions taken to
resolve the issue and mitigate any damages.
28
(e) Certification. The Employer must provide certification to the Plan
that it agrees to:
(1) Not use or further disclose the information other than as permitted
or required by the Plan documents or as required by law;
(2) Ensure that any agent or subcontractor, to whom it provides
Protected Health Information received from the Plan, agrees to the same
restrictions and conditions that apply to the Employer with respect to such
information;
(3) Not use or disclose Protected Health Information for employment-
related actions and decisions or in connection with any other benefit or
employee benefit plan of the Employer;
(4) Report to the Plan any use or disclosure of the Protected Health
Information of which it becomes aware that is inconsistent with the uses
or disclosures permitted by this Section, or required by law;
(5) Make available Protected Health Information to individual Plan
members in accordance with Section 164.524 of the Privacy Standards;
(6) Make available Protected Health Information for amendment by
individual Plan members and incorporate any amendments to Protected
Health Information in accordance with Section 164.526 of the Privacy
Standards;
(7) Make available the Protected Health Information required to
provide an accounting of disclosures to individual Plan members in
accordance with Section 164.528 of the Privacy Standards;
(8) Make its internal practices, books and records relating to the use
and disclosure of Protected Health Information received from the Plan
available to the Department of Health and Human Services for purposes
of determining compliance by the Plan with the Privacy Standards;
(9) If feasible, return or destroy all Protected Health Information
received from the Plan that the Employer still maintains in any form, and
retain no copies of such information when no longer needed for the
purpose for which disclosure was made, except that, if such return or
destruction is not feasible, limit further uses and disclosures to those
purposes that make the return or destruction of the information infeasible;
and
(10) Ensure the adequate separation between the Plan and members
of the Employer's workforce, as required by Section 164.504(f)(2)(iii) of
the Privacy Standards and set out in (d) above.
11.19 COMPLIANCE WITH HIPAA ELECTRONIC SECURITY STANDARDS
Under the Security Standards for the Protection of Electronic Protected Health
Information (45 CFR Part 164.300 et. seq., the "Security Standards"):
(a) Implementation. The Employer agrees to implement reasonable
and appropriate administrative, physical and technical safeguards to protect the
29
confidentiality, integrity and availability of Electronic Protected Health Information
that the Employer creates, maintains or transmits on behalf of the Plan.
"Electronic Protected Health Information" shall have the same definition as set
out in the Security Standards, but generally shall mean Protected Health
Information that is transmitted by or maintained in electronic media.
(b) Agents or subcontractors shall meet security standards. The
Employer shall ensure that any agent or subcontractor to whom it provides
Electronic Protected Health Information shall agree, in writing, to implement
reasonable and appropriate security measures to protect the Electronic Protected
Health Information.
(c) Employer shall ensure security standards. The Employer shall
ensure that reasonable and appropriate security measures are implemented to
comply with the conditions and requirements set forth in Section 11.18.
30
RESO No. 2008-065 Exhibit B
CITY OF ATASCADERO FLEXIBLE BENEFITS PLAN
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
I
ELIGIBILITY
1. When can I become a participant in the Plan?......................................................................1
2. What are the eligibility requirements for our Plan?................................................................1
3. When is my entry date?........................................................................................................2
4. What must I do to enroll in the Plan?.....................................................................................2
11
OPERATION
1. How does this Plan operate?................................................................................................2
III
CONTRIBUTIONS
1. How much of my pay may the Employer redirect?................................................................2
2. What happens to contributions made to the Plan?................................................................2
3. When must I decide which accounts I want to use?..............................................................3
4. When is the election period for our Plan?..............................................................................3
5. May I change my elections during the Plan Year?.................................................................3
6. May I make new elections in future Plan Years?...................................................................4
IV
BENEFITS
1. What benefits are available?.................................................................................................4
V
BENEFIT PAYMENTS
1. When will I receive payments from my accounts?.................................................................6
2. What happens if I don't spend all Plan contributions during the Plan Year? ..........................6
3. Family and Medical Leave Act(FMLA)..................................................................................7
4. Uniformed Services Employment and Reemployment Rights Act..........................................7
5. What happens if I terminate employment?............................................................................7
6. Will my Social Security benefits be affected?........................................................................8
VI
HIGHLY COMPENSATED AND KEY EMPLOYEES
1. Do limitations apply to highly compensated employees?.......................................................8
VII
PLAN ACCOUNTING
1. Periodic Statements..............................................................................................................8
VIII
GENERAL INFORMATION ABOUT OUR PLAN
1. General Plan Information......................................................................................................9
2. Employer Information............................................................................................................9
3. Plan Administrator Information..............................................................................................9
4. Service of Legal Process......................................................................................................9
5. Type of Administration..........................................................................................................9
6. Claims Submission.............................................................................................................10
IX
ADDITIONAL PLAN INFORMATION
1. Claims Process...................................................................................................................10
X
CONTINUATION COVERAGE RIGHTS UNDER COBRA
1. What is COBRA continuation coverage?.............................................................................11
2. Who can become a Qualified Beneficiary?..........................................................................11
3. What is a Qualifying Event?................................................................................................12
4. What factors should be considered when determining to elect COBRA continuation
coverage?...........................................................................................................................12
5. What is the procedure for obtaining COBRA continuation coverage?..................................13
6. What is the election period and how long must it last?........................................................13
7. Is a covered Employee or Qualified Beneficiary responsible for informing the Plan
Administrator of the occurrence of a Qualifying Event?.......................................................13
8. Is a waiver before the end of the election period effective to end a Qualified
Beneficiary's election rights?...............................................................................................15
9. Is COBRA coverage available if a Qualified Beneficiary has other group health plan
coverageor Medicare?.......................................................................................................15
10. When may a Qualified Beneficiary's COBRA continuation coverage be terminated? ...........
15
11. What are the maximum coverage periods for COBRA continuation coverage?...................16
12. Under what circumstances can the maximum coverage period be expanded?....................16
13. How does a Qualified Beneficiary become entitled to a disability extension? ......................17
14. Does the Plan require payment for COBRA continuation coverage?...................................17
15. Must the Plan allow payment for COBRA continuation coverage to be made in
monthlyinstallments?..........................................................................................................17
16. What is Timely Payment for COBRA continuation coverage?.............................................17
17. Must a Qualified Beneficiary be given the right to enroll in a conversion health plan at
the end of the maximum coverage period for COBRA continuation coverage? ...................18
18. How is my participation in the Health Flexible Spending Account affected? ........................18
XI
SUMMARY
CITY OF ATASCADERO FLEXIBLE BENEFITS PLAN
INTRODUCTION
We are pleased to announce that we have established a "Flexible Benefit Plan" for you
and other eligible employees. Under this Plan, you will be able to choose among certain benefits
that we make available. The benefits that you may choose are outlined in this Summary Plan
Description. We will also tell you about other important information concerning the Plan, such as
the rules you must satisfy before you can join and the laws that protect your rights.
One of the most important features of our Plan is that the benefits being offered are
generally ones that you are already paying for, but normally with money that has first been
subject to income and Social Security taxes. Under our Plan, these same expenses will be paid
for with a portion of your pay before Federal income or Social Security taxes are withheld. This
means that you will pay less tax and have more money to spend and save.
Read this Summary Plan Description carefully so that you understand the provisions of
our Plan and the benefits you will receive. This SPD describes the Plan's benefits and
obligations as contained in the legal Plan document, which governs the operation of the Plan.
The Plan document is written in much more technical and precise language. If the non-technical
language in this SPD and the technical, legal language of the Plan document conflict, the Plan
document always governs. Also, if there is a conflict between an insurance contract and either
the Plan document or this Summary Plan Description, the insurance contract will control. If you
wish to receive a copy of the legal Plan document, please contact the Administrator.
This SPD describes the current provisions of the Plan which are designed to comply with
applicable legal requirements. The Plan is subject to federal laws, such as the Internal Revenue
Code and other federal and state laws which may affect your rights. The provisions of the Plan
are subject to revision due to a change in laws or due to pronouncements by the Internal
Revenue Service (IRS) or other federal agencies. We may also amend or terminate this Plan. If
the provisions of the Plan that are described in this SPD change, we will notify you.
We have attempted to answer most of the questions you may have regarding your
benefits in the Plan. If this SPD does not answer all of your questions, please contact the
Administrator (or other plan representative). The name and address of the Administrator can be
found in the Article of this SPD entitled "General Information About the Plan."
I
ELIGIBILITY
1. When can I become a participant in the Plan?
Before you become a Plan member (referred to in this Summary Plan Description as a
"Participant"), there are certain rules which you must satisfy. First, you must meet the eligibility
requirements and be an active employee. After that, the next step is to actually join the Plan on
the "entry date" that we have established for all employees. The "entry date" is defined in
Question 3 below. You will also be required to complete certain application forms before you
can enroll in the Health Flexible Spending Account or Dependent Care Flexible Spending
Account.
2. What are the eligibility requirements for our Plan?
You will be eligible to join the Plan once you have satisfied the conditions for coverage
under our group medical plan.
11/08
3. When is my entry date?
Once you have met the eligibility requirements, your entry date will be the first day of the
month coinciding with or following the date you met the eligibility requirements.
4. What must I do to enroll in the Plan?
Before you can join the Plan, you must complete an application to participate in the Plan.
The application includes your personal choices for each of the benefits which are being offered
under the Plan. You must also authorize us to set some of your earnings aside in order to pay
for the benefits you have elected.
However, if you are already covered under any of the insured benefits, you will
automatically participate in this Plan to the extent of your premiums unless you elect not to
participate in this Plan.
II
OPERATION
1. How does this Plan operate?
Before the start of each Plan Year, you will be able to elect to have some of your
upcoming pay contributed to the Plan. These amounts will be used to pay for the benefits you
have chosen. The portion of your pay that is paid to the Plan is not subject to Federal income or
Social Security taxes. In other words, this allows you to use tax-free dollars to pay for certain
kinds of benefits and expenses which you normally pay for with out-of-pocket, taxable dollars.
However, if you receive a reimbursement for an expense under the Plan, you cannot claim a
Federal income tax credit or deduction on your return. (See the Article entitled "General
Information About Our Plan" for the definition of "Plan Year.")
III
CONTRIBUTIONS
How much of my pay may the Employer redirect?
Each year, we will automatically contribute on your behalf enough of your compensation
to pay for the insurance coverage provided unless you elect not to receive any or all of such
coverage. You may also elect to have us contribute on your behalf enough of your
compensation to pay for any other benefits that you elect under the Plan. These amounts will be
deducted from your pay over the course of the year.
2. What happens to contributions made to the Plan?
Before each Plan Year begins, you will select the benefits you want and how much of
the contributions should go toward each benefit. It is very important that you make these
choices carefully based on what you expect to spend on each covered benefit or expense
during the Plan Year. Later, they will be used to pay for the expenses as they arise during the
Plan Year.
2
11/08
3. When must I decide which accounts I want to use?
You are required by Federal law to decide before the Plan Year begins, during the
election period (defined below). You must decide two things. First, which benefits you want and,
second, how much should go toward each benefit.
If you are already covered by any of the insured benefits offered by this Plan, you will
automatically become a Participant to the extent of the premiums for such insurance unless you
elect, during the election period (defined below), not to participate in the Plan.
4. When is the election period for our Plan?
You will make your initial election on or before your entry date. (You should review
Section I on Eligibility to better understand the eligibility requirements and entry date.) Then, for
each following Plan Year, the election period is established by the Administrator and applied
uniformly to all Participants. It will normally be a period of time prior to the beginning of each
Plan Year. The Administrator will inform you each year about the election period. (See the
Article entitled "General Information About Our Plan" for the definition of Plan Year.)
5. May I change my elections during the Plan Year?
Generally, you cannot change the elections you have made after the beginning of the
Plan Year. However, there are certain limited situations when you can change your elections.
You are permitted to change elections if you have a "change in status" and you make an
election change that is consistent with the change in status. Currently, Federal law considers
the following events to be a change in status:
-- Marriage, divorce, death of a spouse, legal separation or annulment;
-- Change in the number of dependents, including birth, adoption, placement for adoption,
or death of a dependent;
-- Any of the following events for you, your spouse or dependent: termination or
commencement of employment, a strike or lockout, commencement or return from an
unpaid leave of absence, a change in worksite, or any other change in employment status
that affects eligibility for benefits;
-- One of your dependents satisfies or ceases to satisfy the requirements for coverage due
to change in age, student status, or any similar circumstance; and
-- A change in the place of residence of you, your spouse or dependent that would lead to
a change in status, such as moving out of a coverage area for insurance.
In addition, if you are participating in the Dependent Care Flexible Spending Account,
then there is a change in status if your dependent no longer meets the qualifications to be eligible
for dependent care.
There are detailed rules on when a change in election is deemed to be consistent with a
change in status. In addition, there are laws that give you rights to change health coverage for
you, your spouse, or your dependents. If you change coverage due to rights you have under the
law, then you can make a corresponding change in your elections under the Plan. If any of
these conditions apply to you, you should contact the Administrator.
3
11/08
If the cost of a benefit provided under the Plan increases or decreases during a Plan
Year, then we will automatically increase or decrease, as the case may be, your salary
redirection election. If the cost increases significantly, you will be permitted to either make
corresponding changes in your payments or revoke your election and obtain coverage under
another benefit package option with similar coverage, or revoke your election entirely.
If the coverage under a Benefit is significantly curtailed or ceases during a Plan Year,
then you may revoke your elections and elect to receive on a prospective basis coverage under
another plan with similar coverage. In addition, if we add a new coverage option or eliminate an
existing option, you may elect the newly -added option (or elect another option if an option has
been eliminated) and make corresponding election changes to other options providing similar
coverage. If you are not a Participant, you may elect to join the Plan. There are also certain
situations when you may be able to change your elections on account of a change under the
plan of your spouse's, former spouse's or dependent's employer.
These rules on change due to cost or coverage do not apply to the Health Flexible
Spending Account, and you may not change your election to the Health Flexible Spending
Account if you make a change due to cost or coverage for insurance.
You may not change your election under the Dependent Care Flexible Spending
Account if the cost change is imposed by a dependent care provider who is your relative.
6. May I make new elections in future Plan Years?
Yes, you may. For each new Plan Year, you may change the elections that you
previously made. You may also choose not to participate in the Plan for the upcoming Plan
Year. If you do not make new elections during the election period before a new Plan Year
begins, we will assume you want your elections for insured benefits only to remain the same
and you will not be considered a Participant for the non-insured benefit options under the Plan
for the upcoming Plan Year.
IV
BENEFITS
1. What benefits are available?
Under our Plan, you can choose to receive your entire compensation or use a portion to
pay for the following benefits or expenses during the year:
Health Flexible Spending Account:
The Health Flexible Spending Account enables you to pay for expenses allowed under
Sections 105 and 213(d) of the Internal Revenue Code which are not covered by our insured
medical plan and save taxes at the same time. The Health Flexible Spending Account allows
you to be reimbursed by the Employer for out-of-pocket medical, dental and/or vision expenses
incurred by you and your dependents.
Drug costs, including "over-the-counter" drugs may be reimbursed. You may not,
however, be reimbursed for the cost of other health care coverage maintained outside of the
Plan, or for long-term care expenses. A list of covered expenses is available from the
Administrator.
D
11/08
The most that you can contribute to your Health Flexible Spending Account each Plan
Year is $3,500. In order to be reimbursed for a health care expense, you must submit to the
Administrator an itemized bill from the service provider. We will also provide you with a debit or
credit card to use to pay for medical expenses, such as co -pays, deductibles, medical
equipment and drug costs. The Administrator will provide you with further details. Amounts
reimbursed from the Plan may not be claimed as a deduction on your personal income tax
return. Reimbursement from the fund shall be paid at least once a month.
Newborns' and Mothers' Health Protection Act: Group health plans generally may not,
under Federal law, restrict benefits for any hospital length of stay in connection with childbirth
for the mother or newborn child to less than 48 hours following a vaginal delivery, or less than
96 hours following a cesarean section. However, Federal law generally does not prohibit the
mother's or newborn's attending provider, after consulting with the mother, from discharging the
mother or her newborn earlier than 48 hours (or 96 hours as applicable). In any case, plans and
issuers may not, under Federal law, require that a provider obtain authorization from the plan or
the issuer for prescribing a length of stay not in excess of 48 hours (or 96 hours).
Dependent Care Flexible Spending Account:
The Dependent Care Flexible Spending Account enables you to pay for out-of-pocket,
work-related dependent day-care cost with pre-tax dollars. If you are married, you can use the
account if you and your spouse both work or, in some situations, if your spouse goes to school
full-time. Single employees can also use the account.
An eligible dependent is someone for whom you can claim expenses on Federal Income
Tax Form 2441 "Credit for Child and Dependent Care Expenses." Children must be under age
13. Other dependents must be physically or mentally unable to care for themselves. Dependent
Care arrangements which qualify include:
(a) A Dependent (Day) Care Center, provided that if care is provided by the facility
for more than six individuals, the facility complies with applicable state and local laws:
(b) An Educational Institution for pre-school children. For older children, only
expenses for non -school care are eligible; and
(c) An "Individual" who provides care inside or outside your home: The "Individual"
may not be a child of yours under age 19 or anyone you claim as a dependent for
Federal tax purposes.
You should make sure that the dependent care expenses you are currently paying for
qualify under our Plan. The law places limits on the amount of money that can be paid to you in
a calendar year from your Dependent Care Flexible Spending Account. Generally, your
reimbursements may not exceed the lesser of: (a) $5,000 (if you are married filing a joint return
or you are head of a household) or $2,500 (if you are married filing separate returns); (b) your
taxable compensation; (c) your spouse's actual or deemed earned income (a spouse who is a
full time student or incapable of caring for himself/herself has a monthly earned income of $250
for one dependent or $500 for two or more dependents). Also, in order to have the
reimbursements made to you from this account be excludable from your income, you must
provide a statement from the service provider including the name, address, and in most cases,
the taxpayer identification number of the service provider on your tax form for the year, as well
as the amount of such expense as proof that the expense has been incurred. In addition,
Federal tax laws permit a tax credit for certain dependent care expenses you may be paying for
even if you are not a Participant in this Plan. You may save more money if you take advantage
5
11/08
of this tax credit rather than using the Dependent Care Flexible Spending Account under our
Plan. Ask your tax adviser which is better for you.
Premium Expense Account:
A Premium Expense Account allows you to use tax-free dollars to pay for certain
premium expenses under various insurance programs that we offer you. These premium
expenses include:
-- Health care premiums under our insured group medical plan.
-- Group term life insurance premiums.
-- Dental insurance premiums.
-- Vision insurance premiums.
-- Prescription drug coverage.
Under our Plan, we will establish sub -accounts for you for each different type of
insurance coverage that is available. Also, certain limits on the amount of coverage may apply.
The Administrator may terminate or modify Plan benefits at any time, subject to the
provisions of any insurance contracts providing benefits described above. We will not be liable
to you if an insurance company fails to provide any of the benefits described above. Also, your
insurance will end when you leave employment, are no longer eligible under the terms of any
insurance policies, or when insurance terminates.
Any benefits to be provided by insurance will be provided only after (1) you have
provided the Administrator the necessary information to apply for insurance, and (2) the
insurance is in effect for you.
V
BENEFIT PAYMENTS
When will I receive payments from my accounts?
During the course of the Plan Year, you may submit requests for reimbursement of
expenses you have incurred. Expenses are considered "incurred" when the service is
performed, not necessarily when it is paid for. The Administrator will provide you with
acceptable forms for submitting these requests for reimbursement. If the request qualifies as a
benefit or expense that the Plan has agreed to pay, you will receive a reimbursement payment
soon thereafter. Remember, these reimbursements which are made from the Plan are generally
not subject to federal income tax or withholding. Nor are they subject to Social Security taxes.
Requests for payment of insured benefits should be made directly to the insurer. You will only
be reimbursed from the Dependent Care Flexible Spending Account to the extent that there are
sufficient funds in the Account to cover your request.
2. What happens if I don't spend all Plan contributions during the Plan Year?
If you have not spent all the amounts in your Health Flexible Spending Account or
Dependent Care Flexible Spending Account by the end of the Plan Year, you may continue to
incur claims for expenses during the "Grace Period." The "Grace Period" extends 2 1/2 months
0
11/08
after the end of the Plan Year, during which time you can continue to incur claims and use up all
amounts remaining in your Health Flexible Spending Account or Dependent Care Flexible
Spending Account.
Any monies left at the end of the Plan Year and the Grace Period will be forfeited.
Obviously, qualifying expenses that you incur late in the Plan Year or during the Grace Period
for which you seek reimbursement after the end of such Plan Year and Grace Period will be
paid first before any amount is forfeited. For the Health Flexible Spending Account, you must
submit claims no later than 90 days after the end of the Plan Year. For the Dependent Care
Flexible Spending Account, you must submit claims no later than 90 days after the end of the
Plan Year. Because it is possible that you might forfeit amounts in the Plan if you do not fully
use the contributions that have been made, it is important that you decide how much to place in
each account carefully and conservatively. Remember, you must decide which benefits you
want to contribute to and how much to place in each account before the Plan Year begins. You
want to be as certain as you can that the amount you decide to place in each account will be
used up entirely.
3. Family and Medical Leave Act (FMLA)
If you take leave under the Family and Medical Leave Act, you may revoke or change your
existing elections for health insurance, group -term life insurance and the Health Flexible Spending
Account. If your coverage in these benefits terminates, due to your revocation of the benefit while
on leave or due to your non-payment of contributions, you will be permitted to reinstate coverage
for the remaining part of the Plan Year upon your return. For the Health Flexible Spending
Account, you may continue your coverage or you may revoke your coverage and resume it when
you return. You can resume your coverage at its original level and make payments for the time
that you are on leave. For example, if you elect $1,200 for the year and are out on leave for 3
months, then return and elect to resume your coverage at that level, your remaining payments will
be increased to cover the difference - from $100 per month to $150 per month. Alternatively your
maximum amount will be reduced proportionately for the time that you were gone. For example, if
you elect $1,200 for the year and are out on leave for 3 months, your amount will be reduced to
$900. The expenses you incur during the time you are not in the Health Flexible Spending
Account are not reimbursable.
If you continue your coverage during your unpaid leave, you may pre -pay for the
coverage, you may pay for your coverage on an after-tax basis while you are on leave, or you and
your Employer may arrange a schedule for you to "catch up" your payments when you return.
4. Uniformed Services Employment and Reemployment Rights Act (USERRA)
If you are going into or returning from military service, you may have special rights to
health care coverage under your Health Flexible Spending Account under the Uniformed Services
Employment and Reemployment Rights Act of 1994. These rights can include extended health
care coverage. If you may be affected by this law, ask your Administrator for further details.
5. What happens if I terminate employment?
If you terminate employment during the Plan Year, your right to benefits will be
determined in the following manner:
(a) You will remain covered by insurance, but only for the period for which premiums
have been paid prior to your termination of employment.
7
11/08
(b) You will still be able to request reimbursement for qualifying dependent care
expenses for the remainder of the Plan Year from the balance remaining in your
dependent care account at the time of termination of employment. However, no further
salary redirection contributions will be made on your behalf after you terminate. You
must submit claims within 90 days after the end of the Plan Year in which termination
occurs.
(c) For health benefit coverage and Health Flexible Spending Account coverage on
termination of employment, please see the Article entitled "Continuation Coverage
Rights Under COBRA." Upon your termination of employment, your participation in the
Health Flexible Spending Account will cease, and no further salary redirection
contributions will be contributed on your behalf. However, you will be able to submit
claims for health care expenses that were incurred before the end of the period for which
payments to the Health Flexible Spending Account have already been made. Your
further participation will be governed by "Continuation Coverage Rights Under COBRA."
6. Will my Social Security benefits be affected?
Your Social Security benefits may be slightly reduced because when you receive
tax-free benefits under our Plan, it reduces the amount of contributions that you make to the
Federal Social Security system as well as our contribution to Social Security on your behalf.
VI
HIGHLY COMPENSATED AND KEY EMPLOYEES
1. Do limitations apply to highly compensated employees?
Under the Internal Revenue Code, highly compensated employees and key employees
generally are Participants who are officers, shareholders or highly paid. You will be notified by
the Administrator each Plan Year whether you are a highly compensated employee or a key
employee.
If you are within these categories, the amount of contributions and benefits for you may
be limited so that the Plan as a whole does not unfairly favor those who are highly paid, their
spouses or their dependents. Federal tax laws state that a plan will be considered to unfairly
favor the key employees if they as a group receive more than 25% of all of the nontaxable
benefits provided for under our Plan.
Plan experience will dictate whether contribution limitations on highly compensated
employees or key employees will apply. You will be notified of these limitations if you are
affected.
VII
PLAN ACCOUNTING
1. Periodic Statements
The Administrator will provide you with a statement of your account periodically during
the Plan Year that shows your account balance. It is important to read these statements
carefully so you understand the balance remaining to pay for a benefit. Remember, you want to
spend all the money you have designated for a particular benefit by the end of the Plan Year.
E:7
11/08
VIII
GENERAL INFORMATION ABOUT OUR PLAN
Plan. This Section contains certain general information which you may need to know about the
General Plan Information
City of Atascadero Flexible Benefits Plan is the name of the Plan.
Your Employer has assigned Plan Number 501 to your Plan.
The provisions of the Plan become effective on January 1, 2009, which is called the
Effective Date of the Plan.
Your Plan's records are maintained on a twelve-month period of time. This is known as
the Plan Year. The Plan Year begins on January 1 and ends on December 31.
2. Employer Information
Your Employer's name, address, and identification number are:
City of Atascadero
6907 EI Camino Real
Atascadero, California 93422
95-3389063
3. Plan Administrator Information
The name, address and business telephone number of your Plan's Administrator are:
City of Atascadero
6907 EI Camino Real
Atascadero, California 93422
(805) 470-3400
The Administrator keeps the records for the Plan and is responsible for the
administration of the Plan. The Administrator will also answer any questions you may have
about our Plan. You may contact the Administrator for any further information about the Plan.
4. Service of Legal Process
The name and address of the Plan's agent for service of legal process are:
City of Atascadero
6907 EI Camino Real
Atascadero, California 93422
5. Type of Administration
The type of Administration is Employer Administration.
Irl
11/08
6. Claims Submission
Claims for expenses should be submitted to:
Flex -Plan Services, Inc
PO Box 53250
Bellevue, WA 98015
IX
ADDITIONAL PLAN INFORMATION
Claims Process
You should submit all reimbursement claims during the Plan Year. For the Health
Flexible Spending Account, you must submit claims no later than 90 days after the end of the
Plan Year. For the Dependent Care Flexible Spending Account, you must submit claims no later
than 90 days after the end of the Plan Year. Any claims submitted after that time will not be
considered.
Claims that are insured will be handled in accordance with procedures contained in the
insurance policies. All other general requests should be directed to the Administrator of our
Plan. If a dependent care or medical expense claim under the Plan is denied in whole or in part,
you or your beneficiary will receive written notification. The notification will include the reasons
for the denial, with reference to the specific provisions of the Plan on which the denial was
based, a description of any additional information needed to process the claim and an
explanation of the claims review procedure. Within 60 days after denial, you or your beneficiary
may submit a written request for reconsideration of the denial to the Administrator.
Any such request should be accompanied by documents or records in support of your
appeal. You or your beneficiary may review pertinent documents and submit issues and
comments in writing. The Administrator will review the claim and provide, within 60 days, a
written response to the appeal. (This period may be extended an additional 60 days under
certain circumstances.) In this response, the Administrator will explain the reason for the
decision, with specific reference to the provisions of the Plan on which the decision is based.
The Administrator has the exclusive right to interpret the appropriate plan provisions. Decisions
of the Administrator are conclusive and binding.
X
CONTINUATION COVERAGE RIGHTS UNDER COBRA
Under federal law, the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA), certain employees and their families covered under health benefits under this Plan
will be entitled to the opportunity to elect a temporary extension of health coverage (called
"COBRA continuation coverage") where coverage under the Plan would otherwise end. This
notice is intended to inform Plan Participants and beneficiaries, in summary fashion, of their
rights and obligations under the continuation coverage provisions of COBRA, as amended and
reflected in final and proposed regulations published by the Department of the Treasury. This
notice is intended to reflect the law and does not grant or take away any rights under the law.
The Plan Administrator or its designee is responsible for administering COBRA
continuation coverage. Complete instructions on COBRA, as well as election forms and other
information, will be provided by the Plan Administrator or its designee to Plan Participants who
become Qualified Beneficiaries under COBRA. While the Plan itself is not a group health plan, it
10
11/08
does provide health benefits. Whenever "Plan" is used in this section, it means any of the health
benefits under this Plan including the Health Flexible Spending Account.
1. What is COBRA continuation coverage?
COBRA continuation coverage is the temporary extension of group health plan coverage
that must be offered to certain Plan Participants and their eligible family members (called
"Qualified Beneficiaries") at group rates. The right to COBRA continuation coverage is triggered
by the occurrence of a life event that results in the loss of coverage under the terms of the Plan
(the "Qualifying Event"). The coverage must be identical to the coverage that the Qualified
Beneficiary had immediately before the Qualifying Event, or if the coverage has been changed,
the coverage must be identical to the coverage provided to similarly situated active employees
who have not experienced a Qualifying Event (in other words, similarly situated non -COBRA
beneficiaries).
2. Who can become a Qualified Beneficiary?
In general, a Qualified Beneficiary can be:
(a) Any individual who, on the day before a Qualifying Event, is covered under a
Plan by virtue of being on that day either a covered Employee, the Spouse of a covered
Employee, or a Dependent child of a covered Employee. If, however, an individual who
otherwise qualifies as a Qualified Beneficiary is denied or not offered coverage under the
Plan under circumstances in which the denial or failure to offer constitutes a violation of
applicable law, then the individual will be considered to have had the coverage and will
be considered a Qualified Beneficiary if that individual experiences a Qualifying Event.
(b) Any child who is born to or placed for adoption with a covered Employee during a
period of COBRA continuation coverage, and any individual who is covered by the Plan
as an alternate recipient under a qualified medical support order. If, however, an
individual who otherwise qualifies as a Qualified Beneficiary is denied or not offered
coverage under the Plan under circumstances in which the denial or failure to offer
constitutes a violation of applicable law, then the individual will be considered to have
had the coverage and will be considered a Qualified Beneficiary if that individual
experiences a Qualifying Event.
The term "covered Employee" includes any individual who is provided coverage under
the Plan due to his or her performance of services for the employer sponsoring the Plan.
However, this provision does not establish eligibility of these individuals. Eligibility for Plan
coverage shall be determined in accordance with Plan Eligibility provisions.
An individual is not a Qualified Beneficiary if the individual's status as a covered
Employee is attributable to a period in which the individual was a nonresident alien who
received from the individual's Employer no earned income that constituted income from sources
within the United States. If, on account of the preceding reason, an individual is not a Qualified
Beneficiary, then a Spouse or Dependent child of the individual will also not be considered a
Qualified Beneficiary by virtue of the relationship to the individual. A domestic partner is not a
Qualified Beneficiary.
Each Qualified Beneficiary (including a child who is born to or placed for adoption with a
covered Employee during a period of COBRA continuation coverage) must be offered the
opportunity to make an independent election to receive COBRA continuation coverage.
11
11/08
3. What is a Qualifying Event?
A Qualifying Event is any of the following if the Plan provided that the Plan participant
would lose coverage (i.e., cease to be covered under the same terms and conditions as in effect
immediately before the Qualifying Event) in the absence of COBRA continuation coverage:
(a) The death of a covered Employee
(b) The termination (other than by reason of the Employee's gross misconduct), or
reduction of hours, of a covered Employee's employment.
(c) The divorce or legal separation of a covered Employee from the Employee's
Spouse. If the Employee reduces or eliminates the Employee's Spouse's Plan coverage
in anticipation of a divorce or legal separation, and a divorce or legal separation later
occurs, then the divorce or legal separation may be considered a Qualifying Event even
though the Spouse's coverage was reduced or eliminated before the divorce or legal
separation.
(d) A covered Employee's enrollment in any part of the Medicare program.
(e) A Dependent child's ceasing to satisfy the Plan's requirements for a Dependent
child (for example, attainment of the maximum age for dependency under the Plan).
If the Qualifying Event causes the covered Employee, or the covered Spouse or a
Dependent child of the covered Employee, to cease to be covered under the Plan under the
same terms and conditions as in effect immediately before the Qualifying Event, the persons
losing such coverage become Qualified Beneficiaries under COBRA if all the other conditions of
COBRA are also met. For example, any increase in contribution that must be paid by a covered
Employee, or the Spouse, or a Dependent child of the covered Employee, for coverage under
the Plan that results from the occurrence of one of the events listed above is a loss of coverage.
The taking of leave under the Family and Medical Leave Act of 1993 ("FMLA") does not
constitute a Qualifying Event. A Qualifying Event will occur, however, if an Employee does not
return to employment at the end of the FMLA leave and all other COBRA continuation coverage
conditions are present. If a Qualifying Event occurs, it occurs on the last day of FMLA leave and
the applicable maximum coverage period is measured from this date (unless coverage is lost at
a later date and the Plan provides for the extension of the required periods, in which case the
maximum coverage date is measured from the date when the coverage is lost.) Note that the
covered Employee and family members will be entitled to COBRA continuation coverage even if
they failed to pay the employee portion of premiums for coverage under the Plan during the
FMLA leave.
4. What factors should be considered when determining to elect COBRA
continuation coverage?
You should take into account that a failure to continue your group health coverage will
affect your rights under federal law. First, you can lose the right to avoid having pre-existing
condition exclusions applied by other group health plans if there is more than a 63 -day gap in
health coverage and election of COBRA continuation coverage may help you avoid such a gap.
Second, if you do not elect COBRA continuation coverage and pay the appropriate premiums
for the maximum time available to you, you will lose the right to convert to an individual health
insurance policy, which does not impose such pre-existing condition exclusions. Finally, you
should take into account that you have special enrollment rights under federal law (HIPAA). You
12
11/08
have the right to request special enrollment in another group health plan for which you are
otherwise eligible (such as a plan sponsored by your Spouse's employer) within 30 days after
Plan coverage ends due to a Qualifying Event listed above. You will also have the same special
right at the end of COBRA continuation coverage if you get COBRA continuation coverage for
the maximum time available to you.
5. What is the procedure for obtaining COBRA continuation coverage?
The Plan has conditioned the availability of COBRA continuation coverage upon the
timely election of such coverage. An election is timely if it is made during the election period.
6. What is the election period and how long must it last?
The election period is the time period within which the Qualified Beneficiary must elect
COBRA continuation coverage under the Plan. The election period must begin not later than the
date the Qualified Beneficiary would lose coverage on account of the Qualifying Event and ends
60 days after the later of the date the Qualified Beneficiary would lose coverage on account of
the Qualifying Event or the date notice is provided to the Qualified Beneficiary of her or his right
to elect COBRA continuation coverage. If coverage is not elected within the 60 day period, all
rights to elect COBRA continuation coverage are forfeited.
Note: If a covered Employee who has been terminated or experienced a reduction of
hours qualifies for a trade readjustment allowance or alternative trade adjustment assistance
under a federal law called the Trade Act of 2002, and the employee and his or her covered
dependents have not elected COBRA coverage within the normal election period, a second
opportunity to elect COBRA coverage will be made available for themselves and certain family
members, but only within a limited period of 60 days or less and only during the six months
immediately after their group health plan coverage ended. Any person who qualifies or thinks
that he or she and/or his or her family members may qualify for assistance under this special
provision should contact the Plan Administrator or its designee for further information.
The Trade Act of 2002 also created a new tax credit for certain TAA -eligible individuals
and for certain retired employees who are receiving pension payments from the Pension Benefit
Guaranty Corporation (PBGC) (eligible individuals). Under the new tax provisions, eligible
individuals can either take a tax credit or get advance payment of 65% of premiums paid for
qualified health insurance, including continuation coverage. If you have questions about these
new tax provisions, you may call the Health Coverage Tax Credit Consumer Contact Center toll-
free at 1-866-628-4282. TTD/TTY callers may call toll-free at 1-866-626-4282. More information
about the Trade Act is also available at www.doleta.gov/tradeact.
7. Is a covered Employee or Qualified Beneficiary responsible for informing the Plan
Administrator of the occurrence of a Qualifying Event?
The Plan will offer COBRA continuation coverage to Qualified Beneficiaries only after the
Plan Administrator or its designee has been timely notified that a Qualifying Event has occurred.
The Employer (if the Employer is not the Plan Administrator) will notify the Plan Administrator or
its designee of the Qualifying Event within 30 days following the date coverage ends when the
Qualifying Event is:
(a) the end of employment or reduction of hours of employment,
(b) death of the employee,
13
11/08
(c) commencement of a proceeding in bankruptcy with respect to the Employer, or
(d) enrollment of the employee in any part of Medicare.
IMPORTANT:
For the other Qualifying Events (divorce or legal separation of the employee and
spouse or a dependent child's losing eligibility for coverage as a dependent child), you
or someone on your behalf must notify the Plan Administrator or its designee in writing
within 60 days after the Qualifying Event occurs, using the procedures specified below. If
these procedures are not followed or if the notice is not provided in writing to the Plan
Administrator or its designee during the 60 -day notice period, any spouse or dependent
child who loses coverage will not be offered the option to elect continuation coverage.
You must send this notice to the Plan Administrator or its designee.
NOTICE PROCEDURES:
Any notice that you provide must be in writing. Oral notice, including notice by telephone, is not
acceptable. You must mail, fax or hand -deliver your notice to the person, department or firm listed
below, at the following address:
City of Atascadero
6907 EI Camino Real
Atascadero, California 93422
If mailed, your notice must be postmarked no later than the last day of the required notice period.
Any notice you provide must state:
• the name of the plan or plans under which you lost or are losing coverage,
• the name and address of the employee covered under the plan,
• the name(s) and address(es) of the Qualified Beneficiary(ies), and
• the Qualifying Event and the date it happened.
If the Qualifying Event is a divorce or legal separation, your notice must include a copy of the
divorce decree or the legal separation agreement.
Be aware that there are other notice requirements in other contexts, for example, in order to qualify
for a disability extension.
Once the Plan Administrator or its designee receives timely notice that a Qualifying
Event has occurred, COBRA continuation coverage will be offered to each of the qualified
beneficiaries. Each Qualified Beneficiary will have an independent right to elect COBRA
continuation coverage. Covered employees may elect COBRA continuation coverage for their
spouses, and parents may elect COBRA continuation coverage on behalf of their children. For
each Qualified Beneficiary who elects COBRA continuation coverage, COBRA continuation
coverage will begin on the date that plan coverage would otherwise have been lost. If you or
your spouse or dependent children do not elect continuation coverage within the 60 -day election
period described above, the right to elect continuation coverage will be lost.
14
11/08
8. Is a waiver before the end of the election period effective to end a Qualified
Beneficiary's election rights?
If, during the election period, a Qualified Beneficiary waives COBRA continuation
coverage, the waiver can be revoked at any time before the end of the election period.
Revocation of the waiver is an election of COBRA continuation coverage. However, if a waiver
is later revoked, coverage need not be provided retroactively (that is, from the date of the loss of
coverage until the waiver is revoked). Waivers and revocations of waivers are considered made
on the date they are sent to the Plan Administrator or its designee, as applicable.
9. Is COBRA coverage available if a Qualified Beneficiary has other group health
plan coverage or Medicare?
Qualified Beneficiaries who are entitled to elect COBRA continuation coverage may do
so even if they are covered under another group health plan or are entitled to Medicare benefits
on or before the date on which COBRA is elected. However, a Qualified Beneficiary's COBRA
coverage will terminate automatically if, after electing COBRA, he or she becomes entitled to
Medicare or becomes covered under other group health plan coverage (but only after any
applicable preexisting condition exclusions of that other plan have been exhausted or satisfied).
10. When may a Qualified Beneficiary's COBRA continuation coverage be terminated?
During the election period, a Qualified Beneficiary may waive COBRA continuation
coverage. Except for an interruption of coverage in connection with a waiver, COBRA
continuation coverage that has been elected for a Qualified Beneficiary must extend for at least
the period beginning on the date of the Qualifying Event and ending not before the earliest of
the following dates:
(a) The last day of the applicable maximum coverage period
(b) The first day for which Timely Payment is not made to the Plan with respect to
the Qualified Beneficiary.
(c) The date upon which the Employer ceases to provide any group health plan
(including a successor plan) to any employee.
(d) The date, after the date of the election, that the Qualified Beneficiary first
becomes covered under any other Plan that does not contain any exclusion or limitation
with respect to any pre-existing condition, other than such an exclusion or limitation that
does not apply to, or is satisfied by, the Qualified Beneficiary.
(e) The date, after the date of the election, that the Qualified Beneficiary first enrolls
in the Medicare program (either part A or part B, whichever occurs earlier).
(f) In the case of a Qualified Beneficiary entitled to a disability extension, the later of:
(1) (i) 29 months after the date of the Qualifying Event, or (ii) the first day of
the month that is more than 30 days after the date of a final determination under
Title II or XVI of the Social Security Act that the disabled Qualified Beneficiary
whose disability resulted in the Qualified Beneficiary's entitlement to the disability
extension is no longer disabled, whichever is earlier; or
15
11/08
(2) the end of the maximum coverage period that applies to the Qualified
Beneficiary without regard to the disability extension.
The Plan can terminate for cause the coverage of a Qualified Beneficiary on the same
basis that the Plan terminates for cause the coverage of similarly situated non -COBRA
beneficiaries, for example, for the submission of a fraudulent claim.
In the case of an individual who is not a Qualified Beneficiary and who is receiving
coverage under the Plan solely because of the individual's relationship to a Qualified
Beneficiary, if the Plan's obligation to make COBRA continuation coverage available to the
Qualified Beneficiary ceases, the Plan is not obligated to make coverage available to the
individual who is not a Qualified Beneficiary.
11. What are the maximum coverage periods for COBRA continuation coverage?
The maximum coverage periods are based on the type of the Qualifying Event and the
status of the Qualified Beneficiary, as shown below.
(a) In the case of a Qualifying Event that is a termination of employment or reduction
of hours of employment, the maximum coverage period ends 18 months after the
Qualifying Event if there is not a disability extension and 29 months after the Qualifying
Event if there is a disability extension.
(b) In the case of a covered Employee's enrollment in the Medicare program before
experiencing a Qualifying Event that is a termination of employment or reduction of
hours of employment, the maximum coverage period for Qualified Beneficiaries other
than the covered Employee ends on the later of:
(1) 36 months after the date the covered Employee becomes enrolled in the
Medicare program; or
(2) 18 months (or 29 months, if there is a disability extension) after the date
of the covered Employee's termination of employment or reduction of hours of
employment.
(c) In the case of a Qualified Beneficiary who is a child born to or placed for adoption
with a covered Employee during a period of COBRA continuation coverage, the
maximum coverage period is the maximum coverage period applicable to the Qualifying
Event giving rise to the period of COBRA continuation coverage during which the child
was born or placed for adoption.
(d) In the case of any other Qualifying Event than that described above, the
maximum coverage period ends 36 months after the Qualifying Event.
12. Under what circumstances can the maximum coverage period be expanded?
If a Qualifying Event that gives rise to an 18 -month or 29 -month maximum coverage
period is followed, within that 18- or 29 -month period, by a second Qualifying Event that gives
rise to a 36 -months maximum coverage period, the original period is expanded to 36 months,
but only for individuals who are Qualified Beneficiaries at the time of and with respect to both
Qualifying Events. In no circumstance can the COBRA maximum coverage period be expanded
to more than 36 months after the date of the first Qualifying Event. The Plan Administrator must
be notified of the second qualifying event within 60 days of the second qualifying event. This
16
11/08
notice must be sent to the Plan Administrator or its designee in accordance with the procedures
above.
13. How does a Qualified Beneficiary become entitled to a disability extension?
A disability extension will be granted if an individual (whether or not the covered
Employee) who is a Qualified Beneficiary in connection with the Qualifying Event that is a
termination or reduction of hours of a covered Employee's employment, is determined under
Title II or XVI of the Social Security Act to have been disabled at any time during the first 60
days of COBRA continuation coverage. To qualify for the disability extension, the Qualified
Beneficiary must also provide the Plan Administrator with notice of the disability determination
on a date that is both within 60 days after the date of the determination and before the end of
the original 18 -month maximum coverage. This notice must be sent to the Plan Administrator or
its designee in accordance with the procedures above.
14. Does the Plan require payment for COBRA continuation coverage?
For any period of COBRA continuation coverage under the Plan, Qualified Beneficiaries
who elect COBRA continuation coverage may be required to pay up to 102% of the applicable
premium and up to 150% of the applicable premium for any expanded period of COBRA
continuation coverage covering a disabled Qualified Beneficiary due to a disability extension.
Your Plan Administrator will inform you of the cost. The Plan will terminate a Qualified
Beneficiary's COBRA continuation coverage as of the first day of any period for which timely
payment is not made.
15. Must the Plan allow payment for COBRA continuation coverage to be made in
monthly installments?
Yes. The Plan is also permitted to allow for payment at other intervals
16. What is Timely Payment for COBRA continuation coverage?
Timely Payment means a payment made no later than 30 days after the first day of the
coverage period. Payment that is made to the Plan by a later date is also considered Timely
Payment if either under the terms of the Plan, covered Employees or Qualified Beneficiaries are
allowed until that later date to pay for their coverage for the period or under the terms of an
arrangement between the Employer and the entity that provides Plan benefits on the Employer's
behalf, the Employer is allowed until that later date to pay for coverage of similarly situated
non -COBRA beneficiaries for the period.
Notwithstanding the above paragraph, the Plan does not require payment for any period
of COBRA continuation coverage for a Qualified Beneficiary earlier than 45 days after the date
on which the election of COBRA continuation coverage is made for that Qualified Beneficiary.
Payment is considered made on the date on which it is postmarked to the Plan.
If Timely Payment is made to the Plan in an amount that is not significantly less than the
amount the Plan requires to be paid for a period of coverage, then the amount paid will be
deemed to satisfy the Plan's requirement for the amount to be paid, unless the Plan notifies the
Qualified Beneficiary of the amount of the deficiency and grants a reasonable period of time for
payment of the deficiency to be made. A "reasonable period of time" is 30 days after the notice
is provided. A shortfall in a Timely Payment is not significant if it is no greater than the lesser of
$50 or 10% of the required amount.
17
11/08
17. Must a Qualified Beneficiary be given the right to enroll in a conversion health
plan at the end of the maximum coverage period for COBRA continuation coverage?
If a Qualified Beneficiary's COBRA continuation coverage under a group health plan
ends as a result of the expiration of the applicable maximum coverage period, the Plan will,
during the 180 -day period that ends on that expiration date, provide the Qualified Beneficiary
with the option of enrolling under a conversion health plan if such an option is otherwise
generally available to similarly situated non -COBRA beneficiaries under the Plan. If such a
conversion option is not otherwise generally available, it need not be made available to
Qualified Beneficiaries.
18. How is my participation in the Health Flexible Spending Account affected?
You can elect to continue your participation in the Health Flexible Spending Account for
the remainder of the Plan Year, subject to the following conditions. You may only continue to
participate in the Health Flexible Spending Account if you have elected to contribute more
money than you have taken out in claims. For example, if you elected to contribute an annual
amount of $500 and, at the time you terminate employment, you have contributed $300 but only
claimed $150, you may elect to continue coverage under the Health Flexible Spending Account.
If you elect to continue coverage, then you would be able to continue to receive your health
reimbursements up to the $500. However, you must continue to pay for the coverage, just as
the money has been taken out of your paycheck, but on an after-tax basis. The Plan can also
charge you an extra amount (as explained above for other health benefits) to provide this
benefit.
IF YOU HAVE QUESTIONS
If you have questions about your COBRA continuation coverage, you should contact the
Plan Administrator or its designee. For more information about your rights under ERISA,
including COBRA, the Health Insurance Portability and Accountability Act (HIPAA), and other
laws affecting group health plans, contact the nearest Regional or District Office of the U.S.
Department of Labor's Employee Benefits Security Administration (EBSA). Addresses and
phone numbers of Regional and District EBSA Offices are available through EBSA's website at
www.dol.gov/ebsa.
KEEP YOUR PLAN ADMINISTRATOR INFORMED OF ADDRESS CHANGES
In order to protect your family's rights, you should keep the Plan Administrator informed
of any changes in the addresses of family members. You should also keep a copy, for your
records, of any notices you send to the Plan Administrator or its designee.
XI
SUMMARY
The money you earn is important to you and your family. You need it to pay your bills,
enjoy recreational activities and save for the future. Our flexible benefits plan will help you keep
more of the money you earn by lowering the amount of taxes you pay. The Plan is the result of
our continuing efforts to find ways to help you get the most for your earnings.
If you have any questions, please contact the Administrator.
W
11/08
IN WITNESS WHEREOF, this Plan document is hereby executed this
day of
City of Atascadero
By
31
EMPLOYER