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HomeMy WebLinkAbout45-Personnel Department . CI"r " OF SAN BERNARD'~'O - REQUE' 'T FOR COUNCIL AC.....ON Gordon R. Johnson From: Director of Personnel Subject: Adoption of a Health care premium payment plan document to provide tax benefit for employees Date: AU9ust 16, 1988 -rf4l Dept: Personne 1 Synopsis of Previous Council action: None Recommen<:led motion: Adopt resolution ik--A.-r-,r:,lJ._~rL/ Sigl)~re t~/ i :10 J'I'I C') Ifi ~ , I .. to (::J % ~ :z: of; CD ..., .c- :" .,... . Contact person: Gordon R. Johnson Phone: 5161 Supporting data attached: Ward: FUNDING REQUIREMENTS: Amount: Sou rce: Finance: Council Notes: 75-0262 Agenda Item No. Lis- CI1 . OF SAN BERNARDt :>> - REQUE T FOR COUNCIL AC., ON STAFF REPORT The City's Health & Insurance Consultant, the Wyatt Company, has recommended that the City adopt a health care premium payment plan to defray ever-rising premiums through a tax benefit. The various unions and bargaining groups have agreed to the implementation of this plan, and, as it has no financial impact to the City, the Personnel Department is also recommending adoption. The effective date for the plan is January 1, 1988 so that employees can take advantage during this tax year, but in order to do this, this plan must be adopted before December 31, 1988. The plan allows employees who elect to pay some of their health care premiums from their salaries and pay such premiums with pre-tax do 11 a rs . 75-0264 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 RESOLUTION NO. 3 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE EXECUTION OF THE CITY OF SAN BERNARDINO HEALTH CARE PREMIUM 4 PAYMENT PLAN. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLLOWS: SECTION 1. The Mayor is hereby authorized and directed to execute on behalf of said City an Agreement with the City of San Bernardino Health Care Premium Payment Plan, which Plan is attached hereto, marked Exhibit "A", and incorporated herein by reference as fully as though set forth at length. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a meeting thereof, held on the , 1988, by the following day of vote, to wit: AYES: Council Members NAYS: ABSENT: City Clerk DAB:cez September 7, 1988 1 1 2 3 of The foregoing resolution is hereby approved this day , 1988. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Evlyn Wilcox, Mayor City of San Bernardino Approved as to form and legal content: ';f)::'~(i~J DAB:cez September 7, 1988 2 CITY OF SAN BERNARDINO HEALTH CARE PREMIUM PAYMENT PLAN Err ective January I, 1988 CITY OF SAN BERNARDINO HEALTH CARE PREMIUM PAYMENT PLAN TABLE OF CONTENTS ~ ARTICLE I - PURPOSE, EFFECTIVE DATE, AND DEFINITIONS 1.1 Purpose 1.2 Effective Date 1.3 Governing Law 1.4 Definitions I I ARTICLE II - PARTICIPATION 2.1 Eligibility and Participation 2.2 Termination of Participation 2.3 Notification 2.4 Enrollment for Premium Expense Benefits and To Authorize Salary Reduction 2.5 Election Form 2.6 Irrevocability of Election 2.7 Nondiscriminatory Classification 2.8 Adoption of Plan by Related Employer 4 4 4 4 5 5 6 6 ARTICLE III - AMOUNT AND PAYMENT OF BENEFIT 3.1 Amount of Benefit 3.2 Source of Payments 3.3 Method of Payment 3.4 Salary Reduction to Reflect Premium Expenses 3.5 Denials and Appealing Payment Denials 3.6 Facility of Payment 3.7 Nondiscriminatory Benefits 7 7 7 7 8 9 9 CITY OF SAN BERNARDINO HEALTH CARE PREMIUM PAYMENT PLAN TABLE OF CONTENTS (Continued) fatt ARTICLE IV - MISCELLANEOUS 4.1 Named Fiduciary 4.2 Allocation of Fiduciary Responsibilities 4.3 Source of Funds 4.4 Nonassignability 4.5 No Vested Interest 4.6 Employment Rights 4.7 Limit on Liability 4.8 Amendment and Termination 10 10 10 10 II II II II CITY OF SAN BERNARDINO HEALTH CARE PREMIUM PAYMENT PLAN ARTICLE I PURPOSE. EFFECTIVE DATE. AND DEFINITIONS 1.1 Puroose This document constitutes the City Of San Bernardino Health Care Premium Payment Plan. The purpose of the Plan is to enable Participants to direct the Employer to purchase coverage for them under certain Employer-sponsored health care plans, the payment of which a Participant is required, as a condition of coverage under those plans, to defray through payment of health insurance premiums. 1.2 Effective Date The Plan is effective January I, 1988. 1.3 Governin2 Law This Plan is intended to satisfy all requirements necessary for it to provide Participants with a choice between nontaxable benefits under Section IDS and 106 of the Code and taxable benefits in the form of cash and for the Plan to qualify as a cafeteria plan Section 125 of the Code. Accordingly, this Plan shall be construed consistently with the provisions of Section 125 of the Code and any regulations or other interpretations thereunder. 1.4 Definitions The general terms used in the Plan have the following meanings: (a) ~ means the Internal Revenue Code of 1986. (b) Emolovee means any person who is a regular full-time active employee employed by the Employer, a Participating Employer whose employees are scheduled to work at least 40 hours per week, or any employee included in a collective bargaining agreement with the City. - I - (c) Emolover means the City Of San Bernardino, a municipal government located in San Bernardino County, California. (d) ERISA means the Employee Retirement Income Security Act of 1974, as periodically amended and only those sections, where applicable to government agency health and welfare plans. (e) Hilzhlv Comoensated Emolovee means an individual described in Section 414(q) of the Code. (f) Kev Emolovee means a person who is a key employee as defined in Section 416(i)(l) of the Code. (g) Named Fiduciarv means the Employer. (h) Particioant means each Employee. Each Participant shall make an election to authorize, salary reduction for the payment of Premium Expenses in accordance with the provisions of Article II. (i) Particioatin2 Emolover means the Employer and any "Related Employer" which has adopted and is participating in the Plan in accordance with the provi- sions of Section 2.8 hereof. A "Related Employer" means the Employer and any other employer in which that employer and the Employer are members of a controlled group of corporations or commonly controlled trades or businesses (as defined in Sections 414(b) and (c) of the Code) or affiliated service groups (as defined in Section 414(m) of the Code). (j) Plan means the City Of San Bernardino Health Care Premium Payment Plan, which is set forth in this document and is intended to constitute a separate, written plan for the exclusive benefit of Employees. (k) Plan Administrator means the Employer. - 2 - (l) Plan Year means, for the first Plan Year, the period beginning January I, 1988 and ending December 31, 1988; and thereafter, the 12-month period beginning each January I and ending December 31. (m) Premium Exoenses means health care insurance premiums or actuarially determined contributions under certain Employer-sponsored health care plans which are required to be paid by a Participant as a condition of coverage under such plan. The term health insurance premiums includes contributions to the City's self -funded as well as prepaid health care plans and in no way implies that the City conducts or is engaged in the insurance business. Additional terms may be defined in the text of the Plan. Wherever words are used in the masculine gender, they will be construed to include the feminine gender and vice versa. Where words are used in the singular form they will be construed as though they were also used in the plural form in all cases where they would so apply and vice versa. - 3 - ARTICLE II PARTICIPATION 2.1 Eli2ibilitv and Particioation Each Employee shall become a Participant in this Plan on the later of the Effective Date, the date of employment, or the date he becomes an Employee. In the event an Employee does not elect to authorize salary reduction payments when first eligible, he may elect to do so as of the first day of any following Plan Year. 2.2 Termination of Particioation Participation shall terminate in the event the Employee fails to complete the annual election form or ceases to be an Employee. 2.3 Notification The Plan Administrator shall give to all Employees reasonable notification of their status as Participants under the Plan and of the availability and terms of the Plan. 2.4 Enrollment for Premium Exoense Benefits and To Authorize Salarv Reduction Each Plan Year, a Participant may authorize salary reductions equal to the amount of Premium Expenses or may decline to authorize salary reductions equal to the amount of Premium Expenses by completing and filing an election form (described in Section 2.5 below) with the Plan Administrator. To the extent that a Participant does not elect to authorize the Employer or Participating Employer to reduce his salary, he will be deemed to have elected cash in lieu of the amount of Premium Expenses provided under the Plan. For Employees eligible as of the Effective Date, participation will commence as of the Effec- tive Date. For Employees who become eligible after the Effective Date, partic- ipation will commence as of the pay period next following the pay period in which the Employee becomes employed or transfers to Employee status. An eligi- ble Employee shall have his salary reduced only if an election form authorizing such salary reduction has been completed and filed with the Plan Administrator. - 4 - 2.5 Election Form The election form shall permit an Employee to elect to reduce his salary by the amount of Premium Expenses by: (a) electing that the health care insurance premiums under certain Employer- sponsored health care plans in which the Employee shall have separately enrolled be paid by the Employer, and (b) authorizing a concurrent reduction in regular salary payments (in accor- dance with Section 3.4) equal to the amount of Premium Expenses paid by the Employer on the Participant's behalf. Alternatively, the election form shall permit the Employee to elect cash in lieu of any salary reduction for the amount of Premium Expenses. 2.6 Irrevocabilitv of Election A Participant may not revoke an election to reduce salary payments pursuant to Section 2.4 during the Plan Year. Further, any amounts allocated to pay Premium Expenses which are not used to pay such expenses will be forfeited as of the last day of the Plan Year and will be used to defray the administrative expenses of the Plan or shall be returned to the Employer. Notwithstanding the above, a Participant may revoke an election to reduce salary payments during the Plan Year and make a new election with respect to the remainder of the Plan Year if both the revocation and new election are on account of and consistent with a Family Status Change. When a Family Status Change occurs, and the Participant wishes to increase, decrease or cease salary reductions for payment of Premium Expenses, a new Election Form detailing such changes, and the desired action must be submitted to the Plan Administrator within thirty days of the change to be reviewed for compliance with this Plan. For purposes of this Section, a "Family Status Change" means any of the follow- ing situations as they pertain to the Participant marriage, divorce, death of a spouse or child, birth or adoption of child, or a change in a Participant's or spouse's employment status which affects benefits eligibility. - 5 - 2.7 Nondiscriminatorv Classification It is intended that the Plan not discriminate in favor of Highly Compensated Employees or Key Employees with respect to eligibility to participate, in compliance with the requirements of Section 89 (when effective for this Plan) and 125 of the Code. If, in the judgment of the Plan Administrator, the Plan so discriminates, the Plan Administrator will select and exclude from coverage under the Plan such Participants as are necessary to assure that, in the judgment of the Plan Administrator, the Plan does not so discriminate. 2.8 Adootion of Plan bv Related Emolover Any Related Employer may adopt this Plan by written action on its part provided that the City Council of the City Of San Bernardino approves such participation. The administrative powers and control of the Employer, as provided in the Plan, shall not be deemed diminished by reason of the partici- pation of any other Participating Employers. Any Participating Employer may withdraw at any time without affecting the others in the Plan by furnishing written notice to the Employer of its determi- nation to withdraw. The Employer may, in its absolute discretion, terminate any Participating Employer's participation at any time. - 6 - ARTICLE m AMOUNT AND PAYMENT OF BENEFIT 3.1 Amount of Benefit Benefits under this Plan shall be in the form of payments on behalf of Partici- pants of Premium Expenses who authorize salary reductions in accordance with Section 2.4 and cash in lieu of payment of Premium Expenses for Participants who elect not to authorize salary reduction for Premium Expenses in accordance with Section 2.4. The amount of cash received by a Participant who does not authorize salary reduction shall be equal to the amount of salary reduction that would have been reflected in the Participant's regular salary payment under Section 3.4 had the Participant elected to authorize salary reduction m accordance with Section 2.4. No additional salary or cash payment shall be made to a Participant who elects not to authorize salary reduction. 3.2 Source of Pavments Payments under the plan shall be made directly by the Employer from such Employer's general assets; separate funding in advance or otherwise for such benefits shall not be made under the Plan. 3.3 Method of Pavment Premium Expenses shall be paid by the Employer as level regular payments in the amount applicable to such Participant based on the Participant's family status, the benefit levels and the health care plan selected as specified on the election form the Participant shall have filed. 3.4 Salarv Reduction to Reflect Premium Exoenses In the event the Participant authorizes salary reductions in accordance with Section 2.4, the amount of the Participant's salary that would otherwise be reflected in each Participant's regular salary payment shall be reduced by the amount of payment for Premium Expenses. - 7 - The Plan Administrator shall, immediately following the filing of an election form in accordance with Section 2.4, certify to the Employer's payroll depart- ment the level regular amount by which each regular salary payment to a Participant is to be reduced. 3.5 Denials and Aooealin2 Payment Denials If reimbursement of Premium Expenses is denied in whole or in part, the Plan Administrator will provide the Participant a written notification within 90 days after the date the payment is denied. The notification will include a worksheet showing the calculation of the total amount payable, expenses not reimbursable, and the reason for the denial. If additional information is needed for payment, the Plan Administrator will request it from the Participant. Any Participant may request a review of the denial of any benefit payment by filing a written application with the business office of the Plan Administra- tor. A written request for review must be filed within 60 days after the denial is received. Upon receipt of a written request for review of a denial, the Plan Administrator will review the claim and furnish in writing the reasons and facts relating to the decision. Any Participant and his authorized representative may examine pertinent docu- ments which the Plan Administrator has and may submit opinions and comments. The decision of the Plan Administrator regarding an appeal will be in writing and will be made within 60 days of receiving a claim appeal unless special circumstances require an extension of time. The Participant will be furnished with written notice of any such extension before it begins. in the case of an extension, the decision will be rendered as soon as possible but not later than 120 days after receipt of the claim appeal. The decision on the appeal will also be delivered to the claimant in writing and will state the specific reasons for the decision and specific references to pertinent provisions of the Plan on which the decision is based. This decision will be final. - 8 - 3.6 Facilitv of Pavment When any person entitled to benefits under the Plan is under legal disability or, in the Plan Administrator's opinion, is in any way incapacitated s as to be unable to manage his affairs, the benefits that would otherwise be payable to such person will be paid to such person's legal representative for his benefit or be applied for the benefit of such person in any other manner that the Plan Administrator may determine. Such payment of benefits shall completely discharge the liability of the Plan Administrator or the Employer for such benefits. 3.7 Nondiscriminatorv Benefits It is intended that the Plan not discriminate in favor of Highly Compensated Employees or Key Employees as to contributions and benefits. in compliance with the requirements of Sections 89 (when effective for this Plan) and 125 of the Code. If, in the judgment of the Plan Administrator, the Plan so discrimi- nates, the Plan Administrator will select and reduce such contributions and/or benefits under the Plan as are necessary to assure that, in the judgment of the Plan Administrator, the Plan thereafter does not so discriminate. - 9 - ARTICLElV MISCELLANEOUS 4.1 Named Fiduciarv The Employer shall have all the duties and liabilities assigned to it as 'named fiduciary' pursuant to Section 402 of ERISA. The Employer shall have complete authority to control and manage the operation and administration of the Plan. The Employer, subject to the provisions of Section 4.2, shall interpret the Plan and determine all questions ansmg in the administration, interpretation, and application of the Plan, and if any such interpretation involves a question of law, the Employer may rely and act upon the advice of counsel. 4.2 Allocation of Fiduciarv ResDonsibilities The Employer may allocate certain of its fiduciary responsibilities among others and/or designate other persons to carry out certain of its fiduciary responsibilities in accordance with and subject to the limitations of Section 405 of ERISA. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. The Employer and any fiduciary designated by the Employer as aforesaid may employ one or more persons to render advice with respect to their responsibilities under the Plan. 4.3 Source of Funds The Plan will be funded by direct payments by the Employer to Participants or insurers, subject to all of the provisions of this Plan. 4.4 Nonassilmabilitv Benefits under the Plan are not in any way obligations of the persons entitled thereto involuntarily be sold, transferred, or assigned. subject to and may the debts or other not voluntarily or - 10 - 4.5 No Vested Interest Except for the right to receive any benefit payable under the Plan, no person has any right, title, or interest in or to the assets of the Employer because of the Plan. 4.6 Emolovment Ril!hts Employment rights of a Participant are not deemed to be enlarged or diminished by reason of the establishment of the Plan. A Participant has no right to be retained in the service of the Employer or a Participating Employer that he would not otherwise have if the Plan did not exist. 4.7 Limit on Liabilitv Nothing contained in the Plan imposes on the Plan Administrator, the Employer, a Participating Employer, or any directors, officers, or employees of the Employer any liability for the payment of benefits under the Plan other than liabilities resulting from willful neglect or fraud. The liability of the Employer for benefits is limited to the benefits provided under the Plan. Persons entitled to benefits under the Plan must look only to the Employer for payment. 4.8 Amendment and Termination The Plan may be amended periodically or terminated at any time by the Employer. No amendment, however, will diminish or eliminate any claim for any benefit to which a Participant was entitled before such amendment. CITY OF SAN BERNARDINO Dated By By - II - CITY OF SAN BERNARDINO HEALTII CARE PREMIUM PAYMENT PLAN ENROLLMENT/AUTHORIZATION I hereby elect to participate in the Health Care Premium Payment Plan of the City. I understand that my contributions, if any, to the City sponsored health care plans will be deducted from my pay on a pretax basis. As a result, my salary will be reduced by the amount of my health care premium/contribution so that no state or federal income taxes are owed or withheld. This election is valid while I am an employee of the City and enrolled in one of its health care plans for active employees (and their eligible dependents). Employee's Name Date Social Security Number CIT . OF SAN BERNARDI: ) - REQUE r FOR COUNCIL AC"~ -')N STAFF REPORT The City's Health & Insurance Consultant, the Wyatt Company,regularly advises City staff on matters pertaining to employee insurance programs. Recently Wyatt Company staff recommended that the City adopt a health care premium payment plan to defray ever-rising premiums through a tax benefit. This plan was made available throughout the United States by a recent amendment to the Internal Revenue Code. The various unions and bargaining groups have agreed to the implementation of this plan, and, as it has no financial impact to the City, the Personnel Department is also recommending adoption. The plan allows employees who elect to pay some of their health care premiums from their salaries and pay such premiums with pre-tax dollars. For example, an employee with $200.00 in monthly premiums who has $180.00 of that amount paid for by the City now pays the difference of $20.00 per month with after-tax salary. If you approve this plan, that employee will be able to pay that $20.00 with pre-tax salary. Tile effective date for the plan is January 2, 1939. , 75-0264 ~ J /,/y~ 0 t- ~.. ~.~1(/:~