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December 16, 2025
ITEM TITLE
Employee Benefits: Adopt the 2026 Cafeteria Benefits Plan Reflecting Health Insurance and Voluntary Insurance Benefits for Eligible City Employees
Report Number: 25-0300
Location: No specific geographic location
Department: Human Resources
G.C. § 84308 Regulations Apply: No
Environmental Notice : The proposed action is not a "Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines. Therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt resolution for 2026 Cafeteria Benefits Plan
SUMMARY
The Internal Revenue Code requires that the Section 125 Cafeteria Benefits Plan offered by the City to its employees be in a written document and that the document be formally adopted by the City Council on or before the first day of the plan year. Staff is requesting Council’s approval to adopt the 2026 Cafeteria Benefits Plan document by resolution to fulfill the City’s obligation for the 2026 plan year.
ENVIRONMENTAL REVIEW
The proposed action was reviewed for compliance with the California Environmental Quality Act (CEQA), and it was determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
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DISCUSSION
In June 1998, the City established its first Section 125 Cafeteria Benefits Plan. In compliance with Internal Revenue Code §125(d) the City Council annually adopts a written plan document prior to the first day of the plan year. The first day of the City’s next plan year is January 1, 2026. This Cafeteria Plan Document is a written plan that describes how the City offers eligible employees certain benefits on a pretax basis (such as health insurance) while having the option to choose among at least one taxable benefit (such as cash). Having an approved written plan is critical under cafeteria plan regulations. Without a written Plan or if the written Plan does not comply with applicable requirements regarding content and timing of adoption, the Plan is not a Section 125 Cafeteria Plan and employees’ benefit elections will be taxable. The City timed its open enrollment period in 2025 to comply with these regulations and to meet provider cutoff deadlines for enrollment which will ensure employees have benefits coverage without interruption. The City’s Plan includes the following required information and incorporates all of the o perating rules prescribed in Code §125 and the regulations thereunder.
Description of available benefits
Participation rules
Benefit election procedures
Plan Year
Manner of contributions
Maximum amount of contributions
Plan provisions for complying with flexible spending accounts (FSAs) Specific health plans offered and their structure are not part of this Cafeteria Plan Document and instead are defined in what is known as the Summary of Benefits and Coverage (SBC). Employees are provided the SBCs as part of open enrollment materials to assist them in making their benefits elections. The determination of the health plans available and their structure are based on an annual review after our broker, Marsh and McLennan Agency LLC, extensively markets with benefit plan providers for coverage comparable to the prior year, while keeping the increase in costs to the City and its benefited employees to a minimum. All employee groups are advised of the offers and the plan structures that will provide the least increase in premium costs.
Cafeteria Benefits Flex Allotments for unrepresented employees and elected officials are included in both the Cafeteria Plan Document and the Compensation Summary. Adoption of the Resolution will a dopt the 2026 Cafeteria Benefits Plan document to fulfill the City’s obligation for the 2026 plan year (Attachments 1-4).
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
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CURRENT-YEAR FISCAL IMPACT
The adoption of this plan is not anticipated to result in an additional fiscal impact as increases based on the preliminary information provided by the City's insurance broker were included in the fiscal year 2025-26 budget.
ONGOING FISCAL IMPACT
Flex Allotments are negotiated with the City’s bargaining groups. Unrepresente d employees and elected officials also receive Flex Allotments. With the exception of Public Safety bargaining groups, the City shares the cost of medical insurance premium increases on a 50/50 basis. The 50/50 cost sharing formula utilizes the average c ost increase of family premiums of non -indemnity health plans. Then to determine the next plan year’s Flex Allotment, 50% of the average increase is added to the current year’s Flex Allotment amount.
For Public Safety bargaining groups, the City assumes t he full cost of the medical premium increases. As a result of the negotiated premium changes for the 202 6 Benefits Plan Year, the 202 6 Flex Allotments are increasing by an annual amount of $1,584. This increase will not impact Flex Allotments for employees who waive medical insurance or elect Employee Only medical c overage since those amounts are capped at amounts specified in the Compensation Summary or Memorandum of Understanding.
The tables below illustrate the Cafeteria Flex Allotments for the 2026 Plan Year. The impact to future budgets and the ten-year General Fund Long -Term Financial Plan will depend on the outcome of negotiations with the City’s bargaining groups and the changes in medical insurance premiums. 2026 Flex Allotments (Non-Safety Employees)
Group/Bargaining Unit
Employees Who Cover
Dependents on Medical
Insurance
Employees Who Waive
or Elect Employee Only
Medical Insurance
Association of Chula Vista Employees (ACE) $19,664 $13,024 Confidential (CONF) $20,164 $13,024
Elected Officials (CATY, CL, MY) $22,940 $15,162
Executives, City Manager, and City Clerk
(EXEC, CMGR, CCLK)
$22,940 $15,162
Middle Managers and Professionals
(MM/PROF)
$21,284 $13,250
Confidential and Unclassified Middle
Managers and Professionals
(MMUC, MMCF, PRUC, PRCF)
$21,284 $13,250
Non-Safety IAFF (NIAF) $19,664 $13,024
Senior Managers (SM) $21,540 $13,762
Western Council of Engineers (WCE) $20,540 $13,024
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ATTACHMENTS
1. 2026 City of Chula Vista Cafeteria Benefits Plan Document
2. 2026 Health Care & Dependent/Child Care Flexible Spending Accounts
3. Hartford Voluntary Insurance Plan
4. Employee Assistance Program (EAP)
Staff Contact: Tanya Tomlinson, Director of Human Resources/Risk Management