1 CITY OF FRESNO
FLEXIBLE BENEFITS PLAN
2 Table of Contents
ARTICLE I. Introduction 4
1.1 Establishment of Plan
1.2 Legal Status
ARTICLE II. Definitions 4
2.1 Definitions
ARTICLE III. Eligibility and Participation 8
3.1 Eligibility to Participate
3.2 Termination of Participation
3.3 Participation Following Termination of Employment or Loss of Eligibility
3.4 FMLA Leaves of Absence
3.5 Non-FMLA Leaves of Absence
ARTICLE IV. Method and Timing of Elections 9
4.1 Elections When First Eligible
4.2 Elections During Open Enrollment Period
4.3 Failure of Eligible Employee to File an Election Form/Salary Reduction Agreement
4.4 Irrevocability of Elections
ARTICLE V. Benefits Offered and Method of Funding 10
5.1 Benefits Offered
5.2 City and Participant Contributions
5.3 Using Salary Reductions to Make Contributions
5.4 Funding This Plan
ARTICLE VI. Premium Payment Benefit 12
6.1 Benefits
6.2 Benefit Premiums
6.3 Medical, Dental, etc. Benefits Provided Under the Health and Welfare Trust Plan
ARTICLE VII. Health Care Spending Account Benefit 13
7.1 Benefits
7.2 Benefit Premiums
7.3 Eligible Medical Care Expenses
7.4 Maximum and Minimum Benefits
7.5 Establishment of Account
7.6 Forfeiture of Accounts
7.7 Reimbursement Procedure
7.8 Reimbursements After Termination
7.9 Named Fiduciary; Compliance With COBRA, HIPAA, USERRA.
3 ARTICLE VIII. Dependent Care Assistance Benefit 17
8.1 Benefits
8.2 Benefit Premiums
8.3 Eligible Dependent Care Expenses
8.4 Maximum and Minimum Benefits
8.5 Establishment of Account
8.6 Forfeiture of Accounts
8.7 Reimbursement Procedures
8.8 Reimbursements After Termination
8.9 Report to Participants
ARTICLE IX. Irrevocability of Elections; Exceptions 21
9.1 Irrevocability of Elections
9.2 Procedure for Making New Election If Exception to Irrevocability Applies
9.3 Change in Status Defined
9.4 Events Permitting Exception to Irrevocability Rule
9.5 Election Modifications Required by Administrator
ARTICLE X. Appeals Procedure 29
10.1 Procedure If Benefits Are Denied Under This Plan
10.2 Claims Procedures for Health Benefits
ARTICLE XI. Recordkeeping and Administration 29
11.1 Administrator
11.2 Powers of the Administrator
11.3 Reliance on Participant, Tables, etc.
11.4 Provision for Third-Party Plan Services Providers
11.5 Fiduciary Liability
11.6 Compensation of Plan Administrator
11.7 Bonding
11.8 Insurance Contracts
11.9 Inability to Locate Payee
11.10 Effect of Mistake
ARTICLE XII. General Provisions 31
12.1 Expenses
12.2 No Contract of Employment
12.3 Amendment and Termination
12.4 Governing Law
12.5 No Guarantee of Tax Consequences
12.6 Indemnification of City
12.7 Non-Assignability of Rights
12.8 Headings
12.9 Plan Provisions Controlling
12.10 Severability
4 5
ARTICLE I. INTRODUCTION
1.1 Establishment of Plan
Effective July 1, 2002, the City of Fresno (the “City”) hereby restates and amends the City of Fresno Premium Conversion Plan established and adopted by the City of Fresno effective on July 1, 1992, (the “Effective Date”). The restated Plan shall be called the City of Fresno Flexible Benefits Plan (“Plan”).
1.2 Legal Status
This Plan is intended to qualify as a “cafeteria plan” under Code § 125, and regulations issued thereunder and shall be interpreted to accomplish that objective.
The Health Care Spending Account Benefit is intended to qualify as a “self -insured medical reimbursement plan” under Code § 105, and the Medical Care Expenses reimbursed thereunder are intended to be eligible for excl usion from participating Employees’ gross income under Code § 105(b). The Dependent Care Assistance Benefit is intended to qualify as a “dependent care assistance plan” under Code § 129, and the Dependent Care Expenses reimbursed thereunder are intended t o be eligible for exclusion from participating Employees’ gross income under Code § 129(a).
The Health Care Spending Account Benefit and the Dependent Care Assistance Benefit are separate plans for purposes of administration and all reporting and nondiscr imination requirements imposed by Code §§ 105 and 129. The Health Care Spending Account Benefit is also a separate plan for purposes of applicable provisions of COBRA.
ARTICLE II. DEFINITIONS
2.1 Definitions
“Account(s)” means the Health Care Spending Acc ounts and the Dependent Care Assistance Accounts.
"Administrator" means the City Manager or his/her designee.
“Benefits” means the Health and Welfare Trust Premium Payment Benefits, the Health Care Spending Account Benefits and the Dependent Care Assistance Benefits offered under the Plan.
“Benefit Package Option” means a qualified benefit under Code Section 125(F) that is offered under a cafeteria plan, or an option for coverage under an underlying accident or health plan.
“Change in Status” has the meaning described in Section 9.
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” means the Internal Revenue Code of 1986, as amended.
6 “Committee” means the Benefits Committee or individual(s) appointed by the Council of the City of Fresno.
“Compensation” means the wages or salary paid to an Employee by the City, determined prior to (a) any Salary Reduction election under this Plan, (b) any salary reduction election under any other cafeteria plan, and (c) any compensation reduction under any Code Section 132(f)(4) plan; but determined after (d) any salary deferral elections under any Code Section 401(k), 403(b), 408(k) or 457(b) plan or arrangement. Thus, “Compensation” generally means wages or salary paid to an Employee by the City, as reported in Box 1 of Form W-2, but adding back any wages or salary forgone by virtue of any election described in (a), (b), or (c) of the prior sentence.
“Dependent Care Assistance” means dependent care assistance program.
“Dependent” means any individual who is a tax dependent of the Participant as defined in Code Section 152, with the following exceptions: (a) for purposes of accident or health coverage (to the extent funded under the Premium Payment Benefit, and for purposes of the Health Care Spending Account Benefit), any child to whom Code Section 152(e) applies (regarding a child of divorced parents, etc., where one or both parents have custody of the child for more than half of the calendar year and where the parents tog ether provide more than half of the child’s support for the calendar year) is treated as a dependent of both parents; and (b) for purposes of the Dependent Care Assistance Benefit, a dependent means a qualifying individual as defined in Code Section 21(B)()1) with respect to the Participant, and in the case of divorced parents, the child shall, as provided in Code Section 21 (e)(5), be treated as qualifying individual of the custodial parent (within the meaning of Code Section 152(e)(1) and shall not be tre ated as a qualifying individual with respect to the non -custodial parent. Notwithstanding the foregoing, the Health Care Spending Account Benefit will provide benefits in accordance with the applicable requirements of any QMCSO, even if the child does not meet the definition of “Dependent.”
“Dependent Care Expenses” has the meaning described in Article 8.
“Earned Income” means all income derived from wages, salaries, tips, self -employment, and other Compensation (such as disability or wage continuation b enefits), but only if such amounts are includible in gross income for the taxable year. Earned income does not include (a) any amounts received pursuant to any Dependent Care Assistance established under Code Section 129; or (b) any other amounts excluded from earned income under Code Section 32(c)(2), such as amounts received under a pension or annuity, or pursuant to workers’ compensation.
“Effective Date” means July 1, 2002.
“Election Form/Salary Reduction Agreement” means the form provided by the Adm inistrator for the purpose of making elections for this Plan.
“Eligible Employee” means an Employee eligible to participate in this Plan, as provided in Section 3.1.
“Employee” means an individual that the City classifies as a common -law employee and who is on the City’s W -2 payroll, but does not include the following: (a) any leased employee (including but not limited to those individuals defined as leased employees in Code Section 414(n) or an individual classified by the City as a contract worker, inde pendent contractor, temporary employee
7 or casual employee for the period during which such individual is so classified, whether or not any such individual is on the City’s W -2 payroll or is determined by the IRS or others to be a common -law employee of the City; (b) any individual who performs services for the City but who is paid by a temporary or other employment or staffing agency for the period during which such individual is paid by such agency, whether or not such individual is determined by the IRS o r others to be a common-law employee of the City; (c) any employee covered under a collective bargaining agreement; (d) any self -employed individual. The term “Employee” does include “former Employees” for the limited purpose of allowing continued eligibi lity for benefits under the Plan for the remainder of the Plan Year in which an Employee ceases to be employed by the City.
“City” means CITY OF FRESNO.
““FMLA” means the Family and Medical Leave Act of 1993, as amended.
“Health Care Spending Account” means health flexible spending arrangement.
“Health Benefits” means the Employee’s Health and Welfare Trust Premium Payment Benefit coverage for purposes of this Plan.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.
“Medical Care Expenses” has the meaning defined in Article 7.
“Open Enrollment Period” with respect to a Plan Year means the month of May in the year preceding the Plan Year, or such other period as may be prescribed by the Administrator.
“Participant” means a person who is an Eligible Employee and who is participating in this Plan.
“Period of Coverage” means the Plan Year, with the following exceptions: (a) for Employees who first become eligible to participate, it shall mean the portion of the P lan Year following the date participation commences, as described in Section 3.1; and (b) for Employees who terminate participation, it shall mean the portion of the Plan Year prior to the date participation terminates, as described in Section 3.2.
“Plan” means the City of Fresno Flexible Benefits Plan, as set forth herein and as amended from time to time.
“Plan Year” means the 12-month period commencing July 1, and ending on June 30, except in the case of a short plan year representing the initial Plan Y ear or where the Plan Year is being changed, in which case the Plan Year shall be the entire short plan year.
“Premium Payment Benefits” means the Premium Payment Benefits provided under the Health and Welfare Trust Plan described in Article 6.
“QMCSO” means a qualified medical child support order, as defined in ERISA § 609(a).
“Qualifying Dependent Care Services” has the meaning described in Article 8.
8 “Qualifying Individual” has the meaning described in Article 8.
“Record Keeper” means HealthComp Administrators, Inc.
“Salary Reduction” means the amount by which the participant’s Compensation is reduced and applied by the City under this Plan to pay for one or more of the Benefits, as permitted for the applicable Benefit, before any applicable state a nd/or federal time have been deducted from the Participant’s Compensation (i.e., on a pre-tax basis).
“Spouse” means an individual who is legally married to a Participant as determined under applicable state law (and who is treated as a spouse under the C ode). Notwithstanding the above, for purposes of the Dependent Care Assistance Benefit, the term “Spouse” shall not include (a) an individual legally separated from the Participant under a divorce or separate maintenance decree; or (b) an individual who, although married to the Participant, files a separate federal income tax return, maintains a principal residence separate from the Participant during the last six months of the taxable year, and does not furnish more than half of the cost of maintaining th e principal place of abode of the Participant.
“Student” means an individual who, during each of five or more calendar months during the Plan Year, is a full -time student at any educational organization that normally maintains a regular faculty and curric ulum and normally has an enrolled student body in attendance at the location where its educational activities are regularly carried on.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility to Participate
An individual is eligible to participate in th is Plan if the individual: (a) is an Employee eligible for the Health and Welfare Trust Plan. Once an Employee has met the Plan’s eligibility requirements, the Employee may elect coverage during the open enrollment period for any subsequent Plan Year, in a ccordance with the procedures described in Article IV. A former Employee may continue eligibility for the remainder of the Plan Year in which the Employee ceased to be employed by the City.
3.2 Termination of Participation
A Participant will cease to be a Participant in this Plan upon the earlier of:
• the expiration of the Period of Coverage for which the Employee has elected to participate;
• the termination of this Plan;
• the date on which the Employee ceases to be an Eligible Employee, provided that eligibility may continue beyond such date for purposes of pre -tax COBRA coverage, as may be permitted by the Administrator on a uniform and consistent basis, but not beyond the end of the current Plan Year; or
• the date the Participant revokes his or her election t o participate under a circumstance when such change is permitted under the terms of this Plan.
9 Termination of participation in this Plan will automatically revoke the Participant’s elections and terminate the Health Benefits as of the date specified in th e Health and Welfare Trust.
Reimbursements from the Health Care Spending Account and Dependent Care Assistance Accounts after termination of participation will be made pursuant to Articles 7 and 8.
3.3 Participation Following Termination of Employment or Loss of Eligibility
If a Participant terminates his or her employment for any reason, including (but not limited to) disability, retirement, layoff or voluntary resignation, and then is rehired within 30 days or less of the date of a termination of employmen t, the Employee will be reinstated with the same elections that such individual had before termination. If a former Participant is rehired more than 30 days following termination of employment and is otherwise eligible to participate in the Plan, then the individual may make new elections as a new hire as described in Section 3.1. Notwithstanding the above, an election to participate in the Premium Payment Benefit will be reinstated only to the extent that coverage under the Health and Welfare Trust is re instated. If an Employee (whether or not a Participant) ceases to be an Eligible Employee for any reason (other than for termination of employment), including (but not limited to) a reduction in hours, and then becomes an Eligible Employee again, the Empl oyee must complete the waiting period described in Section 3.1 before again becoming eligible to participate in the Plan.
3.4 FMLA Leaves of Absence
(a) Health Benefits. Notwithstanding any provision to the contrary in this Plan, if a Participant goes on a qualifying leave under the FMLA, then to the extent required by the FMLA, the City will continue to maintain the Participant’s Health Benefits and Health Care Spending Account Benefits on the same terms and conditions as if the Participant were still an active Employee. That is, if the Participant elects to continue his or her coverage while on leave, the City will continue to pay its share of the premium. A Participant may elect to continue his or her coverage under the Premium Payment and/or Health Care Spending Account Benefit during the FMLA leave. If the Participant elects to continue coverage while on leave, then the Participant may pay his or her share of the premium in one of the following ways:
• with after-tax dollars, by sending monthly payments to the City by the due date established by the City;
• with pre -tax dollars, by pre -paying all or a portion of the premium for the expected duration of the leave on a pre -tax Salary Reduction basis out of pre - leave Compensation.
• under another arrangement agree d upon between the Participant and the Administrator.
(b) Non-Health Benefits. If a Participant goes on a qualifying leave under the FMLA, entitlement to non-health benefits, such as Dependent Care Assistance Benefits, is to be determined by the City’s policy for providing such Benefits when the Participant is on non-FMLA leave, as described in Section 3.5.
3.5 Non-FMLA Leaves of Absence
10 If a Participant goes on an unpaid leave of absence that does not affect eligibility, then the Participant will continue to participate and the premium due for the Participant will be paid by pre - payment before going on leave, by after -tax contributions while on leave, or with catch -up contributions after the leave ends, as may be determined by the Administrator.
If a Parti cipant goes on an unpaid leave that affects eligibility, the election change rules will apply.
ARTICLE IV. METHOD AND TIMING OF ELECTIONS
4.1 Elections When First Eligible
An Employee who first becomes eligible to participate in the Plan mid -year may comme nce participation on the first day of the month after the eligibility requirements have been satisfied, provided that an Election Form/Salary Reduction Agreement is submitted to the Administrator before the first day of the month in which participation wil l commence. An Employee who does not elect to participate when first eligible may not enroll until the next Open Enrollment Period, unless an event occurs that would justify a mid -year election change. Eligibility for Premium Payment Benefits shall be su bject to the additional requirements, if any, specified in the Health and Welfare Trust. The provisions of this Plan are not intended to override any exclusions, eligibility requirements or waiting periods specified in the Health and Welfare Trust.
4.2 Elections During Open Enrollment Period
During each Open Enrollment Period with respect to a Plan Year, the Administrator shall provide an Election Form/Salary Reduction Agreement to each Employee who is eligible to participate in this Plan. The Election Form/Salary Reduction Agreement shall enable the Employee to elect to participate in the various Benefits of this Plan for the next Plan Year, and to authorize the necessary Salary Reductions to pay for the benefits elected. The Election Form/Salary Reduction Agreement must be returned to the Administrator on or before the last day of the Open Enrollment Period. If an Eligible Employee makes an election to participate during an Open Enrollment Period, then the Employee will become a Participant on the first d ay of the next Plan Year. If an Eligible Employee fails to return the Election Form/Salary reduction Agreement during the Open Enrollment Period, the Employee may not elect to participate in this Plan until the next Open Enrollment Period, unless an event occurs that would justify a mid-year election change.
4.3 Failure to Eligible Employee to File an Election form/Salary Reduction Agreement
If an Eligible Employee fails to file an Election Form/Salary Reduction Agreement within the time period described in Section 4.1 and 4.2, then the Employee may not elect to participate in the Plan; (a) until the next Open Enrollment Period; or (b) until an event occurs that would justify a mid - year election change. If an Employee who fails to file an election is eligibl e for Health Benefits and has made an effective election for such Benefits, then the Employee's share of the premiums for such Benefits will be paid with after -tax dollars outside of this Plan until such time as the Employee files, during a subsequent Open Enrollment Period, or an event occurs that would justify a mid -year election change, a timely Election Form/Salary Reduction Agreement to elect Premium Payment Benefits. Until the Employee files such an election the City’s portion of the premium will also be paid outside this Plan.
11 Irrevocability of Elections
Unless an exception applies, as described in this Plan Document, a Participant’s election under the Plan is irrevocable for the duration of the Period of Coverage to which it relates.
ARTICLE V. BENEFITS OFFERED AND METHOD OF FUNDING
5.1 Benefits Offered
When first eligible or during the Open Enrollment Period as described under Article IV, Participants will be given the opportunity to elect one or more of the following Benefits:
(a) Premium Payment Benefits under the Health and Welfare Trust Plan, as described in Article VI;
(b) Health Care Spending Account Benefits, as described in Article VII; and (c) Dependent Care Assistance Benefits, as described in Article VIII.
In no event shall Benefits under the Plan be provided in the form of deferred compensation.
5.2 City and Participant Contributions
(a) City Contributions. For Participants who elect Health Benefits under the Health and Welfare Trust Plan described in Article VI, the City will contribute a portion o f their premium as provided in the open enrollment materials furnished to Employees and/or on the Election Form/Salary Reduction Agreement. There are no City contributions for Health Care Spending Account Benefits or Dependent Care Assistance Benefits.
(b) Participant Contributions. Participants who elect any of the Health Benefits under the Health and Welfare Trust Plan described in Article VI may pay for the cost of that coverage on a pre -tax Salary Reduction basis, or with after -tax deductions, by completing an Election Form/Salary Reduction Agreement. Participants who elect Health Care Spending Benefits or Dependent Care Assistance Benefits must pay for the cost of that coverage on a pre -tax Salary Reduction basis by completing an Election Form/Salary Reduction Agreement.
5.3 Using Salary Reductions to Make Contributions
(a) Salary Reductions per Pay Period. The Salary Reduction for a pay period for a Participant is, for the Benefits elected, an amount equal to the annual premium for such Benefits (as desc ribed in Section 6.2 for the Health and Welfare Trust Plan Premium Payment Benefits, Section 7.2 for Health Care Spending Account Benefits, and Section 8.2 for Dependent Care Assistance Benefits), divided by twenty -four (24) pay periods in the Period of Coverage, or an amount otherwise agreed upon between the City and the Participant. If a Participant increases his or her election under the Health Care Spending Account Benefit or Dependent Care Assistance Benefit due to a change in status, the Salary Reduc tions per pay period will be equal to (1) the new
12 reimbursement limit elected, less the Salary Reductions made prior to such election change, divided by (2) the number of pay periods in the balance of the Period of Coverage commencing with the election change.
(b) Considered City Contributions for Certain Purposes. Salary Reductions are applied by the City to pay for the Participant’s share of the premiums for the Health and Welfare Trust, the premiums for the Health Care Spending Account Benefits and the Dependent Care Assistance Benefits and, for the purposes of this Plan and the Code, are considered to be City contributions.
(c) Salary Reduction Balance Upon Termination of Coverage. If, as of the date that any elected coverage under this Plan terminates, a Pa rticipant’s year -to-date Salary Reductions exceed or are less than the Participant’s required contributions for the coverage, then the City will, as applicable, either return the excess to the Participant as additional taxable wages or recoup the due Salar y Reduction amounts from any remaining Compensation.
(d) After-Tax Contributions for Premium Payment Benefits under the Health and Welfare Trust Plan. For those Participants who elect to pay their share of the cost of any of the Health Benefits under the Hea lth and Welfare Trust Plan with after -tax deductions, both the Employee and City portions of such premiums will be paid outside of this Plan.
5.5 Funding This Plan
All of the amounts payable under this Plan shall be paid from the general fund account of the City. Nothing herein will be construed to require the City or the Administrator to maintain any fund or to segregate any amount for the benefits 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 City from which any payment under this Plan may be made. There is no trust or other fund from which Benefits are paid. While the City has complete responsibility for the payment of Benefits out if its g eneral fund account (except for Premium Payment Benefit paid as provided in the applicable policy), it may hire an unrelated third party paying agent to make Benefit payments on its behalf.
The maximum contributions that may be made under this Plan for a Participant is the total of the maximums that may be elected (a) as City and Participant Contributions for the Health and Welfare Trust Plan Premium Payment Benefits, as described in Section 6.2; and (b) as described under Sections 7.4(b) and 8.4(b) for He alth Care Spending Benefits and Dependent Care Assistance Benefits.
ARTICLE VI. PREMIUM PAYMENT BENEFIT
6.1 Benefits
The only Health Benefits that are offered under the Premium Payment Benefit are those benefits under the Health and Welfare Trust. The H ealth Benefits are subject to the terms and conditions of the Health and Welfare Trust. An Eligible Employee can elect benefits under the Premium Payment Benefit by electing to pay for his or her share of the premiums for Health Benefits on a pre-tax Salary Reduction basis; or elect no benefits under the Premium Payment Benefit and to
13 pay for his or her share of the premiums, if any, for Health Benefits with after-tax deductions outside of this Plan. Unless an exception applies, such election is irrevocab le for the duration of the Period of Coverage to which it relates.
6.2 Benefit Premiums under the Health and Welfare Trust Plan
The annual premium for a Participant’s Premium Payment Benefits is equal to the amount as set by the City, if any.
6.3 Health Benefits Provided Under the Health and Welfare Trust
Health Benefits will be provided by the Health and Welfare Trust, not this Plan. The types and amounts of Health Benefits for participating in the Health and Welfare Trust, and the other terms and conditions of coverage and benefits are set forth in the Health and Welfare Trust. All claims to receive benefits under the Health and Welfare Trust shall be subject to and governed by the terms and conditions of the Health and Welfare Trust and the rules, regulatio ns, policies and procedures from time to time adopted in accordance therewith, as may be amended from time to time.
ARTICLE VII. HEALTH CARE SPENDING ACCOUNT BENEFIT
7.1 Benefits
An Eligible Employee can elect to participate in the Health Care Spending Acc ount Benefit by electing to receive benefits in the form of reimbursements for Medical Care Expenses (Health Care Spending Account Benefits); and to pay the premium for such Health Care Spending Account Benefits on a pre -tax Salary Reduction basis. Unless an exception applies, such election is irrevocable for the duration of the Period of Coverage to which it relates.
7.2 Benefit Premiums
The annual premium for a Participant’s Health Care Spending Account Benefits is equal to the annual benefit amount elected by the Participant, not to exceed the plan’s maximum.
7.3 Eligible Medical Care Expenses
Under the Health Care Spending Account Benefit, a Participant may receive reimbursement for Medical Care Expenses incurred during the Period of Coverage for which an election is in force.
(a) Incurred. A Medical Care Expense is incurred at the time the medical care or the service giving rise to the expense is furnished, and not when the Participant is formally billed for, is charged for, or pays for the medical care.
(b) Medical Care Expenses. Medical Care Expenses means expenses incurred by a Participant or his or her Spouse or Dependents for medical care, as defined in Code § 213, but only to the extent that the Participant or other person incurring the expense is not reim bursed for the expense through the Health and Welfare Trust, other insurance, or any other accident or health plan. If only a portion of a Medical Care
14 Expense has been reimbursed elsewhere, the Health Care Spending Account can reimburse the remaining por tion of such Expense if it otherwise meets the requirements of this
Article VII.
7.4 Maximum and Minimum Benefits
(a) Maximum Reimbursement Available; Uniform Coverage. The maximum dollar amount elected by the Participant for reimbursement of Medical Care Expenses incurred during a Period of Coverage (reduced by prior reimbursements during the Period of Coverage) shall be available at all times during the Period of Coverage, regardless of the actual amounts credited to the Participant’s Health Care Spending Account pursuant to Section 7.5. Notwithstanding the foregoing, no reimbursements will be available for Medical Care Expenses incurred after coverage under this Plan has terminated, unless the Participant has elected COBRA. Payment shall be made to the Participant in cash as reimbursement for medical care expenses incurred during the Period of Coverage for which the Participant’s election is effective, provided that the other requirements of this Article VII have been satisfied.
(b) Dollar Limits. The maxi mum annual benefit amount that a Participant may elect to receive under this Plan in the form of reimbursement for Medical Care Expenses incurred in any Period of Coverage shall be $2,500.00, subject to Section 7.5(c) below.
(c) Changes. For subsequent Plan Years, the maximum and minimum dollar limit may be changed by the Administrator and shall be communicated to Employees through the Election Form/Salary Reduction Agreement or another document. If a Participant enters the Health Care Spending Account Benef it mid-year, or wishes to increase his or her election mid -year as permitted under change in status, there will be no proration rule-i.e., the Participant may elect coverage up to the maximum dollar limit or may increase coverage to the maximum dollar limit, as applicable.
(d) Effect on Maximum Benefits If Election Change Permitted. Any change in an election due to a change in status affecting annual contributions to the Health Care Spending Account Benefit also will change the maximum reimbursement benefits for the balance of the Period of Coverage commencing with the election change. Such maximum reimbursement benefits for the balance of the Period of Coverage shall be calculated by adding the (1) contributions made by the Participant (if any) as of the end of the portion of the Period of Coverage immediately preceding the change in election, to the (2) total contributions scheduled to be made by the Participant during the remainder of such Period of Coverage to the Health Care Spending Account, reduced by ( 3) all reimbursements made during the entire Period of Coverage.
7.5 Establishment of Account
The Administrator will establish and maintain a Health Care Spending Account with respect to each Participant who has elected to participate in the Health Care Spending Account Benefit, but will not create a separate fund or otherwise segregate assets for this purpose. The Account
15 established will merely be a recordkeeping account with the purpose of keeping track of contributions and determining forfeitures under Section 7.6.
(a) Crediting of Accounts. A Participant’s Health Care Spending Account will be credited periodically during each Period of Coverage with an amount equal to the Participant’s Salary Reductions, and elected to be allocated to such Accounts.
(b) Debiting of Accounts. A Participant’s Health Care Spending Account will be debited during each Period of Coverage for any reimbursement of Medical Care Expenses incurred during the Period of Coverage.
(c) Available Amount Not Based on Credited Amount. As des cribed in Section 7.4, the amount available for reimbursement of Medical Care Expenses is the Participant’s annual benefit amount, reduced by prior reimbursements during the Period of Coverage; and it is not based on the amount received to the Health Care Spending Account at a particular point in time. Thus, a Participant’s Health Care Spending Account may have a negative balance during a Period of Coverage, but any such negative amount shall never exceed the maximum dollar amount of annual benefits elected by the Participant under this Plan.
7.6 Forfeiture of Accounts; Use-It-or-Lose-It Rule
If any balance remains in the Participant’s Health Care Spending Account for a Period of Coverage after all reimbursements have been made for the Period of Coverage, suc h balance shall not be carried over to reimburse the Participant for Medical Care Expenses incurred during a subsequent Plan Year. The Participant shall forfeit all rights with respect to such balance. All forfeitures under this Plan shall be used as fol lows: (a) first, to offset any losses experienced by the City during the Plan Year as a result of making reimbursements with respect to any Participant in excess of the premiums paid by such Participant through Salary Reductions; (b) second, to reduce the cost of administering the Health Care Spending Account Benefit during the Plan Year or the subsequent Plan Year; and (c) third, to provide increased benefits or compensation to Participants in subsequent years in any weighted or uniform fashion that the Ad ministrator deems appropriate, consistent with applicable regulations. In addition, any Health Care Spending Account Benefit payments that are unclaimed (e.g., uncashed benefit checks) by the close of the Plan Year following the Period of Coverage in whic h the Medical Care Expense was incurred shall be forfeited and applied as described above.
7.7 Reimbursement Procedure
(a) Timing. Within 30 days after receipt by the Record Keeper of a reimbursement claim from a Participant, the City will reimburse the Participant for the Participant’s Medical Care Expenses (if the Record Keeper approves the claim), or the Record Keeper will notify the Participant that his or her claim has been denied. This time period may be extended for an additional 15 days for matters beyo nd the control of the Record Keeper, including in cases where a reimbursement claim is incomplete. The Record Keeper will provide written notice of any extension, including the reasons for the extension, and will allow the Participant 45 days in which to complete an incomplete reimbursement claim.
16 (b) Claims Substantiation. A Participant who has elected to receive Health Care Spending Account Benefits for a Period of Coverage may apply for reimbursement by submitting an application in writing to the Record K eeper in such form as the Record Keeper may prescribe, by no later than the run out period, following the close of the Plan Year in which the Medical Care Expense was incurred, setting forth:
• the person or persons on whose behalf Medical Care Expenses hav e been incurred;
• the nature and date of the Expenses so incurred;
• the amount of the requested reimbursement; and
• a statement that such Expenses have not otherwise been reimbursed and are not reimbursable through any other source.
The application shall be accompanied by bills, invoices, or other statements from an independent third party showing that the Medical Care Expenses have been incurred and the amounts of such Expenses, together with any additional documentation that the Administrator may request. The Record Keeper may determine that, except for the final reimbursement claim for a Period of Coverage, no claim for reimbursement may be made unless and until the aggregate claims for reimbursement is at least $25.
(c) Claims Denied. For reimbursement claims that are denied, see the appeals procedure in Article X.
7.8 Reimbursements After Termination; COBRA
When a Participant ceases to be a Participant under Section 3.2, the Participant’s Salary Reductions will terminate, as will the Participant’s election to receive reimbursements. The Participant will not be able to receive reimbursements for Medical Care Expenses incurred after his or her participation terminates. However, such Participant (or the Participant’s estate) may claim reimbursement for any Medi cal Care Expenses incurred during the Period of Coverage prior to termination, provided that the Participant (or the Participant’s estate) files a claim by the last day of the run out period, in which the Medical Care Expense arose.
Notwithstanding any provision to the contrary in this Plan, to the extent required by COBRA, a participant and his or her Spouse and Dependents, whose coverage terminates under the Health Care Spending Account Benefit because of a COBRA qualifying event, shall be given the oppo rtunity to continue on a self-pay basis the same coverage that he or she had under the Health Care Spending Account Benefit the day before the qualifying event for the period prescribed by COBRA (subject to all conditions and limitations under COBRA), with premiums or such overage to be paid on an after - tax basis unless permitted otherwise by the City on a uniform and consistent basis (but not beyond the current Plan Year). Specifically, such individuals will be eligible for COBRA continuation coverage only if, under Section 7.5, they have a positive Health Care Spending Account balance at the time of a COBRA qualifying event (taking into account all claims submitted before the date of the qualifying event). Such individuals will be notified if they are el igible for COBRA continuation coverage. If COBRA is elected, it will be available only for the remainder of the Plan Year in which the qualifying event occurs; such COBRA coverage for the Health Care Spending Account Benefit will cease at the end of the Plan Year and cannot be continued for the next Plan Year.
7.9 Named Fiduciary; Compliance With COBRA, HIPAA, USERRA.
17 (a) Named Fiduciary. The City of Fresno is the named fiduciary for the Health Care Spending Account Benefit.
(b) Laws Applicable to Group Health Plans. Health Care Spending Account Benefits shall be provided in compliance with COBRA, HIPAA, etc.
(c) Coordination of Benefits. Health Care Spending Account Benefits are intended to pay benefits solely for Medical Care Expenses not previously reimbursed or reimbursable elsewhere. Accordingly, the Health Care Spending Account shall not be considered a group health plan for coordination of benefits purposes, and Health Care Spending Account Benefit shall not be taken into account when determining benefits payable under any other plan.
(d) Uniform Services Employment and Reemployment Rights Act. 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 USERRA and the regulations there under.
ARTICLE VIII. DEPENDENT CARE ASSISTANCE BENEFIT
8.1 Benefits
An Eligible Employee can elect to participate in the Dependent Care Assistance Benefit by electing to receive benefits in the form of reimbursements for Dependent Care Expenses, and to pay the premium for such benefits on a pre -tax Salary Reduction basis (Dependent Care Assistance Benefits). Unless an exception applies (as a change in status), such election is irrevocable for the duration of the Period of Coverage to which it relates.
8.2 Benefit Premiums
The annual premium for a Participant’s Dependent Care Assistance Benefits is equal to the annual benefit amount elected by the participant, not to exceed the maximum $5,000 annual amount.
8.3 Eligible Dependent Care Expenses
Under the Dependent Care Assistance Benefits, a Participant may receive reimbursement for Dependent Care Expenses incurred during the Period of Coverage for which an election is in force.
(a) Incurred. A Dependent Care expense is incurred at the time the Qualifying Dependent Care Services giving rise to the expense is furnished, and not when the Participant is formally billed for, is charged for, or pays for the Qualifying Dependent Care Services (e.g., services rendered for th e month of June are not fully incurred until June 30 and cannot be reimbursed in full until then).
(b) Dependent Care Expenses. Dependent Care Expenses means expenses that are considered to be employment -related expenses under Code § 21(b)(2) (relating to
18 expenses for the care of a Qualifying Individual necessary for gainful employment of the Employee and Spouse, if any), and expenses for incidental household services, if paid for by the Eligible Employee to obtain Qualifying Dependent Care Services, but only to the extent that the Participant or other person incurring the expense is not reimbursed for the expense through insurance or any other plan. If only a portion of a Dependent Care Expense has been reimbursed elsewhere (e.g. because the Spouse’s Dependen t Care Assistance imposes maximum benefit limitations), the Dependent Care Assistance can reimburse the remaining portion of such expense if it otherwise meets the requirements of this Article VIII.
(c) Qualifying Individual. “Qualifying Individual” means:
• a Participant’s Dependent who is under the age of thirteen (13); • a Participant’s Dependent who is mentally or physically incapable of self-care; or • a Participant’s Spouse who is mentally or physically incapable of self-care.
(d) Qualifying Dependent Care Ser vices. “Qualifying Dependent Care Services” means the following: services that both (1) relate to the care of a Qualifying Individual that enable the Participant and his or her Spouse to remain gainfully employed after the date of participation in the Dep endent Care Assistance Benefit and during the Period of Coverage; and (2) services are performed:
• in the Participant’s home; or
• outside the Participant’s home for (1) the care of a Participant’s Dependent who is under age 13; or (2) the care of any other Qualifying Individual who regularly spends at least eight hours per day in the Participant’s household. In addition, if the expenses are incurred for services provided by a dependent care center (i.e., a facility that provides care for more than six indiv iduals not residing at the facility and that receives a fee, payment or grant for such services), then the center must comply with all applicable state and local laws and regulations.
(e) Exclusion. Dependent Care Expenses do not include amounts paid to:
• an individual with respect to whom a personal exemption is allowable under Code § 151 to a Participant or his or her Spouse;
• a Participant’s Spouse; or
• a Participant’s child who is under 19 years of age at the end of the year in which the expenses were incurred.
8.4 Maximum and Minimum Benefits
(a) Maximum Reimbursement Available: Statutory Limitations. The maximum dollar amount elected by the Participant for reimbursement of Dependent Care Expenses incurred during a Period of Coverage (reduced by prior reimbursem ents during the Period of Coverage) shall only be available during the Period of Coverage to the extent of the actual amounts credited to the Participant’s Dependent Care Assistance Account pursuant to Section 8.5. Payment shall be made to the Participant in cash as reimbursement for Dependent Care Expenses incurred during the Period of Coverage
19 for which the Participant’s election is effective, provided that the other requirements of this Article VIII have been satisfied. Notwithstanding the foregoing, n o payment otherwise due to a Participant hereunder shall exceed the smallest of:
• the year -to-date amount that has been withheld from the participant’s compensation for reimbursement for Dependent Care Expenses for the Period of Coverage, less any prior re imbursements for Dependent Care Expenses incurred during the Period of Coverage;
• the Participant’s Earned Income for the calendar year; • the Earned Income of the Participant’s Spouse for the calendar year (a Spouse who (1) is not employed during a month in which the Participant incurs a Dependent Care Expense, and (2) is either physically or mentally incapable of self- care or a Student shall be deemed to have Earned Income in the Amount of $200 per month per Qualifying Individual for whom the Participant inc urs Dependent Care Expenses, up to a maximum amount of $200 per month); or • Either (1) $5,000 for the calendar year if one of the following applies:
(A) the Participant is married and files a joint return;
(B) the Participant is married, but (1) furnishes more th an one -half the cost of maintaining the Dependent for whom the Participant is eligible to receive reimbursements under the Dependent Care Assistance; (2) the Participant’s Spouse maintains a separate residence for the last six months of the calendar year; and (3) the Participant files a separate tax return; or
(C) the Participant is single or is the head of the household for tax purposes; or (2) $2,500 for the calendar year if the Participant is married and resides with the Spouse, but files a separate federal income tax return.
(b) Maximum and Minimum Dollar Limits. The maximum annual benefit amount that a Participant may elect to receive under this Plan in the form of reimbursements for Dependent Care Expenses incurred in any Period of Coverage shall be $5,000 , subject to the other limitations described above, and subject to Section 8.4(c). The City may set a minimum annual benefit amount that a Participant may elect to receive under this Plan in the form of reimbursements for Dependent Care Expenses incurred in any Period of Coverage.
(c) Changes; No Proration. For subsequent Plan Years, the maximum and minimum dollar limit may be changed by the Administrator and shall be communicated to Employees through the Election Form/Salary Reduction Agreement or another document. If a Participant enters the Dependent Care Assistance Benefit mid-year, or wishes to increase his or her election mid-year as permitted under a change in status, there will be no proration rule -i.e., the Participant may elect coverage up to the maximum dollar limit or may increase coverage up to the maximum dollar limit, as applicable.
20 (d) Effect on Maximum Benefits If Election Change Permitted. Any change in an election under an change in status affecting annual contributions to the Dependent Ca re Assistance Benefit also will change the maximum reimbursement benefits for the balance of the Period of Coverage (commencing with the election change), as further limited by Section 8.4(a). Such maximum reimbursement benefits for the balance of the Per iod of Coverage shall be calculated by adding (1) the contributions made by the Participant (if any) as of the end of the portion of the Period of Coverage immediately preceding the change in election, to (2) the total contributions scheduled to be made by the Participant during the remainder of such Period of Coverage to the Dependent Care Assistance Account, reduced by (3) reimbursements during the Period of Coverage.
8.5 Establishment of Account
The Record Keeper will establish and maintain a Dependent Car e Assistance Account with respect to each Participant who has elected to participate in the Dependent Care Assistance Benefit, but will not create a separate fund or otherwise segregate assets for this purpose. The Account so established will merely be a recordkeeping account with the purpose of keeping track of contributions and determining forfeitures under Section 8.6.
(a) Crediting of Accounts. A Participant’s Dependent Care Assistance Account will be credited periodically during each Period of Coverage with an amount equal to the Participant’s Salary Reductions elected to be allocated to such Account.
(b) Debiting of Accounts. A Participant’s Dependent Care Assistance Account will be debited during each Period of Coverage for any reimbursement of Dependent Care Expenses incurred during the Period of Coverage.
(c) Available Amount Is Based on Credited Amount. As described in Section 8.4, the amount available for reimbursement of Dependent Care Expenses may not exceed the year -to-date amount credited to the Par ticipant’s Dependent Care Assistance Account, less any prior reimbursements; i.e., it is based on the amount credited to the Dependent Care Assistance Account at a particular point in time. Thus, a Participant’s Dependent Care Assistance Account may not have a negative balance during a Period of Coverage.
8.6 Forfeiture of Accounts; Use-It-or-Lose-It Rule
If any balance remains in the Participant’s Dependent Care Assistance Account for a Period of Coverage after all reimbursements have been made for the Peri od of Coverage, such balance shall not be carried over to reimburse the Participant for Dependent Care Expenses incurred during a subsequent Plan Year. The Participant shall forfeit all rights with respect to such balance. All forfeitures under this Plan shall be used as follows: first, to reduce the cost of administering this Plan during the Plan Year or the subsequent Plan Year (all such administrative costs shall be documented by the Record Keeper); and second, to provide increased benefits or compensation to Participants in subsequent years in any fashion the City deems appropriate, and consistent with applicable regulations. In addition, any Dependent Care Assistance Account benefit payments that are unclaimed (e.g. uncashed benefit checks) by the cl ose of the Plan Year following the Period of
21 Coverage in which the Dependent Care Expense was incurred shall be forfeited and applied as described above.
8.7 Reimbursement Procedure
(a) Timing Within 30 days after receipt by the Record Keeper of a reimbursement claim from a Participant, the Record Keeper will reimburse the Participant for the Participant’s Dependent Care expenses (if the Record Keeper approves the claim), or the Record Keeper will notify the Participant that his or her claim has been denied.
This time period may be extended for an additional 15 days for matters beyond the control of the Record Keeper, including in cases where a reimbursement claim is incomplete. The Record Keeper will provide written notice of any extension, including the reason s for the extension, and will allow the Participant 45 days in which to complete an incomplete reimbursement claim.
(b) Claims Substantiation. A Participant who has elected to receive Dependent Care Assistance Benefits for a Period of Coverage may apply for reimbursement by submitting an application in writing to the Record Keeper in such form as the Record Keeper may prescribe, by no later than 90 days following the close of the Plan Year in which the Dependent Care Expense was incurred, setting forth:
• the person or persons on whose behalf Dependent Care Expenses have been incurred;
• the nature and date of the Expenses so incurred;
• the amount of the requested reimbursement;
• the name of the person, organization or entity to whom the Expense was or is to be pa id, and taxpayer identification number (Social Security Number, if an individual); and
• a statement that such Expenses have not otherwise been paid and are not expected to be paid through any other source.
The application shall be accompanied by bills, in voices, or other statements from an independent third party showing that the Dependent Care Expenses have been incurred and the amounts of such Expenses, together with any additional documentation that the Record Keeper may request. The Record Keeper may determine that, except for the final reimbursement claim for a period of Coverage, no claim for reimbursement may be made unless and until the aggregate claims for reimbursement is at least a certain dollar amount.
(c) Claims Denied. For reimbursement claims that are denied, see the appeals procedure in Article X.
8.8 Reimbursements After Termination
When a Participant ceases to be a Participant as defined under Section 3.2, the Participant’s Salary Reductions will terminate, as will the Participant’s election to receive reimbursements, subject to the following: such Participant (or the Participant’s estate) may claim reimbursement for any Dependent Care Expenses incurred during the Period of Coverage prior to termination, including
22 expenses incurred in the month following termination if such month is in the current Plan Year, provided that the Participant (or the Participant’s estate) files a claim by the end of the 90 -day run out, following the close of the Plan Year in which the Dependent Care Expense arose.
8.9 Report to Participants
On or before January 31 of each year, the Record Keeper shall furnish to each Participant who has received reimbursement for Dependent Care Expenses during the prior calendar year a written statement showing the Dependent Care E xpenses paid during such year with respect to the Participant, or showing the Salary Reductions for the year for the Dependent Care Assistance Benefit, as the Record Keeper deems appropriate.
ARTICLE IX. IRREVOCABILITY OF ELECTIONS; EXCEPTIONS
9.1 Irrevocability of Elections
Except as described in this Article IX, a Participant’s election under the Plan is irrevocable for the duration of the Period of Coverage to which it relates. In other words, unless an exception applies, the Participant may not change any elections for the duration of the Period of Coverage regarding:
• participation in this Plan;
• Salary Reduction amounts; or
• election of particular Benefit Package Options.
9.2 Procedure for Making New Election If Exception to Irrevocability Applies
(a) Timing for When New Election Must Be Made. A Participant in the Health Care Spending Account or the Dependent Care Assistance Account may make a new election within 30 days of the occurrence of an event described in Section 9.4, as applicable, but only if the e lection under the new Election Form/Salary Reduction Agreement is made on account of and is consistent with the event, and the election is made within any specified time period (e.g. for subsections 9.4(d) through (I), within 30 days of the events described in such subsections).
(b) Effective Date of New Election. Elections made pursuant to this Section 9.2 shall be effective for the balance of the Period of Coverage following the change of election unless a subsequent event allows for a further election cha nge. Except as provided in Section 9.4(e) for HIPAA special enrollment rights in the event of birth, adoption, or placement for adoption, all election changes shall be effective on a prospective basis only.
(c) Effect of New Election Upon Amount of Benefits . For the effect of a changed election upon the maximum and minimum benefits under the Health Care Spending Account and Dependent Care Assistance Benefits, see Sections 7.4 and 8.4 respectively.
23 9.3 Change in Status Defined
A Participant may make a new election upon the occurrence of certain events as described in Section 9.4, including a Change in Status, for the applicable Benefit. “Change in Status” means any of the events described below, as well as any other events included under subsequent changes to Code § 125 or regulations issued thereunder, which the Administrator, in its sole discretion and on a uniform and consistent basis, determines which events are permitted under IRS regulations and under this Plan:
(a) Legal Marital Status. A change in a Parti cipant’s legal marital status, including marriage, death of a Spouse, divorce, legal separation or annulment;
(b) Number of Dependents. Events that change a Participant’s number of Dependents, including birth, death, adoption, and placement for adoption;
(c) Employment Status. Any of the following events that change the employment status of the Participant or his or her Spouse or Dependents: (1) a termination or commencement of employment: (2) a strike or lockout; (3) a commencement of or return from an unpaid leave of absence; (4) a change in worksite; and (5) if the eligibility conditions of this Plan or other employee benefit plan of the Participant or his or her Spouse or Dependents depend on the employment status of that individual and there is a change in that individual’s status with the consequence that the individual becomes (or ceases to be ) eligible under this Plan or other employee benefit plan, such as if a plan only applies to salaried employees and an employee switches from salaried to hourly-paid, union to non-union, or full-time to part-time (or vice versa), with the consequence that the employee ceases to be eligible for the Plan;
(d) Dependent Eligibility Requirements. An event that causes a Dependent to satisfy or cease to satisfy the Dependent eligibility requirements for a particular benefit, such as attaining a specified age, student status, or any similar circumstance; and
(e) Change in Residence. A change in the place of residence of the Participant or his or her Spouse or Dependents.
9.4 Events Permitting Exception to Irrevocability Rule
A Participant may change an election as described below upon the occurrence of the stated events for the applicable Benefit of this Plan:
(a) Open Enrollment Period (Applies to the eligible Premium Payment, Health Care Spending Account and Dependent Care Assistance Benefits). A Participant may change an election during the Open Enrollment Period in accordance with Section
3.2. (b) Termination of Employment (Applies to the eligible Premium Payment, Health Care Spending Account and Dependent Care Assistance Benefits). A Participant’s election will terminate under the Plan upon termination of employment in accordance with Sections 3.3 and 3.4, as applicable.
24 (c) FMLA (Applies to Premium Payment, Health Care Spending Account and Dependent Care Assistance Benefits). A Participant may change an election under the Plan upon FMLA leave in accordance with Section 3.4.
(d) Change in Status (Applies to the eligible Premium Payment Benefits, Health Care Spending Account Benefits as Lim ited Below, and Dependent Care Assistance Benefits as Limited Below). A Participant may change his or her actual or deemed election under the Plan upon the occurrence of a Change in Status (as defined in Section 9.3), but only if such election change is m ade on account of and corresponds with a Change in Status that affects eligibility for coverage under a plan of the City or a plan of the Spouse’s or Dependent’s City (referred to as the general consistency requirement). A Change in Status that affects el igibility for coverage under a plan of the City or a plan of the Spouse’s or Dependent’s City includes a Change in Status that results in an increase or decrease in the number of an Employee’s family members (i.e., a Spouse and/or Dependents) who may benef it from the coverage. Election changes may not be made to reduce Health Care Spending Account coverage during a Period of Coverage; however, election changes may be made to cancel Health Care Spending Account coverage completely due to the occurrence of a ny of the following events; death of a Spouse, divorce, legal separation, or annulment; death of a Dependent; change in employment status such that the Participant becomes ineligible for Health Care Spending Account coverage; or a Dependent’s ceasing to satisfy eligibility requirements for Health Care Spending Account coverage on account of attaining a certain age, etc. The City in its sole discretion and on a uniform and consistent basis, shall determine, based on prevailing IRS guidance, whether a requested change is on account of and corresponds with a Change in Status.
Assuming that the general consistency requirement is satisfied, a requested election change must also satisfy the following specific consistency requirements in order for a Participant t o be able to alter his or her election based on the specified Change in Status:
(1) Loss of Spouse or Dependent Eligibility; Special COBRA Rules. For a Change in Status involving a Participant’s divorce, annulment or legal separation from a Spouse, the death of a Spouse or a Dependent, or a Dependent’s ceasing to satisfy the eligibility requirements for coverage, a Participant may only elect to cancel accident or health insurance coverage for (a) the Spouse involved in the divorce, annulment, or legal separat ion; (b) the deceased Spouse or Dependent; or (c) the Dependent that ceased to satisfy the eligibility requirements. Canceling coverage for any other individual under these circumstances would fail to correspond with that Change in Status.
Notwithstanding the foregoing, if the Participant or his or her Spouse or Dependent becomes eligible for COBRA (or similar health plan continuation coverage under state law) under the City’s plan (and the Participant remains a Participant under this Plan in accordance w ith Section 3.2), the Participant may increase his or her election to pay for such coverage (this rule does not apply to a Participant’s Spouse who becomes eligible for COBRA or similar coverage as a result of divorce, annulment or legal separation).
25 (2) Gain of Coverage Eligibility Under Another Employer’s Plan. For a Change in Status in which a Participant or his or her Spouse or Dependent gains eligibility for coverage under a cafeteria plan or qualified benefit plan of the City of the Participant’s Spouse or Dependent as a result of a change in marital status or a change in employment status, a Participant may elect to cease or decrease coverage for that individual only if coverage for that individual becomes effective or is increased under the Spouse’s or Dependent’s Employer’s plan. The Record Keeper may rely on a Participant’s certification that the Participant has obtained or will obtain coverage under the Spouse’s or Dependent’s City’s plan, unless the Administrator has reason to believe that the Participant’s certification is incorrect.
(3) Special Consistency Rule for Dependent Care Assistance Benefits. With respect to the Dependent Care Assistance Benefits, a Participant may change or terminate his or her election upon a Change in Status if (a) such c hange or termination made on account of and corresponds with a Change in Status that affects eligibility for coverage under an Employer’s plan; or (b) the election change is on account of and corresponds with a Change in Status that affects eligibility of Dependent Care Expenses for the tax exclusion under Code § 129.
(e) HIPAA Special Enrollment Rights (Applies to the eligible Premium Payment Benefits, but Not to Health Care Spending Account or Dependent Care Assistance Benefits). If a Participant or his or her Spouse or Dependent is entitled to special enrollment rights under a group health plan, as required by HIPAA under Code § 980(f), then a Participant may revoke a prior election for group health plan coverage and make a new election, provided that the election change corresponds with such HIPAA special enrollment right. As required by HIPAA, a special enrollment right will arise if:
(1) A Participant or his or her Spouse or Dependent declined to enroll in group health plan coverage because he or she had other coverage, and eligibility for such other coverage is subsequently lost due to legal separation, divorce, death, termination of employment, reduction in hours, or exhaustion of the maximum COBRA period, or the other coverage was non -COBRA coverage and City contributions for such coverage were terminated; or
(2) A new Dependent is acquired as a result of marriage, birth, adoption, or placement for adoption, or placement for adoption of a new dependent child may, subject to the provisions of the underlying gr oup health plan, be effective retroactively (up to 30 days).
(f) Certain Judgments, Decrees and Orders (Applies to Premium Payment and Health Care Spending Account Benefits, but Not to Dependent Care Assistance Benefits). If a judgment, decree, or order (an “Order”) resulting from a divorce, legal separation, annulment or change in legal custody (including a QMCSO) requires accident or health coverage (including an election for Health Care Spending Account Benefits) for a Participant’s Dependent child (including a foster child who is a Dependent of the Participant), a Participant may (1) change his or her election to provide coverage for the Dependent child (provided that the Order requires the Participant to provide
26 coverage); or (2) change his or her electio n to revoke coverage for the Dependent child if the Order requires that another individual (including the Participant’s Spouse or former Spouse) provide coverage under that individual’s plan and such coverage is actually provided.
(g) Medicare and Medicaid (A pplies to Premium Payment Benefits, to Health Care Spending Account Benefits as Limited Below, but Not to Dependent Care Assistance Benefits). If a Participant or his or her Spouse or Dependent who is enrolled in a health or accident plan under this Plan becomes entitled to Medicare or Medicaid (other than coverage consisting solely of benefits under Section 1928 of the Social Security Act providing for pediatric vaccines), the Participant may prospectively reduce or cancel the health or accident coverage of the person becoming entitled to Medicare or Medicaid and/or the Participant’s Health Care Spending Account coverage may be canceled (but not reduced). Further, if a Participant or his or her Spouse or Dependent who has been entitled to Medicare or Medi caid loses eligibility for such coverage, the Participant may prospectively elect to commence or increase the accident or health coverage of the individual who loses Medicare or Medicaid eligibility and/or the Participant’s Health Care Spending Account cov erage may commence or increase.
(h) Change in Cost (Applies to Premium Payment Benefits, to Dependent Care Assistance Benefits as Limited Below; but not to Health Care Spending Account Benefits). For purposes of this Section 9.4(h), “similar coverage” means coverage for the same category of benefits for the same individuals (e.g., family to family or single to single). For example, two plans that provide major medical coverage are considered to be similar coverage. For purposes of this definition, (1) a Hea lth Care Spending Account is not similar coverage with respect to an accident or health plan that is not a Health Care Spending Account, (2) the HMO and the PPO are considered to be similar coverage, and (3) coverage by another City, such as a Spouse’s or Dependent’s City, is treated as similar coverage.
(1) Increase or Decrease for Insignificant Cost Changes. Participants are required to increase their elective contributions (by increasing Salary Reductions) to reflect insignificant increases in their requi red contribution for their Benefit Package Option(s), and to decrease their elective contributions to reflect insignificant decreases in their required contribution. The City in its sole discretion and on a uniform and consistent basis, will determine whe ther an increase or decrease is insignificant based upon all the surrounding facts and circumstances, including, but not limited to, the dollar amount or percentage of the cost change. The Administrator, on a reasonable and consistent basis, will automatically effectuate this increase or decrease in affected employees; elective contributions on a prospective basis.
(2) Significant Cost Increases. If the City determines that the cost charged to an Employee of a Participant’s Benefit Package Option(s) (such as the health plan) significantly increases during a Period of Coverage, the Participant may (a) make a corresponding prospective increase in his or her elective contributions (by increasing Salary Reductions); (b) revoke his or her election
27 for that coverage, and in lieu thereof, receive on a prospective basis coverage under another Benefit Package Option offered by the City that provides similar coverage (but not the Health Care Spending Account); or (c) crop coverage prospectively if there is no other Bene fit Package Option available that provides similar coverage. The City, in its sole discretion and on a uniform and consistent basis, will decide whether a cost increase is significant in accordance with prevailing IRS guidance.
(3) Significant Cost Decreases. If the City determines that the cost of any Benefit Package Option significantly decreases during a Period of Coverage, the City may permit the following election changes: (a) Participants who are enrolled in a Benefit Package Option, but not the Health Care Spending Account) other than the Benefit Package Option that has decreased in cost may change their election on a prospective basis to elect the Benefit Package Option that has decreased in cost and (b) Employees who are otherwise eligible under Sect ion 3.1 may elect the Benefit Package Option that has decreased in cost on a prospective basis, subject to the terms and limitations of the Benefit Package Option. The City, in its sole discretion and on a uniform and consistent basis, will decide whether a cost decrease is significant in accordance with prevailing IRS guidance.
(4) Limitation on Change in Cost Provisions for Dependent Care Assistance Benefits. The above “Change in Cost” provisions (Sections 9.4(h)(1)-(3) apply to Dependent Care Assistance Benefits only if the cost change is imposed by a dependent care provider who is not a “relative” of the Employee. For this purpose, a relative is an individual who is related as described in Code §§ 152(a)(1) through (8), incorporating the rules of Code §§ 152(b)(1) and (2).
(i) Change in Coverage (Applies to Premium Payment and Dependent Care Assistance Benefits, but Not to Health Care Spending Account Benefits).
The definition of “similar coverage” under Section 9.4(h) applies also to this Section
9.4(I).
(1) Significant Curtailment. If coverage is “significantly curtailed” (as defined in subsection (I) below), Participants may elect coverage under another Benefit Package Option that provides similar coverage. In addition, as set forth in subsection (ii) below , if the coverage curtailment results in a “Loss of Coverage” (as defined in subsection (iii) below), Participants may drop coverage if no similar coverage is offered by the City. The City in its sole discretion, on a uniform and consistent basis, will de cide, in accordance with prevailing IRS guidance, whether a curtailment is “significant,” and whether a Loss of Coverage has occurred.
(i) Significant Curtailment without Loss of Coverage. If the City determines that a Participant’s coverage under a Benefit Package Option under this Plan (or the Participant’s Spouse’s or Dependent’s coverage under this or her City’s plan) is significantly curtailed without a Loss of Coverage (for example, when there is a significant increase in the deductible, the co -pay, or the out -of-pocket cost -
28 sharing limit under an accident or health plan) during a Period of Coverage, the Participant may revoke his or her election for the affected coverage, and in lieu thereof, prospectively elect coverage under another Benefit Package Option that provides similar coverage.
Coverage under a plan is deemed to be “significantly curtailed” only if there is an overall reduction in coverage provided under the plan so as to constitute reduced coverage generally.
(ii) Significant Curtailment With a Loss of Coverage. If the City determines that a Participant’s Benefit Package Option coverage under this Plan or the Participant’s Spouse’s or Dependent’s coverage under his or her City’s plan is significantly curtailed, and such curtailment results in a Loss of Coverage during a Period of Coverage, the Participant may revoke his or her election for the affected coverage, and may either prospectively elect coverage under another Benefit Package Option that provides similar coverage, or drop coverage if no other Benefit Package Option providing similar coverage is offered by the City.
(iii) Definition of Loss of Coverage. For purposes of this Section 9.4(I)(1), a “Loss of Coverage” means a complete loss of coverage (including the elimination of a Benefit Package Option or the Benefit Package Option ceasing to be available where the Participant or his or her Spouse or Dependent resides, or a Participant or his or her Spouse or Dependent losing all coverage under the Benefit Package Option by reason of an overall l ifetime or annual limitation). In addition, the Administrator in its sole discretion, on a uniform and consistent basis, may treat the following as a Loss of Coverage:
• a substantial decrease in the medical care providers available under the Benefit Package Option
• a reduction in benefits for a specific type of medical condition or treatment with respect to which the Participant or his or her Spouse or Dependent is currently in a course of treatment; or • any other similar fundamental loss of coverage.
(2) Addition or Significant Improvement of a Benefit Package Option. If during a Period of Coverage, the Plan adds a new Benefit Package Option or significantly improves an existing Benefit Package Option, the City may permit the following election changes: (1) Pa rticipants who are enrolled in a Benefit Package Option other than the newly-added or significantly improved Benefit Package Option may change their election on a prospective basis to elect the newly-added or significantly improved Benefit Package Option; and (2) Employees who are otherwise eligible under Section 3.1 may elect the newly-added or significantly improved Benefit Package Option on a prospective basis, subject to the terms and limitations of the Benefit Package Option. The City in its sole disc retion and on a uniform and consistent basis, will decide whether there has been an addition of, or a significant
29 improvement in, a Benefit Package Option in accordance with prevailing IRS guidance.
(3) Loss of Coverage Under Other Group Health Coverage. A P articipant may prospectively change his or her election to add group health coverage for the Participant or his or her Spouse or Dependent, if such individual(s) loses coverage under any group health coverage sponsored by a governmental or educational inst itution, including (but not limited to) the following: a state children’s health insurance program under Title XXI of the Social Security Act; a medical care program of an Indian Tribal government, the Indian Health Service, or a tribal organization; a sta te health benefit risk pool; or a foreign government group health plan, subject to the terms and limitations of the applicable Benefit Package Option(s).
(4) Change in Coverage Under Another City Plan. A Participant may make a prospective election change tha t is on account of and corresponds with a change made under an City plan (including a plan of the City or a plan of the Spouse’s or Dependent’s City), so long as (a) the other cafeteria plan or qualified benefits plan permits its participants to make an el ection change that would be permitted under applicable IRS regulations; or (b) the Plan permits Participants to make an election for a Period of Coverage that is different from the plan year under the other cafeteria plan or qualified benefits plan. For example, if an election is made by the Participant’s Spouse during his or her City’s open enrollment to drop coverage, the Participant may add coverage to replace the dropped coverage. The City, in its sole discretion and on a uniform and consistent basis, will decide whether a requested change is on account of and corresponds with a change made under the other City plan, in accordance with prevailing IRS guidance.
(5) Dependent Care Assistance Coverage Changes. A Participant may make a prospective election c hange that is on account of and corresponds with a change by the Participant in the dependent care service provider. For example: (a) if the Participant terminates one dependent care services provider and hires a new dependent care services provider, the Participant may change coverage to reflect the cost of the new service provider; and (b) if the Participant terminates a dependent care service provider because a relative becomes available to take care of the child at no charge, the Participant may cancel coverage.
A Participant entitled to change an election as describe in this Section 9.4 must do so in accordance with the procedures described in Section 9.2.
9.5 Election Modifications Required by Administrator
The City may, at any time, require any Partic ipant or class of Participants to amend the amount of their Salary Reductions for a Period of Coverage if the City determines that such action is necessary or advisable in order to (a) satisfy any of the Code’s nondiscrimination requirements applicable to this Plan or other cafeteria plan; (b) prevent any Employee or class of Employees from having to recognize more income for federal income tax purposes from the receipt of benefits
30 hereunder than would otherwise be recognized; (c) maintain the qualified status of benefits received under this Plan; or (d) satisfy Code nondiscrimination requirements or other limitations applicable to the City’s qualified plans. In the event that contributions need to be reduced for a class of Participants, the City will reduc e the Salary Reduction amounts for each affected Participant, beginning with the Participant in the class who had elected the highest Salary Reduction amount, continuing with the Participant in the class who had elected the next highest Salary Reduction amount, and so forth, until the defect is corrected.
ARTICLE X. APPEALS PROCEDURE
10.1 Procedure If Benefits Are Denied Under This Plan
Any person who thinks that he or she is entitled to a benefit under the Plan shall have the right to file with the Administrator a written notice of claim for such benefit period. Within sixty (60) days after its receipt of such written notice of claim, the Administrator shall either grant or deny such claim; provided, however, that any delay on the part of the Administrator in arriving at a decision shall not adversely affect benefits payable pursuant to this Plan. The Administrator shall provide each claimant:
a) The specific reasons for such denial;
b) The specific reference to the pertinent Plan provisions of which the denial is based; and c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary to complete the Plan’s claim review procedure.
Each claimant shall have the right to appeal the denial of his claim to the Administrator for a full and fair review at any time within seventy -five (75) days after the claimant received written notice of such denial. The Administrator shall give the claimant or his duly authori zed personal representative the opportunity to:
a) Review documents pertinent to the claim;
b) Submit issues and comments in writing; and
c) Discuss such documents and issues with the Administrator.
The final decision of the Administrator shall be made promptly and no later than sixty (60) days after its receipt from the claimant of a request for review unless circumstances beyond the control of the Administrator require an extension of time for processing, in which case the decision shall e made as soon as possible but not later than one hundred twenty (120) days after receipt of a request for review. Such decision shall be made in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and speci fic reference to pertinent Plan provisions on which the decision is based.
ARTICLE XI. RECORDKEEPING AND ADMINISTRATION
11.1 Administration of the Plan
31 The administration of this Plan shall be under the supervision of the City. It is the principal duty of the City to see that this Plan is carried out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in this Plan without discrimination among them. The City may employ the services of a Record Keeper as it may deem ne cessary or desirable in connection with the operation of the Plan. Unless otherwise provided in the service agreement, obligations under this Plan shall remain the obligation of the City.
11.2 Powers of the Record Keeper
The Record Keeper shall have such dut ies and powers as it considers necessary or appropriate to discharge its duties. It shall have the exclusive right to interpret the Plan and to decide all matters thereunder, and all determinations of the Record Keeper with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Record Keeper shall have the following discretionary authority:
(a) to construe and interpret this Plan, including all possible ambiguities, inconsistencie s and omissions in the Plan and related documents, and to decide all questions of fact, questions relating to eligibility and participation, and questions of benefits under this Plan (provided that, notwithstanding the first paragraph in this Section 11.2) , the Committee shall exercise such exclusive power with respect to an appeal of a claim under Section 11.1);
(b) to prescribe procedures to be followed and the forms to be used by Employees and Participants to make elections pursuant to this Plan;
(c) to prepare and distribute information explaining this Plan and the benefits under this Plan in such manner as the Record Keeper determines to be appropriate;
(d) to request and receive from all Employees and Participants such information as the Record Keeper shall fro m time to time determine to be necessary for the proper administration of this Plan;
(e) to furnish each Employee and Participant with such reports with respect to the administration of this Plan as the Record Keeper determines to be reasonable and appropriate, including appropriate statements setting forth the amounts by which a Participant’s Compensation has been reduced in other to provide benefits under this Plan;
(f) to receive, review and keep on file such reports and information concerning the benefits covered by this Plan as the Record Keeper determines from time to time to be necessary and proper;
(g) to appoint and employ such individuals or entities to assist in the administration of this Plan as it determines to be necessary or advisable, including legal counsel and benefit consultants;
32 (h) to maintain the books of accounts, records, an other data in the manner necessary for proper administration of this Plan and to meet any applicable disclosure and reporting requirements.
11.3 Reliance on Participant, Tables, etc.
The Record Keeper may rely upon the direction, information or election of a Participant as being proper under the Plan and shall not be responsible for any act or failure to act because of a direction or lack of direction by a Participant.
11.4 Fiduciary Liability
To the extent permitted by law, the City shall not incur any liability for any acts or for failure to act except for their own willful misconduct or willful breach of this Plan.
11.5 Compensation of the Record Keeper
The City and the Record Keepe r have entered into an agreement for compensation for services rendered in the day-to-day administration of this Plan.
11.6 Insurance Contracts
The City shall have the right (a) to enter into a contract with one or more insurance companies for the purposes of providing any benefits under the Plan; and (b) to replace any of such insurance companies or contracts. Any dividends, retroactive rate adjustments or other refunds of any type that may become payable under any such insurance contract shall not be assets of the Plan but shall be the property of, and be retained by, the City, to the extent that such amounts are less than aggregate City contributions toward such insurance.
11.7 Inability to Locate Payee
If the Record Keeper is unable to make payment to any Par ticipant or other person to whom a payment is due under the Plan because it cannot ascertain the identity or whereabouts of such Participant or other person after reasonable efforts have been made to identify or locate such person, then such payment and al l subsequent payments otherwise due to such Participant or other person shall be forfeited following a reasonable time after the date any such payment first became due.
11.8 Effect of Mistake
In the event of a mistake as to the eligibility or participation of an Employee, or the allocations made to the account of any Participant, or the amount of benefits paid or to be paid to a Participant or other person, the Record Keeper shall, to the extent it deems administratively possible and otherwise permissible und er Code § 125 or the regulations issued thereunder, cause to be allocated or cause to be withheld or accelerated, or otherwise make adjustment of, such amounts as it will in its judgment accord to such Participant or other person the credits to the account or distributions to which he or she is properly entitled under the Plan.
33 ARTICLE XII. GENERAL PROVISIONS
12.1 Expenses
All reasonable expenses incurred in administering the Plan are currently paid by administration fees and/or forfeitures to the extent provided in Sections 7.6 and 8.6, and then by the City.
12.2 No Contract of Employment
Nothing herein contained is intended to be or shall be construed as constituting a contract or other arrangement between any Employee and the City to the effect that such Em ployee will be employed for any specific period of time. All Employees are considered to be employed at the will of the City.
12.3 Amendment and Termination
This Plan has been established with the intent of being maintained for an indefinite period of time. Nonetheless, the City may amend or terminate all or any part of this Plan at any time for any reason by resolution of the City Council or by any person or persons authorized by the Council to take such action.
12.4 Governing Law
This Plan shall be construed, administered and enforced according to the laws of the State of California to the extent not superseded by the Code, or any other federal law.
12.5 No Guarantee of Tax Consequences
Neither the Record Keeper or the City makes any commitment or guarantee that any amounts paid to or for the benefit of a Participant under this Plan will be excludable from the Participant’s gross income for federal, state, or local income tax purposes. It shall be the obligation of each Participant to determine whether each payme nt under this Plan is excludable from the Participant’s gross income for federal, state and local income tax purposes, and to notify the Record Keeper if the Participant has any reason to believe that such payment is not so excludable.
12.6 Indemnification of City
If any Participant receives one or more payments or reimbursements under this Plan on a tax- free basis, and such payments do not qualify for such treatment under the Code, such Participant shall indemnify and reimburse the City for any liability it m ay incur for failure to withhold any applicable income taxes from such payments or reimbursements.
12.7 Non-Assignability of Rights
The right of any Participant to receive any reimbursement under this Plan shall not be alienable by the Participant by assignment or any other method and shall not be subject to claims by the Participant’s creditors by any process whatsoever. Any attempt to cause such right to be so subjected will not be recognized, except to such extent as may be required by law.
34 12.8 Headings
The headings of the various Articles and Sections are inserted for convenience of reference and are not to be regarded as part of this Plan or as indicating or controlling the meaning or construction of any provision.
12.9 Plan Provisions Controlling
In the event that the terms or provisions of any summary or description of this Plan, or of any other instrument, are in any construction interpreted as being in conflict with the provisions of this Plan as set forth in this document, the provisions of this Plan shall be controlling.
12.10 Severability
Should any part of this Plan subsequently be invalidated by a court of competent jurisdiction, the remainder of the Plan shall be given effect to the maximum extent possible.
IN WITNESS WHEREOF, and as co nclusive evidence of the adoption of the foregoing instrument comprising the City of Fresno Flexible Benefits Plan, the City of Fresno has caused this Plan to be executed in its name and on its behalf; on this ___ day of ____ 2002.
ATTEST: CITY OF FRESNO
A municipal corporation
By: _______________________________
By:______________________________
Title: ______________________________ Title: __________________________
APPROVED AS TO FORM:
Hilda Cantu Montoy
City Attorney
Signature:__________________________