Item Number: 11
City Council / Board of Directors
Written Communications
Meeting of: December 16, 2025
Submitted By:
Heather Barber, Human Resources Officer
Subject:
2026 Section 125 Cafeteria Plan and Retiree Health Premium Reimbursement Plan Recommendation:
Staff recommends that the Honorable City Council:
(1) Adopt Resolution No. 25-001, approving the establishment of a Retiree Health Premium Reimbursement Plan;
(2) Adopt Resolution No. 25-002, approving the Amendment and Restatement of the City of Victorville Section 125 Cafeteria Plan; and
(3) Authorize the City Manager, or designee, to execute the plans and related documents, and to make any designations, minor modifications or non-substantive changes deemed necessary for plan administration.
Fiscal Impact:
There is no fiscal impact associated with this item. Any costs associated with the Cafeteria Plan and Retiree Health Premium Reimbursement Plan have been included in the FY 2025-2026 budget.
Strategic Plan Goal:
This item is consistent with Strategic Plan Goal G – Organizational Effectiveness and Sustainability. Adopting a Section 125 Cafeteria Plan and a Retiree Health Premium Reimbursement Plan aligns with best practices in employee benefits management, enhances recruitment and retention, and provides financial advantages to both the employees and the City.
Background:
The City of Victorville currently provides a flexible benefit plan that allows employees to pay for certain expenses on a pre-tax basis. The plan is governed by the Internal Revenue Service (IRS) Code Section 125. A Section 125 Cafeteria Plan allows employees to choose between taxable and qualified non-taxable benefits. Qualified benefits may 4 4
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include health insurance premiums, dental and vision coverage, flexible spending accounts, and dependent care assistance. By adopting such a plan, the City enables employees to pay for qualified benefits with pre-tax dollars which may reduce their taxable income. The City of Victorville Cafeteria Plan was originally adopted effective July 1, 1999, and then amended and restated effective July 1, 2003.
Discussion:
For compliance with the IRS Code Section 125 a Cafeteria Plan must be established in writing and adopted by the employer prior to the first day of the plan year. The Cafeteria Plan document is a written plan that documents how the City offers eligible employee’s certain benefits on a pre-tax basis (such as health insurance) while having the option to choose among at least one taxable benefit (such as cash). Having an approved 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 could become taxable.
The first day of the City’s next benefits plan year is January 1, 2026. The City timed its open enrollment period of 2025 to comply with the Cafeteria Plan requirements and to meet provider cutoff deadlines for enrollment which will ensure that employees have benefits coverage without interruption. Resolution No. 25-002 seeks to formally adopt an amended and restated Cafeteria Plan for the 2026 benefit year.
Additionally, as part of the City’s ongoing efforts to enhance post-employment benefits and support the long-term well-being of our retirees, the City offers retirement medical coverage for those employees who are eligible. To support long-term workforce retention and assist retirees in managing healthcare costs, Resolution No. 25-001 seeks to formally establish a Retiree Health Premium Reimbursement Plan. The Retiree Health Premium Reimbursement Plan will allow eligible retirees to receive reimbursement for qualified health insurance premiums, including Medicare supplemental coverage at the single- party rate, available through the City’s insurance plan, up to a defined reimbursement limit. This plan is intended to qualify as an accident and health plan, a group health plan and as a health reimbursement arrangement, thereby making the benefits paid to eligible retirees eligible for exclusion from their gross income under IRS Code Section 105(b).
The administration of the Section 125 Cafeteria Plan and Retiree Health Premium Reimbursemetn Plan may require obtaining and disclosing certain information that is considered protected under the Health Insurance Portability and Accountability Act (HIPPA). To ensure proper safeguards are in place, a HIPPA Privacy Policy has been developed and included as Exhibit A to each plan. This policy will require the designation of a Plan/Privacy Official to be determined by the City Manager.
If adopted pursuant to the staff recommendation, the Section 125 Cafeteria Plan and Retiree Health Premium Reimbursemetn Plan will be reviewed annually and brought before the City Council for formal adoption prior to each new plan year. 4 4
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Staff recommends that the City Council adopt Resolution No. 25-001, authorizing the establishment of a Retiree Health Premium Reimbursement Plan; adopt Resolution No. 25-002, authorizing the amendment and restatement of the City of Victorville Section 125 Cafeteria Plan effective January 1, 2026; and authorize the City Manager, or designee, to execute the plans and related documents, and to make any designations, minor modifications or non-substantive changes deemed necessary for plan administration.
Staff remains available for any questions or comments.
Prepared By:
Heather Barber, Human Resources Officer
Attachments: A. Resolution No. 25-001
B. Retiree Health Premium Reimbursement Plan
C. Resolution No. 25-002
D. City of Victorville Cafeteria Plan Amended and Restated Effective January 1, 2026
E. City of Victorville Cafeteria Plan Amended and Restated Effective July 1, 2003