Attachment D
City of Victorville Cafeteria
Plan Amended and Restated
Effective January 1, 2026
13426.00000\29725669.5
12728736.1 VI010-007
City of Victorville
CAFETERIA PLAN
PLAN DOCUMENT
Originally Adopted: July 1, 1999
Previously Amended & Restated: July 1, 2003
Amended & Restated: Effective January 1, 2026
i
12728736.1 VI010-007
Table of Contents
Page
Article I. DEFINITIONS .................................................................................................. 1 Article II. ELIGIBILITY AND PARTICIPATION .............................................................. 7
2.1 Eligibility to Participate................................................................................. 7
2.2 Participation .................................................................................................. 7
2.3 Recommencement of Participation ............................................................. 7
2.4 Termination of Participation ......................................................................... 7
2.5 FMLA Leaves of Absence ............................................................................. 8
2.6 Non-FMLA Leaves of Absence ................................................................... 10
2.7 Cessation of Required Contributions ........................................................ 10
2.8 Eligibility Under Component Plans ........................................................... 10 Article III. ELECTIONS ................................................................................................. 10
3.1 Election of Contributions ........................................................................... 10
3.2 Salary Reduction ......................................................................................... 11
3.3 Initial Election Period .................................................................................. 11
3.4 Elections for Subsequent Plan Years ........................................................ 11
3.5 Waiver of Medical Coverage ....................................................................... 12
3.6 Participant Makes Incorrect Election ........................................................ 12
3.7 Special Enrollment Period .......................................................................... 12
3.8 Irrevocability of Elections ........................................................................... 13
3.9 Revocability of Elections ............................................................................ 14
3.10 Change in Status ......................................................................................... 14
3.11 HIPAA Special Enrollment Rights .............................................................. 16
3.12 Certain Judgments, Decrees, and Orders (Applies to Premium Payment and Health FSA Benefits, but Not to DCSA Benefits) .................... 16 Table of Contents (continued)
ii
12728736.1 VI010-007
3.13 Medicare and Medicaid (Applies to Premium Payment Benefits, to Health FSA Benefits as Limited Below, but Not to DCSA Benefits) ............. 16
3.14 Change in Cost of Benefit (Applies to Premium Payment Benefits, to DCSA Benefits as Limited Below, but Not to Health FSA Benefits) ........ 17
3.15 Significant Change in Coverage of Component Plan Benefit (Applies to Premium Payment and DCSA Benefits, but Not to Health FSA Benefits) .................................................................................................... 18
3.16 National Medical Support Notice ............................................................... 19
3.17 Election Changes to Enroll through Marketplace (Applies Only to Premium Payment Benefits for the Medical Insurance Plan) ....................... 19
3.18 No Cash-Out Permitted ............................................................................... 20
3.19 Late Enrollment in Employer Offered Medical Plan ................................. 20 Article IV. BENEFTIS OFFERED AND METHOD OF FUNDING ................................ 20
4.1 Benefits Offered .......................................................................................... 20
4.2 Employer and Participant Contributions ................................................... 21
4.3 Using Salary Reductions to Make Contributions ..................................... 21
4.4 Funding This Plan ....................................................................................... 22 Article V. PREMIUM PAYMENT BENEFITS ................................................................ 22
5.1 Benefits ........................................................................................................ 22
5.2 Contributions for Cost of Coverage .......................................................... 22
5.3 Benefits Provided Under the Medical, Dental, and Vision Insurance Plans ................................................................................................ 23
5.4 Opt Out Arrangement.................................................................................. 23
5.5 Eligible Opt Out Arrangement .................................................................... 23
5.6 Medical Insurance Benefits; COBRA Contributions ................................ 23
5.7 Uniformed Service Under USERRA ........................................................... 24
5.8 Provision of Benefits .................................................................................. 24
5.9 Cash Payments ........................................................................................... 24 Table of Contents (continued)
iii
12728736.1 VI010-007
5.10 Taxable Benefits .......................................................................................... 24
5.11 Spending Accounts .................................................................................... 25
5.12 Repayment of Excess Payments ............................................................... 25
5.13 Coordination of Benefits Under the Health FSA Plan .............................. 25 Article VI. DEPENDENT CARE SPENDING ACCOUNT PLAN .................................. 25
6.1 Component Plan .......................................................................................... 25
6.2 Definitions .................................................................................................... 26
6.3 Contributions for Cost of Coverage for DCSA Benefits .......................... 26
6.4 Eligible Dependent Care Expenses ........................................................... 27
6.5 Maximum Benefits for DCSA ...................................................................... 28
6.6 Establishment of DCSA Account ............................................................... 30
6.7 Spending Account ...................................................................................... 31
6.8 Reimbursement of Eligible Expenses ....................................................... 31
6.9 Limitations on Reimbursement/Forfeiture ................................................ 31
6.10 Claim for Benefits ....................................................................................... 31
6.11 Time Limit; Grace Period ............................................................................ 32
6.12 No Reversion to Employer ......................................................................... 33
6.13 Reimbursements From DCAP After Termination of Participation .......... 33 Article VII. HEALTH CARE SPENDING ACCOUNT PLAN ......................................... 34
7.1 Component Plan .......................................................................................... 34
7.2 Definitions .................................................................................................... 34
7.3 Annual Limitation ........................................................................................ 34
7.4 Spending Account ...................................................................................... 35
7.5 Reimbursement of Eligible Expenses ....................................................... 35
7.6 Claims for Benefits ..................................................................................... 35 Table of Contents (continued)
iv
12728736.1 VI010-007
7.7 Reimbursements From Health FSA After Termination of Participation; COBRA ...................................................................................... 36
7.8 Debit Card Program .................................................................................... 37
7.9 Limitations on Reimbursement/Forfeiture ................................................ 37
7.10 Time Limit; Carry Over of Unused Benefits .............................................. 38
7.11 No Diversion ................................................................................................ 39 Article VIII. CONTINUATION COVERAGE .................................................................. 39
8.1 In General ..................................................................................................... 39
8.2 Definitions .................................................................................................... 39
8.3 Continuation Coverage ............................................................................... 41
8.4 Type of Coverage ........................................................................................ 41
8.5 Coverage Period .......................................................................................... 42
8.6 Notification Requirements .......................................................................... 43
8.7 Termination of Continuation Coverage ..................................................... 43
8.8 Contribution ................................................................................................. 44 Article IX. LIFE INSURANCE ....................................................................................... 45
9.1 Benefits ........................................................................................................ 45
9.2 Maximum Excludable Amounts ................................................................. 45 Article X. DISCRIMINATION ........................................................................................ 45
10.1 Nondiscrimination Requirements .............................................................. 45
10.2 Annual Testing ............................................................................................ 47
10.3 Avoiding Discrimination ............................................................................. 47
10.4 Reimbursement Plans................................................................................. 48
10.5 Compliance with Mental Health Parity and Addiction Equity Act and GINA ........................................................................................................... 48 Article XI. PLAN ADMINISTRATION ........................................................................... 48 Table of Contents (continued)
v
12728736.1 VI010-007
11.1 Allocation of Authority ................................................................................ 48
11.2 Powers and Duties Not Delegated to Administrator ................................ 49
11.3 Nondiscriminatory Exercise of Authority .................................................. 50
11.4 Reliance on Participant, Tables, etc. ......................................................... 50
11.5 Incapacity of Participant ............................................................................. 50
11.6 Provision for Third Party Administrators .................................................. 50
11.7 Compensation of Plan Administrator ........................................................ 50
11.8 Bonding ........................................................................................................ 50
11.9 Payment of Administrative Expenses ....................................................... 51
11.10 Insurance Contracts ................................................................................... 51
11.11 Inability to Locate Payee ............................................................................ 51
11.12 Effect of Mistake .......................................................................................... 51
11.13 Disbursement Reports ................................................................................ 52
11.14 Indemnification ............................................................................................ 52
11.15 Statements ................................................................................................... 52
11.16 Use of Electronic Medium for Participant Notices and Elections ........... 52
11.17 Timing and Content of Elections and Notices .......................................... 53 Article XII. CLAIMS PROCEDURES ............................................................................ 53 Article XIII. AMENDMENT OR TERMINATION OF PLAN ........................................... 54
13.1 Permanency ................................................................................................. 54
13.2 Employer’s Right to Amend ....................................................................... 54
13.3 Employer’s Right to Terminate .................................................................. 54
13.4 Action by Employer .................................................................................... 54
13.5 Determination of Effective Date of Amendment or Termination ............. 54 Article XIV. HIPAA PROVISIONS FOR HEALTH FSA ................................................ 55 Table of Contents (continued)
vi
12728736.1 VI010-007
14.1 General ......................................................................................................... 55
14.2 Definitions .................................................................................................... 55
14.3 Responsible Employees ............................................................................. 56
14.4 Permitted Uses and Disclosures ............................................................... 57
14.5 Prohibited Uses and Disclosures .............................................................. 58
14.6 Certification Requirement .......................................................................... 58
14.7 Mitigation ..................................................................................................... 59
14.8 Breach Notification ..................................................................................... 60 Article XV. GENERAL PROVISIONS ........................................................................... 60
15.1 Expenses ..................................................................................................... 60
15.2 Not an Employment Contract ..................................................................... 60
15.3 Applicable Laws .......................................................................................... 60
15.4 Compliance With Code and Other Applicable Laws ................................ 60
15.5 Post-Mortem Payments .............................................................................. 60
15.6 Written Plan ................................................................................................. 61
15.7 No Trust Fund Required ............................................................................. 61
15.8 Insured Benefits .......................................................................................... 61
15.9 Rights to Employer’s Assets ...................................................................... 61
15.10 Indemnification of Employer ...................................................................... 61
15.11 Non-Assignability of Rights ....................................................................... 61
15.12 Nonalienation of Benefits ........................................................................... 61
15.13 Mental or Physical Incompetence .............................................................. 61
15.14 Requirement for Proper Forms .................................................................. 62
15.15 Source of Payments .................................................................................... 62
15.16 Tax Effects ................................................................................................... 62 Table of Contents (continued)
vii
12728736.1 VI010-007
15.17 Gender and Number .................................................................................... 62
15.18 Headings ...................................................................................................... 62
15.19 Incorporation by Reference ........................................................................ 62
15.20 Plan Provisions Controlling ....................................................................... 62
15.21 Severability .................................................................................................. 63
15.22 Forfeiture of Unclaimed Spending Account Benefits .............................. 63
12728736.1 VI010-007
PREAMBLE
Effective July 1, 1999, the City of Victorville (“Employer”) established the City of Victorville Cafeteria Plan (“Plan”) for purposes of providing eligible Employees with the opportunity to choose from among the benefits availabl e under the Plan. This Plan is designed to permit an Eligible Employee to pay for his or her share of Contributions under the Medical Insurance Plan, Dental Insurance Plan, Vision Insurance Plan, Health Flexible Spending Account (“Health FSA”), Dependent Care Spending Account (“DCSA”), and Life Insurance Plan on a pre-tax Salary Reduction basis.
The Plan is intended to qualify as a cafete ria plan under the provisions of Internal Revenue Code (“Code”) Section 125 and the regulations issued thereunder and shall be interpreted to accomplish that objective.
The Employer desires to amend and restate the Plan to conform with the proposed regulations issued by the Internal Rev enue Service and the Patient Protection and Affordable Care Act (“ACA”). The Employ er hereby amends and restates the Plan, effective January 1, 2026.
The Health Care Flexible Spending Account (“Health FSA”) is intended to qualify as a Code Section 105 medical expense reimbursement plan and the Medical Care Expenses reimbursed thereunder ar e intended to be eligible for exclusion from participating Employees' gross income under Code §105(b). The Dependent Care Spending Account (“DCSA”) is intended to qualify as a Code Section 129 dependent care assistance plan, and the Dependent Care Expenses reimbursed thereunder are intended to be eligible for exclusion from participating Participants' gross income under Code §129(a).
Although printed within this document, the DCSA and Health FSA Plans are separate written plans for purposes of administration and nondiscrimination requirements imposed by Sections 105 and 129 of the Code. The Health FSA Component is also a separate plan for purposes of applicable provisions of ERISA, HIPAA, and CO BRA. In the event that the Health FSA Component is determined not to be a separate plan, the Plan shall be designated as a hybrid entity for purposes of HIPAA, such that it shall be a covered entity only with respect to the Health F SA Component. The Medical Insurance Plan, Dental Insurance Plan, and Health FSA are intended to be part of an organized health care arrangement for purposes of HIPAA.
With the exception of the DCSA Plan and the Health FSA Plan, the benefits offered under this Plan are provided through separate Component Plans which are set forth in separate plan documents, group insurance policies, and or administrative service contracts and are incorporated herein and identified in Schedule “A” attached hereto. 13426.00000\29725669.5
1 12728736.1 VI010-007
CITY OF VICTORVILLE
CAFETERIA PLAN
ARTICLE I.
DEFINITIONS
1.1 “Account(s)” means the Health FSA Accounts and the DCSA Accounts described in Article VI for DCSAs, and Article VII for Health FSAs.
1.2 “After-tax Contribution(s)” means amounts withheld from a Participant’s Compensation pursuant to a Salary Reduction Agreement after all applicable state and federal taxes have been deducted. Such amounts are withheld for purposes of purchasing one or more of the Benefits available under the Plan.
1.3 “Anniversary Date” means t he first day of any Plan Year.
1.4 “Benefit(s)” means any of the Qualified Be nefits and permitted taxable benefits which may be purchased under this Plan, as described in Schedule “A”. “Benefit” shall also mean any amounts paid to a Participan t in the Plan as re imbursement under the Health FSA Plan (see Article VII) and/or DCSA Plan (see Article VI).
1.5 “Change in Status” means any of the event s described below, as well as any other events included in subsequent changes to Code §125, or regulations or guidance issued thereunder that the Plan Administrator, in its sole discretion and on a uniform and consistent basis, determines are permitted under applicable law and under this Plan:
(a) Legal Marital Status. A change in a Participant'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 employm ent; (2) a strike or lockout; (3) a commencement of or return from an unpaid l eave of absence; (4) a change in worksite; and (5) if the eligibility condi tions of this Plan or other employee benefits 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 benefits 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 13426.00000\29725669.5
2 12728736.1 VI010-007
(e) Change in Residence. A change in the place of residence of the Participant or his or her Spouse or Dependents.
1.6 “City Council” or “Council” means the City Council or other governing body of the Employer.
1.7 “COBRA” means the Consolidated Omni bus Budget Reconciliat ion Act of 1985, as amended.
1.8 “Code” means the Internal Revenue Co de of 1986, as amended, and regulations thereunder.
1.9 “Compensation” means the cash wages or salary paid to an Employee by the Employer, determined prior to (a) any Salary Reduction election under this Plan; (b) any salary reduction election under any other ca feteria plan; and (c) any compensation reduction under any Code §132(f)(4) plan; but det ermined after (d) any salary deferral elections under any Code §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 Employer, 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 preceding sentence.
1.10 “Component Plan” means any plan offering Benefits available under this Plan, as set forth in the separate plan documents, except for the DCSA Plan (see Article VI) and the Health FSA Plan (see Article VII) incorporated herein.
1.11 “Contributions” means the amount contri buted to pay for the cost of Benefits (including self-funded Benefits as well as those that are in sured), as calculated under Article V for Premium Contribut ions or other Benefits ther eunder, Article VII for Health FSA Benefits, and Article VI for DCSA Benefits.
1.12 “Dental Insurance Benefits” means t he Participant's Dental Insurance Plan coverage for purposes of this Plan.
1.13 “Dental Insurance Plan” means the plan( s) that the Employer maintains for its Employees (and for their Spouses and Dependents that may be eligible under the terms of such plan), providing dental type benefits through a group insurance policy or policies, if separate from the Medical Insurance Plan. The Employer may substitute, add, subtract, or revise at any time the menu of such plans and/or the benefits, terms, and conditions of any such plans. Any such substitution, addition, subtra ction, or revision will be communicated to Participants and will automatically be incorporated by reference under this Plan.
1.14 “Dependent” means for purposes of health coverage (to the extent funded under the Flexible Benefit Dollars), (1) a dependent as defined in Code § 105(b), (2) any child (as defined in Code § 152(f)(1)) of the Participant who has not attained age 27, and (3) any child of the Participant to whom IRS Revenue Procedure 2008-48 applies (regarding certain children of divorced or separated pa rents who receive more than half of their 13426.00000\29725669.5
3 12728736.1 VI010-007
support for the calendar year from one or bo th parents and are in the custody of one or both parents for more than hal f of the calendar yea r). “Dependent Care Spending Account” or “DCSA” means the account maintained on behalf of a Participant in the DCSA Plan.
1.15 “Dependent Care Spending Account Plan” or “DCSA Plan” means the Component Plan set forth in Article VI.
1.16 “Earned Income” shall have the meaning given such term in Code §129(e)(2).
1.17 “Effective Date” of this Plan means January 1, 2026. The Plan was originally effective July 1, 1999.
1.18 “Election Form/Salary Reduction Agr eement” means the actual or deemed paper or electronic form provided by the Administra tor for the purpose of allowing an Eligible Employee to participate in this Plan by electi ng Salary Reductions to pay for any of the following: premium contributions, Health FS A Benefits, and DCSA B enefits. It includes an agreement pursuant to whic h an Eligible Employee or Participant authorizes the Employer to make Salary Reductions. If an interactive voice-response system or web- based program is used for enr ollment, the Election Form/Sa lary Reduction Agreement may be maintained on an electronic database in accordance with applicable laws.
1.19 “Eligible Employee” means an Employee eligible to par ticipate in this Plan, as provided in Section 2.1.
1.20 “Employee” means an individual that the Employer classifies as a common-law employee and who is on the Employer'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 §414(n)) or individual cl assified by the Employer as an independent contractor for the period during which such individual is so classified, whether or not any such individual is on the Employer's W-2 payroll or is determined by the IRS or others to be a common-law employee of the Employer; (b ) any individual who performs services for the Employer 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 or ot hers to be a common-law employee of the Employer; (c) any self-employed individual; (d) any partner in a partnership; and (e) any more-than-2% shareholder in a Subchapter S corporation. The term Employee does include former Employees fo r the limited purpose of allowing conti nued eligibility for benefits under the Plan for the remainder of the Plan Year in which an Employee ceases to be employed by the Employer, but only to the extent specifically provided elsewhere under this Plan.
1.21 “Employer” means the City of Victorv ille, and any successor of such Employer.
1.22 “Entry Date” means, for all newly hir ed Employees, the first day of the month following date of hire. In all other cases, the “Entry Date” shall mean the first day of each Plan Year.
13426.00000\29725669.5
4 12728736.1 VI010-007
1.23 “Employment Commencement Date” means the first regularly scheduled working day on which the Employee first performs an hour of service for the Employer for Compensation.
1.24 “ERISA” means the Empl oyee Retirement Income Security Act of 1974, as amended.
1.25 “FMLA” means the Family Medical Leav e Act of 1993, as amended and including all regulations thereunder.
1.26 “Health Flex Contribution” means any Employer Contribution that meets the following requirements: (1) the Participant may not opt to receive the amount as a taxable benefit, (2) the Participant may use the amount to pay for minimum essential coverage, and (3) the Participant may use the amount exclusively to pay for medical care, within the meaning of Code § 213. The Health Flex Contribution includes the City’s dollar allowance to an Eligible Employee for their use in purchasing the various health insurance benefits offered by the City.
1.27 “Health Flexible Spending Account” or “Health FSA” means the account maintained on behalf of a Participant in the Health FSA Plan.
1.28 “Health Flexible Spending Account Plan” or “Health FSA Plan” means the Component Plan set forth in Article VII.
1.29 “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.
1.30 “Grace Period” means the period that begins immediately following the close of a Plan Year and ends on the day that is 2.5 months following the close of that Plan Year.
1.31 “Leave of Absence” m eans any absence of an Employee which is authorized by the Employer under the Employer ’s personnel policies. Additionally, an Employee shall be subject to such rights and benefits for Family or Medical Leave, as defined in the FMLA and the California Family Rights Act of 1991.
1.32 “Marketplace” means a state- or f ederally facilitated exchange through which individuals may purchase health insurance.
1.33 “Medical Insurance Benef its” means the Employee's Medical Insurance Plan coverage for purposes of this Plan.
1.34 “Medical Insurance Plan” means the plan( s) that the Employer maintains for its Employees (and for their Spouses and Dependents who may be eligible under the terms of such plan), providing major medical-type benefits through a group insurance policy or policies. The Employer may substitute, add, subt ract, or revise at any time the menu of such plans and/or the benefits, terms, and c onditions of any such plans. Any such 13426.00000\29725669.5
5 12728736.1 VI010-007
substitution, addition, subtraction, or re vision will be communicated to Participants and will automatically be incorporated by reference under this Plan.
1.35 “Non-Health Flex Contribution” means an Employer designated Contribution that does not meet the definition of a Health Flex Contribution.
1.36 “Open Enrollment Period” m eans the period beginning at least thirty (30) days before the beginning of the next Plan Y ear and ending on any date preceding the commencement of the Plan Year, as dete rmined by the Administrator. For a new Employee, “Open Enrollment Period” shall mean the period between the Employee’s effective date of employment and the fi rst day on which an Employee may become a Participant.
1.37 “Participant” means an Employee or me mber of the City Council who becomes a Participant pursuant to Article II. “Partici pant” shall also mean a former Employee who elects to continue health coverage under the Plan.
1.38 “Period of Coverage” gener ally means the Plan Year. However, a Participant’s Period of Coverage may be less than 12 months if he or s he is a new Participant and enters the Plan during t he Plan Year or a Participant completes a permitted election change in accordance with Article III. A Participant’s Period of Coverage shall also include continuation coverage elected by a terminated Participant or qualified Dependent.
1.39 “Plan” means this Amended and Restated City of Victorville Cafeteria Plan, as set forth herein, including all subsequent amendments and modifications hereto.
1.40 “Plan Administrator” or “Administrator” means the Employer or any person or entity appointed by the Employer to administer this Plan on its behalf, as provided in Article XI.
1.41 “Plan Year” means the twelve cons ecutive month period commencing January 1 and ending December 31.
1.42 “Pre-tax Contribution(s)” means any amount withheld from the Employee’s Compensation pursuant to a Salary Reduction Agreement before any applicable state and federal taxes have been deducted. T he amounts are withheld for purposes of purchasing one or more of the Benefits avail able under the Plan. This amount shall not exceed the combined premiums and contributions attributable to the most costly Benefits afforded hereunder, and for purposes of Code Section 125. Such amounts shall be treated as an Employer contribution (this amount may, however, be treated as an Employee contribution for purposes of state insurance laws).
1.43 “Qualified Benefit” means any benefit which, with the application of subsection (a) is not includible in the gross income of t he employee by reason of an express provision of this chapter (other than Code Sections 106(b), 117 , 127, or 132). Such term includes any group term life insurance which is includible in gross income only because it exceeds the dollar limitation of Code Section 79 and such term includes any other benefit permitted 13426.00000\29725669.5
6 12728736.1 VI010-007
under regulations. Notwithstanding the previous sentence, any product that is advertised, marketed, or offered as long-term care insurance is not a “Qualified Benefit.”
1.44 “Salary Reduction” means the amounts paid into the Pl an pursuant to elections made by the Participant to reduce his or her compensation (i.e., Pre-tax Contributions or After-tax Contributions) for the purchase of Benefits elected by the Participant.
1.45 “Salary Reduction Agreement” means t he actual or deemed agreement pursuant to which an eligible Employee or Participant el ects to contribute his share of the cost of chosen Benefits with Pre- tax or After-tax Contributions in accordance with Article III herein.
1.46 “Spouse” means an individual who is treated as a spouse for federal tax purposes.
Notwithstanding the above, for purposes of the DCSA Plan Component, the term Spouse shall not include (a) an individual legally sepa rated from the Participant under a divorce or separate maintenance decree; or (b) an individual who is married to the Participant and files a separate federal income tax retu rn, where (i) the Part icipant maintains a household that constitutes a Qualifying Individual's principal place of abode for more than one-half of the taxable year, (ii) the Participant furnishes mo re than half of the cost of maintaining such household, and (iii) during the last 6 months of su ch taxable year, the individual is not a member of such household.
1.47 “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 curriculum and normally has an enrolled student body in attendance at the location where its educational activities are regularly carried on.
1.48 “Uniformed Services” means the Armed Forces, the Army National Guard, and the Air National Guard when engaged in active duty for training, inactive duty training, or full- time National Guard duty, the commissioned corps of the Public Health Service, and any other category of persons designated by the President of the United States in time of war or emergency.
1.49 “Vision Insurance Benefits” means t he Employee's Vision Insurance Plan coverage for purposes of this Plan.
1.50 “Vision Insurance Plan” means the plan( s) that the Employer maintains for its Employees (and for their Spouses and Dependents who may be eligible under the terms of such plan), providing vision benefits through a group insurance policy or policies. The Employer may substitute, add, subtract, or re vise at any time th e menu of such plans and/or the benefits, terms, and c onditions of any such plans. Any such substitution, addition, subtraction, or revision will be communicated to Participants and will automatically be incorporated by reference under this Plan.
13426.00000\29725669.5
7 12728736.1 VI010-007
ARTICLE II.
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility to Participate. Subject to t he eligibility requirements under a resolution, policy, memorandum of understanding or other contract, if any, an individual is eligible to participate in this Plan if the individual: (a) is an Employee; and (b) is eligible for the Medical Insurance Benefits (whether or not coverage under such plan has been elected).
Eligibility for the Benefits shall also be subj ect to the additional requirements, if any, specified in the Medical Insurance, Dental Insurance, Vision Insurance, Health FSA, DCSA, and Life Insurance Plans. Each Empl oyee and member of the City Council shall be eligible to participate in this Plan as of his or her Entry Date.
2.2 Participation. An Em ployee may become a Partic ipant by completing and executing an election form and Salary Reduction Agreement and by providing such other information as is reasonably required by the Employer as a condition of such participation.
A Participant’s election to participate in the Plan shall continue to be valid until expressly revoked or altered, as set forth in Articl e III. Unless a new election is made, the Administrator shall continue to make Sala ry Reductions, and the Participant shall be deemed to have selected the Benef its previously elected by Participant in subsequent Plan Years consistent with the Participant’s most recent election form.
2.3 Recommencement of Participation.
(a) A former Participant may recommence participation in the Plan on his or her date of reemployment as an eligible Empl oyee. If a former Partic ipant is rehired by the Employer within thir ty (30) days of his or her date of termination, such Participant shall not be permitted to submit a new elec tion and his or her prior election shall be reinstated for the remainder of the Plan Y ear. However, a reemployed former active Participant may not make a new election to participate in a Health FSA or DCSA which is effective during the same Plan Year in which he or she separated from service with the Employer.
(b) Any employee who returns to active employment within ninety (90) days of completing a period of absence from employment for duty in the Uniformed Services shall reenter the Plan upon reemployment. A Participant whose health coverage under the Plan is terminated on account of his or her being in Uniformed Service, and is later reinstated, shall not be subject to a new exclusion or waiting period requirement imposed by such group health plan and/or Health FSA, provided that such requirements would not have been imposed if coverage had not been te rminated as a result of the Uniformed Service.
2.4 Termination of Participat ion. An Employee shall ceas e to be a Participant under this Plan and therefore, under each Component Plan, as of the earliest of:
(a) the date on which the Plan Administra tor, on a consistent and uniform basis, deems the Participant has failed to make th e required premium payments, including the Salary Reduction, for the elected Benefits, as provided in Section 2.7; or 13426.00000\29725669.5
8 12728736.1 VI010-007
(b) the date on which the Employee ceases (because of retirement, termination of employment, layoff, reduction of hours, or any other reason ) to be an Eligible Employee. Notwithstanding the foregoing, for purposes of pre-taxing COBRA coverage certain Employees may continue eligibility for certain periods on the terms and subject to the restrictions described in Section 5.6 for Insurance Benefits and Section 7.7 for Health FSA Benefits.
(c) the date on which the Plan terminates.
Termination of participation in this Plan will automatically revoke the Participant's elections. The Medical and Dental Insuranc e Benefits will terminate as of the date(s) specified in the Medical and Dental Insurance Plans. Reim bursements from the Health FSA and DCSA Accounts after termination of participation will be made pursuant to Section 7.7 for Health FSA Benefits and Se ction 6.13 for DCSA Benefits. Distributions from a Participant's HSA (whether before or after termination of employment) and all other matters relating to a Participant's HSA are outside of this Plan and are to be handled by the Participant and his or her trustee/cu stodian in accordance with the agreement between them-see Article VIII.
2.5 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 Employer will cont inue to maintain the Partici pant's Medical, Dental, and Vision Insurance Benefits, and Health FS A Benefits on the same terms and conditions as if the Participant were still an active Empl oyee. That is, if the Participant elects to continue their coverage while on leave, the Employer will continue to pay its share of the Contributions.
An Employer may require Participants to continue all Medical Insurance Benefits, Dental Insurance Benefits, Vision Insurance Benefit s, and Health FSA Benefits coverage while they are on paid leave, provided that Part icipants on non-FMLA paid leave are required to continue such coverage. If so, the Participant's share of the Contributions shall be paid by the method normally used during any paid leave (e.g., on a pre-tax Salary Reduction basis).
In the event of unpaid FMLA leave (or paid FM LA leave where coverage is not required to be continued), a Participant may elect to continue their Medical Insurance Benefits, Dental Insurance Benefits, Vision Insurance Benefits, and Health FSA Benefits during the leave. If the Participant elects to c ontinue coverage while on FMLA leave, then the Participant may pay their share of the Contributions in one of the following ways:
with after-tax dollars, by sending monthl y payments to the Employer by the due date established by the Employer;
with pre-tax dollars, by having such amounts withheld from the Participant's ongoing Compensation (if any), including unused sick days and vacation days, 13426.00000\29725669.5
9 12728736.1 VI010-007
or pre-paying all or a porti on of the Contributions for the expected duration of the leave on a pre-tax Salary Reduction basis out of pre-leave Compensation.
To pre-pay the Contributions, the Partic ipant must make a special election to that effect prior to t he date that such Compensat ion would normally be made available (pre-tax dollars may not be us ed to fund covera ge during the next Plan Year); or
under another arrangement agreed upon bet ween the Participant and the Plan Administrator (e.g., the Plan Administrator may fund coverage during the leave and withhold "catch-up" amounts from th e Participant's Co mpensation on a pre-tax or after-tax basis) upon the Participant's return.
If the Employer requires all Participants to continue Medical Insurance, Dental Insurance, Vision Insurance, and/or H ealth FSA Benefits during an unpaid FMLA leave, then the Participant may elect to disc ontinue payment of the Partici pant's required Contributions for such Benefit(s) until the Participant returns from leave. Upon returning from leave, the Participant will be required to repay the Cont ributions not paid by the Participant during the leave. Payment shall be withheld from the Participant's Com pensation either on a pre-tax or after-tax basis, as agreed to by the Plan Administrator and the Participant.
If a Participant's Medical Insurance Benefits, Dental Insurance Benefits, Vision Insurance Benefits, or Health FSA Benefits coverage ceases while on FMLA leave (e.g., for non- payment of required c ontributions), then the Participant is permitt ed to re-enter the Medical Insurance Benefits, D ental Insurance Benefits, Vision Insurance Benefits, or Health FSA Benefits as applicable, upon return from such leave on the same basis as when the Participant was participating in the Plan prior to the leav e, or as otherwise required by the FMLA.
In addition, the Plan may require Participants whose Medical Insurance Benefits, Dental Insurance Benefits, Vision Insurance B enefits, or Health FSA Benefits coverage terminated during the leave to be reinstated in such coverage upon return from unpaid leave, provided that Participants who return from a period of unpaid, non-FMLA leave are required to be reinstated in such coverage. Notwithstanding the preceding sentence, with regard to Health FSA Benefits a Participant whose coverage ceased will be permitted to elect whether to be reinstated in the Health FSA Benefits at the same coverage level as was in effect before the FMLA leave (with increased contributions for the remaining period of coverage) or at a coverage level that is reduced pro rata for the period of FMLA leave during which the Participant did not pay Contributions. If a Participant elects a coverage level that is reduced pro rata for the period of FMLA leave, then the amount withheld from a Participant's Compensation on a per-pay- period basis for the purpose of paying for reinstated Health FSA Benefits will be equal to the amount withheld prior to the period of FMLA leave.
(b) Non-Health Benefits. If a Participant goes on a qualifying leave under the FMLA, then entitlement to non-health benefits (such as DCSA Benefits) is to be determined by the Employer's policy for providing such Benefits when Participants are on 13426.00000\29725669.5
10 12728736.1 VI010-007
non-FMLA leave, as described in Section 2.6. If such poli cy permits a Participant to discontinue contributions while on leave, then the Participant will, upon returning from leave, be required to repay the Contributions not paid by the Participant during the leave.
Payment shall be withheld from the Partici pant's Compensation eit her on a pre-tax or after-tax basis, as may be agreed upon by the Plan Administrator and the Participant, or as the Plan Administrator otherwise deems appropriate.
2.6 Non-FMLA Leaves of Absence. If a Part icipant goes on an unpaid leave of absence that does not affect e ligibility, then the Part icipant will continue to participate and the Contributions 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 Plan Administrator. If a Participant goes on an unpaid leave that affects eligibility, then the election change rules in Article III will apply.
2.7 Cessation of Required Contributions. A Part icipant’s election to participate in the Plan may be terminated in accordance with Sect ion 2.4(a), subject to the terms of any applicable policy, resolution, memorandum of understanding or other contract, if the Participant fails to make the required prem ium payments with respect to the Benefit. In such case, that Participant may not make a new benefit election for the remaining portion of the Plan Year.
2.8 Eligibility Under Component Plans. The eligibility of a Pa rticipant under a Component Plan shall be the same as set forth in this Article, unless otherwise specified in the Component Plan under which a Participant has elected to receive benefits. Each Component Plan may provide more rigorous e ligibility requirements which may cause a Participant to be ineligible to participate in a particular Co mponent Plan, but continue to be eligible to participate in this Plan.
ARTICLE III.
ELECTIONS
3.1 Election of Contributions. Prior to the annual Entry Date (or mid-year Entry Date for newly hired Employees or Employees allowed to change their elections mid-Plan Year as provided herein), there shall be an Open Enrollment Period during which the Employee may elect to participate in this Plan. The Administrator shall provide each Employee during each Open Enrollment Period with acce ss to an electronic platform to elect benefits and complete his or her Salary Re duction Agreement. Each Participant shall submit to the Employer on the election form hi s or her election as to the Benefits to be provided by the Employer and the portion of his or her Flexible Benefit Dollars which is to be applied to provide the Benefits select ed. The Election Form/Salary Reduction Agreement must be returned to the Plan Admini strator on or before the last day of the Open Enrollment Period, and it shall become effective on the first day of the next Plan Year.
13426.00000\29725669.5
11 12728736.1 VI010-007
If an Eligible Employee fails to file an El ection Form/Salary Reduction Agreement within the time period described in Sections 3.1, then the Employee may not elect any Benefits under the Plan (a) until the next Open Enrollment Period; or (b) until an event occurs that would justify a midyear election change.
3.2 Salary Reduction. To the extent that the Benefits elected exceed a Participant’s Flexible Benefit Allo wance, each Participant shall aut horize the Employer to reduce his/her compensation by the amount needed for the purchase of the Benefits elected by the Participant by submitting a completed Sa lary Reduction Agreement containing, at a minimum, the following information:
(a) that the election form must be completed and returned to the Plan Administrator during the Open Enrollment Period; and
(b) that the election shall be effective on the Entry Date and continue in effect until the last day of the Plan Year for which t he election is made, or until the Participant provides the Plan Administrator with a new election form modi fying or terminating his or her existing election; and
(c) that the election shall be irrevocabl e unless the Participant is entitled to change his or her election as provided in this Article III; and (d) that the Participant is directing the Plan Administrator to convert his or her salary (Salary Reduction) to Flexible Benefit Dollars, as set forth in Article IV; and (e) that the Participant’s Salary Redu ction shall be considered as Employer contributions used to pay for Benefits under the Plan.
Salary Reductions shall be contributed to the Plan by the Employer on behalf of a Participant on a level and pro rata basis fo r each payroll period. The Plan Administrator reserves the right to establish a limit on the amount of Salary Reductions which a Participant may elect for the Plan Year or adjust any Salary Reduction election made under the Plan and, if necessary, the Participant’s Flexible Benefit Allowance, to ensure that the Plan complies with the nondiscrimination provisions of Article X.
3.3 Initial Election Period. A new Employee must complete and submit an electronic benefit election form and a Salary Reducti on Agreement with the Plan Administrator during the Open Enrollment Period for that Employee.
3.4 Elections for Subsequent Plan Years.
(a) Open Enrollment Period. An Open Enro llment Period shall occur prior to the beginning of each Plan Year. During the Open Enrollment Period, a Participant who wishes to change his or her existing election, shall have the opportunity to elect new or different Benefits under the Plan effective for the subsequent Plan Year subject to the terms and conditions of the Component Plans.
13426.00000\29725669.5
12 12728736.1 VI010-007
(b) Failure to Reelect. If a Participant fa ils to change his or her benefit elections during Open Enrollment and remains eligible to participate in the Pl an, the Participant shall be deemed to have elect ed the Benefits selected on the election for the preceding Plan Year and a Salary Reduction and/or Flex ible Benefit Allowance amount necessary to provide the same coverage.
(c) Reimbursement Plans. Elections to c ontribute to the Health FSA Plan and DCSA Plan must be affirmatively elected each year by the Participant. A failure to reelect shall result in nonparticipation under the Health FSA Plan and/or DCSA Plan for the upcoming Plan Year. The prior year election will not be carried over. (d) Continuation Coverage. During an Open Enrollment Period, any Participant, or a Qualified Beneficiary thereo f, that has elected continuation of health coverage under the Plan, shall hav e the opportunity to elect new or different coverage under the Plan effective for the subsequent Plan Year. However, any such election shall be limited to health care options under the Plan.
3.5 Waiver of Medical Coverage. If prov ided for in an applicable policy, resolution, memorandum of understanding or other contract, an Elig ible Employee may waive medical coverage as provided in such policy, resolution, memorandum of understanding or other contract, according to the terms of such document. The requirements for an opt out arrangement or eligible opt out arrangement are descri bed in section 5.4 and 5.5 respectively.
3.6 Participant Makes Incorrect Election. If a Participant does not elect the correct amount of Salary Reduction to pay for cove rage of the Benefits elected under the Plan, the Plan Administrator is authorized to increas e or decrease a Participant’s election by the amount necessary to provide the Participant’s elected coverage under the Plan.
3.7 Special Enrollment Period. In accordance with t he Code Section 9801(f) and the regulations issued by the Department of Health and Human Services, an eligible Employee or Dependent who ei ther incurs a loss of health coverage or becomes otherwise eligible for health coverage under th is Plan shall be permitted to enroll for health coverage under the Plan in accordance with one of the special enrollment periods described in paragraphs (a) and (b) below.
(a) Loss of Health Coverage. An Employ ee who is otherwise eligible to enroll in the Plan but has not elected to participat e in the Plan pursuant to Section 3.5 of the Plan, or a Dependent of an Employee that is not enrolled but otherwise eligible under the Plan, shall be permitted to enroll for coverage under the Plan provided all of the following conditions are met:
(1) The Employee or Dependent was covered under another employer’s group health plan or had alternate health insu rance coverage (“Prior Health Coverage”) at the time coverage under this Plan was previously offered to the Employee. 13426.00000\29725669.5
13 12728736.1 VI010-007
(2) The Employee provides proof of c ancellation of his or her or his or her Dependent’s Prior Health Coverage and any other doc umentation required by the CalPERS.
(3) The Employee stated in writing at such time that Prior Health Coverage was the reason for declining enrollment.
(4) The Employee’s or Dependent’s Pr ior Health Coverage was either:
(A) under a continuation cove rage provision and the coverage period was exhausted; or
(B) was terminated as a result of loss of eligibility (including a result from a Change in Status ) or employer contributions toward such coverage were terminated.
(5) Under the terms of the Plan, the Employee requests such enrollment not later than thirty (30) days after the date of a special enrollment event or the date a certificate of group health coverage is provided following a termination of health coverage. (b) Dependent Special Enrollment Peri od. Any Employee, regardless of whether said Employee is currently enro lled for health coverage under the Plan, who experiences an increase in the number of Dependents whether through marriage, birth, adoption or placement for adoption, shall be permitted to enroll for health coverage under the Plan. During the “dependent special enrollment period, ” Employee shall have the opportunity to enroll all ot her Dependents who ar e otherwise eligible for coverage, including the Employee if not enrolled, pr ovided the Employee elec ts enrollment within thirty (30) days commencing on the later of: (i) the date dependent coverage is made available; or (ii) the date of the marriage, birth, adoption, placement for adoption, or other event which results in the change of Dependents of Employee. (c) State Premium Subsidy. Notwithstanding the thirty (30) day election period prescribed by subparagraphs (a) and (b) above, if an Employee or his or her Dependent becomes eligible to receive a state prem ium subsidy for a group health plan sponsored by the Employer, such Employee shall have the opportunity to enroll himself or herself or his or her affected Dependent for coverage in the Employer’s health plan, provided the Employee elects enrollment within sixty (60) days of the date of the notice of qualification from Medicaid or the Children’s Health Insurance Program (CHIP). (d) Health FSA and DCSA Plans. Notwit hstanding the foregoing, the special enrollment rights conveyed under this Section 3.7 shall not extend to include an election to contribute to a Health FSA Plan or DCSA Plan offered under the Plan.
3.8 Irrevocability of Elections. Unless an exception applies (as described in Section
3.9), a Participant's election under the Plan is irrevocable for the duration of the Period of Coverage to which it relates.
13426.00000\29725669.5
14 12728736.1 VI010-007
3.9 Revocability of Elections. The Plan Ad ministrator shall permit a Participant to revoke an existing election or make a new election outside of the Open Enrollment Period for the remainder of a Plan Year only if the new election is for one of the following reasons:
(a) both the revocation and new electi on are made on account of and is consistent with a Change in Status, as set forth in Section 3.10; (b) the Participant or their Spouse or Dependent is entitled to HIPPA special enrollment rights as set forth in Section 3.11;
(c) pursuant to certain judgement, decrees , or orders as set forth in Section
3.12;
(d) the Participant or thei r Spouse or Dependent is entitled to enroll in Medicare or Medicaid as set forth in Section 3.13;
(e) there is a significant change in t he cost or coverage of the benefits previously elected by the Part icipant, that does not occur as a result of the Participant electing continuation coverage pursuant to Article VIII, as se t forth in Sections 3.14 and
3.15;
(f) both the revocation and new election are made on account of and pursuant to the terms of a “national medical support notice” as set forth in Section 3.16; (g) the Participant desires to enroll fo r health coverage in a Qualified Health Plan (as defined in Section 3.17(d)) through a Marketplace in accordance with the provisions of Section 3.17;
(h) the Participant may change an electi on under the Plan upon FMLA leave in accordance with Section 2.5 and upon non-FMLA leave in accordance with Section 2.6; or
(i) the Participant's election will terminat e under the Plan upon termination of employment in accordance with Sections 2.4, as applicable.
3.10 Change in Status. A Pa rticipant may make a change in coverage during a Plan Year due to a Change in Status. A Participant must notify the Plan Administrator within thirty (30) days and complete a new el ectronic election to change coverage. The Participant’s election shall only be deemed valid if the requested change in coverage is necessitated by and corresponds with Change in Status and is consistent with the terms and conditions of the affected Component Plan. This election shall be effective as of the first day of the month followin g the date the Partic ipant provides the Plan Administrator with a new election form reflecting the change in coverage due to a Change in Status. A Participant may change their election under the Plan upon the occurrence of a Change in Status event only if the election is consistent with the event under both the applicable special consistency rules and the general consistency rule. The Plan Administrator, in its sole discretion and on a uniform and consis tent basis, shall determine, based on 13426.00000\29725669.5
15 12728736.1 VI010-007
prevailing IRS guidance, whether a request ed election change meets the consistency requirements below.
(a) General Consistency Rule : A Participant’s election change satisfies the general consistency requirement only if th e election change is made on account of and corresponds with a Change in Status that affect s eligibility for coverage under a plan of the Employer or a plan of the Spouse's or Dependent's employer. (b) Special Consistency Rules: Assuming that the general consistency rule is also satisfied, a requested election change must satisfy the following specific consistency requirements in order for a Participant to be able to alter their 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 co verage, a Participant may only elect to cancel Benefits for the Spouse or Dependent, as applicable. However, if the Participant or their Spouse or Dependent becomes eligible for COBRA because of a reduction of hours or because the Participant's Dependent ceases to satisfy the eligibility requirements for coverage (and the Participant remains a Participant under this Plan), then the Participant may increase their election to pay for such coverage.
(2) Gain of Coverage Eligibility Under Another Employer's Plan . For a Change in Status in which a Participant or their Spouse or Dependent gains eligibility for coverage under another employer’s cafeteria plan or qualified benefit plan as a result of a change in marital or 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 other employer's plan. The Plan Ad ministrator may rely on a Participant's certification that the Participant has obt ained or will obtain coverage under the Spouse's or Dependent's employer's plan, unless the Plan Administrator has reason to believe that the Participant's certification is incorrect.
Election changes may not be made to reduce Health FSA coverage during a Period of Coverage; however, election changes may be made to cancel Health FSA coverage completely due to the occurrence of any of the following events: death of a Spouse, divorce, legal separation, or annulment; death of a D ependent; change in employment status such that the Partic ipant becomes ineligible for Health FSA coverage; or a Dependent's ceasing to satisfy eligibilit y requirements for Health FSA coverage.
Notwithstanding the foregoing, such cancellati on will not become effective to the extent that it would reduce future contributions to the Health FSA to a point where the total contributions for the Plan Year are less than the amount already reimbursed for the Plan Year.
To the extent the Code and the regulations issued thereunder alters this definition of Change in Status, this Section 3.10 is intended to be interpreted in accordance with any revised definition or interpretation.
13426.00000\29725669.5
16 12728736.1 VI010-007
3.11 HIPAA Special Enrollment Rights . If a Participant or their Spouse or Dependent is entitled to special enrollment rights under a group health plan (other than an excepted benefit), as required by HI PAA under Code § 9801(f), then a Participant may revoke a prior election for group health plan coverage and make a new election (including, when required by HIPAA, an election to enroll in another benefit package under a group health plan), provided that the election change corresponds with such HIPAA special enrollment rights. As required by HIPAA, a special enrollment right will arise in the following circumstances:
(a) a Participant or their Spouse or D ependent declined to enroll in group health plan coverage because they had coverage, and eligibility for such coverage is subsequently lost because: (A) the cove rage was provided under COBRA, and the COBRA coverage was exhausted; or (B) the coverage wa s non-COBRA coverage, and the coverage terminated due to loss of elig ibility for coverage or the employer contributions for the coverage were terminated;
(b) a new Dependent is acquired as a re sult of marriage, birth, adoption, or placement for adoption;
(c) the Participant's or Dependent's cove rage under a Medicaid plan or state children's health insurance program is terminated as a result of loss of eligibility for such coverage; or
(d) the Participant or Dependent becomes eligible for a state premium assistance subsidy from a Medicaid plan or through a state children' s health insurance program with respect to coverage under the group health plan.
An election to add previously eligible Depen dents as a result of the acquisition of a new Spouse or Dependent child sh all be considered to be consistent with the special enrollment right. An election change on account of a HIPAA special enrollment attributable to the birth, adoption, or plac ement for adoption of a new Dependent child may, subject to the provisions of t he underlying group health plan, be effective retroactively (up to the amount of time provided by the underlying group health plan).
3.12 Certain Judgments, De crees, and Orders (Applies to Premium Payment and Health FSA Benefits, but Not to DCSA B enefits). If a judgment, decree, or order (collectively, an "Order") resulting from a divorce, legal separation, annulment, or change in legal custody (including a QMCSO) require s health coverage for a Participant's child (including a foster child who is a Dependent of the Participant), then a Participant may (1) change their election to provide coverage for the child if t he Order requires the Participant to provide coverage; or (2) chan ge their election to revoke coverage for the child if the Order requires that another individual provide coverage under that individual's plan, and such coverage is actually provided.
3.13 Medicare and Medicaid (Applies to Pr emium Payment Benefit s, to Health FSA Benefits as Limited Below, but Not to DCSA Benefits). If a Participant or their Spouse or Dependent who is enrolled in a health plan under this Plan becomes entitled to or enrolled 13426.00000\29725669.5
17 12728736.1 VI010-007
in Medicare or Medicaid, then the Particip ant may prospectively reduce or cancel the health coverage of the person becoming entitl ed to Medicare or Medicaid. Furthermore, if a Participant or their Spouse or D ependent who has been entitled to Medicare or Medicaid loses eligibility for such coverage, then the Participant may prospectively elect to commence or increase the Medical Insur ance Benefit of the individual who loses Medicare or Medicaid eligibility.
3.14 Change in Cost of B enefit (Applies to Premium Payment Benefits, to DCSA Benefits as Limited Below, but Not to Health FSA Benefits). (a) Insignificant Change. If the cost of any Benefit offered under the Component Plans (except a Co mponent Plan which provides for the reimbursement of medical expenses) increases or decreases during the Plan Year, the Administrator may, on a reasonable and consistent basis, automatically increase or decrease a Participant’s election by a corresponding amount of Salary Reduction and/or Flexible Benefit Dollars to ensure that the Participant continues to receive the elected coverage under the Component Plans; provided, howeve r, that if the increase or decrease is a significant change in cost, the Participant shall be given the option to elect to change his or her Benefits.
(b) Significant Change in Cost of Benefit. If the cost of a Benefit option (other than a Component Plan which provides for the reimbursement of expenses) significantly increases or decreases during a coverage period, all affected Participants may make a corresponding change in their benefit election under the Plan. Changes that may be made include the following:
(1) In the case of a Benefit opti on that has experienc ed a significant decrease in cost, a Participant may make a prospective change to an election to commence participation in that Benefit option.
(2) In the case of a Benefit opti on that has experienc ed a significant increase in cost, a Participant may change an election to terminate such coverage and either, elect prospective coverage under another Benefit option providing similar coverage or drop coverage if no other Benefit option provid ing similar coverage is available.
(c) Definitions. For purposes of this Sect ion, a “cost of increase or decrease” refers to an increase or decrease in the amount of the Salary Reductions contributed by a Participant under the Plan, wh ether that increase or decreas e results from an action taken by the Employee (such as switching between full-time and part-time status) or from an action taken by the Employer (such as reducing the amount of Employer contributions for a class of Employees).
(d) Changes to Dependent Care Expenses. In the case of an election to participate in the DCSA Plan, a Participant’s prior election may be changed only if the cost change is imposed by a dependent care pr ovider who is not a relative of the 13426.00000\29725669.5
18 12728736.1 VI010-007
employee. For this purpose, a relative is an individual who is related as described in Code §§152(d)(2)(A) through (G), incorporating the rules of Code §§152(f)(1) and 152(f)(4).
3.15 Significant Change in Coverage of Component Plan B enefit (Applies to Premium Payment and DCSA Benefits, but Not to Health FSA Benefits). (a) Significant Curtailment Without Loss of Coverage. If a Participant or a Participant’s Spouse or Dependent experiences a “significant curtailment of coverage” under a Component Plan that is not a loss of co verage, including a significant increase in the deductible, co-payment, or the out-of-pocket cost sharing limit under a group health plan, the Participant may revoke his or her election for such coverage and prospectively elect to receive coverage under another Benef it option providing similar coverage. For this purpose, coverage under a Component Plan is “significantly curtailed” only if there is an overall reduction in coverage provided under the Component Plan so as to constitute reduced coverage generally. In this regard, the loss of one particular physician in a health care provider network in most cases will not qualify for a significant curtailment of coverage under this Section.
(b) Significant Curtailment With Loss of Coverage. If a Participant or a Participant’s Spouse or Dependent experiences a “significant curtailment of coverage” that is a “loss of coverage” under a Component Plan, the Participant may revoke his or her election for such coverage and elect either to receive coverage under another Component Plan providing similar coverage or to drop cove rage if no other Component Plan providing similar coverage is available under the Plan. For this purpose, a “loss of coverage” means a complete loss of co verage under a Component Plan or other coverage option, including the elimination of a Benefit option, an HMO ceasing to be available in the area where t he individual resides, or the individual losing all coverage under the option by reason of an overall lifetime or annual limitation under a group health plan. In this regard, each of the following is considered to be a “loss of coverage” under this Section:
(1) a substantial decrease in the me dical care providers available under the Benefit option (such as a major hospita l ceasing to be a mem ber of a preferred provider network or a subst antial decrease in the physicians participating in a preferred provider network or an HMO; or
(2) a reduction in the benefits for a s pecific type of medical condition or treatment with respect to which a Participant or the Participant’s Spouse or Dependent is currently in a course of treatment; or
(3) any other similar fund amental loss of coverage.
(c) Addition or Improvement of Benef it Option. If duri ng the Plan Year, a Component Plan adds a new benefit package optio n or other coverage option, or if coverage under an existing option is significantly improved, any Participant or Employee, who is otherwise eligible to participate in t he Plan, may revoke th eir election under the 13426.00000\29725669.5
19 12728736.1 VI010-007
Plan for the Plan Year and make an election on prospective basis for coverage under the new or improved benefit option.
(d) DCSA Coverage Changes. A Participant may make a prospective election change that is on account of and corresponds with a change by the Pa rticipant in the dependent care service provider. For example: (a) if the Partici pant terminates one dependent care service provider and hires a new dependent care service provider, then 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, then the Participant may cancel coverage.
(e) Change In Coverage Under Another Em ployer Plan. A Participant, or an Employee who is otherwise elig ible to participate in the Plan but has elected not to participate, may make a prospective election change that is on account of and consistent with a change made under another em ployer plan (including a pl an of the Employer or another employer) by the Employee or the Employee’s spouse or dependent, provided the other employer plan allo ws participants to make an election change that would be permitted under the rules of Treasury Regulat ion Section 1.125-4(c) and as provided in this Plan.
3.16 National Medical Support Notice. A Pa rticipant may make a change in coverage during a Plan Year to provide health cover age under the Plan for Participant’s child or legal dependent pursuant to the terms of a judgment, decree, or order resulting from a family law proceeding, including a National Medical Support Notice (as described in Section 401(b) of the Chil d Support Performance and Incentive Act of 1998), requiring Participant to provide health coverage for the child. The Participant may also make a change which cancels health coverage for the Participant’s child or dependent provided the order requires the spouse, former spouse, or other individual to provide health coverage for the child. The Participant will need to provide legal documentation (e.g., court order) to make any changes in coverage pursuant to this Section 3.16.
3.17 Election Changes to Enroll through Marketplace (Applies Only to Premium Payment Benefits for the Medical Insurance Plan). A Participant may make a prospective election change to revoke coverage under the Employer group health plan which provides minimum essential coverage (as defined in Code Section 5000A(f)(1)) on account of and consistent with his or her enrollment in a Qualified Health Plan through a Marketplace in accordance with the following:
(a) Change Due to Reduction in Hours of Services (Applies Only to Premium Payment Benefits for the Medical Insurance Plan) . A Participant, who was reasonably expected to work an average of at least thir ty (30) hours per week and experiences a change in employment status resulting in a reduction of hours, may prospectively change his or her election to revoke coverage if the Participant has enrolled or is eligible to enroll and intends to enroll in a Qualified Health Plan through a Marketpl ace. To be eligible under this paragraph, the election change must be on account of the Participant’s intent 13426.00000\29725669.5
20 12728736.1 VI010-007
to enroll for new coverage through the Market place, and such new coverage shall be effective beginning no later than the day im mediately following the last day of coverage under the Employer’s group health plan.
(b) Change Due to Enrollment in Qualif ied Health Plan. A Participant, who is eligible for a special enrollment period to enr oll in a Qualified Health Plan through the Marketplace on account of a qualifying life ev ent or is eligible to enroll during the Marketplace’s annual open enrollment period, may prospectively change his or her election to revoke health coverage. To be e ligible under this paragraph, the election change must be on account of the Participant’s intent to enroll for new coverage through the Marketplace and such new coverage sha ll be effective beginning no later than the day immediately following the last day of coverage under the Employer’s group health plan.
(c) Employer Reliance. For purposes of this Section 3.17, the Administrator may rely on the reasonable representation of a Participant that the Participant (and his or her covered Dependents) have enrolled or intend to enroll in a Qualified Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.
(d) Definitions. The term “Qualified Health Plan” shall mean a group health plan that provides “minimum essential coverage” as defined in Code Section 5000A(f).
3.18 No Cash-Out Permitted. Participants el ecting to revoke coverage in accordance with Section 3.17 and purchase Qualified Health Plan coverage shall not be permitted to receive any cash-out or cash-in-lieu.
3.19 Late Enrollment in Employ er Offered Medical Plan. An Employee that elects not to enroll in Employer offered medical coverage pursuant to Section 3.5 and does not qualify for special enrollment will have limited opportunities to enroll. The earliest effective date of medical coverage will be t he first of the month followi ng a 90-day waiting period or January 1 following Open Enrollment.
ARTICLE IV.
BENEFTIS OFFERED AND METHOD OF FUNDING
4.1 Benefits Offered. When first eligible or during the Open Enrollment Period as described under Article III, Eligible Employ ees will be given the opportunity to elect one of more of the following Benefits:
(a) Premium Payment Benefits, as described in Article V; (b) Health FSA Benefits, as described in Article VII.
(c) Life Insurance Benefits, as described in Article IX; and 13426.00000\29725669.5
21 12728736.1 VI010-007
(d) DCSA Plan Benefits, as described in Article VI.
In no event shall Benefits under the Pl an be provided in the form of deferred compensation. Notwithstanding the foregoing, Health FSA carryovers may be permitted as provided in Article VII and under any applicable memorandum of understanding, resolution, policy, or other contract. In add ition, amounts remaining in a Participant's DCSA Plan Account at the end of a Plan Year may be used to reimburse the Participant for Dependent Care Expenses that are incu rred during the Grace Period immediately following the close of that Plan Year as provided in Article VI. No Grace Period is available for Health FSA Benefits.
4.2 Employer and Partic ipant Contributions.
(a) Employer Contributions . For Participants who elect Medical, Dental, Vision, Health FSA, DCSA or Life Insurance Benefits, the Employer may contribute a portion of the Contributions as provided in the Open Enrollment materials furnished to Employees, the Election Form/Salary Reduction Agr eement, and/or any applicable memorandum of understanding, resolution, policy, or contract. The Employer may also designate a Health Flex Contribution that a Partic ipant may allocate to the Medi cal, Dental, and/or Vision Insurance Plans, or the Health FSA as provided by any applicable memorandum of understanding, resolution, policy, or contract related to this Plan. The Employer may also designate a Non-Health Flex Contribution or any other named employer contribution amount as permitted by an Employer policy, memorandum of understanding, resolution, or other contract.
(b) Participant Contributions . Participants who elect Benefits may pay for the cost of coverage on a pre-tax Salary R eduction basis by completing an Election Form/Salary Reduction Agreement. Participants who elect Health FSA Benefits or DCSA Benefits must pay for the cost of that coverage on a pre-tax Salary Reduction basis by completing an Election Form/Salary Reduction Agreement.
4.3 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 el ected, an amount equal to (1) the annual Contributions for such Benefit s, divided by the number of pay periods in the Period of Coverage; (2) an amount otherwise agreed upon between the Employer and the Participant; or (3) an amount deemed appropria te by the Plan Administrator. If a Participant increases his or her electi on under the Health FSA Component, Life Insurance, or DCSA Component to the extent permitted under Section 3.9, the Salary Reductions per pay period will be, for the B enefits affected, an amount equal to (1) the new reimbursement limit elect ed pursuant to Section 3.9, less the Salary Reductions made prior to such election change, divided by the number of pay periods in the balance of the Period of Coverage commencing with the election change; (2) an amount otherwise agreed upon between the Employer and the Pa rticipant; or (3) an amount deemed appropriate by the Plan Administrator (i.e., in the event of sh ortage of reducible 13426.00000\29725669.5
22 12728736.1 VI010-007
Compensation, amounts withheld and the benefit s to which Salary Reductions are applied may fluctuate).
(b) Considered Employer Cont ributions for Certain Purposes . Salary Reductions are applied by the Employer to pay for the Participant's share of the Contributions for the Benefit s, and, for the purposes of this Plan and the Code, are considered to be Employer contributions.
(c) Salary Reduction Balanc e Upon Termination of Coverage. If, as of the date that any elected coverage under this Plan terminates, a Participant's year-to-date Salary Reductions exceed or are less than the Part icipant's required Contributions for the coverage, then the Employer will, as applicable, either return the excess to the Participant as additional taxable wages or recoup t he due Salary Reduction amounts from any remaining Compensation.
4.4 Funding This Plan. All of the amounts payable under this Plan shall be paid from the general assets of the Employer, but Benef its are paid as provi ded in the applicable Medical, Dental, or Vision Insurance Plan. Nothing herein will be construed to require the Employer or the Plan Administrator to maintain any fund or to segregate any amount for the benefit of any Participant, and no Partici pant or other person shall have any claim against, right to, or security or other interest in any fund, account, or asset of the Employer from which any payment under this Plan may be made. There is no trust or other fund from which Benefits are paid.
ARTICLE V.
PREMIUM PAYMENT BENEFITS
5.1 Benefits. The Premium Payment Component offers b enefits under the Medical, Dental, and Vision Insurance Plans. Notwithstanding any other provision in this Plan, the Medical, Dental, and Vision Insurance Benefits are subject to the terms and conditions of the Medical, Dental, and Vision Insuranc e Plans, and no changes can be made with respect to such Benefits under this Plan (suc h as midyear changes in election) if such changes are not permitted under the applicable M edical, Dental, and Vision Insurance Plans. An Eligible Employee can elect Benefits by electing to pay for their share of the Contributions for the Benefits on a pre-tax Salary Reduction basis; or elect no Benefits.
5.2 Contributions for Cost of Coverage. The annual Employer Contribution for a Participant's Benefits is equal to the amount as set by the Employer, as described in a memorandum of understanding, resolution, policy, contract, or other applicable document, which may or may not be the same amount charged by the Medical, Dental, or Vision Insurance Plan or insurance carrier . The Employer may also designate Health Flex Contributions that a Participant may allocate to Medical, Dental, and Vision Insurance Benefits. Participants who elec t benefits under the Medical Insurance Plan and/or the Group Term Life Insurance Plan and c ontribute to the cost of coverage, pay for the cost of that coverage on a pre-ta x Salary Reduction basis up to any applicable limitations by completing an Election Form/Salary Reduction Agreement. 13426.00000\29725669.5
23 12728736.1 VI010-007
5.3 Benefits Provided Under the Medical, Dental, and Vision Insurance Plans. The types and amounts of Medical, Dental, and Vision Insurance Benefits, the requirements for participating in the Medical, Dental, and Vision Insurance Plans, and the other terms and conditions of coverage, benefits, and claims of the Medical, Dental, and Vision Insurance Plans are set forth in the Medical, Dental, and Vision Insurance Plans, not this Plan.
5.4 Opt Out Arrangement . The Employer may establish an Opt Out Arrangement for Eligible Employees who decline to enroll in the Medical Insurance Plan in an applicable memorandum of understanding, resolution, policy, or contract. If an Opt Out Arrangement is established, the Eligible Employee may elect to take a taxable cash amount (otherwise known as cash-in-lieu) established by the Empl oyer in lieu of enrolling in the Medical Insurance Plan subject to any requirements or conditions set forth in an applicable memorandum of understanding, resolution, policy, or contract.
5.5 Eligible Opt Out Arrangement. The Empl oyer may establish an Eligible Opt Out Arrangement under this Plan or in an a pplicable memorandum of understanding, resolution, policy, or contract as a condition to a Participant receiving a taxable cash amount (cash-in-lieu) established by the Em ployer in lieu of enrolling in the Medical Insurance Plan. The conditions that must be satisfied for an Eligible Opt Out Arrangement are as follows:
(a) The Participant and the Participant’s Tax Family must have (or will have) minimum essential coverage ("MEC") through another source (other than coverage in the individual market, whether or not obtained through Covered California); (b) A Tax Family means all individuals for whom the Participant reasonably expects to claim a personal exemption deducti on for the taxable year(s) that cover the Participant's Plan Year to which the opt-out arrangement applies; (c) The Participant must provide r easonable evidence of the MEC for the Participant and their Tax Family for the applicable period. Reasonable evidence may include an attestation by the Participant;
(d) The Participant must provide the ev idence/attestation every Plan Year; (e) The Participant must provide the evidence/attestation no earlier than a reasonable time before coverage starts (e.g. Open Enrollment). The evidence/attestation may also be provided within a reasonable time after the Plan Year starts; and (f) The cash-in-lieu payment cannot be m ade (and the Employer must not in fact make payment) if the Employer knows or has reason to know that the Participant or Tax Family member does not have the alternative coverage.
5.6 Medical Insurance Benef its; COBRA Contributions. Contributions for COBRA coverage for Medical Insurance Benefits may be paid on a pre-tax basis for current Employees receiving taxable compensation where COBRA coverage arises either (a) 13426.00000\29725669.5
24 12728736.1 VI010-007
because the Employee ceases to be eligible because of a reduction of hours or (b) because the Employee's Dependent ceases to satisfy the eligibilit y requirements for coverage. For individuals who cease to be elig ible because of retirement, termination of employment, or layoff, Contributions for COBRA coverage for Medical Insurance Benefits shall be paid on an after-tax basis (unless otherwise permitted by the Plan Administrator on a uniform and consistent basis). Contri butions for COBRA co verage may not be prepaid from contributions in one Plan Year to provide coverage that extends into a subsequent Plan Year.
5.7 Uniformed Service Under USERRA. In accordance with the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), a Participant who is absent from employment with the Employer on account of being in the Uniformed Services (as defined in Section 1.48), may elect to continue participation in the Plan. The coverage period shall extend for the lesser of eighteen (18) months or until the Participant fails to apply for reinstatement or fails to return to empl oyment with the Employer. The Participant shall be responsible for making t he required contributions to pay for benefits elected during the period during which he or she is in “uniformed service.” The manner in which such payments are made shall be determined by the Plan Administrator, in a manner similar to the payment of contributions with respect to FMLA Leave.
5.8 Provision of Benefits. The Employer shall provide those Benefits elected by a Participant on his or her election form for any Period of Coverage in accordance with such election. The Benefits shall be provided purs uant to the terms and conditions of the Component Plans, where applicable, as shall be set forth from time to time in the individual Component Plan documents; provided, however, that the terms and conditions of the Component Plans are not inconsistent with the terms and conditions of this Plan.
No Benefit under the Plan shall be paid in any manner that defer s the receipt of compensation beyond the last day of the Plan Year except as spec ifically provided in Section 7.10 with respect to the carry over for reimbursement of Eligible Medical Expenses.
5.9 Cash Payments. Any cash to be paid to a Participant under an election to receive additional cash compensation under an Opt Out Arrangement or Eligible Opt Out Arrangement shall be added to taxable compens ation and shall be paid during the Plan Year, subject to any applicable wage withholdi ng or similar taxes. Such payments shall not include interest from t he date the amount was credit ed to the Participant’s behalf through to the date of payment.
5.10 Taxable Benefits. If offe red by the Employer, Employees shall be permitted to elect to receive certain permitted taxable benefits. An Employee receiving such benefits shall be treated as having received, at the time that the benefit is received, cash compensation equal to the full value of the benefits and then as subsequently purchasing the benefits with after-tax employee contributions.
If permitted by the Employer, Employees may elect health coverage under the Plan for an individual who is not the Spouse or Dependent of the Participant; provided, however, 13426.00000\29725669.5
25 12728736.1 VI010-007
that the fair market value of such health coverage is included in the Participant’s W-2 income.
5.11 Spending Accounts. The am ounts designated by Participant in his or her Salary Reduction Agreement to be applied to the H ealth FSA or DCSA shall be credited to a separate ledger account in the Particip ant’s name. Such amounts credited to a Participant’s spending account for any Plan Year shall be used only toward the payment of or reimbursement for Part icipant’s “substantiated expenses” incurred for such Plan Year, as determined under Article VI and Article VII.
Except as otherwise provided in this Pl an or any Component Plan, contract or arrangement established to provide Benefits, reimbursement of Expenses shall be made at such time and in such amounts in accordance with Proposed Treasury Regulation Section 1.125-(6). The amount credited to a Participant’s spending account(s) under any Component Plan for any Plan Year shall be us ed only to reimburse the Participant for expenses incurred for such Plan Year, and only if the Participant applies for reimbursement on or before the 90th day following the close of the Plan Year.
5.12 Repayment of Excess Payment s. If, as of the end of any Plan Year, it is determined that a Participant has received payments under this Plan that exceed the amount of Eligible Medical Expenses and/or Eligible Dependent Care Expenses that have been substantiated by such Participant during t he Plan Year as required by Sections 6.7 and
7.6 herein, the Plan Administrator shall give the Participant prompt written notice of any such excess amount, and the Participant shall repay the amount of such excess to the Employer within sixty (60) days of receipt of such notification.
5.13 Coordination of Benefits Under the Health FSA Plan. The Health FSA Plan Account is intended to pay benefits solely for otherwise unreimbursed medical expenses.
Accordingly, it shall not be considered a group health plan for coordination of benefits purposes, and its benefits shall not be tak en into account when determining benefits payable under any other plan.
ARTICLE VI.
DEPENDENT CARE SPENDING ACCOUNT PLAN
6.1 Component Plan. This Article VI shall set forth the provisi ons for the City of Victorville Dependent Care Sp ending Account Plan (“DCSA Plan”). Benefits under the DCSA Plan shall take the form of reimbursement by the Employer for Eligible Dependent Care Expenses incurred by a Participant during the Plan Year. A Participant shall only be entitled to reimbursement of Eligible Dependent Care Expenses incurred after electing to participate in the DCSA Plan. An Eligible Employee can elect to participate in the DCSA Component by electing to receive benefits in the form of reimbursements for Dependent Care Expenses and to pay the Contributi on for such benefits on a pre-tax Salary Reduction basis. Unless an except ion applies (as described in Article III), such election of DCSA Benefits is irrevocabl e for the duration of the Peri od of Coverage to which it relates.
13426.00000\29725669.5
26 12728736.1 VI010-007
6.2 Definitions.
(a) Qualifying Day Care Center. “Qua lifying Day Care Center” means a day care center which provides full-time or part-time care for more than six individuals (other than individuals who reside at the day care center) on a regular basis during the Eligible Employee’s taxable year, and which:
(1) complies with all applicable laws and regulations of the state and town, city or village in which it is located; and
(2) receives a fee, payment or grant for services for any of the individuals to whom it provides services (re gardless of whether such facility is operated for a profit).
(b) Qualifying Individual. “Qua lifying Individual” means a:
(1) Dependent of the Participant, as defined in Code Section 152(a)(1), who is under the age of 13;
(2) Dependent or Spouse of the Participant who is physically or mentally incapable of caring for himself or herself and who has the same principal place of residence as the Participant for more than one-half of the Plan Year, provided such individual regularly spends at least eight hour s a day in the Participant’s home during such period; or
(3) Child that is deemed to be a Qualifying Dependent described in paragraph (1) or (2) above, whichever is appropriate, pursuant to Code Section 21(e)(5). (c) Qualifying Dependent Care Serv ices. “Qualifying Dependent Care Services” or “Qualifying Services” means services performed to enable a Participant or his/her Spouse to remain gainfully employed and which are relevant to the care of a Qualifying Individual. Qualifying Services may be performed either in the home or outside the home of the Participant. Such an expense shall be an Eligible Dependent Care Expense only if it is payable to a person who is not: (1) a Dependent of the Participant; (2) the Participant’s Spouse; or (3) a child of the Participant under the age of 19 as of the close of the Plan Year in which the services are rendered. (d) Eligible Dependent Care Expense. “Eligible Dependent Care Expense” means substantiated expenses incurred by the Participant durin g the Plan Year for Qualifying Dependent Care Services or for the cost of sending a child of the Participant to a Qualifying Day Care Center. Expenses relating to nonrefundable fees charged by a Qualifying Day Care Center shall not be eligible for reimbursement unless the child care services directly related to the fee are provided.
6.3 Contributions for Cost of Coverage for DCSA Benefits. The annual Contribution for a Participant's DCSA Benefits is equal to the annual benefit amount elected by the 13426.00000\29725669.5
27 12728736.1 VI010-007
Participant, subject to the dollar limits set fo rth in Section 6.5(b). For example, if the maximum $5,000 annual benefit amount is elected, then the annual Contribution amount is also $5,000.
6.4 Eligible Dependent Care Expenses. U nder the DCSA Component, a Participant may receive reimbursement for Dependent Care Expenses incurred during the Period of Coverage for which an election is in force. In addition, certain individuals may receive reimbursement for Dependent Care Expens es incurred during the Grace Period immediately following the cl ose of a Plan Year from am ounts remaining in their DCSA Accounts for that Plan Year in accordance with Section 6.5(e). (a) Incurred. A Dependent Care Expense is incurred at the time the Qualifying Dependent Care Services giving rise to the expense is furnished, not when the Participant is formally billed for, is charged for, or pa ys for the Qualifying Dependent Care Services (e.g., services rendered for the 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" are expenses that are considered to be employment-rela ted expenses under Code §21(b)(2) (relating to expenses for the care of a Qualifying I ndividual necessary for gainful employment of the Employee and Spouse, if an y, and expenses for incidental household services), if paid for by the Eligible Employee to obtain Qualifying Dependent Care Services-provided, however, that this term shall not include any expenses for which the Participant or other person incurring the expense is reimbursed for the expense through insurance or any other plan. If only a portion of a Depen dent Care Expense has been reimbursed elsewhere (e.g., because the Spouse's DCSA imposes maximum benefit limitations), the DCSA can reimburse the remaining portion of such Expense if it otherwise meets the requirements of this Article VI.
(c) Qualifying Dependent Care Services. "Qualifying Dependent Care Services" means services that: (1) relate to the care of a Qualifying Individual that enable the Participant and his or her Spouse to re main gainfully employed after the date of participation in the DCSA Co mponent and during the Period of Coverage; and (2) are performed-
in the Participant’s home; or
outside the Participant's home for (1) the care of a Participant's qualifying child who is under age 13; or (2) the care of any other Qualifying Individual who regularly s pends at least eight hours per day in the Participant's household. In addition, if the expenses ar e incurred for services provided by a dependent care center (i.e., a facility (including a day camp) that provides care for more than six individuals (other than individuals residing at the facility) on a regular basis and receives a fee, payment, or grant for such services), then the center must comply with all applicable state and local laws and regulations. (d) Exclusion. Dependent Care Expenses do not include amounts paid to:
13426.00000\29725669.5
28 12728736.1 VI010-007
an individual whom a Participant or his or her Spouse can claim as a dependent for federal income tax purposes;
a Participant's Spouse;
a Participant's child (as defined in Code §152(f)(1)) who is under 19 years of age at the end of the year in which the expenses were incurred; or a parent of a Participant's under age 13 qualifying child as defined in Code §152(a)(1) (e.g., a former spouse who is the child's noncustodial parent).
6.5 Maximum Benefits for DCSA.
(a) Maximum Reimbursement Available. The maximum dollar amount elected by the Participant for reim bursement of Depende nt Care Expenses incurred during a Period of Coverage (reduced by prior reimbur sements 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 DCSA Account pursuant to Section 6.6. (No reimbursement will be made to the ext ent that such reimbursement would exceed the balance in the Participant's Account (that is , the year-to-date am ount that has been withheld from the Participant's Compensation for reimburse ment for Dependent Care Expenses for the Period of Coverage, less any prior reimbursements.) Payment shall be made to the Participant in cash as reimbursement for Dependent Care Expenses incurred during the Period of Coverage for which the Participant' s election is effective (or during a Grace Period, if applicable under Sect ion 6.5(e)), provided that t he other requirements of this Article VI have been satisfied.
(b) Maximum 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 $7,500 beginning in 2026 or, if lower, the maximum amount that the Participant has reason to believe will be excludable from his or her income at the time the election is made as a result of the applicable statutory limit for the Participant. The applicable statutory limit for a Participant is the smallest of the following amounts:
the Participant's Earned Income for the calendar year; the Earned Income of the Participant's Spouse for the calendar year (for this purpose, a Spouse will be deemed to have earned income of at least $250, $500 if the Participant has two or more Qualifying Individuals) for each month in which the Spouse is either (1) physically or mentally incapable of self-care (provided that the Spouse must have the same principal place of abode as the Participant for more than one-half of such year), or (2) a Student); or
either $7,500 or $3,750 for the calendar year, as applicable:
13426.00000\29725669.5
29 12728736.1 VI010-007
(1) $7,500 for the calendar year if one of the following applies:
- the Participant is married and files a joint federal
income tax return;
- the Participant is married, files a separate federal income tax return, and meets th e following conditions: (1) the Participant maintains as his or her home a household that constitutes (for more than one-half of the taxable year) the principal abode of a Qualifying Individual (i.e., the Dependent for whom the Participant is eligible to receive reimburse ments under the DCSA); (2) the Participant furnishes over half of the cost of maintaining such household during the taxable year; and (3) during the last six months of the taxable year, the Participant's Spouse is not a member of such household; or
- the Participant is single or is the head of the household for federal income tax purposes; or
(2) $3,750 for the calendar year if the Participant is married and files a separate federal income tax return under circumstances other than those described above.
(c) Changes; No Proration. For subsequent Plan Years, the maximum dollar limit may be changed by the Plan Administrator and shall be communicated to Employees through the Election Form/Salary Reducti on Agreement or anot her document. If a Participant enters the DCSA Component midyear or wishes to increase his or her election midyear as permitted under Article III, t hen there will be no pror ation 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.
(d) Effect on Maximum Benefit s If Election Change Permitted. Any change in an election affecting annual contributions to the DCSA Component also will change the maximum reimbursement benefits for t he balance of the Period of Coverage (commencing with the election change), as furt her limited by Sections 6.5(a) and (b).
Such maximum reimbursement benefits for t he balance of the Period of Coverage shall be calculated by adding (1) the c ontributions, if any, made by the Participant as of the end of the portion of the Period of Cover age immediately preceding the change in election; (2) the total cont ributions scheduled to be made by the Participant during the remainder of such Period of Coverage to the DCSA Account, reduced by reimbursements during the Period of Coverage.
(e) Grace Periods; Special Rules for Claims Incurred During a Grace Period.
Notwithstanding any contrary pr ovision in this Plan and s ubject to the conditions of Sections 6.5(b), an individual may be reimbursed for Dependent Care Expenses incurred during a Grace Period from amounts remaining in his or her DCSA Account at the end of the Plan Year to which that Grace Period relates ("Prior Plan Year DCSA Amounts") if he 13426.00000\29725669.5
30 12728736.1 VI010-007
or she is a Participant in the Plan with DCSA coverage that is in effect on the last day of that Plan Year.
Prior Plan Year DCSA Amounts may not be cashed out or converted to any other taxable or nontaxable benefi t. For example, Prior Plan Year DCSA Amounts may not be used to reimburse Medical Care Expenses. Dependent Care Expenses incu rred during a Grace Period and approved for reimbursement in accor dance with Section 6.11 will be reimbursed first from any available Prior Plan Year DCSA Amounts and then from any amounts that are available to reimburse expenses that are incurred during the current Plan Year. An individual's Prior Plan Y ear DCSA Amounts will be debited for any reimbursement of Dependent Care Expenses incurred during the Grace Period that is made from such Prior Plan Year DCSA Amounts.
Claims for reimbursem ent of Dependent Care Expenses incurred during a Grace Period must be submitt ed no later than 90 days after January 31 following the close of the Plan Year to wh ich the Grace Period relates in order to be reimbursed from Prior Plan Year DC SA Amounts. Any Prior Plan Year DCSA Amounts that remain after all reimbursements have been made for the Plan Year and its related Grace Period shall not be carried over to reimburse the Participant for expenses incurred in any subsequent per iod. The Participant will forfeit all rights with respect to these amounts, which will be subject to the Plan's provisions regarding forfeitures in Section 6.9.
6.6 Establishment of DCSA Account. The Plan Administrator will establish and maintain a DCSA Account with respect to each Participant who has elected to participate in the DCSA Component, but it will not create a separat e fund or other wise 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 6.9.
(a) Crediting of Accounts . A Participant's DCSA Account will be credited periodically during each Period of Cover age with an amount equal to the Participant's Salary Reductions elected to be allocated to such Account. (b) Debiting of Accounts. A Participant's DCSA Account will be debited during each Period of Coverage for any reimburse ment of Dependent Care Expenses incurred during the Period of Coverage (or for re imbursement of Dependent Care Expenses incurred during any Grace Period to which he or she is entitled as provided in Section
6.5(e)).
(c) Available Amount Is Ba sed on Credited Amount. As described in Section
6.5, the amount ava ilable for reimbursement of D ependent Care Expenses may not exceed the year-to-date amount credited to the Partici pant's DCSA Account, less any prior reimbursements for Dependent Care Ex penses incurred during the Plan Year (or during the Grace Period, if applicable)-i.e., it is based on the amount credited to the DCSA 13426.00000\29725669.5
31 12728736.1 VI010-007
Account at a particular point in time. Thus , a Participant's DCSA Account may not have a negative balance.
6.7 Spending Account. The sole source fo r payment of DCSA Plan Benefits under this Article VI shall be the unfunded ledger accounts established for each Participant pursuant to his or her annual election. The Administ rator shall reimburse each Participant for Eligible Dependent Care Expen ses and his or her spending account shall be debited accordingly. The aggregate reimbursements made at any time during the Plan Year shall not exceed the Participant’s total contributions to the DCSA Plan for the Plan Year.
6.8 Reimbursement of Eligib le Expenses. A Participant shall only be entitled to reimbursement of substantiated Eligible Dependent Care Expenses incurred during the Plan Year. An Eligible Dependent Care Ex pense shall be considered incurred when the services giving rise to such expense are provided, irrespective of when Participant is formally billed or pays for such expenses. Th e amount of reimbursement received by a Participant shall at no time exceed the balan ce of his or her dependent care spending account. An expense in excess of the account balance shall not be reimbursed. An expense must be incurred during the Plan Year to be eligible for reimbursement; however, such reimbursement may be made after the Pa rticipant’s cessation of participation or after the Plan Year as provided in Section 6.11. If a Participant ceases participation in the Plan prior to the end of the Plan Year, whether due to term ination of employment or otherwise, and has unreimbursed contributions remaining in his or her dependent care spending account such Particip ant may receive reimbursement for claims for post- termination Eligible Dependent Care Expenses incurred during the remaining Plan Year or the Grace Period, as defined in Section 6.5(e), immediately following that Plan Year.
6.9 Limitations on Reimbursement/Forfeitur e. The Employer’s payment of DCSA Plan Benefits for any Plan Year will be limited to t he lesser of (1) the Participant’s Eligible Dependent Care Expenses for the year, or (2) the amount of the Participant’s election for DCSA Plan Benefits for the year. A Participant shall receive no reimbursement for DCSA Plan Benefits which are elec ted but unused during a Plan Year, for any reason. Any balance remaining in the Participant’s spending account after all Eligible Dependent Care Expenses have been paid shall be forfeited by the Participant and the account balance reduced to zero. No amounts shall be reimburs ed by the Administrator until after the expense has been properly substantiated in accordance with Section 6.10.
6.10 Claim for Benefits. Each Participant who desires to receive reimbursement under the Plan for Eligible D ependent Care Expenses shall submit to the Administrator or the designated claims representative at the time s indicated herein, or responses to other supplementary factual requests, containing the following information:
(a) the name, age, and relationship to the Participant of the Qualifying Individual for whom the Eligible Dependent Care Expenses were incurred; (b) if any of the Qualif ying Dependent Care Serv ices were performed outside the Participant’s home for a Qualifying Individual incapable of caring for himself, a 13426.00000\29725669.5
32 12728736.1 VI010-007
statement as to whether said Qualifying Individual regularly spends at least eight (8) hours a day in the Participant’s home;
(c) if any of the Qualif ying Dependent Care Servic es are performed for a Qualifying Individual who is physically or mentally incapabl e of caring for himself, a statement to that effect;
(d) the nature and dates of performance of the Qua lifying Dependent Care Services subject to reimbursement;
(e) the relationship, if any , to the Participant of th e person(s) pr oviding the Qualifying Dependent Care Services;
(f) a statement indicating t hat the Participant will include on his federal income tax return the name, address, and (except in the case of a tax-exempt Qualifying Day Care Center) the taxpayer id entification number of the pr ovider of the Qualifying Dependent Care Services;
(g) if the Participant is married and his Spouse is employed, a statement of the Earned Income of the Participant's Spouse (a s defined in Section 6.5); or if the Spouse is not employed, a statement that the Spouse is incapacitated or the Spouse is a full-time student at an educational organization during each of five calendar months in the taxable year and is enrolled for the requisite number of hours considered to be a full time course of study by the organization;
(h) a statement as to the amount, if any, of tax-exempt dependent care assistance benefits receive from any other empl oyer by the Participant or his Spouse during the Plan Year; and
(i) evidence of indebtedness or payment by the Participant to the third party who performed the Qualifying Services.
As soon as administratively feasible fo llowing the end of eac h month, the Plan Administrator shall review all the forms subm itted by Participants during that month in accordance with the foregoing procedures and shall pay each Participant the DCSA Plan Benefits which each Participant is entitled to receive, in accordance with this Article VI.
6.11 Time Limit; Grace Period. No expenses shall be reimbursed for any Plan Year unless the Participant applies for such reim bursement within ninety (90) days following the end of such Plan Year or within ninety (90) days following a Pa rticipant’s date of termination of employment, as described in se ction 6.13. However, any Participant who has unreimbursed contributions remaining in his or her spending acc ount at the end of the Plan year may submit claims for Eligib le Dependent Care Expenses incurred during the period that begins immediately following the close of that Plan Year and ends: on the day that is two months plus fifteen (15) days following close of that Plan Year (“Grace Period”) under the following conditions:
13426.00000\29725669.5
33 12728736.1 VI010-007
(a) Applicability. In order for a Part icipant to be reimbursed for Eligible Dependent Care Expenses incurred during a Grace Period from amounts remaining in his or her dependent care spending account at the end of the Plan Year to which that Grace Period relates, he or she must be a Participant with Dependent Care Spending Account Plan coverage that is in effect on the last day of that Plan Year. (b) No Cash-Out or Conversion. Prior Plan Year Dependent Care Reimbursement Plan amounts may not be cashed-out or converted to any other taxable or nontaxable benefit. For example, prior Plan Year Dependent Care Spending Account Plan amounts may not be used to reimburse Eligible Medical Care Expenses. (c) Reimbursement of Grace Period Expenses. Eligible Dependent Care Expenses incurred during a Grace Period and approved for reimbursement in accordance with the Dependent Care Spending Account Plan’s claims procedure will be reimbursed and charged first against any available Pr ior Plan Year Dependent Care Spending Account Plan amounts and then against any amount s that are available to reimburse expenses that are incurred dur ing the current Plan Year. A ll claims for reimbursement under the Dependent Care Spending Account Plan will be paid in the order in which they are approved.
(d) Run-Out Period and Forfeitures. Cla ims for expenses incurred during the Grace Period must be submitted for reimbursement within ninety (90) days following the end of the Grace Period. Any prior Plan Year Dependent Care Spending Account Plan amounts that remain after all reimbursements have been made for the Plan Year and its related Grace Period shall not be carried over to reimburse the Participant for expenses incurred after the Grace Period ends. The Partic ipant will forfeit all rights with respect to such balance.
6.12 No Reversion to Employer. At no time shall any part of DCSA Plan assets be used for, diverted to, purposes other than for t he exclusive benefit of Participants or their beneficiaries, or for defraying reasonable expenses of administering the Plan.
6.13 Reimbursements From DCSA After Term ination of Participation. When a Participant ceases to be a Participant under Section 3.1, the Participant's Salary Reductions and election to participate will termi nate. Except as ot herwise provided in Section 6.11 (regarding certain individuals who may be reimbursed from Prior Plan Year DCSA Amounts for expenses incurred during a Grace Period), the Participant will not be able to receive reimbursements for Dependent Care Expenses incurred after the end of the day on which the Participant's employm ent terminates or the Participant otherwise ceases to be eligible, with one exception: such Participant (or the Participant's estate) may claim reimbursement for any Dependent Care Expenses incurred in the month following termination of employment or other cessation of eligibility if such month is in the current Plan Year, provided that the Participant (or the Participant's estate) files a claim within 90 days after the date t hat the Participant's empl oyment terminates or the Participant otherwise ceases to be eligible . In addition, such Participant (or the Participant's estate) may claim reimburse ment for any Dependent Care Expenses 13426.00000\29725669.5
34 12728736.1 VI010-007
incurred during the Period of Coverage prior to the date that the Participant ceases to be eligible (or during any Grace Period to which he or she is entitled as provided in Section
6.11), provided that the Participant (or the Participant's estate) files a claim within 90 days after the date that the Participant ceases to be a Participant.
ARTICLE VII.
HEALTH CARE SPENDING ACCOUNT PLAN
7.1 Component Plan. This Article VII shall set forth the provisio ns for the City of Victorville Health Care S pending Account Plan (“Health FSA Plan”). Benefits under the Health FSA Plan shall take the form of reim bursement by the Empl oyer for Eligible Medical Care Expenses incurred by a Participant during the Plan Year. A Participant shall only be entitled to reimbursem ent of Eligible Medical Care Expenses incurred after electing to participate in the Health FSA Plan. Unless an exception applies (as described in Article III), any such election is irrevocabl e for the duration of the Period of Coverage to which it relates. Notwithstanding any other provision of this Plan, an Eligible Employee shall not be eligible for the Health FSA Com ponent unless he or she is also eligible for the Medical Insurance Plan.
7.2 Definitions.
(a) Eligible Medical Care Expense. “Eligible Medi cal Care Expense” means substantiated expenses submitted by the Participant for reimbursement of medical and/or dental services incurred by the Participant, or the Participant’s Spouse or Dependents during the Plan Year. “Eligible Medical Care Expense” shall also include amounts paid for prescription drugs and medicines, and such other expenses which are not covered by insurance, and which are permitted to be re imbursed under a medical flexible spending account pursuant to Section 213(d) of the Code, as amended, or as authorized by the IRS from time to time. “Eligible Medical Care Expense” does not include premiums paid on accident, health insurance or premiums on long-term care insurance, whether or not such insurance is made available by the Employer.
(b) Dependent. “Dependent” includes the S pouse or dependent of a Participant as defined under Code Section 152, det ermined without regard to Code Section 152(b)(1), (b)(2) or (d)(1)(B) and any child (as defined in Code Section 152(f)(1)) of the Participant who as of the end of the taxable year has not attained age 27 years.
7.3 Annual Limitation. For each Plan Year, a Participant shall affirmatively specify the amount of the Participant’s Salary Reducti on and Flexible Benefit Allowance to be allocated to the Health FSA Plan. The ma ximum annual benefit that may be contributed by each Participant shall not exceed the dollar limitation contained in Code Section 125(i), as adjusted for cost-of-living increases, fo r each Plan Year (“Annual Limitation”). The Annual Limitation for Single filers is $3,400 for Plan Year beginning in 2026 and shall be adjusted annually to reflect the most recent IRS guidelines. The Annual Limitation shall be prorated for any plan year lasting less than 12 months due to the implementation of a new plan, the termination of an existing plan, or a change in the plan year. 13426.00000\29725669.5
35 12728736.1 VI010-007
(a) For purposes of this Section, am ounts carried over from a prior year pursuant to the “carry over” provisions under Section 7.10 shall not be taken into account. (b) Further, any non-elective contributions directly funded to the Participant’s spending account by the Employer which c annot be cashed out shall not be taken into account for purposes of the Annual Limitation under Code Section 125(i). (c) If the Plan Administrator determines t hat a Participant’s allocations to the Health FSA Plan exceeded the Annual Limitati on, such amounts shall be considered excess contributions and shall be distributed to the Participant and reported as taxable income for the year in which correction is made.
7.4 Spending Account. The sole source fo r payment of Health FSA Plan Benefits under this Article VII shall be the unfunded accounts estab lished for each Participant pursuant to his or her annual election. The Plan Administrator shall reimburse each Participant for Eligible Medical Care Expenses and his or her spending account shall be debited accordingly. The aggre gate reimbursements made at any time during the Plan Year shall not exceed the Participant’s total contributions to the Health FSA Plan for the Plan Year. A Participant’s Health FSA Pl an Benefits shall be uniformly available throughout the Plan Year.
7.5 Reimbursement of Elig ible Expenses. A Particip ant shall be entitled to reimbursement of Eligible Medical Care Expenses in an amount that does not exceed his or her total contribution to the Health FSA Plan for t he Plan Year. Each payment hereunder shall be a charge to the Participant’s medical care spending account.
Reimbursement shall be provided to any indi vidual only for Elig ible Medical Care Expenses incurred while that individual is a Participant; however, such reimbursement may be made after such participation ceases. An Eligible Medical Care Expense shall be considered incurred when the services giving rise to such expense are provided, irrespective of when such expenses are bill ed to the Participant. Reimbursement shall not be made for any amount that does not qualify as an Elig ible Medical Care Expense or exceeds the Annual Limitation.
7.6 Claims for Benefits.
(a) To receive reimbursement for Eligible Medical Care Expenses, a Participant must submit a written claim for benefits to the Plan Administrator or the designated claims representative at the times indicated herein. Said claim shall include the following:
(1) the name of the person or persons on whose behalf Eligible Medical Care Expenses have been incurred;
(2) a description of the nature and dates of service or expense so incurred;
(3) a statement indicating that such expense or expenses have not otherwise been paid through insurance or reimbursed from any other source; and 13426.00000\29725669.5
36 12728736.1 VI010-007
(4) a receipt or other evidence of indebtedness or payment by the Participant of the service or expense.
(b) The Plan Administrator will review the claim as soon as administratively feasible following the end of each month and will advise the Participant of any reimbursement amounts to whic h they are entitled. If a Participant believes they have been incorrectly denied reimbursement or have not been advised of their Benefits under the Health FSA Plan, he or she may submit a written request to t he Administrator to provide either an explanation of how Eligible Medical Care Expenses are reimbursed or further information regarding Be nefits. The Plan Administrator must respond to such a request within a reasonable time.
Additionally, the Plan Administrator will provide to every claimant, who is denied a claim for reimbursement, a written notice stating in a format determined to be understood by the claimant: (1) the specific reason or reasons for the denial; (2) specific reference to pertinent plan provisions on which the denial is based; (3) a description of any additional material or information necessary for the cl aimant to perfect the claim; and (4) an explanation of the claim review procedure set forth in Paragraph (c) below. (c) Within 60 days of receipt by a claimant of a notice denying a claim under subparagraph (a) above, the claimant or his duly authorized representative may request in writing a full and fair review of the claim by the Plan Administrator or by an Administrator which may be appointed by the Employer for that purpose. The Administrator may extend the 60-day period where the nature of the benefit invo lved, or other attendant circumstances make such extension appropri ate. In connection wit h such review, the claimant or his or her duly authorized r epresentative may review pertinent documents and may submit issues and comments in writing. The Administrator shall make a decision promptly, and not later than 60 days after the Administrator’s receipt of a request for review, unless special circumstances (such as the notice to hold a hearing, if the Administrator deems one necessary) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of a request for review. The decision on review shall be in writing and shall include specific references for the decision, writt en in a manner calculated to be understood by the claimant, and specific references to t he pertinent Plan provisions on which the decision is based. If the decision on review is not made within such period, the claim will be considered denied.
7.7 Reimbursements From Health FSA Afte r Termination of Participation; COBRA.
When a Participant ceases to be a Participant under Section 2.4, the Participant's Salary Reductions and election to participate will terminate. Except as otherwise provided in this Section 7.10, the Participant will not be able to receive reimbursements for Medical Care Expenses incurred after the end of the da y on which the Participant's employment terminates or the Participant otherwise ceases to be eligible. However, such Participant (or the Participant's estate) may claim re imbursement for any Medical Care Expenses incurred during the Period of Coverage prior to the date that the Participant ceases to be 13426.00000\29725669.5
37 12728736.1 VI010-007
eligible, provided that the Part icipant (or the Participant's es tate) files a claim within 90 days after the date that the Participant ceases to be a Participant.
Notwithstanding any provision to the contrary in this Plan, to the extent required by COBRA, a Participant and his or her S pouse and Dependents, as applicable, whose coverage terminates under the Health FSA Component because of a COBRA qualifying event (and who is a qualifi ed beneficiary as defined under COBRA) shall be given the opportunity to continue on a self-pay basis the same coverage that he or she had under the Health FSA Component the day before the qualifying event for the periods prescribed by COBRA. Specifically, such individuals will be eligible for COBRA continuation coverage only if they have a positive Health FSA 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 eligible 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 FSA Component will cease at the end of the Plan Year and cannot be continued for the next Plan Year, except that qualified beneficiaries who continue coverage through the end of the Plan Year may carry over up to the ma ximum carryover amount of unused Health FSA amounts remaining at t he end of such Plan Year in accordance with the Plan's provisions regarding Health FSA carryovers. Such continuation coverage shall be subject to all conditions and limitations under COBRA, except that it shall not be terminated early for after-acquired group health coverage or Medicare entitlement.
Contributions for coverage for Health FSA Benefits may be paid on a pre-tax basis for current Employees receiving taxable comp ensation (as may be permitted by the Plan Administrator on a uniform and consistent basis, but may not be prepaid from contributions in one Plan Year to provide co verage that extends into a subsequent Plan Year) where COBRA coverage arises either (a) because the Employee ceases to be eligible because of a r eduction of hours or (b) becaus e the Employee's Dependent ceases to satisfy the eligibi lity requirements for coverage. For all other individuals (e.g., Employees who cease to be eligible because of retirement, termination of employment, or layoff), Contributions for COBRA covera ge for Health FSA Benefits shall be paid on an after-tax basis (unless permitted otherwise by the Plan Administrator on a uniform and consistent basis, but may not be prepaid from contributions in one Plan Year to provide coverage that extends into a subsequent Plan Year).
7.8 Debit Card Program. If th e Employer allows the Health FSA to be accessed by an electronic payment card (e.g., debit card , credit card, or similar arrangement), Participants will be required to comply with substantiation procedures and all other provisions established by the Plan Admini strator in accordance with applicable IRS guidance regarding electronic payment card programs.
7.9 Limitations on Reimbursement/Forfeiture. The Employer’s payment of Benefits from the Health FSA Plan will not exceed the Eligible Medical Care Expenses for the Plan Year nor will it exceed the amount of the Participant’s annual election, including any “carry over” amount from the prior Plan Year. If any balance rema ins at the end of the Plan 13426.00000\29725669.5
38 12728736.1 VI010-007
Year, the employee may opt to carry over unused amounts up to the maximum described in section 7.10(a), and any excess balance will be forfeited. No amounts shall be reimbursed by the Plan Administrator unt il after the expense has been properly substantiated in accordance with Section 7.6.
(a) Use of Forfeitures. All forfeiture s under this Plan shal l be used as follows:
first, to offset any losses experienced by t he Employer during the Plan Year as a result of making reimbursements (i.e., providing Health FSA Benefits) with respect to all Participants in excess of the Contributions paid by such Participants through Salary Reductions; second, to reduce the cost of administering the Health FSA Component during the Plan Year or the subsequent Plan Year (all such administrative costs shall be documented by the Plan Administrator); and third, to provide increased benefits or compensation to Participants in subsequent years in any weighted or uniform fashion that the Plan Administrator deems appropriate, c onsistent with applicable regulations. In addition, any Health FSA Account benefit pay ments that are unclaimed (e.g., uncashed benefit checks) by the close of the Plan Year following the Period of Coverage in which the Medical Care Expense was incurred s hall be forfeited and applied as described above.
7.10 Time Limit; Carry Over of Unused Benef its. No expenses shall be reimbursed for any Plan Year unless the Participant applies for such reimbursement within 90 days after the end of such Plan Year or within 90 days fo llowing a Participant’s date of termination of employment, and unused amounts shall be forf eited. However, any Participant who has unreimbursed contributions remaining in his or her spending acc ount at the end of the Plan year may carry over the unused acc ount balance to the subsequent Plan Year subject to the following:
(a) Maximum Carry Over Amount. Notwiths tanding any other provision of the Plan to the contrary, unused amounts of up to $640 remaining in the Participant’s Health FSA Account at the end of a Plan Year c an be carried over and used to reimburse the Participant for Medical Care Expenses t hat are incurred duri ng the next Plan Year, subject to the following conditions:
(1) For Plan Years beginning afte r 2025, the maximum carryover amount may be changed by the Plan Administrator and shall be communicated to Employees through the Election Form/Sa lary Reduction Agreement or another document, provided that the maximum carryover amount shall not exceed 20% of the maximum amount permitted under Code §125(i). Carryover amounts may not be cashed out or converted to any other taxable or nontaxable benefit, and will not count toward the maximum dollar limit under subsections (b) and (c) above. (2) A Participant who is otherwise eligible for the Health FSA for a Plan Year but does not make a Health FSA el ection for that Plan Year may use any carryovers from the preceding Plan Year for Medical Care Expenses incurred in the current or preceding Plan Year (as further provided herein). However, an Employee or other individual must be a participant in the Health FSA as of the last 13426.00000\29725669.5
39 12728736.1 VI010-007
day of a Plan Year in order to carry ov er unused amounts to the next Plan Year.
Termination of employment and cessation of eligibility will result in a loss of carryover eligibility unless a COBRA election is made (see Section 7.7). (3) Medical Care Expenses incurred during a Plan Year will be reimbursed first from a Participant's unus ed amounts credited fo r that Plan Year and then from amounts carried over from the preceding Plan Year. Carryovers that are used to reimburse a current Pl an Year expense will reduce the amount available to pay the Part icipant's preceding Plan Year expenses, cannot exceed the maximum carryover amount, and will count against the maximum carryover amount.
(4) If unused Health FSA Amounts remain for a Plan Year after all reimbursements have been made for that Plan Year in excess of the amount that can be carried over under this subsection (f ), the Participant will forfeit all rights with respect to those amount s, which will be subject to the Plan's provisions regarding forfeitures in Section 7.9.
(b) No Cash-Out or Conversion. Prior Plan Year Health FSA Plan amounts may not be cashed-out or converted to any other taxable or nontaxable benefit. For example, prior Plan Year Health FSA may not be us ed to reimburse Eligible Dependent Care Expenses.
7.11 No Diversion. At no time shall any part of Health FSA Plan assets be used for, diverted to, purposes other t han for the exclusive benefit of Participants or their beneficiaries, or for defraying reasonable expenses of administering the Plan.
ARTICLE VIII.
CONTINUATION COVERAGE
8.1 In General. The following provisions s hall apply to Benefits provided to eligible Employees and to their eligible dependents under the Plan, but only to the extent that the Benefits selected pertain to health care coverage providing medical, surgical, or hospital benefits and to plans providing ancillary medical coverage su ch as dental, vision, or prescription drug benefits. This coverage shall be continued pursuant to the federal continuation coverage provisions of the Public Health and Safety Act (“PHSA”) 42 U.S.C. §300bb.
8.2 Definitions. For purposes of this Arti cle VIII, the following words and phrases are intended to supplement, and in some instances replace, the defined terms listed generally in Article III and to the extent of any conflict between the terms set forth herein and those of Article III, the defined terms set forth herein shall control:
(a) “Dependent” means an individual who meets the definition of dependent under the participating Employer provided health plan coveri ng the eligib le Employee.
For the purposes of any medical reimbur sement plan, “Dependent” will also include 13426.00000\29725669.5
40 12728736.1 VI010-007
individuals who are the Participant’s dependents within the meaning of Section 152(a) of the Code.
No person shall be considered a dependent of more than one Employee.
If both an Employee and an Employee’s s pouse are employed by the Employer, dependent children may be covered by either spouse, but not by both. (b) “Election period” means the sixty ( 60) day period during which a Qualified Beneficiary who would lose coverage as a result of a Qualifying Event may elect continuation coverage. This sixty (60) day period begins not later than the date of termination of coverage as a result of a Qua lifying Event and ends not earlier than the sixty (60) days after the later of such date of termination of coverage or the receipt of notice of the right to elect continuation coverage under this Plan. (c) “Medicare” means the Health Insur ance for the Aged and Disabled Act, Title XVIII of Public Law 89-97, Social Security, as amended. (d) “Qualified Beneficiary” means an i ndividual who, on the day before the Qualifying Event, is covered under this Plan as the cove red Employee, the Spouse or dependent child of the covered Employee. Qualified Beneficiary shall include a child who is born to (or placed for adoption with) a co vered Employee during the coverage period.
The term Qualified Beneficiary does not include an individual whose status as a covered Employee is attributable to a period in whic h such individual is a nonresident alien who received no earned income from the employer which constituted income from sources within the United States ( within the meaning of Code Section 911(d)(2) and Section 861(a)(3)). The term Qualified Beneficiary al so does not include a Covered Employee’s domestic partner (as defined by CalPERS, so long as consistent with California law) regardless of whether such person was a covered dependent under the Plan prior to the Qualifying Event. If an individual is not a Qualified Beneficiary pursuant to this paragraph, a spouse or dependent child of such indivi dual shall not be cons idered a Qualified Beneficiary by virtue of the relationship to such individual. (e) “Qualifying Event” means with respect to a covered Employee, any of the following events which, but for the continuation coverage under this provision, would result in the loss of coverage of a Qualified Beneficiary:
(1) the death of the covered Employee;
(2) the termination (except by reason of such covered Employee’s gross misconduct) or reduction in hours of the covered Employee’s employment; (3) the divorce or legal separation of the covered Employee from such covered Employee’s spouse;
(4) the covered Employee becoming ent itled to benefits under Title XVIII of the Social Security Act (Medicare);
13426.00000\29725669.5
41 12728736.1 VI010-007
(5) a dependent child who ceases to be a dependent child under the terms of this Plan;
8.3 Continuation Coverage. To the extent required by Section 8.1 above, a Qualified Beneficiary who would lose health coverage under this Plan as a result of a Qualifying Event is entitled to elect continuation coverage within the election period under this Plan.
Coverage provided under this provision is on a contributory basis. No evidence of good health will be required.
Except as otherwise specified in an election, any election by a Qualified Beneficiary who is a covered employee or spouse of the covered employee will be deemed to include an election for continuation coverage under this provision on behalf of any other Qualified Beneficiary who would lose coverage by reason of a Qualifying Event.
If this Plan provides a choice among the types of coverage under this Plan, each Qualified Beneficiary is entitled to make a separate se lection among such types of coverage (i.e., single, family, etc.).
8.4 Type of Coverage.
(a) Group Health Coverage. Continuati on coverage under this provision is coverage which is identical to the coverage provided under this Plan to similarly situated beneficiaries under this Plan with respect to whom a Qualifying Event has not occurred as of the time coverage is being provided. If coverage under this Plan is modified for any group of similarly situated beneficiaries, the coverage shall also be modified in the same manner for all qualified beneficiaries under this Plan in connection with such group.
Continuation coverage available to a Qualified Beneficiary under this provision shall apply only to the type and level of health coverage under the Plan that a Qualified Beneficiary was actually receiving on the day before the Qualifying Event. The Qualified Beneficiary may not change his or her election except as otherwise provided under Sections 3.4(d) and 3.7(d).
(b) Health FSA Plan. Notwithstandi ng subparagraph (a) above, an Employee that was participating in the Plan prior to the Qualifying Event may be eligible to elect continuation coverage under the Health FSA Plan, subject to the following:
(1) Unavailability of Continuation Coverage. Continuation coverage under the Health FSA Plan shall not be of fered if all of the following three conditions are satisfied:
(A) Employer provides other health coverage options which are available to the Employee;
(B) The maximum amount required under the Plan for a year of continuation coverage under this Article VIII equals or exceeds the maximum benefit available under the Plan for the year; and
13426.00000\29725669.5
42 12728736.1 VI010-007
(C) The contribution premium for the remainder of the Plan Year in which the Qualifying Event occurr ed will exceed the maximum benefit still available to the Participant under the Plan as of the date of the Qualifying Event.
The determination of whether this condition has been satisfied will be made by the Administrator on a case-by-case basis at the time of the Qualifying Event. (2) Limited Continuation Co verage. In the event the Plan satisfies only the first two conditions set forth in s ubparagraph (1) above, the Employer shall offer continuation coverage under the Heal th FSA Plan for the remainder of the Plan Year in which the Qualifying Event occurred.
(3) Full Continuation Cove rage. If the Plan Admini strator finds that the Plan does not satisfy the first two condi tions set forth in subparagraph (1) above, the Employer must offer continuation coverage under the Health FSA Plan to the Employee for the duration of the coverage period required under Section 8.5.
8.5 Coverage Period. The coverage under this provision will ext end for at least the period beginning on the date of a Qualifying Event and ending not earlier than the earliest of the following:
(a) Initial 18-Month Coverage Period. If t he Qualifying Event is a termination of employment (other than for gross misconduct) or a reducti on in employment hours of a covered Employee, the coverage period for the Employee and his or her dependents shall extend for eighteen (18) months after the date of the Qualifying Event; (b) Disability Extension. The initial eighteen (18) month coverage period described in (a) above may be extended to twenty-nine (29) months after the date of the Qualifying Event in the event the Qualified Beneficiary was disabled upon termination of employment or during the firs t sixty (60) days of continuat ion coverage. The Qualified Beneficiary must provide the Plan Administra tor with notice of Social Security disability determination within sixty (60) days of the disability dete rmination and prior to the expiration of the initial eight een (18) month continuation period provided in (a) above to become eligible for this extension of continuation coverage. (c) Extension of Coverage Period. T he initial eighteen (18) month coverage period described in (a) above may be extended to thirty-six (36) months after the date of the Qualifying Event upon the o ccurrence of a second Qualifying Event prior to the expiration of the initial eight een (18) month coverage period . The Qualified Beneficiary must notify the Plan Administrator of the se cond Qualifying Event within sixty (60) days of the date of the second Qualifying Event and prior to the expiration of the initial eighteen (18) month period. In no ev ent shall continuation cover age extend for a period greater than thirty-six (36) months.
(d) 36-Month Coverage Period. In the case of any Qualifying Event causing the loss of coverage, except thos e Qualifying Events identified in (a) above, the coverage period for the Employee and his or her dependents shall extend for thirty-six (36) months after the date of the Qualifying Event.
13426.00000\29725669.5
43 12728736.1 VI010-007
8.6 Notification Requirements.
(a) Notification by Qualified Beneficia ry. Each covered Employee or Qualified Beneficiary must notify the Employer of the occurrence of a divorce or legal separation of the covered Employee from such cover ed Employee’s spouse and/or the covered Employee’s dependent child ceasing to be a dependent child under the terms of this Plan within sixty (60) days after the date of such occurrence. This sixty (60) day time limit shall only apply to those occurrences as described in this paragraph which occur after the date of the enactment of the Tax Reform Act of 1986.
(b) Notification by Employer. The Empl oyer shall notify the Plan Administrator within thirty (30) days of a Qualifying Event, as required by federal law. (c) Notification to Q ualified Beneficiary.
(1) The Plan Administrator shall prov ide written notice to each covered Employee and spouse of such covered Employ ee of his or her right to continuation coverage under this provision upon comm encement of coverage under a Component Plan providing health coverage, as required by federal law. (2) The Plan Administrator, or CalPERS in certain cases, shall notify any Qualified Beneficiary of the right to elect continuation coverage under this provision within fourteen (14) days of receiving notice of the occurrence of a Qualifying Event, as required by federal law. If the Qualif ying Event is the divorce or legal separation of the covered Employee from the covered Em ployee’s spouse or a dependent child ceasing to be a dependent child under the terms of this Plan, the Employer shall only be required to notify a Qualified Beneficiary of his or her right to elect continuation coverage if the covered Employee or the Qualified Benef iciary notifies the Employer of such Qualifying Event within sixty (60) days after the date of such Qualifying Event.
Notification of the requirement s of this provision to the Spouse of a covered Employee shall be treated as notification to all other Qualified Beneficiaries residing with such Spouse at the time notification is made.
8.7 Termination of Continuation Coverage. The continuation coverage provided hereunder shall be terminated prior to the expiration of the coverage periods provided in Section 8.5 above upon the earlier of the following:
(a) with respect to continuation coverage under a Health FSA Plan, the last day of the Plan Year in which the Qualified Beneficiary experiences the Qualifying Event. (b) the date on which the Em ployer ceases to provide any group health plan to any Employee;
13426.00000\29725669.5
44 12728736.1 VI010-007
(c) the date on which the Qua lified Beneficiary fails to make timely payment of the required contribution pursuan t to this provision provi ded the deficiency is not an “insignificant amount” as described in Section 8.8(d);
(d) the date on which the Qua lified Beneficiary first becomes, after the date of the election, covered under any other group health plan as an employee or dependent.
However, if the other group health plan has a preexisting condition limitation, continuation coverage under the Plan will not cease while su ch preexisting condition limitation under the group plan remains in effect (taking into account prior creditable coverage under the portability rules of the Health Insurance Portability and Accountability Act of 1996); or (e) the date on which the Qualified B eneficiary becomes entitled to benefits under Title XVIII of the Social Security Act (Medicare). However, if the Qualified Beneficiary is the Employee, their dependent s may remain eligible for continuation coverage for up to 36 months from the dat e of the covered employee’s Medicare entitlement if a Secondary Q ualifying Event occurs, as described in 42 U.S.C. § 300bb- 2(2)(v). A Secondary Qualifyi ng Event is an event that occurs during continuation coverage, such as divorce, death of the employee, or a dependent aging out.
8.8 Contribution.
(a) A Qualified Beneficiary shall only be entitled to continuation coverage provided such Qualified Beneficiary pays the applicable premium required by the Employer in full and in advance, except as provided in (b) below. Such premium shall not exceed the requirements of applicable federal la w. A Qualified Beneficiary may elect to pay such premium in installments as indicated by the Employer. (b) Except as provided in (c) below, the payment of any premium shall be considered to be timely if m ade within thirty (30) days afte r the date due, or within such longer period of time as applies to or under this Plan. (c) Notwithstanding (a) or (b) above, if an election is made after a Qualifying Event during the election period, this Plan will permit paym ent of the required premium for continuation coverage during the period preceding the electi on to be made within forty-five (45) days of the date of the election.
(d) A premium payment received by the Employer which is deficient by an insignificant amount shall be treated as full payment of the premium amount. For purposes of this section, an insignificant amount is an amount not greater than the lesser of (i) ten percent (10%) of the required amount; or (ii) fifty dollars ($50.00). Alternatively, in the event an Employer receives an insufficient payment premium, the Employer retains the option of taking steps to collect the deficient insignif icant amount by notifying the Qualified Beneficiary of the deficiency and allowing thirty (30) days after date of the notice for payment of the deficiency.
13426.00000\29725669.5
45 12728736.1 VI010-007
ARTICLE IX.
LIFE INSURANCE
9.1 Benefits. The City may provide life insur ance to eligible Employees, subject to the requirements of a City memorandum of understanding, resolu tion, agreement, or contract. The terms and conditions of this b enefit, including eligibility and coverage, are determined by the applicable life insurance policy plan documents. “Group-term Life Insurance” has the meaning defined in sect ion 1.79-1, title 26 of the Code of Federal Regulations. Ot her forms of life insurance t hat are not group-term life insurance, such as voluntary permanent life insurance, are not excludable from tax.
9.2 Maximum Excludable Amounts. Pursuant to section 79 of the Internal Revenue Code, the employer-paid premium cost of a Group-Term Life Insurance policy on the life of the employee shall be include d as taxable gross income, but only to the extent that such cost exceeds the sum of:
(a) The cost of $50,000 of such insurance, and
(b) The amount (if any) pai d by the employee toward the purchase of such insurance.
The cost of the employer-paid premiums on the first $50,000 of group-term life insurance through a nondiscriminatory pl an may be excluded from the employee’s income. A taxable fringe benefit arises if coverage e xceeds $50,000 and the policy is considered carried directly or indirectly by the employ er. A policy is considered carried directly or indirectly by the employer if:
(a) The employer pays any cost of the life insurance, or (b) The employer arranges for the pr emium payments and the premiums paid by at least one employee subsidize those paid by at least one other employee (the “straddle” rule).
The determination of whether the premium c harges straddle the co sts is based on the IRS Premium Table rates, not the actual cost.
ARTICLE X.
DISCRIMINATION
10.1 Nondiscrimination Requirem ents. The Employer shall no t discriminate in favor of Highly Compensated Individuals as to eligibi lity to participate in the Plan or as to contributions and Benefits provided under the Plan pursuant to Section 125 of the Code and the Regulations. In addition, the Employer shall not discriminate in favor of Highly Compensated Individuals as to the actual operation of this Plan. 13426.00000\29725669.5
46 12728736.1 VI010-007
(a) Eligibility to Participate. The Plan s hall not be considered discriminatory if the Plan benefits a group of Em ployees who qualify under a r easonable classification established by the Employer and the group of Employees included in the classification satisfies the safe harbor percentage test or unsafe harbor percentage component of the facts and circumstances test in Section 1. 410(b)-4(c) of the Code. The Employer is permitted to exclude the following Employees in making this determination:
(1) Employees, except Key Employ ees, covered by a collectively bargained plan;
(2) Employees who are nonresident aliens and receive no earned income in the United States from the Employer; and
(3) former Employees who have elected to extend health coverage under the Plan pursuant to Article VIII.
Notwithstanding, the Plan will not be cons idered discriminatory if all Employees are permitted to participate.
(b) Benefit Availability and Participat ion. The Plan shall not be considered discriminatory if the Plan provides Benefits, including Employer contributions allocable to Benefits, which do not discriminate in favor of Highly Compensated Participants. Benefits shall be made available to all Employees on a uniform basis and each eligible Employee will be given an equal opportunity to make an election for B enefits. The Plan shall be considered discriminatory if the actual election or partici pation in the Plan by Highly Compensated Participants, including types of Benefits provided and utilization of Employer contributions for the selection of qualified Benefits, is di sproportionate to the total number of Non-Highly Compensated Participants for a Plan Year. (1) Election of Benefits by Highly Compensated Participants. Qualified Benefits are disproportionately elected by Highly Compensated Participants if the aggregate qualified Benefits elected by Highly Compensated Participants, measured as a percentage of the aggregate compensation of Highly Compensated Participants, exceed the aggregate qualified benefits elected by Non-Highly Compensated Participants measured as a percentage of the aggregate compensation of Non-Highly Compensated Participants.
(2) Utilization of Employer Cont ributions by Highly Compensated Participants. Employer contributions are disproportionately utilized by Highly Compensated Participants if the aggregate contributions utilized by Highly Compensated Participants, measured as a percentage of the aggregate com pensation of Highly Compensated Participants, exceed the aggregat e contributions utilized by Non-Highly Compensated Participants measured as a percentage of the aggregate compensation of Non-Highly Compensated Participants.
(3) Safe Harbor for Health Benefits. If health benefits are provided under the Plan, excluding dental coverage and medical reimbursement plans, the Plan shall not 13426.00000\29725669.5
47 12728736.1 VI010-007
be considered discriminatory as to the availability of Benefits and utilization of Employer contributions if –
(A) Employer contributions m ade on behalf of each Participant include an amount whic h equals one hundred perc ent (100%) of the co st of the health Benefit coverage of the majority of the Highly Compensated Participants similarly situated, or equals or exceeds seventy-five percent (75%) percent of the cost of the health Benefit coverage of the Participants (similarl y situated) having the highest cost health benefit coverage under the Plan; and
(B) Contributions or Benefits under the Plan in excess of those described in subparagraph (i) above bear a uniform relationship to compensation. (c) Safe Harbor for Premium-Only-Pl ans. A premium-only plan is deemed to satisfy the nondiscrimination rule s described in 9.1(b) above, as to the availability of benefits and contributions, for a Plan Year upon satisfaction of the nondiscrimination requirements for eligibility to participate described in Section 10.1(a) above. (d) Definitions.
(1) Highly Compensated Individual. For purposes of this section, “Highly Compensated Individual” shall mean (i) an officer of the Employer who is regularly and continuously involved in the business operations of the Employer; (ii) an individual that is “highly compensated;” or (iii) a spouse or dependent of a Highly Compensated Individual.
An individual is “highly compensated” if for the preceding Plan Year (or the current Plan Year in the case of the first year of employment) if he or she received compensation from the Employer in excess of the amount specified in Sect ion 414(q)(1)(B) of the Code ($160,000 for 2025). The Employer may also el ect to identify a top-paid group for any Plan Year consisting of the top twenty percent (20%) of the Employees when ranked on the basis of compensation pursuant to Section 414(q)(3) of the Code.
A Highly Compensated Individual who elects to participate in the Plan may be referred to as a Highly Compensated Participant for purposes of this Article IX.
10.2 Annual Testing. The Employer shall perform nondiscrimination testing as of the last day of the Plan Year, taking into a ccount all non-excludable Employees or former Employees who were employed during the Plan Year.
10.3 Avoiding Discrimination.
(a) Ability to Reject Election. If the Plan Administrator deems it necessary to avoid discrimination or possible taxation to Highly Compensated Pa rticipants, the Plan Administrator may, but shall not be required to, reject any Salary Reduction Agreement or reduce contributions or non-taxabl e benefits to assure compliance with the nondiscrimination requirements of Code Section 125. Any act taken by the Plan 13426.00000\29725669.5
48 12728736.1 VI010-007
Administrator pursuant to this Section shall be in a nondiscr iminatory and uniform manner.
(b) Manner of Rejecting Election to Avoid Discrimination. In the event the Plan Administrator determines that it is necessary to reject a Salary Reduction Agreement or reduce contributions or non-taxable benefits, the rejection shall be carried out as set forth in this subsection. Non-taxable benefits of the affected Highly Compensated Participant who has elected the highest amount of non-ta xable benefits shall be reduced until the discrimination tests set forth in Section 10.1(a) and (b) are satisfied or until the amount of his or her non-taxable benefit equals the non-taxable of the affected Participant who has elected the second highest amount of non-taxabl e benefits. This process shall continue until the discrimination tests are satisfied. Any reduction made pursuant to this subsection shall be made proportionately among non-insu red benefits and once all non-insured benefits are expended, proportionately among insured benefits. Contributions which are not utilized to provide benefits to any Participant by virtue of any administrative act under this subsection shall be forfeited and deposited into the general account.
10.4 Reimbursement Plans. The Plan is intended not to discriminate in favor of “highly compensated individuals” (as defined in Section 414(q) of the Code with respect to the DCSA Plan and as defined in Section 105(h) of the Code with respect to the Health FSA Plan) as to eligibility to participate, contributions, and/or Benefits under the Health FSA Plan and DCSA Plan (the “Reimbursement Plans”). If the Administrator determines the operation of either Reimburse ment Plan in any Plan Year would result in such discrimination, then the Administrator shall select and excl ude from coverage under the applicable Reimbursement Plan such Participants and/or reduce such contributions and/or Benefits to ensure compliance with the nondiscrimination requirements of Section 129 and 105 of the Code.
10.5 Compliance with Mental Health Pari ty and Addiction Equity Act and GINA.
Notwithstanding any provision in the Plan to the contrary, the Plan, and any Component Plan providing health benefits, will comply with the Mental Health Parity and Addiction Equity Act of 2008 and Title II of the Genetic Information Nondiscrimination Act of 2008.
ARTICLE XI.
PLAN ADMINISTRATION
11.1 Allocation of Authority. The City Manager, on behalf of the Employer, may appoint a Plan Administrator that shall keep the records for the Plan and shall control and manage the operation and administration of the Plan. The Plan Administrator shall have the exclusive right to interpret the Plan and to decide all matters arising thereunder, including the right to make determinations of fact, and construe and interpret possible ambiguities, inconsistencies, or omissions in the Plan and associated documents. All determinations of the Plan Administrator with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Plan Administrator shall have the following powers and duties:
13426.00000\29725669.5
49 12728736.1 VI010-007
(a) To require any person to furnish su ch reasonable information as they may request for the purpose of the proper administration of the Plan as a condition to receiving any benefits under the Plan;
(b) To prescribe the procedures for t he Participants to follow in filing applications for Benefits and to prepare forms to be used by the Participants; (c) To prepare and distribute, in such manner as the Plan Administrator determines appropriate, information explaining the Plan; (d) To receive from the Employer, Pa rticipants, Participant’s spouses and Dependents, and other persons such informat ion as shall be necessary for the proper administration of the Plan;
(e) To make and enforce such rules and regulations and prescribe the use of such forms as they shall deem necessary for the efficient administration of the Plan; (f) To decide on questions concerning the Plan and the eligibility of any Employee to participate in the Plan and to make or revoke elections under the Plan, in accordance with the provisions of the Plan;
(g) To determine the amount of benefits which shall be payable to any person in accordance with the provisions of the Plan; to inform the Employer, insurer as appropriate, of the amount of such benefits; and to provide a full and fair review to any Participant whose claim for benefits has been denied in whole or in part; (h) To designate other persons to carry out any duty or power which may or may not otherwise be a responsib ility of the Plan Administrato r, under the terms of the Plan;
(i) To keep records of all acts and determinations, and to keep all such records, books of account, data and other documents as may be necessary for the proper administration of the Plan;
(j) To appoint or employ individ uals and any other agents the Plan Administrator deems advisable, including legal and actuarial counsel, to assist in the administration of the Plan;
(k) To adopt such rules as the Plan Ad ministrator deems necessary, desirable or appropriate, subject to applicable law. All rules and decisions of the Administrator shall be uniformly and consistently applied to all Participants in similar circumstances; and (l) To do all things necessary to operat e and administer the Plan in accordance with its provisions.
11.2 Powers and Duties Not Delegated to Pl an Administrator. The Plan Administrator shall have no power to add to, subtract from or modify any of the terms of the Plan, or to 13426.00000\29725669.5
50 12728736.1 VI010-007
change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for a benefit under the Plan, except as may be expressly provided herein. Interpretations of the provisi ons of the Plan shall not be deemed to be additions, subtractions, or modifications of the Plan.
11.3 Nondiscriminatory Exercise of Authority. Whenever in the administration of the Plan any discretionary action by the Plan Administrator is required, the Plan Administrator shall exercise its authority in a nondiscriminat ory manner so that all persons similarly situated shall receive substantially the same treatment.
11.4 Reliance on Participant, Tables, etc. The Plan Administrator 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 ac t because of a direction or lack of direction by a Participant. The Plan Administrator will al so be entitled, to t he extent permitted by law, to rely conclusively on all tables, valu ations, certificates, opinions, and reports that are furnished by accountants, attorneys, or other experts employed or engaged by the Plan Administrator.
11.5 Incapacity of Participant. Whenever, in the Plan Administrator’s opinion, a person entitled to receive any payment of a benefit hereunder or an installment thereof is under a legal disability or is incapacitated in any way so as to be unable to manage the person’s financial affairs, the Plan Admi nistrator may direct the Empl oyer to make payments to such Participant or to such person or to the person’s legal representative or to a relative or friend of such person on such person’s behalf, or the Plan Administrator may apply the payment for the benefit of such Participant in such manner as the Plan Administrator considers advisable. Any paym ent of a benefit or installm ent in accordance with the provisions of this Section shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan.
11.6 Provision for Third-Party Administrato rs. The Plan Administrator, subject to approval of the Employer, may employ the se rvices of such persons, as it may deem necessary or desirable in connection with the operation of the Plan and to rely upon all tables, valuations, certificates, reports and opinions furnished thereby. Unless otherwise provided in the service agreement, obligations under this Plan shall remain the obligation of the Employer.
11.7 Compensation of Plan Administrator. Unless otherwise determined by the Employer and permitted by law, any Plan Admi nistrator who is also an employee of the Employer shall serve without co mpensation for services render ed in such capacity, but the Employer shall pay all reasonable expens es incurred in the performance of their duties.
11.8 Bonding. Unless otherwise determined by the Employer, or unless required by any federal or state law, the Plan Administrator shall not be required to give any bond or other security in any jurisdiction in connection with the administration of this Plan. 13426.00000\29725669.5
51 12728736.1 VI010-007
11.9 Payment of Administrative Expenses. T he Employer currently pays all reasonable expenses incurred in administering the Plan.
11.10 Insurance Contracts. The Employer shall have the right to enter into a contract with one or more insurance companies for the purposes of providing any Benefits offered under the Plan and 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 sha ll not be assets of the Plan but shall be the property of, and shall be retained by the Employer. The Employer will not be liable for any loss or obligation relating to any insurance coverage except as is expressly provided by this Plan. Such limitation shall include, but not be limited to, losses or obligations, which pertain to the following:
(a) Once insurance is applied for or obtained, the Employer will not be liable for any loss which may result from the failure to pay premiums to the extent premium notices are not received by the Employer;
(b) To the extent premium notices are received by the Employer, the Employer’s liability for the payment of such premiums will be limit ed to such premiums and will not include liability for any other loss which result from such failure; (c) The Employer will not be liable for th e payment of any insurance premium or any loss that may result from the failure to pay an insurance premium if the benefits available under this plan are not enough to provide for such pr emium cost at the time it is due. In such circumstances, the Empl oyee will be responsible for and see to the payment of such premiums. The Employer will undertake to notify a Participant if available benefits under this Plan are not enough to provide for an insurance premium but will not be liable for any failure to make such notification;
(d) When employment ends, the Employer will have no liability to take any step to maintain any policy in force except as may be specifically requi red otherwise in this Plan, and the Employer will not be liable for or responsible to see to the payment of any premium after employment ends.
11.11 Inability to Locate Payee. If the Plan Administrator is unable to make payment to any Participant 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 all 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.
11.12 Effect of Mistake. In the event of a mistake as to the eligibility or participation of an Employee, 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 Plan Administrator shall, to the extent that it d eems administratively possible and otherwise permissible under Code § 125 or the regulations issued thereunder, cause to be allocated or cause to be withheld or accelerated, or otherwise make adjustment of, su ch amounts as it will in its 13426.00000\29725669.5
52 12728736.1 VI010-007
judgment accord to such Participant or ot her person the credits to the account or distributions to which they are properly entit led under the Plan. Such action by the Plan Administrator may include withholding of any amounts due to the Plan or the Employer from Compensation paid by the Employer.
11.13 Disbursement Reports. The Plan Administ rator shall issue directions to the Employer concerning all benefits that are to be paid from the Employer’s general assets pursuant to the provisions of the Plan.
11.14 Indemnification. The Employer agrees to indemnify any Employee serving as Plan Administrator (including any Employee or former Employee who formerly served as Plan Administrator), against any and all liabilitie s, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Pl an, if such act or omission is made in good faith pursuant to the provisions of the Plan and not as a result of the Plan Administrator’s gross negligence or willful misconduct.
11.15 Statements. The Plan Administrator or its designated third-party administrator may periodically furnish each Participant with a statement, showing the amounts paid or expenses incurred by the Employer in provid ing Health Care and/or Dependent Care Spending Account plans and the respective Spending Account balance(s).
11.16 Use of Electronic Medium for Participant Notices and Elections. (a) Definition of Electronic Medium. “E lectronic Medium” means an electronic method of communication between the Pl an Administrator (or its designated representative) and Employee th ereby allowing each party to send and receive notice and elections through the same medium. T he only form of electronic communication permitted by the Plan shall be via electronic ma il on the Employer’s network or intranet, through an interactive website, or to a priv ate e-mail address supplied to the Employer by the Employee for communication purposes. The electronic medium must be designed so that the information provided is no less u nderstandable to the receiving party than a written paper document. The electronic medium shall be designed to alert the Employee, at the time a notice is provided, to the si gnificance of the information in the notice (including identification of the subject matter of the notice) , and provide any instructions needed to access the notice, in a manner than is readily understandable. The electronic medium shall be designed to preclude any person, other than the appropriate individual, from making a Participant election, such as Salary Reduction Ag reement, or accessing individual participant account information.
(b) Disclosure and Cons ent Requirements.
(1) Disclosure Statement. Prior to electronically transmitting any consent or notice to the Employee, the Plan Administrator shall provide a statement which contains the following: (i) the Employee’s right to receive a paper document of the notice or other Plan-related material either prior to or after giving consent to electronic transmission; (ii) the Employee’s right to withdraw his or her consent at any time and the 13426.00000\29725669.5
53 12728736.1 VI010-007
procedures for withdrawal, including any condit ions or consequences arising from such withdrawal; (iii) description of the scope and duration of the consent as it relates to various plan transactions; (iv) description of t he procedures for updating Employee contact information; and (v) description of the hardw are or software requirements needed to access and retain the notice.
(2) Consent. The Plan Administrator shall be exempt from the consent requirements of Section 101(c) of the Electronic Signatur es in Global and National Commerce Act (E-SIGN) provided the Electroni c Medium used to pr ovide notices and Plan-related material is a m edium that the Employee has t he effective ability to access and the Employee is advised, each time a notice is transmitted, that he or she can request to receive the notice in paper form at no c harge. The form of Electronic Medium utilized by this Plan shall be through an interactive website requiring the Employee to register an e-mail address for communication purposes.
(3) Changes in Hardware or Softwar e Requirements. In the event of any changes in the hardware or software requi rements needed to access the Electronic Medium, the Plan Administrator, or its designated representativ e, shall provide a statement to each Employee of the revis ed requirements and the right to withdraw consent to receive electronic delivery of Plan-related materials without consequence. (c) Participant Elections. The Plan Administrator, or its designated representative, shall be permi tted to electronically distribute participant elections by Electronic Medium. Each Employee who is provided with enrollment or election information via Electronic Medium will also be informed by the Plan Administrator that he or she may receive a paper copy of the re levant documents upon request. Participant election will not be treated as being made avai lable to an individual if such individual cannot effectively access the Electronic Medium for purposes of making the election. An election completed by an Employee via Elec tronic Medium shall be deemed as being provided in written form so long as the following requirements are satisfied:
(1) The Employee has a reasonable opportunity to review, confirm, modify or rescind the terms of the election before the election becomes effective; and (2) The Employee receives, within a reasonable time, a confirmation of the election either through written paper form or by electronic mail (e-mail).
11.17 Timing and Content of Elections and Notices. The provisions of this Section 11.17 shall in no way affect or alter the timing or content requirements applicable to each individual notice or document.
ARTICLE XII.
CLAIMS PROCEDURES
Except as provided under Article VI with respect to payment of Eligible Dependent Care Expenses and Article VII with respect to payment of Eligible Medical Care Expenses, all 13426.00000\29725669.5
54 12728736.1 VI010-007
claims for benefits that are provided through insurance contracts, whether such contracts are between the insurer and the Employer or the insurer and the Participant, shall be made by filing a claim for benefits in accordance with the claims procedure set forth under the insurance contract. The Employer does not have the authority or responsibility for processing, reviewing or paying such claims. All disputes regarding those claims shall be resolved in accordance with the procedure set forth in the separate Component Plan document concerning those benefits.
ARTICLE XIII.
AMENDMENT OR TERMINATION OF PLAN
13.1 Permanency. While the Employer fully expects that this Plan will continue indefinitely, due to unforeseen, future busi ness contingencies, permanency of the Plan will be subject to the Employer ’s right to amend or terminate the Plan, as provided in Sections 13.2 and 13.3, below. Nothing in this Plan is intended to be or shall be construed to entitle any Participant, retired or otherwise, to vested or non-terminable benefits.
13.2 Employer’s Right to Amend. The Employer reserves the right to amend at any time any or all of the provisions of the Plan, without retroactive effect, unless specifically permitted to comply with the law. All amendm ents shall be made in writing and shall be approved by the Employer in accordance wit h its normal procedures for transacting business.
13.3 Employer’s Right to Terminate. The Employ er reserves the right to discontinue or terminate the Plan without prejudice at any time and for any reason without prior notice.
Such decision to terminate the Plan shall be made in writing and shall be approved by the Employer in accordance with its normal procedures for transacting business.
13.4 Action by Employer. Any action by the Em ployer under this Plan, including but not limited to, termination of this Plan, shall be by action of the Employer, or by any person or persons duly authorized by action of t he Employer to act on its behalf. Upon the termination of the Plan, the Plan Administ rator may determine the best method to make payments to the affected Participants.
13.5 Determination of Effective Date of Amendment or Termination. Any such amendment, discontinuance or termination shall be effective as of such date as the Employer shall determine. No amendment, discontinuance or termination shall allow the return to any Employer of any reimbursement account balance for its use for any purpose other than for the exclusive benefit of the Participants and their beneficiaries except that forfeitures under Sections 6.6 and 7.7 herein may be used for any purpose not prohibited by applicable law.
13426.00000\29725669.5
55 12728736.1 VI010-007
ARTICLE XIV.
HIPAA PROVISIONS FOR HEALTH FSA
14.1 General. As a HIPAA Health Plan, the H ealth FSA shall comply with the standards for privacy of protected health information as set forth in the Privacy Rule, the security standards for the protection of Electronic personal health information (“PHI”) as set forth in the Security Rule, and the notification requirements for Breaches of Unsecured PHI under the Breach Notification Rule.
14.2 Definitions. For purposes of this Arti cle, the following definitions shall apply:
(a) “Breach” shall mean the acquisiti on, access, use, or disclosure of an individual's PHI in a manner not permitted under the Privacy Rule. A Breach shall be presumed unless the Plan determines there is a low probability that the PHI has been compromised. A Breach does not include: (1) an unintentional acquisition, access, or use of PHI by a workforce member or person acting under the authority of a covered entity or business associate, if such acquisition, acce ss, or use was in good faith and within the scope of authority and does not result in a further impermissible use or disclosure; (2) an inadvertent disclosure by a person who is authorized to access PHI to another person authorized to access PHI at the same covered entity or business associate or organized health care arrangement, and the information received is not further used or disclosed in a manner not permitted under the Privacy Rule; or (3) a disclosure of PHI where a covered entity or business associate has a good faith belief that an unauthorized person to whom the disclosure was made would not reasonably have been able to retain such information. (b) “Breach Notification Rule” means the regulations issued under HIPAA set forth in subpart D of 45 CFR Part 164.
(c) "Electronic Protected Health Informa tion" or "Electronic PHI" means PHI that is transmitted by or maintained in electronic media. (d) "Health Care Operations" is as defined under 45 CFR §164.501. (e) "HIPAA Health Plan," as defined under 45 CFR §160.103, means an individual or group plan that pr ovides, or pays the cost of, medical care, and includes those plans and arrangements listed in 45 CFR §160.103. (f) “Payment" is as def ined under 45 CFR § 164.501, and means activities undertaken by a HIPAA Health Plan to obtain c ontributions or to de termine or fulfill its responsibility for coverage an d provision of benefits, or to obtain or provide reimbursement for the provision of health care.
(g) "Privacy Policy" means the Employer HIPAA Privacy Policy. (h) "Privacy Rule" means the regulations issued under HIPAA set forth in subpart E of 45 CFR Part 164.
13426.00000\29725669.5
56 12728736.1 VI010-007
(i) "Protected Health Information" or "PHI" means individu ally identifiable health information that (1) relates to the pas t, present, or future physical or mental condition of a current or fo rmer Participant, Spouse, or Dependent, provision of health care to a Participant, Spouse, or Dependent, or payment for such health care; (2) can either identify the Participant, Spouse, or Dependent, or there is a reasonable basis to believe the information can be used to identif y the Participant, Spouse, or Dependent; and (3) is received or created by or on behalf of the Health FSA. (j) "Responsible Employee" means an employee (including a contract, temporary, or leased employee) of the Health FSA or of t he Employer whose duties (1) require that the employee have access to PHI for purposes of Payment or Health Care Operations; or (2) make it likely that the employee will receive or have access to PHI.
Persons designated as Responsible Employees are described in Section 14.3. (k) "Security Incident," as defi ned under 45 CFR §164.304, means the attempted or successful unauthorized access, use, disclosure, modification, or destruction of information or interference with system operations in an information system.
(l) "Security Rule" means the regulat ions issued under HIPAA set forth in subpart C of 45 CFR Part 164.
14.3 Responsible Employees. Only Responsib le Employees shall be permitted to use, disclose, create, receive, access, maintain, or transmit PHI or Electronic PHI on behalf of a Health FSA. The use or disclosure of PHI or Electronic PHI by Responsible Employees shall be restricted to the Health FSA administration functions that the Employer performs on behalf of a Health FSA pursuant to Section 7.6.
(a) Employer employees who perform the following functions on behalf of the Health FSA are Responsible Employees: (1) claims determination and processing functions; (2) Health FSA vendor relati ons functions; (3) benefits education and information functions; (4) Health FSA admin istration activities ; (5) legal department activities; (6) Health FSA compliance activities; (7) information systems support activities; (8) internal audit functions; and (9) human resources functions. (b) In addition to those individuals descr ibed in subsection (a), the Health FSA HIPAA privacy official and security official, and Employer employees to whom the Health FSA HIPAA privacy official and security o fficial have delegated any of the following responsibilities, shall also be Responsible Employees: (1) implementation, interpretation, and amendment of the Privacy Policy; (2) Pr ivacy Rule, Breach Notification Rule, or Security Rule training for Employer empl oyees; (3) investigation of and response to complaints by Participants, Spouses, De pendents, and/or employ ees; (4) preparation, maintenance, and distribution of the Health FSA's privacy notice; (5) response to requests by Participants, Spouses, or Dependents to inspect or copy PHI; (6) response to requests by Participants, Spouses, or Dependents to restrict the use or disclosure of their PHI; (7) response to requests by Participants, Spouses, or Dependents to receive communications of their PHI by alternat e means or in an alternate manner; (8) 13426.00000\29725669.5
57 12728736.1 VI010-007
amendment and response to requests to amend the PHI of Participants, Spouses, or Dependents; (9) response to requests by Part icipants, Spouses, or Dependents for an accounting of disclosures of their PHI; (10) response to requests for information by the Department of Health and Human Services; (11) approval of disclosures to law enforcement or to the military for government purposes; (12) maintenance of records and other documentation required by the Privacy Rule, Breach Notification Rule, or Security Rule; (13) negotiation of Privacy Rule, Br each Notification Rule, and Security Rule provisions and/or reasonable secu rity provisions into contra cts with third-party service providers; (14) maintenance of Health FSA PHI or Electronic PHI security documentation; or (15) approval of access to Electronic PHI by Participants, Spouses, or Dependents.
14.4 Permitted Uses and Disclosures. Respons ible Employees may access, request, receive, use, disclose, create, and/or transmit PHI only to perform certain permitted and required functions on behalf of th e Health FSA, consistent wit h the Privacy Policy. This includes:
(a) uses and disclosures for the Health FSA's own Payment and Health Care Operations functions;
(b) uses and disclosures for another HI PAA Health Plan's Payment and Health Care Operations functions;
(c) disclosures to a health care pr ovider, as defined under 45 CFR §160.103, for the health care provider's treatment activities;
(d) disclosures to the Employer, acting in its role as Plan sponsor, of (1) summary health information for purposes of obtaining health insurance coverage or premium bids for HIPAA Health Plans or for making decisions to modify, amend, or terminate a HIPAA Health Plan; or (2) enrollment or disenrollment information; (e) disclosures of a Participant's, Spouse's, or Dependent's PHI to the Participant or the Dependent or his or her personal repres entative, as defined under 45 CFR §164.502(g);
(f) disclosures to a Participant's, Spou se's, or Dependent's family members or friends involved in the Participant's, Spouse's, or Dependent's health care or payment for the Participant's, Spouse's, or Dependent's health care, or to notify a Participant's, Spouse's, or Dependent's family in the event of an emergency or disaster relief situation; (g) uses and disclosures to comply with workers' compensation laws; (h) uses and disclosures for legal and la w-enforcement purposes, such as to comply with a court order;
(i) disclosures to the Secretary of H ealth and Human Services to demonstrate the Health FSA's compliance with the Privacy Rule, Security Rule, or Breach Notification Rule;
13426.00000\29725669.5
58 12728736.1 VI010-007
(j) uses and disclosures for other governmental purposes, such as for national security purposes;
(k) uses and disclosures for certain heal th and safety purposes, such as to prevent or lessen a threat to public health, to report suspected cases of abuse, neglect, or domestic violence, or relating to a claim for public benefits or services; (l) uses and disclosures to identify a dec edent or cause of death, or for tissue- donation purposes;
(m) uses and disclosures requir ed by other applicable laws; and (n) uses and disclosures pursuant to the Participant's authorization that satisfies the requirements of 45 CFR §164.508.
14.5 Prohibited Uses and Disclosures. Not withstanding anything in the Plan to the contrary, use or disclosure of Protected Heal th Information is prohibited in the following situations.
(a) Genetic Information. Use or disclosure of Protected Health Information that is Genetic Information about an individual for underwriting purposes shall not be a permitted use or disclosure. The term "under writing purposes" includes determining eligibility or benefits, computation of premium or contri bution amounts, or the creation, renewal, or replacement of a contract of health insurance. (b) Employment-Related Actions . Use or disclosure of Protected Health Information for the purpose of employment-re lated actions or decisions shall not be a permitted use or disclosure.
(c) Other Benefits. Use or disclosure of Protected Health Information in connection with any other benefit or employee benefit plan of the Employer, except as expressly permitted in Section 14.4, shall not be a permitted use or disclosure.
14.6 Certification Requi rement. The Health FSA shall disclose PHI, including Electronic PHI, to Responsible Employees only upon receipt of a certification by the Employer that the Employer agrees:
(a) not to use or further disclose PHI ot her than as permitted or required by this Article and the Privacy Policy or as required by law;
(b) to take reasonable steps to ensure t hat any agents to whom the Employer provides PHI or Electronic PHI received from the Health FSA agree: (1) to the same restrictions and conditions that apply to the Employer with respect to such PHI; and (2) to implement reasonable and appropriate security measures to protect such Electronic PHI;
13426.00000\29725669.5
59 12728736.1 VI010-007
(c) not to use or disclose PHI for empl oyment-related actions and decisions or in connection with any other benefit or employee benefit plan of the Employer other than another Health Plan;
(d) to report to the Health FSA any use or disclosure of PHI, including Electronic PHI, that is inconsistent with the uses or disclosures described in Section 14.4, or any Security Incident, of which the Employer becomes aware; (e) to make available PHI for inspec tion and copying in accordance with 45 CFR §164.524;
(f) to make available PHI for amendmen t, and to incorporate any amendments to PHI, in accordance with 45 CFR §164.526;
(g) to make available PHI required to pr ovide an accounting of disclosures in accordance with 45 CFR §164.528;
(h) to make its internal practices, books, and records relating to the use and disclosure of PHI and Electronic PHI, received on behalf of the Health FSA, available to the Secretary of Health and Human Services for purposes of determining compliance by the Health FSA with the Privacy Rule, the Breach Notification Rule, or the Security Rule; (i) if feasible, to return or destroy all PHI and Electronic PHI received from the Health FSA that the Employer still maintains in any form and retain no copies of such PHI and Electronic PHI when no longer needed for t he purpose for which disclosure was made, except that, if such re turn or destruction is not feas ible, limit further uses and disclosures to those purposes that make th e return or destruction of PHI and Electronic PHI infeasible;
(j) to take reasonable st eps to ensure that ther e is adequate separation between the Health FSA and the Employer's activi ties in its role as Health FSA sponsor and employer, and that such adequate separ ation is supported by reasonable and appropriate security measures; and
(k) to implement administrative, ph ysical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of any Electronic PHI that the Employ er creates, receives, maintains, or transmits on behalf of the Health FSA.
14.7 Mitigation. In the event of noncompliance with any of the provisions set forth in this Article:
(a) The HIPAA privacy official or securi ty official, as appropriate, shall address any complaint promptly and confidentially. The HIPAA privacy official or security official, as appropriate, first will investigate the complaint and document the investigation efforts and findings.
13426.00000\29725669.5
60 12728736.1 VI010-007
(b) If PHI, including Electronic PHI, has been used or disclosed in violation of the Privacy Policy or inconsistent with this Article, the HIPAA priva cy official and/or the security official, as appropriate, shall take immediate steps to mitigate any harm caused by the violation and to minimize the possibility that such a violation will recur. (c) If a Responsible Employee or other Employer employee is found to have violated the Privacy Policy and/or policy dev eloped under the Security Rule, such personnel shall be subject to disciplinary action up to and including termination.
14.8 Breach Notification. Following the discove ry of a Breach of unsecured PHI, the Health FSA shall notify each individual whose unsecured PHI has been, or is reasonably believed to have been, accessed, acquired, or disclosed as a result of a Breach, in accordance with 45 CFR §164.404, and shall notify the Secretary of Health and Human Services in accordance with 45 CFR §164.408. For a breach of unsecured PHI involving more than 500 residents of a State or jurisdic tion, the Health FSA shall notify the media in accordance with 45 CFR §164.406. "Unsec ured PHI" means PHI that is not secured through the use of a technology or methodology specified in regulations or other guidance issued by the Secretary of Health and Human Services.
ARTICLE XV.
GENERAL PROVISIONS
15.1 Expenses. All reasonable expenses incu rred in administering the Plan are currently paid by forfeitures to the extent pr ovided in Section 7.9 with respect to Health FSA Benefits and Section 6.9 with respect to DCSA Benefits, and then by the Employer.
15.2 Not an Employment Contract. Neither th is Plan nor any action taken with respect to it shall confer upon any person the right to continue employment with any Employer.
15.3 Applicable Laws. This Plan shall be constr ued, 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. Any claim or acti on resulting from, relating to, or arising under the Plan shall only be brought in the San Be rnardino County in t he Eastern District of California, and such Court shall have personal jurisdiction over any party named in the action.
15.4 Compliance With Code and Other Applicab le Laws. It is intended that this Plan meet all applicable requirement s of the Code and of all regul ations issued thereunder.
This Plan shall be construed, operated, and adm inistered accordingly, and in the event of any conflict between this Plan and the Code, the provisions of the Code shall be deemed controlling, and any conflicting pr ovision of this Plan shall be deemed superseded to the extent of the conflict. In addition, the Plan will comply with the requirements of all other applicable laws.
15.5 Post-Mortem Payments. Any benefit payable under the Plan after the death of a Participant shall be paid to hi s or her surviving Spouse (if any ), otherwise, to his or her 13426.00000\29725669.5
61 12728736.1 VI010-007
estate. If there is doubt as to the right of any beneficiary to receive any amount, the Plan Administrator may retain such amount until the rights thereto ar e determined, without liability for any interest thereon.
15.6 Written Plan. The Administrator shall, upon request, provide each Participant with a copy of the written Plan(s) detailing the benefits available to the Participant.
15.7 No Trust Fund Required. The Employer shall have no obligation, but shall have the right, to insure any benefit s under the Plan or to establis h any fund or trust for the payment of benefits under the Plan.
15.8 Insured Benefits. The Empl oyer shall have no responsibility for the payment of any benefits covered under the Component Plans provided by policies of insurance.
15.9 Rights to Employer’s Assets. No Employ ee or beneficiary shall have any right to, or interest in, any assets of the Employer upon termination of employment or otherwise, except as provided from time to time under this Plan, and t hen only to the extent of the benefits payable under the Plan to such Employee or beneficiary. All payments of benefits as provided for in this Plan shall be made sole ly out of the assets of the Employer and the Plan Administrator shall not be liable therefore in any manner.
15.10 Indemnification of Employer. If any Part icipant receives one or more payments or reimbursements under this Plan on a tax-free bas is and if such payments do not qualify for such treatment under the Code, then such Participant shall indemnify and reimburse the Employer for any liability that it may incur for failure to withhold federal income taxes, Social Security taxes, or other taxes from such payments or reimbursements.
15.11 Non-Assignability of Rights. The right of any Participant to receive reimbursement under this Plan shall not be assigned by the Participant and shall not be subject to claims by the Participant's creditors. Any attempt to cause such right to be so subjected will not be recognized, except to the extent required by law.
15.12 Nonalienation of Benefits. Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for a limony or other payment s for the support of a spouse or former spouse, or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, a ssign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder, shall not be recognized except to the extent required by law. The Employer shall not in any manner be liable for, or subject to, the debts, contracts, liabilit ies, engagements or torts of any person entitled to benefits hereunder.
15.13 Mental or Physical Inco mpetence. Every person rece iving or claiming benefits under the Plan shall be presumed to be ment ally and physically competent and of age until the Plan Administrator receives a written notice, in a form and manner acceptable to 13426.00000\29725669.5
62 12728736.1 VI010-007
it, that such person is mentally or physically incompetent or a minor, and that a guardian, conservator or other person legally vested with the care of his estate has been appointed.
15.14 Requirement for Proper Forms. All communications in connection with the Plan made by a Participant shall become effective only when duly executed on any forms as may be required and furnished by, and filed with, the Plan Administrator.
15.15 Source of Payments. The Employer and any insurance company contracts purchased or held by the Empl oyer or funded pursuant to th is Plan shall be the sole sources of benefits under the Pl an. No Employee or beneficiary shall have any right to, or interest in, any assets of the Employer upon termination of employment or otherwise, except as provided from time to time under the Plan, and t hen only to the extent of the benefits payable under the Plan to such Employee or beneficiary.
15.16 Tax Effects. Neither the Employer, nor the Plan Administrator makes any warranty or other representation as to whether any pre-tax premiums made to or on behalf of any Participant hereunder will be treated as excludable from gross income for local, state, or federal income tax purposes. If for any reas on it is determined that any amount paid for the benefit of a Participant or Beneficiary are includable in an Employee’s gross income for local, federal, or state income tax pur poses, then under no circ umstances shall the recipient have any recourse against the Plan Administrator or the Employer with respect to any increased taxes or other losses or damages suffered by the Employees as a result thereof. The Plan is designe d and intended operate as a “cafeteria plan” under Section 125 of the Code.
15.17 Gender and Number. Words used in the masculine, feminine, or neutral gender shall each be deemed to refer to the other whenever the context so requires. Words used in the singular or plural number shall each be deemed to refer to the other whenever the context so requires.
15.18 Headings. The Article and Section headings contained herein are for convenience of reference only and shall not be construed as defining or limiting the matter contained thereunder.
15.19 Incorporation by Reference. The act ual terms and condition s of the separate component Benefits offered under this Plan are contained in separate, written documents governing each respective benefit, and shall govern in the event of a conflict between the individual plan document, and this Plan as to substantive content. To that end, each such separate document, as amended or subsequently replaced, is hereby incorporated by reference as if fully recited herein.
15.20 Plan Provisions Controlling. In the event that the te rms or provisions of any summary or description of this Plan conflict with the provisions of this Plan, the provisions of this Plan shall control.
13426.00000\29725669.5
63 12728736.1 VI010-007
15.21 Severability. Should a c ourt of competent jurisdiction subsequently invalidate any part of this Plan, the remai nder thereof shall be given effe ct to the maximum extent permitted by law.
15.22 Forfeiture of Unclaimed Spending Account Benefits. An y Spending Account reimbursements that are uncla imed (e.g., uncashed benefit che cks) by the close of the Plan Year following the Plan Year in which the Health Care or Dependent Care expenses were incurred shall be forfeited.
IN WITNESS WHEREOF, the Employer has ex ecuted this restated Plan, Health FSA Plan, and DCSA Plan as of the date set forth below.
Employer:
City of Victorville
B y :
I t s :
Date:
A T T E S T :
B y :
I t s :
Date:
13426.00000\29725669.5
64 12728736.1 VI010-007
SCHEDULE “A”
SCHEDULE OF BENEFITS
The following Schedule of Benefits, which ma y be amended from time to time by the Employer, specifies the Benefits and the Co mponent Plans which set forth the terms, conditions and limitations of the Benefits offered to Participants. The periods of coverage for the Component Plans shall be the same as the Plan Year of the Plan, unless specified otherwise.
Pursuant to Resolution 25-002, staff have the authority to automatically update or revise Schedule “A” of the Plan, whenever changes are made to the Benefits referenced herein pursuant to any collective bargaining agree ment, resolution or policy approved by the City Council.
Capitalized terms in this Schedule of Benefits shall have the meaning as defined in Article I of the Cafeteria Plan.
BENEFITS – Eligible Employees may elect the following Benefits under this Cafeteria Plan to the extent permitted by the applicable Resolution, memorandum of understanding or contract which offers Benefits to such Eligible Employees at the coverage levels specified therein and in the Cafeteria Plan:
Medical
2026 Rates EE Onl y EE + 1 EE + 2
Anthem Blue Cross Select HMO $962.68 $1,925. 36 $2,502.97 Anthem Blue Cross Traditional HMO $1,128.53 $2, 257.06 $2,934.18 Blue Shield Access + HMO $917.91 $1,835.82 $2,386.57
Blue Shield Trio HMO $852.56 $1,705.12 $2,216.66
Health Net Salud y Mas (Hesperia/Oak Hills Residents only) $740.11 $1,480. 22 $1,924.29 Kaiser Permanente $969.05 $1,938.10 $2,519.53
PERS Gold – PPO plan $960.03 $1,920.06 $2,496.08
PERS Platinum – PPO plan $1,431.81 $2,863.62 $3,722.71 United Healthcare Signature Value Alliance $870. 76 $1,741.52 $2,263.98 13426.00000\29725669.5
65 12728736.1 VI010-007
Dental
2026 Rates EE Onl y EE + Spouse EE +Child (ren) EE + Famil y DeltaCare USA DHMO $13.46 $24.18 $38.09 $53.83
Delta Dental PPO $54.01 $122.99 $122.99 $192.01
Vision
2026 Rates EE Onl y EE + Spouse EE + Child (ren) EE+ Famil y VSP $8.17 $16.35 $17.49 $27.95
Health Care Flexible Spending Account
HealthEquity
PO Box 14374
Lexington, KY 40512
(866) 346-5800
Maximum Contribution Limit for 2026 - $4,400
Carryover amount - $640
Dependent Care Spending Account
HealthEquity
PO Box 14374
Lexington, KY 40512
(866) 346-5800
Maximum Contribution Limit for single individuals and
married couples filing jointly in 2026 - $7,500
Maximum Contribution Limit for married individuals filing separatel
y in 20256 - $3,750
Supplemental Group Term Life Insurance
The Hartford
One Hartford Plaza
Hartford, CT 06155
(888) 563-1124
13426.00000\29725669.5
66 12728736.1 VI010-007
CERTIFICATION OF CITY OF VICTORVILLE TO
CITY OF VICTORVILLE CAFETERIA PLAN
City of Victorville is the spons or of the City of Victorville Cafeteria Plan. The Cafeteria Plan is a hybrid entity within the meaning of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which includes non-health care and health care components. The health care components of the Cafeteria Plan include the following separate group health plans:
Medical
Dental
Vision
Health Care FSA Spending Account Plan
The Cafeteria Plan (excluding the non-health care components) and the health care components included in the Cafeteria Plan are group health plans within the meaning of HIPAA (collectively, the “Plan”). The Plan and City of Victorville desire to exchange health information protected under HIPAA for purposes related to administration of the Plan.
City of Victorville, acting in its capacity as plan sponsor of the Plan (“Plan Sponsor”) makes the following certifications for purposes of administering the Plan as required by the “Standards for Privacy of Individually Identifiable H ealth Information,” 45 CFR § 164.102 et seq. (the “Privacy Rule”):
The plan document of the Plan incorporates the following provisions and Plan Sponsor agrees to:
not use or further disclose any protected health information (“PHI”) received from the Plan (including any health insurance issuer or HMO with respect to the group health plan) except as permitted or required by the plan documents or required by law;
ensure that any agents to whom it prov ides PHI received from the Plan agree to the same restrictions and conditions that apply to the Plan Sponsor with respect to such information;
not use or disclose PHI for empl oyment-related actions and decisions; not use or disclose PHI in connection with any other benefit plan, program, or arrangement of City of Victorville except to the extent such other benefit plan, program or arrangement is part of an or ganized health care arrangement of which the Plan also is a part;
report to the Plan any use or disclosure of PHI that is inconsistent with 45 CFR 13426.00000\29725669.5
67 12728736.1 VI010-007
§164.524 and the uses and disclosures spec ified in the Plan of which it becomes aware;
give individuals access rights to PHI in its possession in accordance with the policies and procedures of the Plan;
permit individuals to request amendment of their PHI in the Plan Sponsor’s possession, and to make any necessary amendments, in accordance 45 CFR §164.526 and with the policies and procedures of the Plan; make information available to provide any necessary accounting of disclosures of PHI in accordance with 45 CFR §164. 528 and the policies and procedures of the Plan;
make its internal practices, books, and records relating to the use and disclosure of PHI from the Plan available to the Secretary of the Department of Health and Human Services for purposes of determining the Plan’s compliance with the Privacy Rule;
if feasible, return to the Plan or destro y any PHI from the Plan that it maintains in any form, and shall retain no copies of the PHI when the PHI is no longer needed for the purpose for which disclosure was originally made. If it is not feasible to return or destroy the PHI, the Plan Sponsor agr ees that it shall further limit any uses and disclosures to those purposes that make the return or the destruction of the information not feasible; and ensure that adequate separ ation between the Plan Sp onsor and the Plan is established.
PLAN SPONSOR
City of Victorville
PLAN
City of Victorville Cafeteria Plan
B y :
Print Name: Keith C. Metzler_________
Title: City Manager________________
D a t e d :
B y :
Print Name: ___________
Title: Privacy Official
D a t e d :
Exhibit A
HIPAA Privacy Policy for
Cafeteria Plan
(Section 125 Plan)
HIPAA Privacy Policy for Cafeteria Plan (Section 125 Plan)
This HIPAA Privacy Policy outlines t he procedures and saf eguards implemented by the public entity administering the Cafeteria Plan (Section 125 Plan) to ensure the protection of Protected Health Information (PHI) in compliance with the Health Insurance Portability and Accountability Act (HIPAA).
This policy applies to all employees, c ontractors, and Business Associates who have access to PHI in connection with the administration of the Cafeteria Plan.
Definitions
a) Business Associate: Any person or entity that perfo rms functions or activities on behalf of the Plan invo lving the use or disclosure of PHI, pursuant to a Business Associate Agreement.
b) Plan Sponsor: The public entity that establishes and maintains the Cafeteria Plan and is responsible for its funding and administration. c) Plan Official (Privacy Official): The individual designated by the Plan Sponsor to oversee compliance with HIPAA Privacy Rule requirements. d) Protected Health Information (PHI ): Individually identifiable health information maintained or transmitted in any form or medium.
The Plan Sponsor shall designate a Priva cy Official responsible for developing, implementing, and overseei ng the Plan’s privacy policies and procedures, ensuring compliance with HIPAA regulations.
PHI may be used or disclosed by the Plan only for purposes of treatment, payment, and healthcare operations, or as otherwise permitted or required by law. Any other use or disclosure requires written authorization from the individual.
The Plan Sponsor shall im plement appropriate adminis trative, physical, and technical safeguards to protect the confidentiality, integrity, and availability of PHI.
These safeguards include secure storage, access controls, and encryption where applicable.
All workforce members with access to PHI shall receive training on HIPAA privacy policies and procedures. Training sha ll be conducted upon hire and periodically thereafter.
Individuals may file complaints regardi ng the Plan’s privacy practices with the designated Privacy Official. Complaints will be investigat ed promptly, and appropriate corrective actions will be taken.
This policy shall be reviewed and updated periodically to ensure continued compliance with HIPAA and to reflect changes in operations or regulations. All updates shall be documented and communicated to affected parties.