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Exhibit 1
Resolution No. 2003-05
A RESOLUTION AUTHORIZlNG THE ADOPTION OF A FLEXIBLE
SPENDlNG PLAN IN COMPLIANCE WITH SECTION 125 OF THE
lNTERNAL REVENUE SERVICE CODE ACCORDlNG TO THE
ATTACHED PLAN DOCUMENT:
. Section 1. The City Council authorizes a flexible spending plan ill
accordance with the plan documents outlined in "Attachment A".
Section 2. All resolutions and parts of resolutions in conflict herewith are
hereby repealed to the extent of the conflict only.
Section 3. If any word, phrase, clause, sentence, paragraph, section or
other part. of this resolution or the application thereof to any person or
circumstance, shall ever be held to be invalid or unconstitutional by any court of
competent jurisdiction, the remainder of this resolution and the application of such
word, phrase, clause, sentence, paragraph, section, or other part of this resolution
to any other person or circumstances shall not be affected thereby.
Section 4. The City Council officially finds, determines and declares that a
sufficient written notice of the date, hour, place and subject of each meeting at
which this resolution was discussed, considered or acted upon was given in the
manner required by the Texas Open Meetings Law, as amended, and that each such
meeting has been open to the public as required by law at all times during such
discussion, consideration and action. The City Council ratifies, approves and
confirms such notices and the contents and posting thereof
Section 5. This notice shall take effect immediately upon its adoption and
signature.
PASSED, APPROVED AND ADOPTED ON June 9.2003
Signed &1/11;- @/-~
Mayor
ATTEST: (SEAL)
~
Exhibit 2
CAFETERIA PLAN
PREMIUM REDUCTION OPTION PLUS
FLEXIBLE SPENDING ACCOUNTS
PLAN DOCUMENT
As ADOPTED BY
THE CITY OF WEST UNIVERSITY PLACE
TABLE OF CONTENTS
SECTION 125 CAFETERIA PLAN .....................................................................................................1
1. INTRODUCfIO N ....................................................................................................................1
1.1 Purpose of Plan............... .......................................................................... 1
2. DEFINITIONS ................................... .....................................................................................1
2.1 Administrator ............ ............... ... ............. ... ........ ... .................................. 1
2.2 Affiliated Employer ....................................... ................. .......................... 1
2.3 Anniversary Date...................................................................................... 1
2.4 Benefit Credits.......................................................................................... 1
2.5 Benefit Election Form............................................................................... 1
2.6 Benefit Package Option(s) ........................................................................ 2
2.7 Board of Directors .......... ... ............ ..... ...................................................... 2
2.8 Cash Benefits..... ...................................................................................... 2
2.9 Change in Status ...................................................................................... 2
2.10 Claim Submission Grace Period................................................................ 2
2.11 Closing Period.......................................................................................... 2
2.12 Code......................................................................................................... 2
2.13 City ...........................................................Error! Bookmark not defined.
2.14 Compensation. ........... ............. .................. ....... .................. ........... ............ 2
2.15 Contributions............................ ................................................................ 2
2.16 Dependent................................................................................................ 2
2.17 Effective Date ................................ .......................... ................................. 3
2.18 Election Period ......................................................................................... 3
2.19 Eligible Employee ....................................................................................3
2.20 Eligibility Requirements ........................ ................................................... 3
2.21 Employee................................................................... ............................... 3
2.22 Employer.................................................................................................. 3
2.23 Entry Date...................................................... ........................... ............... 3
2.24 Health Care Premium Expenses................................................................3
2.25 Highly Compensated Individual................................................................4
2.26 Insurance Benefits....................................... ...................................... ....... 4
2.27 Key Employee .......... ......... .............. .................................................... ..... 4
2.28 Participant................................................................................................ 4
2.29 Plan....... ......................... ........................................ .................................. 4
2.30 Plan Year. ................................................................................................ 4
2.31 Qualified Benefits ......... ............................................. ................. .............. 4
2.32 Reimbursement Account...... ..................................................................... 4
2.33 Reimbursable Expense................................................ .............................. 4
2.34 Salary Reduction Agreement ....................................................................4
2.35 Spouse...................................................................................................... 5
2.36 Summary Plan Description or "SPD" ........................................................ 5
3. ELIGIBILITY AND PARTICIPATION .................................................................................... .... 5
3.1 Eligibility Requirements.................................... .... ........................... ..... ... 5
3.2 Participation Termination..... ......... ........................ ..................... ..... .... ..... 5
3.3 Non-FMLA Leave of Absence ..................................................................5
3.4 Qualified Leave under Family and Medical Leave Act.............................. 5
3.5 Automatic Termination of Election and Reinstatement of Participation .... 5
EFFECTIVE: JANUARY 1,2003
PREMIUM REDUCTION OPTION PLus FSAs
4. ELECfION OF BENEFITS ....................................................................................................... 5
4.1 Election of Benefits.................................................................................. 5
4.2 Election Period Prior to Effective Date...................................................... 6
4.3 Annual Election Period.............................................................................6
4.4 Initial Election Period........................................ ................... ........ ... ......... 6
4.5 Changes by Administrators.......................................................................6
4.6 Revocation of Elections ............................................................................6
5. CONTRIBUTIONS ..................................... ......................... .................................................... 7
5.1 Contributions for Elected Benefit Package Options ................................... 7
5.2 Source of Contributions ......... ................................................................... 7
5.3 Benefit Credits.......................................................................................... 7
5.4 Allocations Irrevocable During Plan year................................................. 7
5.5 Reduction of Certain Elections to Prevent Discrimination......................... 7
5.6 Adjustment of Elections due to Contribution Changes ............................. 7
5.7 Credits and Debits to Medical Expense Reimbursement Accounts............. 7
5.8 Credits and Debits to Dependent Care Expense Reimbursement Accounts 7
5.9 Health Care Premium Reimbursment........................................................ 8
6. BENEFIT PACKAGE OPTIONS ................................................................................................ 8
6.1 Insurance Benefits ............................ ........................................................ 8
6.2 Medical Expense Reimbursement Benefit (Health FSA)............................ 8
6.3 Dependent Care Assistance Plan (DCAP FSA) ......................................... 8
6.4 Cash Benefits............... ....................................................................... ..... 8
6.5 Health Care Premium Expense Reimbursement ........................................8
7. PLAN AD MINISTRA TIO N ................................................................................. ...................... 8
7.1 Appointment of Administrators ................................................................ 8
7.2 Allocation of Responsibility for Administration........................................ 8
7.3 Provision for Third-Party Plan Service Providers ......................................9
7.4 Fiduciary Liability .................................... ......... .............................. ......... 9
7.5 Compensation of Plan Administrator ........................................................ 9
7.6 Bonding.................................................................................................... 9
7.7 Payment of Administrative Expenses........................................................ 9
7.8 Funding Policy ......................................... ......... ............. .......................... 9
7.9 Disbursement Reports............................................................................. 10
7.10 Indemnification ..................................... .............................. ............. ...... 10
7.11 Statements ...... .................................................... ............... ...... ............... 10
8. CLAIMS PROCEDURES ......................................................................... ............................... 10
9. PLAN AMENDMENT AND TERMINATION..............................................................................10
9.1 Permanency ...... ....... ........ ...... ... ........ ........... ............................ ........ ....... 10
9.2 Employer's Right to Amend.................................................................... 10
9.3 Employer's Right to Terminate ............................................................... 10
9.4 Determination of Effective Date of Amendment or Termination ............. 11
10. MISCELLANEOUS PROVISIO NS.............................................................................. .............. 11
10.1 Information to be Furnished.................................................................... 11
10.2 Limitation of Rights ............................................................................... 11
10.3 Not an Employment Contract ................................................................. 11
10.4 Governing Law....................................... ................................................ 11
10.5 Postmortem Payments.................................. ........ ............... ..... ............... 11
CITy OF WEST UNIVERSITY PLACE
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PLAN DOCUMENT (REV. 05/19/03)
EFFECTIVE: JANUARY 1, 2003
PREMIUM REDUCTION OPTION PLus FSAs
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Non-alienation of Benefits . .... ..... .................... ................................. ... .... 11
Mental or Physical Incompetency ........................................................... 11
Inability to Locate Payee ............. .................... .................................... .... 11
Requirement for Proper Forms.. ....... ...... .............. ... ..... ...... .................. ... 11
Source of Payments.. .............. ................................................................. 12
Multiple Functions .......................... ...... .............. ..... .............................. 12
Tax Effects............................................................................................. 12
Gender, Number, and Headings ....... .......................................... ............. 12
Code and ERISA Compliance................................................................. 12
Incorporation by Reference ................................................. .................... 12
Severability......... .................................................................................... 12
APPENDIX A: DEPENDENT CARE ASSISTANCE PLAN .............................................................1
1. PURPOSE ............. ....... ............................... ...........................................................................1
2. DEFINITIONS ......................................................................... ...............................................1
2.1 Dependent Care Assistance Account......................................................... 1
2.2 Dependent Care Expenses......................................................................... 1
2.3 Educational Institution.... ......................................................................... 1
2.4 Eligible Day Care Center.......................................................................... 1
2.5 Qualifyi.ng Individual ... ................... ... '" ...................... .......................... ... 1
2.6 Participant............... ................................................................................. 1
2.7 Spouse...................................................................................................... 1
2.8 Student............................................ ......................................................... 2
3. PARTICIPATION .................................................................................................................... 2
3.1 Commencement of Participation.................. .................... ..... .................... 2
3.2 Cessation of Participation ... ... ............................................ ....................... 2
3.3 Election of Benefits ... ............ ........ ................. .......................................... 2
3.4 Plan Limits... .............................. ... ................................................... ........ 2
3.5 Other Administrative Documentation .......................................................2
3.6 Maximum Contribution Amounts.............................................................2
4. DEPENDENT CARE ASSISTANCE ACCOUNTS..........................................................................2
4.1 Establishment of Accounts........................ ....................... ... ...................... 2
4.2 Crediting and Debiting of Accounts......................................................... 2
4.3 Source of Payments............. ............................................ .... ...................... 3
4.4 Forfeiture of Dependent Care Assistance Accounts ................................... 3
5. PAYMENT OF DEPENDENT CARE ASSIST ANCE....................................................................... 3
5.1 Claims for Reimbursement .......................................................................3
5.2 Reimbursement or Payment of Expenses................................................... 3
5.3 Report(s) to Participants ................ ........................................................... 3
5.4 Limitation on Reimbursements or Payments with Respect to Certain
Participants .............................................................................................. 3
6. ADMINISTRATION......................... .................................... ........ ............................................ 4
6.1 Administrator......... .................................................... .............................. 4
6.2 Records................ ....................................................... ....................... ...... 4
6.3 Reliance on Determinations, etc................................................................4
6.4 Denied Claims Procedure Under the Plan .................................................4
CITY OF WEST UNIVERSITY PLACE
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PLAN DOCUMENT (REv. 05/19/03)
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PREMIUM REDuCTION OPTION PLus FSAs
6.5
6.6
Preservation of Remedies . .......................... .... ....... ..... .............. ................. 4
Excess Reimbursement...................................................... ....................... 4
7. AMENDMENT AND TERMINATION ................... ...................................................................... 4
8. MISCELLANEOUS........................................................... .......................................................4
8.1 Funding Status ofDCAP ..........................................................................4
8.2 Assignment .... .................. ........................................................................ 5
8.3 No Guarantee of Tax Consequence ...........................................................5
8.4 Indemnification of Employer by Participants ............................................ 5
APPENDIX B: MEDICAL EXPENSE REIMBURSEMENT PLAN .................................................1
1. PURPOSE ........................................ ........... ...........................................................................1
2. DEFINITIONS ........................................................................................................................1
2.1 Coverage Amount................................................................................. .... 1
2.2 Dependent ................................................................. ...... ........ ................. 1
2.3 Eligible Medical Care Expense ................................................................. 1
2.4 Medical Reimbursement Account ............................................................. 1
2.5 Participant............ ........... ........................................................ ................. 1
3. PARTICIPATION ....................................................................................................................1
3.1 Commencement of Participation............................................................... 1
3.2 Cessation of Participation......................................................................... 1
3.3 Coverage During a Leave of Absence........................................................ 1
4. ELECfIONS..... ......................................................................................................................2
4.1 Election of Benefits..... .................................................................. ........... 2
4.2 Plan Limits.. ...................... ....................................................................... 2
4.3 Duration of Elections................................................................................ 2
5. MEDICAL REIMBURSEMENT Acco UNTS............................................................................... 2
5.1 Establishment of Accounts........................................................................2
5.2 Crediting and Debiting of Accounts.........................................................2
5.3 Source of Payments. ..................................... ............................................. 2
5.4 Employer Risk......... .................................. ............................................... 2
5.5 Forfeiture of Health Care Accounts...........................................................2
6. PAYMENT OF ELIGIBLE MEDICAL CARE EXPENSES.............................................................. 3
6.1 Claims for Reimbursement ....................................................................... 3
6.2 Reimbursement or Payment of Expenses................................................... 3
6.3 Report(s) to Participants ...........................................................................3
6.4 Limitation on Reimbursements or Payments with Respect to Certain
Participants .............................................................................................. 3
6.5 Excess Reimbursements................. ........................................................... 3
7. COBRA CONTINUA TIO N COVERAGE ........... ........................................................................ 3
8. ADMINISTRA TIO N ......................................... .................................... .................................... 4
8.1 Administration .. ................ .... .................................................. ................. 4
8.2 Records. ....... .... .... ......... ....... ..... .............................. ................................. 4
8.3 Reliance on Determinations, etc................................................................4
8.4 Denied Claims Procedure Under the Plan .................................................4
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PREMIUM REDUCTION OPTION PLus FSAs
8.5
Preservation of Remedies.......... ............................. .... ... ............ ................ 4
9. AMENDMENT AND TERMINATION ............................................................... .......................... 4
10. MISCELLANEO us.................................................................................................................. 4
10.1 Funding Status of Health FSA Plan ..........................................................4
10.2 Assignment ......... .............. .................. ................ ............... ..... ............ ..... 5
10.3 No Guarantee of Tax Consequence ........................................................... 5
10.4 Indemnification of Employer by Participants ............................................ 5
CITy OF WEST UNIVERSITY PLACE
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PLAN DOCUMENT (REv. 05/19/03)
Section 125 Cafeteria Plan
1. INTRODUCTION
1.1 PURPOSEOFPLAN
The purpose of this Plan (as defined in Section 2.29) is to provide Employees of the City a choice between cash and the non-
taxable Benefit Package Options referenced herein under Section 6.The Plan is intended to qualify as a "cafeteria plan" under
Section 125 of the Internal Revenue Code, as amended from time to time. This Plan is intended to be maintained for the
exclusive benefit of the City's Eligible Employees (as defined in Section 2.19 herein), their Dependents, and beneficiaries. The
Employer further intends that the terms of this Plan, including those relating to the underlying Insurance Benefits, Medical
Expense Reimbursement Plan, and the Dependent Care Assistance Plan, be legally enforceable by Eligible Employees. If
elected by the Employer, the Dependent Care Assistance Plan is intended to qualify as a Code Section 129 dependent care
assistance plan, and, if elected by the Employer, the Medical Expense Reimbursement Plan is intended to qualify as a Code
Section 105 medical expense reimbursement plan. Although reprinted within this document, the Dependent Care Assistance
Plan and the Medical Expense Reimbursement Plan are separate written plans for purposes of administration and all reporting
and nondiscrimination requirements imposed by Sections 105 and 129 of the Code and all applicable provisions of ERISA.
2. DEFINITIONS
The following words and phrases are used in this Plan and will have the meanings set forth unless a different meaning is
clearly required by the context.
2.1 ADMINISTRATOR
Employer and/or other person or committee who has been so designated by the Employer in the Sununary Plan Description.
Also referred to as Plan Administrator.
2.2 AFFILIATED EMPWYER
Any Employer who, within the context of Code Section 414(b), (c), or (m) of the Code, will be treated with the Employer as a
single employer for purposes of Code Section 125.
2.3 ANNIVERSARY DATE
The first day of any subsequent Plan Year.
2.4 BENEFIT CREDITS
Any amount that the Employer, in its sole discretion, may contribute on behalf of each Employee to provide benefits for such
Employee, his spouse, and/or his Dependents, if applicable under the Plan. To the extent set forth in the enrollment material,
an Employee may be permitted to allocate his allotted share of Benefit Credits among various Benefit Package Options selected
by the Employee as set forth in the enrollment material. The amount of Benefit Credits for each Employee is set forth in the
enrollment materials provided by the Plan Administrator. Benefit Credits may be adjusted upward or downward at the
contributing Employer's discretion. The amount shall be calculated for each Plan Year in a uniform and nondiscriminatory
manner based on the Employee's dependent status, commencement or termination date of the Employee's employment during
the Plan Year, and such other factors as the Employer shall prescribe. The Benefit Credits available either may be limited to
purchase of a particular Benefit Package Option, or may be unrestricted as designated in the enrollment materials provided by
the Plan Administrator. Except as otherwise provided in the Sununary Plan Description and enrollment materials, Benefit
Credits will not be disbursed to the Employee if the cost of Benefit Package Options elected is less than the Benefit Credits
allocable thereto. Any excess shall be retained by the Employer.
2.5 BENEFIT ELECfION FORM
Agreement whereby the Eligible Employee participates by electing to reduce and/or deduct from the Employee's Compensation
so as to receive selected benefits under Section 6 below. Also known as a Salary Reduction Agreement.
EFFECTIVE: JANUARY 1,2003
PREMIUM REDUCTION OPTION PLus FSAs
2.6 BENEFIT PACKAGE OPTION(S)
Those Qualified Benefits available to a Participant under this Plan as set forth in the Summary Plan Description.
2.7 CITY COUNCIL
The dilly elected City Council, as constituted from time to time.
2.8 CASH BENEFITS
The cash payment described in Section 6.4 of this Plan.
2.9 CHANGE IN STATUS
Change in status means any of the events described in the Summary Plan Description, as well as any other events included
under subsequent changes to Code Section 125 or regulations issued under Code Section 125, that the Plan Administrator (in
its sole discretion) decides to recognize on a uniform and consistent basis as a reason to change the election mid-year. Note:
See the SPD for requirements that must be met to permit certain mid-year election changes on account of a Change in Status.
2.10 CLAIM SUBMISSION GRACE PERIOD
The Claim Submission Grace Period is the period during which Participants who terminate coverage during the Plan Year can
file claims after participation in a Benefit Package Option has terminated. If set forth in the Summary Plan Description, a
separate Claims Submission Grace Period can be established for Participants terminating coverage during the Plan Year and
will take precedence over the Closing Period with respect to those who terminate employment. If a Claims Submission Grace
Period is not set forth in the Summary Plan Description, terminated employees can file claims until the end of the applicable
Closing Period for expenses incurred before termination.
2.11 CLOSING PERIOD
The period of time beginning at the end of the Plan Year in which a Participant may submit claims incurred during the Plan
Year. The Closing Period is as specified in the Summary Plan Description. (See Claim Submission Grace Period above.)
2.12 CODE
The Internal Revenue Code as amended from time to time.
2.13 CITY
The organization named in the Summary Plan Description as the "Employer."
2.14 COMPENSATION
The cash wages paid to an Employee by the Employer determined prior to:
(a) any salary deferral elections made under Code Sec. 401(k), 403(b), 408(k) or 457 (if any) plans,
(b) any salary reduction elections made under this Plan, and
(c) any salary reduction elections made under a Code Section 132 transportation fringe benefit plan maintained by the
Employer.
2.15 CONTRIBUTIONS
Amounts withheld from a Participant's Compensation before any applicable state and federal taxes have been deducted or, if
permitted by the Employer, after all applicable state and federal taxes have been deducted, in accordance with the Participant's
Salary Reduction Agreement, to apply towards the cost of the Benefit Package Options selected by the Participant.
2.16 DEPENDENT
Any individual who is a tax dependent of the Participant as defined in Code Section 152(a), provided, however, that in the case
of a divorced Employee, the Dependent shall be defined (a) as in Code Section 21(e)(5) (i.e. dependent of the parent with
custody) for purposes of the Dependent Care Expense Account Plan; and (b) for purposes of accident or health coverage, a child
CITy OF WEST UNIVERSITY PLACE
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PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
PREMIUM REDUCTION OPTION PLus FSAs
shall be considered a Dependent of both parents. Nothing in this Section 2.16 is intended to restrict the definition of Dependent
established by each Benefit Package Option.
2.17 EFFECTIVE DATE
Date specified in the Summary Plan Description on which the Plan is applicable to the Eligible Employees.
2.18 ELECTION PERIOD
The period established by the Plan Administrator during which an election is made to participate in the Plan pursuant to
Sections 4.2, 4.3 and 4.4 herein.
2.19 ELIGIBLE EMPLOYEE
An Employee who meets the Eligibility Requirements set forth in the Summary Plan Description.
2.20 ELIGIBILITY REQUIREMENTS
Those requirements setting forth the minimum conditions necessary to be able to participate in the Plan as set forth in the
Summary Plan Description.
2.21 EMPLOYEE
Any individual who is considered to be in a legal employer-employee relationship with the Employer for federal withholding
tax purposes. Such term includes "former employees" for the limited purpose of allowing continued eligibility for benefits
hereunder for the remainder of the Plan Year in which an employee ceases to be employed by the Employer provided the
component Benefit Package Option allows for such continuation and any required contributions are made. The term
"Employee" shall not include any leased employee (as Code Section 414(n) defines that term) or an individual classified by the
employer as a contract worker, independent contractor, temporary employee, seasonal or casual employee, whether or not any
such persons deemed by a court to be in a legal employer-employee relationship with the Employer. In addition, the term
"Employee" shall not include any self-employed individual who receives from the Employer "net earnings from self
employment" within the meaning of Code Section 401(c)(2) unless such individual is also an Employee or an individual
covered under a collective bargaining agreement and the collective bargaining agreement specifically provides for participation
herein.
2.22 EMPLOYER
The City and any Affiliated Employer that adopts the Plan pursuant to the City's authorization. When the Plan provides that
the "Employer" has a certain power (e.g., the appointment of an Plan Administrator, entering into a contract with a third party
insurer, or amendment or termination of the Plan), the term "Employer" shall mean only the City. Affiliated Employers who
adopt the Plan shall be bound by the Plan as adopted and subsequently amended unless they clearly withdraw from
participation herein.
2.23 ENTRY DATE
The date participation in the Plan actually commences after the Eligibility Requirements have been met. This date is set forth in
the Summary Plan Description.
2.24 HEALTH CARE PREMIUM EXPENSES
Health Care Premium Expenses means amounts paid by an Eligible Employee to maintain an individual accident and health
insurance policy issued to the Employee to the extent that the individual insurance policy must be determined by the Plan
Administrator to be qualified before the beginning of the Plan Year or, if the individual is a new hire, before the effective date
of the Employee's participation in the Plan. For purposes of Health Care Premium Expenses, (a) an individual insurance policy
is qualified if it provides accident and health insurance described in Code Section 106 and is an "excepted benefit" as defined
by the Health Insurance Portability and Accountability Act ("HIPAA"), (b) the contract must be an individually purchased
contract and not an employer- sponsored insurance plan. and (c) the Employee must be the policyholder of the insurance policy.
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EFFECTIVE: JANUARY 1,2003
PREMIUM REDUCTION OPTION PLus FSAs
2.25 HIGHLY COMPENSATED INDIVIDUAL
An individual defined under Section 105 (h), 125(e)(2), and 414(q) of the Code as a "highly compensated individual" or a
"highly compensated employee."
2.26 INSURANCE BENEFITS
Employer-sponsored Benefit Package Options provided pursuant to one or more insurance policies issued by an insurance
carrier or pursuant to a self-funded arrangement other than the Medical Expense Reimbursement Plan, the Dependent Care
Expense Reimbursement Plan, and the Health Premium Reimbursement Account referenced in Section 6 herein.
2.27 KEY EMPLOYEE
An individual who is a "key employee" as defined in Section 125(b)(2) of the Code.
2.28 PARTICIPANT
Any Eligible Employee participating in the Plan in accordance with Section 3 below.
2.29 PLAN
This document as set forth herein, together with any and all documents incorporated by reference including the Summary Plan
Description, attachments, amendments, and supplements hereto. The Plan will be known by the name and number set forth in
the Summary Plan Description.
2.30 PLAN YEAR.
Twelve-month period commencing and ending on the dates indicated in the Summary Plan Description and each anniversary
thereof. The first Plan Year will commence on the Effective Date of the Plan and may be for less than twelve months. A period
of less than twelve months may be a Plan Year for the initial or final Plan Years, and a transition period to a different Plan
Year.
2.31 QUALIFIED BENEFITS
Any benefit not included in the gross income of the Employee by reason of an express provision of Chapter 1 of the Code
(other than Sections 106(b), 117, 124, 127, or 132), including (a) any group-term life insurance coverage that is includible
in gross income only by virtue of exceeding the dollar limitation on nontaxable coverage under Code Section 79, and (b)
any other benefit permitted by the Income Tax Regulations. Long-Term Care insurance shall not be a qualified benefit
hereunder.
2.32 REIMBURSEMENT ACCOUNT
The funding mechanism by which amounts are withheld from an Employee's Compensation and retained for future
reimbursement of Reimbursable Expenses. No money shall actually be allocated to any individual Reimbursement Accounts
elected by the Participant; any such Reimbursement Accounts shall be of a memorandum nature maintained by the
Administrator for accounting purposes and shall not be representative of any identifiable trust assets. No interest will be
credited to or paid on amounts credited to Reimbursement Accounts.
2.33 REIMBURSABLE EXPENSE
Any out-of-pocket Eligible Medical Expense (as defined in Appendix B of this Document) and/or Dependent Care Expense (as
defined in Appendix A of this Document) of a Participant that qualifies for reimbursement under either the Medical Expense
Reimbursement Plan described in Appendix B of this Document or the Dependent Care Assistance Plan described in Appendix
A of this Document.
2.34 SALARY REDUCTION AGREEMENT
Agreement whereby the Eligible Employee participates in the Plan by electing to reduce and/or deduct from the Employee's
Compensation so as to receive selected Benefit Package Options. The Salary Reduction Agreement is also known as a Benefit
Election Form.
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PREMIUM REDUCTION OPTION PLus FSAs
2.35 SPOUSE
An individual who is legally married to a Participant (and who is treated as a spouse under the Code).
2.36 SUMMARY PLAN DESCRIPTION OR "SPD"
The document and all appendices incorporated into and made a part of the SPD that is adopted by the Employer and attached to
this Plan Document as Attachment I, as amended from time to time. The SPD and appendices are incorporated hereto by
reference.
3. ELIGffiILITY AND PARTICIPATION
3.1 ELIGIBILITY REQUIREMENTS
Each Employee who has satisfied the Eligibility Requirements set forth in the SPD is eligible to participate in the Plan on the
dates set forth in the SPD. An Eligible Employee will become a Participant by electing at least one Benefit Package Option
each Plan Year pursuant to either Section 4.2, 4.3 or 4.4 below, as applicable. Eligibility for the component Benefit Package
Options is subject to the additional requirements, if any, specified in the applicable governing documents for the Benefit
Package Options. The provisions of this Plan are not intended to override any exclusion, eligibility requirement, or waiting
period specified in the applicable Benefit Package Options.
3.2 PARTICIPATION TERMINATION
A Participant will cease to be a Participant as of the earlier of the dates set forth in the SPD.
3.3 NON-FMLA LEAVE OF ABSENCE
If a Participant goes on an unpaid leave of absence that does not affect eligibility under this Plan or the Benefit Package
Options chosen by the Participant, then the Participant will continue to participate and the contributions due for the Participant
will be paid by one or more of the payment options described in the SPD and implemented by the Employer on a uniform and
consistent basis in accordance with the Employer's internal policy and procedure. If a Participant goes on an unpaid leave that
affects eligibility under this Plan or the Benefit Package Options chosen by the Participant, the election change rules in Section
3.04 will apply. If such policy requires coverage to continue during the leave but permits a Participant to discontinue
contributions while on leave, the Participant will, upon returning from leave, be required to repay the contributions not paid by
the Participant during the leave.
3.4 QUALIFIED LEAVE UNDER FAMILY AND MEDICAL LEAVE ACT
Notwithstanding any provision to the contrary in this Plan, if a Participant goes on a qualifying leave under the Family and
Medical Leave Act of 1993 (the "FMLA"), then to the extent required by the FMLA, the Participant will be entitled to continue
the Participant's Benefit Package Options that provide health coverage (including Health FSA benefits to the extent offered
under the Plan) on the same terms and conditions as if the Participant were still an active employee. The requirements for
continuing coverage, procedures for FMLA leave and payment options provided by the Employer (as described above) will be
set forth in the SPD and will be administered in accordance with the regulations issued under Code Section 125 and in
accordance with the FMLA.
3.5 AUTOMATIC TERMINATION OF ELECTION AND REINSTATEMENT OF PARTICIPATION
Termination of employment or cessation of eligibility shall automatically revoke any Salary Reduction Agreement. Rules
governing elections for former participants rehired during the same Plan Year shall be set forth in the SPD.
4. ELECTION OF BENEFITS
4.1 ELECTION OF BENEFITS
To become a Participant, an Eligible Employee must elect under this Plan to receive one or more of the Benefit Package
Options set forth in the attached SPD by signing a Benefit Election Form and any enrollment form for the Benefit Package
Option, as required by the Plan Administrator, in accordance with the procedure described in Sections 4.2, 4.3, and 4.4 below.
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4.2 ELECTION PERIOD PRIOR TO EFFECTIVE DATE
An Employee who has satisfied the Eligibility Requirements on the Effective Date of the Plan must complete a Benefit Election
Form during the Election Period immediately preceding the Effective Date of the Plan in order to become a Participant on the
Effective Date of the Plan. If the Plan is amended and restated during a Plan Year, Participants' elections (either to participate
or not to participate) in effect inunediately preceding the amended and restated Effective Date, as set forth in the SPD, shall be
continued for the remainder of the Plan Year, except as otherwise provided in Sections 3.5 and 4.6 herein.
4.3 ANNUAL ELECTION PERIOD
Each Employee who is a Participant in this Plan or who is eligible to become a Participant in this Plan shall be notified, prior to
each Anniversary Date of this Plan, of his right to (i) become a Participant in this Plan, (ii) continue participation in this Plan,
or (iii) modify or cease participation in this Plan, and shall be given a reasonable period of time in which to exercise such right.
Such period of time shall be known as the "Annual Election Period." The Annual Election Period shall be set forth in the
enrollment material. An annual election shall be made by submitting a Benefit Election Form to the Plan Administrator during
the Annual Election Period, and shall be effective for the entire Plan Year beginning on the Anniversary Date, subject to
Section 4.6 herein.
An Eligible Employee who is not a current Participant in the Plan and who fails to return a Benefit Election Form to the Plan
Administrator on or before the end of the Annual Election Period will be deemed to have elected to receive his or her full
Compensation in cash. An Employee who is currently participating and who fails to return a completed Benefit Election Form
to the Plan Administrator changing the Employee's Benefit Package Option elections on or before the end of the Annual
Election Period will be deemed to have made the same election of Benefit Package Options in the subsequent Plan Year as was
in effect in the current year (with the following exceptions), and will also be deemed to have agreed to a reduction in
Compensation for the subsequent Plan Year equal to the Participant's share of the cost of each such benefit. Notwithstanding
the foregoing, annual elections for participation in the Medical Expense Reimbursement Plan, Dependent Care Assistance
Plan, and Health Care Premium Expense Reimbursement must be made by submitting a Benefit Election Form electing such
benefits during the Annual Election Period-there are no deemed elections with respect to any of these three Benefit Package
Options.
4.4 INITIAL ELECTION PERIOD
An Employee who becomes eligible to become a Participant in this Plan after the Effective Date must complete, sign, and file a
Benefit Election Form with the Plan Administrator during the Election Period established by the Employer. This period shall be
known as the Initial Election Period. Except as provided in the SPD for HIP AA special enrollment rights in the event of birth,
adoption, or placement for adoption, the Contribution elections made by the Participant during the Initial Election Period shall
be prospectively effective as of the Plan Entry Date set forth in the SPD, and shall end on the last day of the Plan Year in which
such participation began, subject to Sections 3.5 and 4.6 herein. Coverage under the component Benefit Package Options will
be effective in accordance with the eligibility requirements contained in such Benefit Package Options. An Eligible Employee
who fails to make an election during this Initial Election Period may elect to participate at a later date in accordance with
Sections 4.3 and 4.6 herein.
4.5 CHANGES BY ADMINISTRATORS
If the Plan Administrator determines, before or during any Plan Year, that the Plan may fail to satisfy any nondiscrimination
requirement imposed by the Code or any limitation on benefits provided to Key Employees, the Plan Administrator will take
such action as the Plan Administrator deems appropriate, under rules uniformly applicable to similarly situated Participants, to
assure compliance with such requirement or limitation. Such action may include, with limitation, a modification of elections by
Highly Compensated and/or Key Employees with or without the consent of such Employees.
4.6 REVOCATION OF ELECTIONS
A Participant shall not make any changes to his or her Contribution election under the Plan, or to the Participant's elected
allocation of Benefit Credits (if applicable), except for election changes permitted under this Section 4.6, for changes made
during the Annual Election Period (Section 4.3), changes caused by termination of participation (Section 3.2) and changes
purs~t to the Family and Medical Leave Act (Section 3.4).
Except as provided in the SPD for HIP AA special enrollment rights in the event of birth, adoption, or placement for adoption,
all election changes shall be effective on a prospective basis only (i.e., election changes will become effective no earlier than the
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first day of the first pay period coinciding with or immediately following the date that the election change was filed, but, as
determined by the Plan Administrator, election changes may become effective later to the extent the coverage in the applicable
component plan commences later).
The circumstances under which a Participant may change his election under this Plan shall be set forth in the SPD.
5. CONTRIBUTIONS
5.1 CONTRIBUTIONS FOR ELECTED BENEFIT PACKAGE OPTIONS
By signing and completing the Benefit Election Form, the Participant agrees to reduce the Participant's cash Compensation by
such amounts as are necessary to provide for the elected Benefit Package Options. These amounts will then be contributed by
the Employer on the Employee's behalf as employer contributions.
5.2 SOURCE OF CONTRIBUTIONS
The Employer shall withhold Contributions equal to the cost of the elected Benefit Package Options less any applicable Benefit
Credits for coverage of the Participant and/or the Participant's Spouse or Dependents. The required Contributions thereunder
shall be set forth in the enrollment material. Contributions shall be applied to fund benefits as soon as administratively feasible.
The maximum amount of Contributions plus any available Benefit Credits shall not exceed the aggregate cost of the Benefit
Package Options elected.
5.3 BENEFIT CREDITS
The Employer may, but is not required to, make available Benefit Credits. The amount of such Benefit Credits, if any, and the
manner in which they may be applied, will be described in the enrollment material.
5.4 ALLOCATIONS IRREVOCABLE DURING PLAN YEAR
Except as provided in Sections 3.5, 4.6, and 5.5, neither the Contributions withheld nor the Benefit Credits (if applicable)
allocated towards the cost of Benefit Package Options by the Participant can be changed during the Plan Year.
5.5 REDUCTION OF CERTAIN ELECTIONS TO PREVENT DISCRIMINATION
If the Plan Administrator determines, before or during any Plan Year, that the Plan may fail to satisfy for such Plan Year any
requirement imposed by the Code or any limitation on Pre-tax Contributions allocable to Key Employees or to Highly
Compensated Individuals, the Plan Administrator shall take such action(s) as he deems appropriate, under rules uniformly
applicable to similarly situated Participants, to assure compliance with such requirement or limitation. Such action may
include, without limitation, a modification or revocation of a Highly Compensated Individual's or Key Employee's election
without the consent of such Employee.
5.6 ADJUSTMENT OF ELECTIONS DUE TO CONTRIBUTION CHANGES
The Plan Administrator may automatically increase or decrease on a prospective basis the amount of a Participant's Salary
Reduction Agreement during the Plan Year in response to an insignificant change (as determined by the Plan Administrator) in
the Contribution required for the Insurance Benefits elected hereunder, commensurate with the time that the change is
effective.
If the Plan Administrator determines a Contribution increase to be significant, the Plan Administrator will notify the
Participants of their permitted actions as set forth under Section 4.6 above. Unless the Participant is entitled to and makes a
change of election under Section 4.6 above, the adjusted Contribution amount will be in effect until the end of the Plan Year.
5.7 CREDITS AND DEBITS TO MEDICAL EXPENSE REIMBURSEMENT ACq>UNTS
Each Participant's Medical Expense Reimbursement Account ("Health Care Account"), if applicable, will be credited and
debited as set forth in Appendix B of this Document.
5.8 CREDITS AND DEBITS TO DEPENDENT CARE EXPENSE REIMBURSEMENT ACCOUNTS
Each Participant's Dependent Care Expense Reimbursement Account ("Dependent Care Account"), if applicable, will be
credited and debited as set forth in Appendix A to this document.
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5.9 HEALTH CARE PREMIUM REIMBURSMENT
During the Initial and/or Annual Election Period, an Eligible Employee shall allocate an amount of Contributions on his Salary
Reduction Agreement equal to the cost of the individual accident and health insurance policy owned by such Participant that
has been determined by the Plan Administrator to be a qualified in accordance with the terms of the SPD. The Participant shall
be reimbursed for such Health Care Premium Expenses in accordance with Section 6.7 herein.
6. BENEFIT PACKAGE OPTIONS
The maximum benefit a Participant may elect under this Plan shall not exceed the sum of the following Benefit Package Options.
The benefits offered under the Plan will be set forth in the SPD:
6.1 INSURANCE BENEFITS
The Employer shall withhold from a Participant's Compensation an amount equal to the Contributions required from the
Participant (less any applicable Benefit Credits) for coverage of the Participant and/or the Participant's Spouse or Dependents
under the Benefit Package Options consisting of Insurance Benefits elected by the Participant and maintained by the Employer
as set forth in the SPD. The Insurance Benefits are subject to the terms and conditions of the applicable Benefit Package
Options, which are incorporated herein.
6.2 MEDICAL EXPENSE REIMBURSEMENT BENEFIT (HEALTH FSA)
Health FSA benefits shall be made available under the Plan to the extent listed as a Benefit Package Option in the SPD. This
benefit provides payment to the Participant in cash as reimbursement for Eligible Medical Expenses as defined in Appendix B
of this document.
6.3 DEPENDENT CARE ASSISTANCE PLAN (DCAP FSA)
Dependent Care FSA benefits will be made available under this Plan to the extent listed as a Benefit Package Option in the
SPD. This benefit provides payment to the Participant in cash as reimbursement for Dependent Care Expenses as described in
Appendix A.
6.4 CASH BENEFITS
To the extent that a Participant does not elect to have the maximum amount of his Compensation contributed as a pre-tax
Contribution or after-tax Contribution hereunder, such amount not elected shall be paid to the Participant in the form of normal
Compensation payments, provided however, that Benefit Credits (other than Vacation Conversion, if applicable) may not be
received in the form of cash compensation unless otherwise provided in the SPD or in the enrollment materials.
6.5 HEALTH CARE PREMIUM EXPENSE REIMBURSEMENT
If set forth in the SPD, a Participant may be reimbursed with Contributions withheld in accordance with Section 5.9 herein for
Health Care Premium Expenses. In order to receive reimbursement, each Participant must satisfy the substantiation
requirements for Health Care Premium Expenses set forth in the SPD.
7. PLAN ADMINISTRATION
7.1 APPOINTMENT OF ADMINISTRATORS
The Plan will be administered by the Plan Administrator as named in the SPD. If a Plan Administrator is not named, the
Employer shall be the Plan Administrator.
7.2 ALLOCATION OF RESPONSIBILITY FOR ADMINISTRATION
The Plan Administrator shall have the exclusive right to interpret the Plan and to decide all matters arising there under,
including the right to make determinations of fact, and construe and interpret possible ambiguities, inconsistencies, or
omissions in the Plan and the SPD issued in connection with the Plan. In the case of an insured Benefit Package Option, the
insurer shall be the named fiduciary with respect to benefit claim determinations there under, and with respect to benefit,
claims shall have all of the powers of the Plan Administrator described herein. All determinations of the Plan Administrator
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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 to:
(a) Require any person to furnish such reasonable information as the Plan Administrator may request for the purpose of the
proper administration of the Plan as a condition to receiving any benefits under the Plan,
(b) Make and enforce such rules and regulations and prescribe the use of such forms as the Plan Administrator shall deem
necessary for the efficient administration of the Plan,
(c) 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,
(d) 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,
(e) Designate other persons to carry out any duty or power which mayor may not otherwise be a fiduciary responsibility of
the Plan Administrator, under the terms of the Plan,
(:t) 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, and
(g) Do all things necessary to operate and administer the Plan in accordance with its provisions.
7.3 PROVISION FOR THIRD-PARTY PLAN SERVICE PROVIDERS
The Plan Administrator, subject to approval of the Employer, may employ the services 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.
7.4 FIDUCIARY LIABILITY
To the extent permitted by law, the Plan Administrator shall not incur any liability for any acts or for failure to act except for
their own willful misconduct or willful breach of this Plan.
7.5 COMPENSATION OF PLAN ADMINISTRATOR
Unless otherwise determined by the Employer and permitted by law, any Plan Administrator who is also an employee of the
Employer shall serve without compensation for services rendered in such capacity, but all reasonable expenses incurred in the
performance of their duties shall be paid by the Employer.
7.6 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.
7.7 PAYMENT OF ADMINISTRATIVE EXPENSES
All reasonable expenses incurred in administering the Plan are currently paid by the Employer.
7.8 FUNDING POLICY
The Employer shall have the right to enter into a contract with one or more insurance companies for the purposes of providing
any benefits under the Plan and to replace any of such insurance companies or contracts. Any dividends, retroactive rate
adjustments, or other refunds of any type which may become payable under any such insurance contract shall 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;
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(b) To the extent premium notices are received by the Employer, the Employer's liability for the payment of such premiums
will be limited 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 the payment of any insurance premium or any loss which may result from the failure
to pay an insurance premium if the benefits available under this plan are not enough to provide for such premium cost at
the time it is due. In such circumstances, the Employee 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 required 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.
7.9 DISBURSEMENT REpORTS
The Plan Administrator shall issue directions to the Employer concerning all benefits which are to be paid from the Employer's
general assets pursuant to the provisions of the Plan.
7.10 INDEMNIFICATION
The Plan Administrator shall be indemnified by the Employer against claims, and the expenses of defending against such
claims, resulting from any action or conduct relating to the administration of the Plan except claims arising from gross
negligence, willful neglect, or willful misconduct.
7.11 STATEMENTS
The Plan Administrator may periodically furnish each Participant with a statement, showing the amounts paid or expenses
incurred by the Employer in providing Health Care and/or Dependent Care Reimbursement and the respective Reimbursement
Account balance(s).
8. CLAIMS PROCEDURES
The Plan has established procedures for reviewing claims denied under this Plan and those claims review procedures are set forth in
the SPD. The Plan's claim review procedures set forth in the SPD shall only apply to issues germane to the pre-tax Contributions
made under this Plan (i.e. determinations of Change in Status events, changes in cost or coverage, eligibility and participation
matters under this document) and to the extent offered under the Plan, claims for benefits under the Reimbursement Accounts. Only
after exhaustion of the claims procedure as provided under this Plan may any person pursue any other legal or equitable remedy.
9. PLAN AMENDMENT AND TERMINATION
9.1 PERMANENCY
While the Employer fully expects that this Plan will continue indefinitely, permanency of the Plan will be subject to the
Employer's right to amend or terminate the Plan, as provided in Sections 9.2 and 9.3 below.
9.2 EMPLOYER'S RIGHT TO AMEND
The Employer reserves the right to:
(a) Amend the Plan at any time and from time-to-time, and retroactively, if deemed necessary or appropriate for any reason
whatsoever; and
(b) Modify or amend in whole; or in part any or all of the provisions of the Plan; provided, however, that, no such
modification or amendment shall make it possible for any balances in a Participant's Account to be used for, or diverted
to, purposes other than for the exclusive benefit of the Participants and their beneficiaries under the Plan.
9.3 EMPLOYER'S RIGHT TO TERMINATE
The Employer reserves the right to discontinue or terminate the Plan without prejudice at any time without prior notice. Such
decision to terminate the Plan shall be made in writing and shall be approved by the Board of Directors (or a duly authorized
officer) in accordance with its normal procedures for transacting business.
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9.4 DETERMINATION OF EFFECTIVE DATE OF AMENDMENT OR TERMINATION
Any such amendment, discontinuance, or termination shall be effective as of such date as the Board of Directors (or a duly
authorized officer) shall determine. Subject to Section 4.4 of Appendix A and Section 5.5 of Appendix B, no amendment,
discontinuance, or termination shall allow the return to any Employer of any balance in a Participant's Account nor its use for
any purpose other than for the exclusive benefit of the Participants and their beneficiaries.
10. MISCELLANEOUS PROVISIONS
10.1 INFORMATION TO BE FURNISHED
As may reasonably be requested from time to time for the purpose of administration of the Plan, Participants will sign
documents and provide the City and Plan Administrators with pertinent information and evidence.
10.2 LIMITATION OF RIGHTS
Neither the establishment of the Plan nor any amendment thereof nor the payment of any benefits will be construed as giving to
any Participant or other person any legal or equitable right against the City or Plan Administrator except as provided herein.
10.3 NOT AN EMPLOYMENT CONTRACT
Neither this Plan nor any action taken with respect to it confers upon any person the right of employment or continued
employment with any Employer.
10.4 GoVERNINGLAW
This Plan will be construed, administered, and enforced according to applicable federal law and, unless preempted by ERISA,
the laws of the state named in the SPD.
10.5 POSTMORTEM PAYMENTS
Any Benefit payable under the Plan after the death of a Participant will be paid to the surviving Spouse (if any), otherwise to
the Participant's 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 are determined, without liability for any interest thereon, or it may pay such amount
into any court of appropriate jurisdiction, in either of which events neither the Plan Administrator nor any Employer shall be
under any further liability to any person.
10.6 NON-ALIENATION OF BENEFITS
No benefit under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge; and any attempt to do so will be void.
10.7 MENTAL OR PHYSICAL INCOMPETENCY
If the Plan Administrator determines that any person entitled to payments under the Plan is incompetent by reason of physical
or mental disability, the Plan Administrator may cause all payments thereafter becoming due to such person to be made to any
other person for the Participant's benefit, without responsibility to follow the application of amounts so paid. Payments made
pursuant to this Section will completely discharge the Plan Administrator and Employer from further liability hereunder.
10.8 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 the identity or whereabouts of such Participant or other person cannot be ascertained after reasonable efforts have
been made to identify or locate such person (including a notice of the payment so due mailed to the last known address of each
Participant or other person as shown on the records of the Employer), such payment and all subsequent payments otherwise due
to such Participant or other person will be forfeited seven (7) years after the date any such payment first became due.
10.9 REQUIREMENT FOR PROPER FORMS
All communications in connection with the Plan made by a Participant will become effective only when duly executed on any
forms as may be required and furnished by, and filed with, the Plan Administrator.
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10.10 SOURCE OF PAYMENTS
The Employer and any insurance City contracts purchased or held by the Employer will be the sole sources of benefits under
the Plan. No Employee or beneficiary will 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 then only to the extent of the benefits
payable under the Plan to such Employee or beneficiary.
10.11 MULTIPLE FuNCTIONS
Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.
10.12 TAX EFFECTS
Neither the Employer nor the Plan Administrator makes any warranty or other representation as to whether any payments made
to or on behalf of any Participant hereunder will be treated as excludable from gross income for state or federal income tax
purposes.
10.13 GENDER, NUMBER, AND HEADINGS
Masculine pronouns include the feminine as well as the neuter genders, and the singular shall include the plural, unless
indicated otherwise by the context. The Section headings contained herein are for convenience of reference only, and are not to
be construed as defIDing or limiting the matter contained thereunder.
10.14 CODEANDERISACOMPLIANCE
It is intended that this Plan meet all applicable requirements of the Code and ERISA, and of all regulations issued
thereunder. (ERISA applies to the Health Insurance Plan and the Health FSA component, but not to the DCAP component.)
This Plan shall be construed, operated, and administered accordingly, and in the event of any conflict between any part,
clause, or provision of this Plan and the Code and/or ERISA, the provisions of the Code and ERISA shall be deemed
controlling, and any conflicting part, clause, or provision of this Plan shall be deemed superseded to the extent of the
conflict.
10.15 INCORPORATION BY REFERENCE
The actual terms and conditions of the separate Benefit Package Options offered under this Plan are contained in separate,
written documents governing each respective benefit, and will govern in the event of a conflict between the individual plan
document and this Agreement 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.
10.16 SEVERABILITY
Should a court of competent jurisdiction subsequently invalidate any part of this Plan, the remainder thereof shall be given
effect to the maximum extent possible.
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APPENDIX A:
DEPENDENT CARE ASSISTANCE PLAN
1. PURPOSE
This Dependent Care Assistance Plan (DCAP) has been established by the Employer as a dependent care assistance program under
Section 129 of the Internal Revenue Code for the benefit of Employees who participate in the Cafeteria Plan (the Plan) and who,
pursuant to the election procedures set forth in the Plan, choose to make contributions to a dependent care expense reimbursement
spending account (Dependent Care Account) established pursuant to this DCAP. A Participant may utilize his Dependent Care
Account to reimburse eligible expenses for the custodial care of a child or other eligible dependent, when such custodial care is
needed to enable the Participant and his Spouse (if applicable) to remain employed. This DCAP is intended to provide
reimbursement of dependent care expenses that are excludable from the Participants' gross incomes under Section 129 of the Code.
This DCAP is a component of, and incorporated by reference into, the Plan.
2. DEFINITIONS
Unless otherwise specified, terms that are capitalized in this Appendix A have the same meaning as the defined terms in the Plan.
The definitions of terms defined in this Appendix A, but not defined in Section 2 of the Plan shall be applicable only with respect to
this Appendix A. To the extent a term is defined both in the Plan and in this Appendix A. the term as defined in the Plan shall
govern the interpretation of the Plan and the term as defined in this Appendix A shall govern the interpretation of this Appendix A.
2.1 DEPENDENT CARE ASSISTANCE ACCOUNT
The Reimbursement Account referenced in Section 6.3 of the Plan.
2.2 DEPENDENT CARE EXPENSES
Dependent Care Expenses means those expenses incurred after the Employee's effective date of participation in the DCAP to
the extent that the expenses incurred satisfy the conditions set forth in the SPD.
2.3 EDUCATIONAL INSTITUTION
Any educational institution which normally maintains a regular faculty and curriculum and normally has a regularly enrolled
body of students in attendance at the place where its educational activities are regularly carried on.
2.4 ELIGIBLE DAY CARE CENTER
A day care center which provides full- 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 calendar year, and which:
(a) complies with all applicable laws and regulations of the state and town, city, or village in which it is located; and
(b) receives a fee, payment, or grant for services for any of the individuals to whom it provides services (regardless of whether
such facility is operated for profit).
2.5 QUALIFYING INDIVIDUAL
A Qualifying Individual is an individual who satisfies the conditions set forth in the SPD.
2.6 PARTICIPANT
An individual Employee who participates in this DCAP in accordance with Section 3 of the Plan.
2.7 SPOUSE
The person to whom the Participant is legally married, but shall not include an individual legally separated from a Participant
under a decree of legal separation, nor a spouse living apart from the Participant in accordance with the special rules of Code
Section 21(c)(4).
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2.8 STUDENT
An individual who during each of five calendar months during a Plan Year is enrolled as a full-time student at an Educational
Institution.
3. PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION
Each Employee who satisfies the Eligibility Requirements set forth in the SPD shall be eligible to participate in this DCAP on
the dates set forth in the SPD.
3.2 CESSATION OF PARTICIPATION
A Participant will cease to be a Participant in the DCAP as of the earliest of dates set forth in the SPD.
3.3 ELECTION OF BENEFITS
A Participant may elect to contribute to a Dependent Care Assistance Account under this DCAP and to receive reimbursement
for Dependent Care Expenses by filing a Benefit Election Form in accordance with the procedures established under the Plan.
3.4 PLAN LIMITS
The Plan Administrator may establish procedures to limit the amount of a Participant's contributions to this DCAP in order to
prevent the amount of such contributions exceeding the maximum annual amount which the Participant may receive in
reimbursement of Dependent Care Expenses as described in Section 3.6 below.
3.5 OTHER ADMINISTRATIVE DOCUMENTATION
The Plan Administrator may require the Participant, on an annual basis, to file a statement or otherwise acknowledge that he
intends to file Form 2441 with the Internal Revenue Service. In addition, if the Participant elects to contribute more than
$2,500 to his Dependent Care Assistance Account, the Plan Administrator may require the Participant to verify that he is either
unmarried or that, if married, he does not intend to file a separate federal tax return:.
3.6 MAxIMUM CONTRIBUTION AMOUNTS
The maximum amount, which the Participant may receive in the form of dependent care assistance under this DCAP with
respect to Dependent Care Expenses incurred in any calendar year, shall be set forth in the SPD.
4. DEPENDENT CARE ASSISTANCE ACCOUNTS
4.1 ESTABLISHMENT OF ACCOUNTS
The Employer will establish and maintain on its books a Dependent Care Assistance Account for each Plan Year with respect
to each Participant who has elected to receive reimbursement of Dependent Care Expenses incurred during the Plan Year.
4.2 CREDITING AND DEBITING OF ACCOUNTS
Each Participant's Dependent Care Expense Reimbursement Account ("Dependent Care Account") will be credited with
Contributions allocated thereto by the Participant on the Benefit Election Form and/or any Benefit Credits allocated thereto by
the Employer (or where applicably, by the Participant). The Dependent Care Account will be debited for reimbursement
amounts disbursed to the Participant in accordance with this Appendix A. In the event that the amount in the Dependent Care
Account is less than the amount of reimbursable claims at any time during the Plan Year, the excess part of the claim will be
carried over into following months (within the same Plan Year), to be paid out as the Dependent Care Account balance
becomes adequate. In no event will the amount of reimbursements of Dependent Care Expenses exceed the amount elected to be
credited to the Dependent Care Account for any Plan Year. Any amount allocated to the Dependent Care Account shall be
forfeited by the Participant and restored to the Employer if it has not been applied to provide Dependent Care Expense
Reimbursements for the Plan Year within the Claims Submission Grace Period or the Closing Period set forth in the SPD,
whichever is applicable. Amounts so forfeited shall be used as set forth in Section 4.4 of this Appendix A.
CITy OF WEST UNIVERSITY PLACE
PAGEA-2
PLAN DoCUMENT (REV. 05/19/03)
EFFECTIVE: JANUARY 1, 2003
APPENDIX A
PREMIUM REDUCTION OPTION PLus FSAs
4.3 SOURCE OF PAYMENTS
All Dependent Care Expenses shall be paid exclusively from the amounts in each Employee's Dependent Care Account funded
by amounts withheld from the Employee's Compensation and/or Benefit Credits (if applicable) allocated thereto pursuant to the
Benefit Election Form.
4.4 FORFEITURE OF DEPENDENT CARE ASSISTANCE ACCOUNTS
If any balance remains in the Participant's Dependent Care Assistance Account for a Plan Year after all reimbursements
hereunder, such balance shall not be carried over to reimburse the Participant for any Dependent Care Expenses incurred
during a subsequent Plan Year, and shall not be available to the Participant in any other form or manner, but shall revert back
to the Employer to be used in a manner permitted by applicable law.
5. PAYMENT OF DEPENDENT CARE ASSISTANCE
5.1 CLAIMS FOR REIMBURSEMENT
A Participant who has elected to receive dependent care assistance for a Plan Year may apply to the Plan Administrator, or its
designated claims administration representative, for reimbursement of Dependent Care Expenses. The application shall be in
such form as the Plan Administrator (or its designated claims administration representative) may prescribe. The application
shall be accompanied by a written statement or invoice from an independent third party stating or indicating that the expense
has been incurred and the amount of the expense. The Plan Administrator, or its designated claims administration
representative, may also require as part of the application such other information or documentary evidence (e.g., bills, receipts,
canceled checks) as it may deem necessary or desirable to ascertain the eligibility of a Participant's claim for reimbursement.
5.2 REIMBURSEMENT OR PAYMENT OF EXPENSES
The Participant shall be reimbursed from the Participant's Dependent Care Assistance Account, at such time and in such
manner as the Plan Administrator or its claims administration representative may prescribe, but no less frequently than
monthly, for Dependent Care Expenses incurred during the Plan Year by a Participant, for which the Participant makes written
application and submits documentation in accordance with the terms of the SPD. The Plan Administrator (or its designated
representative) may, at its option or in accordance with the Participant's written direction, pay any such Dependent Care
Expenses directly to the provider of services with respect to such expenses in lieu of reimbursing the Participant. No
reimbursement or payment under this Section 5.2 of expenses incurred during a Plan Year shall at any time exceed the balance
of the Participant's Dependent Care Assistance Account for the Plan Year at the time of the reimbursement or payment, nor
shall any reimbursement or payment be made if the Participant's claim is for an amount less than the minimum reimbursable
amount as may be established by the Plan Administrator. The amount of any Dependent Care Expenses not reimbursed or paid
as a result of the minimum reimbursable amount described in the preceding sentence shall be carried over and reimbursed or
paid only if and when the Participant's un-reimbursed claims equal or exceed such minimum and the balance in the
Participant's Dependent Care Assistance Account permits such reimbursement or payment. Notwithstanding the preceding
sentence, claims for expenses incurred during a Plan Year that are submitted for reimbursement during the earlier of the end of
a terminated employee's grace period or the last month of the Plan Year or within the three months (or such other reasonable
period as may be established by the Plan Administrator) following the close of the Plan Year (or which are carried over to the
last month of the Plan Year in accordance with the preceding sentence) shall be paid regardless of whether they equal or exceed
the minimum reimbursable amount, provided the balance in the Participant's Dependent Care Assistance Account permits such
reimbursement or payment.
5.3 REpORT(S) TO PARTICIPANTS
The Plan Administrator shall furnish or cause to be furnished to each Participant (or former Participant) who has received
dependent care assistance under this DCAP during the Plan Year a written statement showing the amount of such assistance
paid during such year with respect to the Participant (or former Participant). Such reports must be furnished at least annually,
but may be provided more frequently.
5.4 LIMITATION ON REIMBURSEMENTS OR PAYMENTS WITH RESPECT TO CERTAIN PARTICIPANTS
Notwithstanding any other provisions of this Plan, the Plan Administrator may limit the amounts reimbursed or paid with
respect to any Participant who is a Highly Compensated Individual (within the meaning of Code Section 414(q)) to the extent
CITy OF WEST UNIVERSITY PLACE
PAGEA-3
PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
APPENDIX A
PREMIUM REDUCTION OPTION PLus FSAs
the Plan Administrator deems such limitation to be necessary to assure compliance with any nondiscrimination provision of the
Code. Such limitation may be imposed whether or not it results in a forfeiture.
6. ADMINISTRATION
6.1 ADMINISTRATOR
The administration of the DCAP shall be under the supervision of the Plan Administrator, the responsibilities of which are set
forth in Section 7 of the Plan. It shall be a principal duty of the Plan Administrator to see that the DCAP is carried out, in
accordance with its terms, for the exclusive benefit of persons entitled to participate in the DCAP without discrimination
among them. The powers ascribed to the Plan Administrator under the Plan shall likewise apply with respect to their duties
under this DCAP, and are incorporated herein by reference.
6.2 RECORDS
The Plan Administrator shall keep or cause to be kept accurate and complete books and records with respect to the operations
and administration of this DCAP.
6.3 RELIANCE ON DETERMINATIONS, ETC.
In administering the DCAP, the Plan Administrator and/or its delegate will be entitled, to the extent permitted by law, to rely
conclusively on all certificates, determinations, opinions, and reports which are furnished by any accountant, counsel, claims
administrator, or other expert who is employed or engaged by the Plan Administrator.
6.4 DENIED CLAIMS PROCEDURE UNDER THE PLAN
The Plan has established procedures for reviewing claims denied under the DCAP and those claims review procedures are set
forth in the SPD.
6.5 PRESERVATION OF REMEDIES
After exhaustion of the claims procedure as provided under this Plan, nothing is to prevent any person from pursuing any
other legal or equitable remedy. Any suit [for benefits] must be brought within one year after the date the Plan
Administrator (or his designee) has made a final denial (or deemed denial) of the claim. Notwithstanding any other
provision herein, any suit for benefits must be brought within two years after the date the claim arose.
6.6 EXCESS REIMBURSEMENT
If it is determined that a Participant has received payments under this Plan that exceed the amount of Dependent Care
Expenses that have been substantiated by such Participant during the Plan Year, 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.
7. AMENDMENT AND TERMINATION
The Employer reserves the right at any time or times to amend or terminate the provisions of the DCAP, to any extent and in any
manner that it may deem advisable, as specified in the Plan.
8. MISCELLANEOUS
8.1 FUNDING STATUS OF DCAP
Except as may othenvise be required by law or under the terms of the Plan:
(a) Any amount by which a Participant's taxable compensation is reduced by reason of an election made under this DCAP
will remain part of the general assets of the Employer.
(b) The benefits provided hereunder will be paid solely from the general assets of the Employer.
(c) Nothing herein will be construed to require any Employer or the Plan Administrator to maintain any fund or segregate
any amount for the benefit of any Participant.
CITy OF WEST UNIVERSITY PLACE
PAGEA-4
PLAN DocUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1, 2003
APPENDIX A
PREMIUM REDUCTION OPTION PLus FSAs
(d) No Participant or other person shall have any claim against, right to, or security, or other interest in any fund, account,
or asset of the Employer from which any payment under the DCAP may be made.
Notwithstanding the foregoing, the Employer may establish one or more voluntary employees beneficiary association (VEBA)
trusts within the meaning of Code Section 501(c)(9) for the purpose of funding benefits to be provided under this DCAP.
8.2 ASSIGNMENT
The Participant may, if permitted by the Plan Administrator, authorize the DCAP to pay a Participant's reimbursement of
Dependent Care Expenses directly to the provider of services with respect to such expenses. Except as provided in the foregoing
sentence, a Participant may not assign, alienate, anticipate, or commute any payment with respect to any reimbursements of
Dependent Care Expenses which a Participant is entitled to receive from the DCAP and, further, except as may be prescribed
by law, no benefits shall be subject to any attachments or garnishments of or for a Participant's debts or contracts except for
recovery of overpayments made on the Participant's behalfby this DCAP.
8.3 No GUARANTEE OF TAX CONSEQUENCE
Neither the Plan Administrator nor the Employer makes any commitment or guarantee that any amounts paid to or for the
benefit of a Participant under this DCAP will be excludable from the Participant's gross income for federal or state income tax
purposes, or that any other federal or state tax treatment will apply to or be available to any Participant. It shall be the
obligation of each Participant to determine whether each payment under the DCAP is excludable from the Participant' s gross
income for federal and state income tax purposes, and to notify the Employer if the Participant has reason to believe that any
such payment is not so excludable.
8.4 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or reimbursements under this DCAP that are not for Dependent Care
Expenses, such Participant shall indemnify and reimburse the Employer for any liability it may incur for failure to withhold
federal or state income tax or Social Security tax from such payments or reimbursements.
CITY OF WEST UNIVERSITY PLACE
PAGEA-5
PLAN DOCUMENT (REV. 05/19/03)
APPENDIX B:
MEDICAL EXPENSE REIMBURSEMENT PLAN
1. PuRPOSE
This Medical Expense Reimbursement Plan (the Health FSA Plan) has been established by the Employer to help provide full and
complete medical care for those Employees who participate in the Employer's cafeteria plan (plan) and who, pursuant to the election
procedures set forth in the Plan. choose to make contributions to a medical expense reimbursement account established pursuant to
this Health FSA Plan. This Health FSA Plan is intended to provide reimbursement of deductibles, co-payments, and coinsurance
amounts that a Participant may be required to pay pursuant to the medical care, dental, and vision Benefit Package Option elected
under the Plan, as well as reimbursement of other medical and hospitalization expenses covered by this Plan. The Employer intends
that the Health FSA Plan qualify as a Code Section 105 self-insured medical reimbursement plan, and that the benefits provided
under the Health FSA Plan be eligible for exclusion from the Participant's income for federal income tax purposes under Section
105(b) of the Code. This Health FSA Plan is a component of, and incorporated by reference into, the Plan.
2. DEFINITIONS
Unless otherwise specified, terms that are capitalized in this Appendix B have the same meaning as the defined terms in the Plan.
The definitions of terms defined in this Appendix B, but not defined in Section 2 of the Plan, shall be applicable only with respect to
this Appendix B. To the extent a term is defined both in the Plan and in this Appendix B, the term as defined in the Plan shall
govern the interpretation of the Plan and the term as defined in this Appendix B shall govern the interpretation of this Appendix B.
2.1 COVERAGE AMOUNT
The amount of medical reimbursement coverage elected by the Participant for the Plan Year under Section 4 of Appendix B
herein.
2.2 DEPENDENT
For the purpose of this Appendix B only, a "Dependent" shall have the meaning assigned to it by the SPD.
2.3 ELIGIBLE MEDICAL CARE EXPENSE
Eligible Medical Expenses shall have the meaning assigned to it by the SPD.
2.4 MEDICAL REIMBURSEMENT ACCOUNT
The medical expense reimbursement spending account described in Section 6.2 of the Plan.
2.5 PARTICIPANT
A participant is an individual who participates in this Health FSA Plan in accordance with Section 6.2 of the Plan.
3. PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION
Each Employee who satisfies the Eligibility Requirement set forth in the SPD shall be eligible to participate in this Health FSA
Plan on the dates set forth in the SPD.
3.2 CESSATION OF PARTICIPATION
A Participant will cease to be a Participant as of the earliest of the dates set forth in the SPD.
3.3 COVERAGE DURING A LEAVE OF ABSENCE
Coverage under the Health FSA Plan will be governed by the rules set forth in the SPD.
JANUARY 1,2003
PAGE B-1
PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
APPENDIX B
PREMIUM REDUCTION OPTION PLus FSAs
4. ELECTIONS
4.1 ELECTION OF BENEFITS
A Participant may elect to contribute to a Medical Reimbursement Account under this Health FSA Plan and to receive
reimbursements of Eligible Medical Care Expenses not in excess of the Plan Limits described in Section 4.2 below elected by
filing a Benefit Election Form in accordance with the procedures set forth in the SPD.
4.2 PLAN LIMITS
A Participant may elect to receive payments or reimbursements of Eligible Medical Care Expenses incurred in any Plan
Year up to any dollar amount specified by the Participant, but not exceeding the maximum annual reimbursement amount
set forth in the SPD.
4.3 DURATION OF ELECTIONS
Once effective, any election (and related Benefit Election Form) with respect to this Health FSA Plan shall remain in effect
until the end of the Plan Year for which it was made, except as provided in Section 3.4,3.5 or 4.6 of the Plan herein.
5. MEDICAL REIMBURSEMENT ACCOUNTS
5.1 ESTABLISHMENT OF ACCOUNTS
The Employer will establish and maintain on its books a Medical Reimbursement Account ("Health Care Account") for each
Plan Year with respect to each Participant who has elected to receive reimbursement of Eligible Medical Care Expenses
incurred during the Plan Year, as described in Section 6.2 of the Plan.
5.2 CREDITING AND DEBITING OF ACCOUNTS
Each Participant's Health Care Account will be credited with Contributions allocated thereto by the Participant on the Benefit
Election Form for Eligible Medical Expenses and any Benefit Credits allocated thereto by the Employer (or where applicable,
by the Participant) not to exceed the maximum annual reimbursement set forth in the SPD. The Health Care Account will be
debited for reimbursement amounts disbursed to the Participant in accordance with this Appendix B. The entire amount elected
by the Participant on the Benefit Election Form as an annual amount for the Plan Year for Eligible Medical Expenses less any
reimbursement from the Health Care Account already disbursed shall be available to the Participant at any time during the Plan
Year without regard to the balance in the Health Care Account (provided that the periodic Contributions have been paid). Thus,
the maximum amount of reimbursement available at any particular time during the Plan Year will not relate to the amount
which a Participant has had credited to the Health Care Account at that time. In no event will the amount of Eligible Medical
Expenses reimbursed in any Plan Year exceed the annual amount specified for the Plan Year in Benefit Election Form for the
Medical Expense Reimbursement Plan. Any amount allocated to the Health Care Account shall be forfeited by the Participant
and restored to the Employer if it has not been applied to provide reimbursement of Eligible Medical Expenses within the
Claims Submission Grace Period or Closing Period set forth in the SPD, whichever is applicable. Amounts so forfeited shall be
used in accordance with Section 5.5 herein.
5.3 SOURCE OF PAYMENTS
All Eligible Medical Expenses shall be paid exclusively from the amounts in each Employee's Health Care Account funded by
amounts withheld from the Employee's Compensation and any Benefit Credits (if applicable) allocated to the Health Care
Account pursuant to the Benefit Election Form.
5.4 EMPLOYER RISK
If the Employee terminates employment or ceases to be eligible before the Employer has been reimbursed for the amounts it has
advanced on behalf of the Employee, the entire un-reimbursed portion shall be deemed to be an "administrative expense" to be
refunded to the Employer by any unused Health Care Account balance(s) if any.
5.5 FORFEITURE OF HEALTH CARE ACCOUNTS
If any balance remains in the Participant's Health Care Account for a Plan Year after all reimbursements hereunder, the
Participant shall forfeit such balance. Said balance shall be used in a manner permitted by the applicable rules and regulations.
CITy OF WEST UNIVERSITY PLACE
PAGE B-2
PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
APPENDIX B
PREMIUM REDUCTION OPTION PLus FSAs
6. PAYMENT OF ELIGmLE MEDICAL CARE EXPENSES
6.1 CLAIMS FOR REIMBURSEMENT
A Participant who has elected to receive medical care reimbursements for a Plan Year may apply to the Plan Administrator, or
its designated claims administration representative, for reimbursement of Eligible Medical Care Expenses. The application
shall be in such form as the Plan Administrator (or its designated claims administration representative) may prescribe.
The application shall be accompanied by a written statement or invoice from an independent third party stating or indicating
that the expense has been incurred, the date the service was rendered, and the amount of the expense. The Plan Administrator,
or its designated claims administration representative, may also require as part of the evidence application such other
information or documentation as it may deem necessary or desirable to ascertain the eligibility of a Participant's claim for
reimbursement (e.g., bills, receipts, canceled checks).
6.2 REIMBURSEMENT OR PAYMENT OF EXPENSES
The Participant shall be reimbursed from the Participant's Medical Reimbursement Account, at such time and in such manner
as the Plan Administrator or its claims administration representative may prescribe, but no less frequently than monthly, for
Eligible Medical Care Expenses incurred during the Plan Year while a Participant:. for which the Participant makes written
application and submits documentation in accordance with Section 6.1 above. The Plan Administrator (or its claims
administration representative) may, at its option or in accordance with the Participant's written direction, pay any such Eligible
Medical Care Expenses directly to the person providing or supplying medical care in lieu of reimbursing the Participant. No
reimbursement or payment will be made if the Participant's claim for reimbursement or payment is for an amount less than the
minimum reimbursable amount as specified in the SPD. The amount of any Eligible Medical Care Expenses not reimbursed or
paid as a result of the minimum reimbursable amount described in the preceding sentence shall be carried over and reimbursed
or paid only if and when the Participant's un-reimbursed claims equal or exceed such minimum. Notwithstanding the preceding
sentence, claims for expenses incurred during a Plan Year that are submitted for reimbursement during the last month of the
Plan Year or within the Claims Submission Grace Period or Closing Period (whichever is applicable) shall be paid regardless of
whether they equal or exceed the minimum reimbursable amount, provided they do not exceed the remaining balance of the
Participant's Health Care Account.
6.3 REpORT(S) TO PARTICIPANTS
The Plan Administrator shall furnish or cause to be furnished to each Participant (or former Participant) who has received
reimbursement of Eligible Medical Care Expenses under this Health FSA Plan during the Plan Year a written statement
showing the amount of such assistance paid during such year with respect to the Participant (or former Participant). Such
reports must be furnished at least annually, but may be provided more frequently.
6.4 LIMITATION ON REIMBURSEMENTS OR PAYMENTS WITH RESPECT TO CERTAIN PARTICIPANTS
Notwithstanding any other provisions of this Health FSA Plan, the Plan Administrator may limit the amounts reimbursed or
paid with respect to any Participant who is a Highly Compensated Individual (within the meaning of Code Section 105(h)(5) or
125(e)) to the extent the Plan Administrator deems such limitation to be necessary to assure compliance with any
nondiscrimination provision of the Code. Such limitation may be imposed whether or not it results in a forfeiture.
6.5 EXCESS REIMBURSEMENTS
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 that have been substantiated by such Participant during the Plan Year, 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.
7. COBRA CONTINUATION COVERAGE
The SPD includes provisions that shall be applicable to the Health FSA to the extent the Health FSA is a "group health" as defined
by Code Section 4980B and 5000(b)(1) and the regulations promulgated there under and is offered under the Plan. The intent of
those provisions (as incorporated in this Article) is to extend continuation rights required by COBRA. To the extent greater rights
are provided for in the SPD, that portion of the SPD is void.
CITy OF WEST UNIVERSITY PLACE
PAGE B-3
PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
APPENDIX B
PREMIUM REDUCTION OPTION PLus FSAs
8. ADMINISTRATION
8.1 ADMINISTRATION
The administration of the Health FSA Plan shall be under the supervision of the Plan Administrator, the responsibilities of
which are set forth in the Plan. It shall be a principal duty of the Plan Administrator to see that the Health FSA Plan is carried
out, in accordance with its terms, for the exclusive benefit of persons entitled to participate in the Health FSA Plan without
discrimination among them. The powers ascribed to the Plan Administrator under the Plan, including without limitation the
power and discretion to interpret its terms and to delegate responsibilities among themselves and to others, shall likewise apply
with respect to their duties under this Health FSA Plan, and are incorporated herein by reference.
8.2 REcORDS
The Plan Administrator shall keep or cause to be kept accurate and complete books and records with respect to the operations
and administration of this Health FSA Plan.
8.3 RELIANCE ON DETERMINATIONS, ETC.
In administering the Health FSA Plan, the Plan Administrator will be entitled, to the extent permitted by law, to rely
conclusively on all tables, valuations, certificates, determinations, opinions, and reports which are furnished by any accountant,
counsel, claims administrator providing medical utilization management services, or other expert who is employed or engaged
by the Plan Administrator.
8.4 DENIED CLAIMS PROCEDURE UNDER THE PLAN
The Plan has established procedures for reviewing claims denied under this Plan and those claims review procedures are set
forth in the SPD.
8.5 PRESERVATION OF REMEDIES
After exhaustion of the claims procedure as provided under this Plan, nothing is to prevent any person from pursuing any
other legal or equitable remedy. Any suit [for benefits] must be brought within one year after the date the Plan
Administrator (or his designee) has made a final denial (or deemed denial) of the claim. Notwithstanding any other
provision herein, any suit for benefits must be brought within two years after the date the claim arose.
9. AMENDMENT AND TERMINATION
The Employer reserves the right at any time or times to amend or terminate the provisions of this Health FSA Plan, to any extent and
in any manner that it may deem advisable, as specified in the Plan.
10. MISCELLANEOUS
10.1 FuNDING STATUS OF HEALTH FSA PLAN
Except as may otherwise be required by law or under the terms of the Plan,
(a) Any amount by which a Participant's taxable Compensation is reduced by reason of an election made under this Health
FSA Plan will remain part of the general assets of the Employer.
(b) The benefits provided hereunder will be paid solely from the general assets of the Employer.
(c) Nothing herein will be construed to require any Employer or the Plan Administrator to maintain any fund or segregate
any amount for the benefit of any Participant.
(d) No Participant or other person shall have any claim against, right to, or security or other interest in, any fund, account or
asset of the Employer from which any payment under the Health FSA Plan may be made.
Notwithstanding the foregoing, the Employer may establish one or more voluntary employees beneficiary association (VEBA)
trusts within the meaning of Code Section 50 1( c)(9) for the purpose of funding benefits to be provided under this Health FSA
Plan.
CITy OF WEST UNIVERSITY PLACE
PAGEB-4
PLAN DOCUMENT (REv. 05/19/03)
EFFECTIVE: JANUARY 1,2003
APPENDIX B
PREMIUM REDUCTION OPTION PLus FSAs
10.2 ASSIGNMENT
The Participant may, if permitted by the Plan Administrator, authorize the Health FSA Plan to pay a Participant's or
Dependent's reimbursement directly to the physician or hospital who provided the Participant or Dependent with covered care
and treatment. Except as provided in the foregoing sentence, a Participant may not assign, alienate, anticipate, or commute any
payment with respect to any reimbursements of Eligible Medical Care Expenses which a Participant or Dependent is entitled to
receive from the Health FSA Plan and, further, except as may be prescribed by law, no benefits shall be subject to any
attachments or garnishments of or for a Participant or Dependent's debts or contracts, except for recovery of overpayments
made on the Participant's or Dependent's behalf by this Health FSA Plan.
10.3 No GUARANTEE OF TAX CONSEQUENCE
Neither the Plan Administrator nor the Employer makes any commitment or guarantee that any amounts paid to or for the
benefit of a Participant under this Health FSA Plan will be excludable from the Participant's gross income for federal or state
income tax purposes, or that any other federal or state tax treatment will apply to or be available to any Participant. It shall be
the obligation of each Participant to determine whether each payment under the Health FSA Plan is excludable from the
Participant's gross income for federal and state income tax purposes, and to notify the Employer if the Participant has reason to
believe that any such payment is not so excludable.
10.4 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or reimbursements under this Plan that are not for Eligible Medical Care
Expenses, such Participant shall indemnify and reimburse the Employer for any liability it may incur for failure to withhold
federal or state income tax or Social Security tax from such payments or reimbursements.
CITy OF WEST UNIVERSITY PLACE
PAGE B-5
PLAN DOCUMENT (REV. 05/19/03)
Exhibit 3
CAFETERIA PLAN
PREMIUM REDUCTION OPTION PLUS
FLEXIBLE SPENDING ACCOUNTS
SUMMARY PLAN DESCRIPTION
As ADOPTED By
CITY OF WEST UNIVERSITY PLACE
1.
2.
Q-l.
Q-2.
Q-3.
Q-4.
Q-5.
Q-6.
Q-7.
Q-8.
Q-9.
Q-IO.
Q-ll.
3.
Q-l.
Q-2.
Q-3.
Q-4.
Q-5.
Q-6.
Q-7.
4.
5.
Q-l.
Q-2.
Q-3.
Q-4.
Q-5.
Q-6.
Q-7.
Q-8.
Q-9.
Q-1O.
PAGEl
TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................1
GENERAL INFORMATION ABOUT THE PLAN ................................................................1
What is the purpose of the plan?.......................................................................1
What benefits are offered through the Plan? ...................................................... 1
Who can participate in the Plan? .......................................................................1
What tax advantages can I gain by participating in the Plan? ............................ 1
How do I become a Participant?.........................................................................2
What are the enrollment periods? ......................................................................2
How long am I committing to if I elect to be a participant? ................................3
What happens if I fail to return my Benefit Election Form? ...............................3
Can I change my election during the Plan Year? ...............................................3
What happens if I go on leave of absence? .........................................................6
What happens if I go on a Qualified Leave under Family and Medical Leave
Act? .................................................................................................................. 6
HEALTH PREMIUM REIMBURSEMENT ACCOUNTS...................................................... 7
Who can elect an HPRA? ..................................................................................7
What individually owned health policies are qualified to be paid under a
HPRA? ....................... ..................... ..................................... .............................7
How do I become a Participant?........................................................................7
What happens if I fail to return my Benefit Election Form? ...............................7
How do I receive Reimbursement under an HPRA? ........................................... 8
Can I change the election during the year? ........................................................ 8
What happens if I still have a balance in my HPRA at the end of the Plan
Year? ................................................................................................................ 8
CASH BENEFITS .........................................................................................................8
Q-ll.
Q-12.
Q-13.
HEALTH FSA BENEFITS .............................................................................................8
Who can participate in the Health FSA? ............................................................ 9
How do I become a Participant?........................................................................9
What happens if I fail to return my Benefit Election Form? ...............................9
How is my Health FSA Account funded? ........................................................... 9
What annual benefits are available under the Health FSA, and how much
will they cost? ................. .................................................................................. 9
How are my Health FSA benefits paid for? ........................................................9
What amounts will be available for reimbursement at any particular time
during the Plan Year? .......................................................................................9
How do I receive Reimbursement under the Health FSA? ..................................9
What is an "Eligible Expense"?...................................................................... 10
Who is an "eligible dependent" for whom I can claim expenses for
reimbursement?.............................................................................................. 10
When must a reimbursable expense be incurred? ............................................. 10
Can I change the election during the year? ...................................................... 10
What happens if I still have a balance in my Account at the end of the Plan
Year? .................. ............................................................................................ 10
Can I continue coverage in my Account? ......................................................... 11
Q-14.
CITY OF WEST UNIVERSITY PLACE
MAY 19,2003, V. 7.0
PAGE ii
PAGE ii
6.
Q-l.
Q-2.
Q-3.
Q-4.
Q-5.
Q-6.
Q-7.
Q-8.
Q-9.
Q-lO.
Q-ll.
Q-12.
Q-13.
Q-14.
Q-15.
Q-16.
Q-17.
8.
9.
PREMIUM REDUCTION OPTION PLUS FSAs
SUMMARY PLAN DESCRIPTION
DEPENDENT CARE ASSISTANCE BENEFIT .................................................................12
Who can participate in a DCAP? ..................................................................... 12
How do I become a Participant?...................................................................... 12
What happens if I fail to return my Benefit Election form? .............................. 12
How is my DCAP Account funded? ................................................................. 12
Are there any other limits on what DCAP benefits are tax free?...................... 12
Is there any other way I can save taxes on my DCAP expenses? ...................... 13
What is the Household and Dependent Care Credit?....................................... 13
Would I be better off with a DCAP or claiming the Household and
Dependent Care Credit? .................................................................................. 13
If I participate in the DCAP, can I claim the Household and Dependent Care
Credit on my federal income tax return?......................................................... 13
Who is an "eligible dependent" for whom I can claim reimbursement?........... 13
What is an "eligible expense"? ........................................................................ 14
How do I receive my benefits under the DCAP?.............................................. 14
Will I be taxed on the DCAP benefits I receive? .............................................. 15
Can a relative provide the service? .................................................................. 15
Can I change my election if I change day care providers during the year and
the rates are different? .................................................... ................................. 15
Can I change my election if a relative starts keeping my children for free? ...... 15
What happens if I still have a balance in my DCAP Account at the end of the
Plan Year? ...................................................................................................... 15
CLAIMS PROCEDURES ................ ..............................................................................15
PLAN INFORMATION SUMMARy............................................................ ...................16
CITY OF WEST UNIVERSITY PLACE
MAY 19,2003 V. 7.0
Section 125 Cafeteria Plan
1. Introduction
The City of West University Place ("Employer") is pleased to sponsor an employee benefit program known as a Cafeteria Plan
("Plan") for you and your fellow employees. It is called a Cafeteria Plan because you can choose from a selection of different
insurance and fringe benefit programs according to your needs. Your Employer gives you this opportunity to use a salary conversion
arrangement through which you can use pre-tax dollars to pay for your benefits instead of paying for the benefits through after-tax
payroll deductions. By paying for the benefits with pre-tax dollars, you save money by not having to pay social security and income
taxes on your salary reduction. However, you still have the option of paying for your benefits with after-tax dollars.
This Summary Plan Description ("SPD") describes the basic features of the Plan; how it operates, and how you can get the
maximum advantage from it. This SPD only summarizes the Plan's key parts and briefly describes your rights as a Participant, and
is not designed to be a part of the official plan documents. If a conflict exists between the plan documents and this SPD, the plan
documents will apply.
2. General Information about the Plan
Q-l. What is the purpose of the plan?
This Plan is designed to allow eligible employees to choose one or more of the benefits offered through the Plan and, using
funds provided through employee salary reduction, to pay for the selected benefits with pre-tax dollars. It is established for
the exclusive benefit of Participants.
Q-2. What benefits are offered through the Plan?
The Plan can offer one or more of the following four types of benefits ("Benefit Package Options"). See Section 9 below for
the specific Benefit Package Options offered under this Plan.
1. Insurance premium benefits
2. Health Premium Reimbursement Account Benefits (See Section 3 below.)
3. Health FSA benefits (See Section 5 below.)
4. Dependent Care Assistance benefits (See Section 6 below.)
You will receive information materials before each enrollment period explaining the various benefit options your Employer
is offering for the next Plan Year.
Q-3. Who can participate in the Plan?
Any employee (as defined by the Plan) of the Employer who satisfies the Eligibility Requirements established by the
Employer in the Plan's Adoption Agreement, (as summarized in Section 9 below), is eligible to participate in this Plan. An
eligible employee can become a Participant by electing at least one Benefit Package Option offered under the Plan (see
Section 2, Q-2 above).
A Participant will cease to be a Participant if (1) the Plan terminates, (2) the Participant ceases to be eligible for the Plan
(except for continuation coverage under COBRA), (3) the Participant revokes an election to participate, or (4) the
Participant's employment is terminated or the participant is laid off.
Q-4. What tax advantages can I gain by participating in the Plan?
By participating in the Plan, you will not have to pay income tax or Social Security tax on your elections. Following is an
illustration of how a hypothetical employee saved on taxes by participating in a cafeteria plan. Let's assume our
hypothetical employee makes $2,500 each month and has 28% withheld for federal withholding and 7.65% for Social
Security. The employee's take-home pay before participating in the Plan is $1,609 a month. Out of that, $348 a month is
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MAY 19, 2003, V. 7.0
SUMMARY PLAN DESCRIPTION
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paid for insurance benefits, $100 for Health FSA, and $200 for Dependent Care FSA. The employee decides to participate
in the cafeteria plan. By participating in the Plan and paying contributions on a pre-tax basis under the Plan, the employee
saved $230 a month. Here is a table to better illustrate the example.
BREAKDOWN OF PAY CHECK
AND DEDUCTIONS
NOT PARTICIPATING
IN CAFETERIA PLAN
PARTICIPATING IN
CAFETERIA PLAN
2,500.00
(700.00)
(191.00)
(348.00)
(100.00)
(200.00)
$961.00
$2,500.00
(348.00)
(100.00)
(200.00)
1,852.00
(519.00)
(142.00)
Gross Monthly Pay
Less Premium for Major Medical
Less MedicallDental Expenses
Less Day Care Expenses
Taxable Income
Less 28% Federal Withholding
Less 7.65% Social Security Tax
Less Premium for Major Medical
Less Health FSA Expenses
Less Day Care Expenses
Spendable Income
$2,500.00
$1,191.00
The employee saved $230 a month or $2,760 a year by participating in Plan!
This savings results in extra spendable income and this occurs because the employee participated in the Plan and made the
required employee contributions before the taxes were withheld. This is just one example of the possible tax savings under
the Plan.
Q-5. How do I become a Participant?
You become a Participant by signing a Benefit Election Form indicating that you elect one or more of the Benefit Package
Options available under the Plan that are listed in Section 10 below and agree to a salary reduction to pay for your elected
benefits with pre-tax dollars. You will then submit the Benefit Election Form to your Employer during the applicable
Enrollment Periods described in Q-6 below. Participation in this Plan will be effective as described in Q-6 below. Coverage
under the Benefit Package Options that you elect will begin as set forth in the summary plan descriptions for each Benefit
Package Option that you elect.
Q-6. What are the enrollment periods?
There are three enrollment periods:
1. Enrollment Period prior to the Effective Date. This is the enrollment period that occurs before the Plan's Effective
Date (as described in the Adoption Agreement). An Election made during this Enrollment Period is effective on the
Effective Date.
2. Initial Enrollment Period. The Initial Enrollment Period is the period during which newly eligible employees enroll in
the Plan. The Initial Enrollment Period is described in the enrollment material provided by the Plan Administrator. An
election to participate that is made during this enrollment period will be effective on the Plan Entry Date.
3. Annual Enrollment Period. The Annual Enrollment Period is the period each year in which participants may elect to
change and/or continue their elections or eligible employees may elect to participate for the next Plan Year. The
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SUMMARY PLAN DESCRIPTION
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Annual Enrollment Period is described in your enrollment material that you will receive prior to the Annual
Enrollment Period. An election to participate made during this period will be effective on the anniversary date.
Elections that you make or are deemed to make during the Annual Enrollment Period will be effective on the
Anniversary Date, which is identified in Section 9 below. If you have the ability to enroll by phone or Internet,
separate enrollment periods may be set for paper, telephone, and Internet. Your Employer will tell you what
enrollment periods are established for each.
See Q-8 below for what happens when you fail to return a Benefit Election Form during the enrollment period.
Q- 7. How long am I committing to if I elect to be a participant?
You will be signing up for a Plan Year which is usually 12 months. The first Plan Year and the last Plan Year may be for a
shorter period. See Section 9 below for the exact dates of your Plan Year.
Q-8. What happens if! fail to return my Benefit Election Form?
If you are not currently participating in the Plan and you fail to return a Benefit Election Form before the end of the
applicable Enrollment Period, it will be assumed that you have elected to receive your full compensation in cash and you
cannot elect to become a Participant until the next Annual Enrollment Period. The only exception to this is if you have
experienced one of the qualifying events listed in Q-9 below. If so, you must submit an Employee Statement of Qualifying
Event form (stating the event) and a Personal Benefit Election Change Request Form (stating the changes in elections)
within 30 days of the event to enroll.
If you are currently participating in the Plan and fail to submit a Benefit Election Form by the end of the Annual
Enrollment Period for the next Plan Year, your elections for the next Plan Year will depend on which benefits you currently
have.
1. If you have currently elected insurance premium benefits, it will be assumed that you want to continue these benefits
for the next Plan Year (and contribute your share of the cost on a pre-tax basis).
2. If you have currently elected a Health Premium Reimbursement Account, it will be assumed that you do not want to
continue participation and the premiums will no longer be deducted.
3. If you have currently elected to participate in a Health FSA, it will be assumed that you do not want to continue
participation in the Health FSA for the next Plan Year.
4. If you have currently elected to participate in a Dependent Care Assistance Plan (DCAP), it will be assumed that you
do not want to continue participation in the DCAP for the next Plan Year.
Q-9. Can I change my election during the Plan Year?
Generally, you cannot change your election to participate in the Plan or vary the benefits you have selected during the Plan
Year, although your election will terminate if you are no longer working for the Employer or you are no longer eligible.
You may change your elections only during the Annual Enrollment Period, and then the change will not be effective until
the beginning of the next Plan Year.
There are several important exceptions to this general rule. You may change or revoke your previous elections during the
Plan Year if you experience one of the events listed below:
Please refer to the Change of Status Matrix (distributed with this SPD) for a table of the qualifying events, the
benefits affected by each event, and the possible changes in elections that may take place for each benefit. H you
have a qualifying event, you must submit an Employee Statement of Qualifying Event form (stating the event)
and a Personal Benefit Election Change Request Form (stating the changes in elections) within 30 days of the
event to enroll.
1. Change in Status. If one or more of the following Changes in Status occur, you may revoke your old election and
make a new election, provided that both the revocation and new election are on account of and correspond with the
Change in Status (as described below). Those occurrences which qualify as a Change in Status include the events
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SUMMARY PLAN DESCRIPTION
POP PLUS FSAs
described below, as well as any other events which the Plan Administrator determines are permitted under subsequent
IRS regulations:
. Change in your legal marital status (such as marriage, legal separation, annulment, divorce, or death of your
Spouse),
. Change in the number of your tax Dependents (such as the birth of a child, adoption or placement for adoption of
a Dependent, or death of a Dependent),
. Any of the following events that change the employment status of you, your Spouse, or your Dependent that affect
benefit eligibility under a cafeteria plan (including this Plan) or other employee benefit plan of yours, your Spouse,
or your Dependents. Such events include any of the following changes in employment status: termination or
commencement of employment, a strike or lockout, a commencement of or return from an unpaid leave of
absence, a change in worksite, switching from salaried to hourly-paid, union to non-union, or part-time to full-
time; incurring a reduction or increase in hours of employment; or any other similar change which makes the
individual become (or cease to be) eligible for a particular employee benefit,
. Event that causes your Dependent to satisfY or cease to satisfy an eligibility requirement for a particular benefit
(such as attaining a specified age, getting married, or ceasing to be a student), or
. Change in your, your Spouse's, or your Dependent's place of residence.
If a Change in Status occurs, you must inform the Plan Administrator and complete a new election for Pre-Tax
Contributions within 30 days of the occurrence.
If you wish to change your election based on a Change in Status, you must establish that the revocation is on account
of and corresponds with the Change in Status. The Plan Administrator (in its sole discretion) shall determine whether
a requested change is on account of and corresponds with a Change in Status. As a general rule, a desired election
change will be found to be consistent with a Change in Status event if the event affects coverage eligibility (for the
Dependent Care FSA, the event may also affect eligibility for the dependent care exclusion). A Change in Status
affects coverage eligibility if it results in an increase or decrease in the number of dependents who may benefit under
the plan. In addition, you must also satisfY the following specific requirements in order to alter your election based on
that Change in Status:
. Loss of Dependent Eligibility. For accident and health benefits (e.g., health, dental and vision coverage,
accidental death and dismemberment coverage, and Health FSA benefits), a special rule governs which type of
election changes is consistent with the Change in Status. For a Change in Status involving your divorce,
annulment, or legal separation from your Spouse; the death of your Spouse or your Dependent; or your Dependent
ceasing to satisfy the eligibility requirements for coverage, your election to cancel accident or health benefits for
any individual other than your Spouse involved in the divorce, annulment, or legal separation, your deceased
Spouse or Dependent, or your Dependent that ceased to satisfy the eligibility requirements, would fail to
correspond with that Change in Status. Hence, you may only cancel accident or health coverage for the affected
Spouse or Dependent.
Example: Employee Mike is married to Sharon, and they have one child. The employer offers a calendar year
cafeteria plan that allows employees to elect no health coverage, employee-only coverage, employee-plus-one-
dependent coverage, or family coverage. Before the plan year, Mike elects family coverage for himself, his wife
Sharon, and their child. Mike and Sharon subsequently divorce during the plan year; Sharon loses eligibility for
coverage under the plan, while the child is still eligible for coverage under the plan. Mike now wishes to cancel
his previous election and elect no health coverage. The divorce between Mike and Sharon constitutes a Change in
Status. An election to cancel coverage for Sharon is consistent with this Change in Status. However, an election
to cancel coverage for Mike and/or the child is not consistent with this Change in Status. In contrast, an election
to change to employee-plus-one-dependent coverage would be consistent with this Change in Status.
However, if you, your Spouse, or a Dependent elects COBRA continuation coverage under the Employer's plan,
you may be able to increase your contribution to pay for such coverage.
. Gain of Coverage Eligibility under Another Employer's Plan. For a Change in Status in which you, your Spouse,
or your Dependent gain eligibility for coverage under another employer's cafeteria plan (or qualified benefit plan)
as a result of a change in your marital status or a change in your, your Spouse's, or your Dependent's employment
status, your election to cease or decrease coverage for that individual under the Plan would correspond with that
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SUMMARY PLAN DESCRIPTION
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Change in Status only if coverage for that individual becomes effective or is increased under the other employer's
plan.
. Dependent Care FSA Benefits. With respect to the Dependent Care FSA benefit (when offered by the Plan), you
may change or terminate your election only if (1) such change or termination is made on account of and
corresponds with a Change in Status that affects eligibility for coverage under the Plan; or (2) your election
change is on account of and corresponds with a Change in Status that affects the eligibility of dependent care
assistance expenses for the available tax exclusion.
Example: Employee Mike is married to Sharon, and they have a 12-year-old daughter. The employer's plan
offers a dependent care expense reimbursement program as part of its cafeteria plan. Mike elects to reduce his
salary by $2,000 during a plan year to fund dependent care coverage for his daughter. In the middle of the plan
year when the daughter turns 13 years old, however, she is no longer eligible to participate in the dependent care
program. This event constitutes a Change in Status. Mike's election to cancel coverage under the dependent care
program would be consistent with this Change in Status.
. Group Term Life Insurance, Disability Income, or Dismemberment Benefits. In the case of group term life
insurance or disability income and dismemberment benefits, if you experience any Change in Status (as described
above), you may elect to either increase or decrease coverage.
Example: Employee Mike is married to Sharon and they have one child. The employer's plan offers a cafeteria
plan which funds group-term life insurance coverage (and other benefits) through salary reduction. Before the
plan year Mike elects $10,000 of group-term life insurance. Mike and Sharon subsequently divorce during the
plan year. The divorce constitutes a Change in Status. An election by Mike either to increase or to decrease his
group-term life insurance coverage would each be consistent with this Change in Status.
2. Special Enrollment Rights. If you, your Spouse and/or a Dependent are entitled to special enrollment rights under a
group health plan, you may change your election to correspond with the special enrollment right. Thus, for example, if
you declined enrollment in medical coverage for yourself or your eligible Dependents because of outside medical
coverage and eligibility for such coverage is subsequently lost due to certain reasons (such as legal separation, divorce,
death, termination of employment, reduction in hours, or exhaustion of COBRA period), you may be able to elect
medical coverage under the Plan for yourself and your eligible Dependents who lost such coverage. Furthermore, if
you have a new dependent as a result of marriage, birth, adoption, or placement for adoption, you may also be able to
enroll yourself, your Spouse, and your newly acquired Dependents, provided that you request enrollment within 30
days after the marriage, birth, adoption, or placement for adoption. An election change that corresponds with a special
enrollment must be prospective, unless the special enrollment is attributable to the birth, adoption, or placement for
adoption of a child, which may be retroactive up to 30 days. Please refer to the group health plan description for an
explanation of special enrollment rights.
3. Certain Judgments, Decrees, and Orders. If a judgment, decree, or order from a divorce, separation, annulment, or
custody change requires your Dependent child (including a foster child who is your tax Dependent) to be covered
under this Plan, you may change your election to provide coverage for the Dependent child. If the order requires that
another individual (such as your former Spouse) cover the Dependent child, and such coverage is actually provided,
you may change your election to revoke coverage for the Dependent child.
4. Entitlement to Medicare or Medicaid. If you, your Spouse, or a Dependent becomes entitled to Medicare or
Medicaid, you may cancel that person's accident or health coverage. Similarly, if you, your Spouse, or a Dependent
who has been entitled to Medicare or Medicaid loses eligibility for such, you may, subject to the terms of the
underlying plan, elect to begin or increase that person's accident or health coverage.
5. Change in Cost. If the Plan Administrator notifies you that the cost of your coverage under the Plan significantly
increases or decreases during the Plan Year, regardless of whether the cost change results from action by you (such as
switching from full-time to part-time) or the Employer (such as reducing the amount of Employer contributions for a
certain class of employees), you may make certain election changes. If the cost significantly increases, you may choose
either (a) to make an increase in your contributions, (b) revoke your election and receive coverage under another
Benefit Package Option which provides similar coverage, or ( c) drop coverage altogether if no similar coverage exists.
If the cost significantly decreases, you may revoke your election and elect to receive coverage provided under the
option that decreased in cost. For insignificant increases or decreases in the cost of Benefit Package Options, however,
PAGE 5
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MAy 19,2003, V. 7.0
SUMMARY PLAN DESCRIPTION
POP PLUS FSAs
the Plan Administrator will automatically adjust your election contributions to reflect the minor change in cost. The
Plan Administrator (in its sole discretion) will determine whether the requirements of this section are met. The
Change in Cost provisions do not apply to Health FSA benefits.
Example: Employee Mike is covered under an indemnity option of his employer's accident and health insurance
coverage. If the cost of this option significantly increases during a period of coverage, the Employee may make a
corresponding increase in his payments or may instead revoke his election and elect coverage under an HMO option.
6. Change in Coverage. If the Plan Administrator notifies you that your coverage under the Plan is significantly
curtailed you may revoke your election and elect coverage under another Benefit Package Option which provides
similar coverage. If the significant curtailment amounts to a complete loss of coverage, you may also drop coverage if
no other similar coverage is available. Further, if the Plan adds or significantly improves a benefit option during the
Plan Year, you may revoke your election and elect to receive on a prospective basis coverage provided by the newly-
added or significantly improved option, so long as the newly added or significantly improved option provides similar
coverage. Also, you may make an election change that is on account of and corresponds with a change made under
another employer plan (including a plan of the Employer or another employer), so long as: (a) the other employer
plan permits its participants to make an election change permitted under the IRS regulations; or (b) this Plan permits
you to make an election for a period of coverage which is different from the period of coverage under the other
employer plan. Finally, you may change your election to add coverage under this Plan for yourself, your Spouse, or
your Dependent if such individual(s) loses coverage under any group health coverage sponsored by a governmental or
educational institution. The Plan Administrator (in its sole discretion) will determine whether the requirements of this
section are met. The Change in Coverage provisions do not apply to Health FSA benefits.
Additionally, the Plan's Administrator may modify your election(s) downward during the Plan Year if you are a Key
Employee or Highly Compensated Individual (as defined by the Internal Revenue Code), if necessary to prevent the
Plan from becoming discriminatory within the meaning of the federal income tax law.
Q-lO. What happens in go on leave of absence?
If you go on leave of absence with pay, your participation in the Plan will continue and your contributions to the Plan will
continue to be deducted from your paycheck.
If you go on leave of absence without pay (L WOP), your participation in the Plan will cease (except as discussed in Q-ll
below). The Employer may, on a uniform and nondiscriminatory basis, require all employees returning from leave within
30 days to have their elections in effect before the leave automatically reinstated (after they have satisfied any applicable
eligibility requirements) when they return. If you return after more than 30 days, you can make new elections.
Q-l1. What happens in go on a Qualified Leave under Family and Medical Leave Act?
(a) If you go on a qualifying unpaid leave under the Family and Medical Leave Act of 1993 (FMLA), to the extent required
by the FMLA, the Employer will continue to maintain your Benefit Package Options providing health coverage
(including the Health FSA) on the same terms and conditions as though you were still active (i.e., the Employer will
continue to pay its share of the premium to the extent the Employee opts to continue coverage).
(b) If you opt to continue your group health coverage, you may pay your share of the premium with after-tax dollars while on
leave (or pre-tax dollars to the extent you receive compensation during the leave), or you may be given the option to pre-
pay all or a portion of your share of the premium for the expected duration of the leave on a pre-tax salary reduction basis
out of your pre-leave Compensation by making a special election to that effect before the date such Compensation would
normally be made available to you (provided, however, that pre-tax dollars may not be utilized to fund coverage during
the next Plan Year), or by other arrangements agreed upon between you and the Plan Administrator (e.g., the Plan
Administrator may fund coverage during the leave and withhold amounts upon your return). If the Employer requires all
Participants to continue coverage during the leave, you may elect to discontinue your share of the required contributions
until you return from leave. Upon return from such leave, you will be permitted to reenter the Plan on the same basis you
were participating in the Plan before your leave, or as otherwise required by the FMLA. Notwithstanding the preceding
sentence, your coverage that is terminated during the leave may be automatically reinstated provided that health coverage
for employees on non-FMLA leave is automatically reinstated upon return from leave.
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SUMMARY PLAN DESCRIPTION
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(c) The employer may, on a uniform and consistent basis, continue your group health coverage for the duration of the leave
following your failure to pay the required contribution. Upon return from leave, you will be required to repay the
contribution in a manner agreed upon by you and your Employer.
(d) If you are commencing or returning from unpaid FMLA leave, your election under this Plan for Benefit Package Options
providing non-health benefits shall be treated in the same manner that elections for non-health Benefit Package Options
are treated with respect to Participants commencing and returning from an unpaid non-FMLA leave.
3. Health Premium Reimbursement Accounts
If listed as a benefit offered under the Plan in Section 9 below, you can elect a Health Premium Reimbursement Account (HPRA) to
pay for individually owned health policies such as dental, vision, disability, accidental death and dismemberment (AD&D), and
other accident and health insurance policies (including cancer, dread disease, heart, stroke, first occurrence, or other health
indemnification type policies) adopted by the Employer.
An HPRA is not a separate benefit in and of itself, but is a mechanism whereby premiums are qualified through the ordinary
operation of this cafeteria plan. The employer may further exercise the option to pay the premiums directly to the underlying carriers
rather than through employee reimbursement.
Q-l. Who can elect an HPRA?
If you are eligible to be a participant in the Cafeteria Plan, you can participate in a Health Premium Reimbursement
Account (HPRA) to pay for qualified individually owned health policies if your employer offers this type of benefit. (See
Section 9 below for a list of the benefits offered by your employer.)
Q-2. What individually owned health policies are qualified to be paid under a HPRA?
The individual insurance that you purchase outside of any employer plan must meet the following conditions: (a) the
individual insurance policy must be determined by the Plan Administrator to be a "Qualified Benefit" (as defined by Code
Section 125) before the beginning of the Plan Year or, if you are a new hire, before the effective date of your participation in
the Plan; (b) the insurance policy must be a policy that provides accident or health insurance (for example, health, dental,
vision, and disability) as defined by the Internal Revenue Code; (c) the contract must be an individually purchased contract
and not an employer- sponsored insurance plan; (d) you must be the policyholder of the insurance policy (if applicable, your
spouse or dependents who would othenvise be eligible for coverage under the Employer's group health plan may also be
covered under the individual accident or health insurance policy); and (e) the premium for the insurance coverage must be
billed directly to you.
Q-3. How do I become a Participant?
During the applicable Enrollment Periods described in Q-6 of Section 2, you must (a) provide the Plan Administrator with a
copy of the individual accident or health insurance policy that you have purchased for yourself (or yourself and your
dependents who are othenvise eligible for coverage under the Employer's group health plan) outside of any employer plan
and (b) indicate on the Benefit Election Form the premium amount that you will expect to pay during the Plan Year for
such individual accident or health insurance policy. The Plan Administrator will notify you if the insurance policy is
determined to be a "qualified benefit" under the Plan. See Q-6 of Section 2 for your effective date of participation. The
effective date of coverage may vary by Enrollment Period.
Q-4. What happens ifI fail to return my Benefit Election Form?
If you are not currently participating in the Plan and fail to return a Benefit Election Form before the end of the applicable
Enrollment Period, it will be assumed that you have elected to receive your full compensation in cash and you cannot elect
to participate in the HPRA until the next Plan Year. The only exception to this is if you have experienced one of the
qualifying events listed in Q-9 under Section 2. If so, you must submit an Employee Statement of Qualifying Event form
(stating the event) and a Personal Benefit Election Change Request Form (stating the changes in elections) within 30 days
of the event to enroll.
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If you have currently elected a HPRA, it will be assumed that you do not want to continue participation and the premiums
will no longer be deducted.
See Q-8 under Section 2 for further discussion.
Q-5. How do I receive Reimbursement under an HPRA?
If you elect to participate in an HPRA, you will have to take certain steps to be reimbursed for your eligible premiums. You
will be supplied with the necessary claim forms. In addition to the claim form, you must submit to the Plan Administrator a
statement from the insurance carrier indicating that you have paid the Eligible Individual Premium Expenses for which you
are requesting reimbursement unless the Employer is paying the carrier directly. In that case, you must submit a statement
or invoice from the carrier indicating the amount of the premium and the period of coverage. You will be reimbursed for
your premium in the next check processing cycle. Your Plan Administrator will advise you how often the checks are
processed.
The amount of your reimbursement will depend on your current Account Balance (deductions to date minus any previous
reimbursement). If your Account Balance is equal to or exceeds your claim, your claim for eligible expenses will be
reimbursed in full. If your claim exceeds your current Account balance, the excess part of the claim will be carried over into
the following pay cycles to be paid as your balance can cover it. In other words, as additional salary conversion amounts are
credited to your Account raising your Account Balance, a reimbursement check will be processed automatically for any
unpaid portions of any properly submitted claims. Remember, no expenses can be reimbursed that exceed the payments you
have made up to that date minus any previous reimbursements.
You cannot be reimbursed for any expenses incurred before the Plan Effective Date, before your Benefit Election Form
becomes effective, or after the Claim Submission Grace Period or Closing Period, whichever is applicable. Also, no check
will be written if the current amount payable is less than the Minimum Check Amount as specified in Section 9, below. The
Minimum Check Amount will not apply for processing the final checks during any Plan Year.
At the end of the Plan Year, you will have a closing period (as stated in Section 9 below) to turn in claims for premiums
incurred during the Plan Year. No claims can be submitted for reimbursement after that time. Your Employer may set a
different claims submission grace period for terminated employees; if so, you will find this information in Section 9 below.
Q-6. Can I change the election during the year?
Only if you experience one of the qualifying events listed in Q-9 under Section 2 above, and follow the procedures outlined
within that question.
Q- 7. What happens if! still have a balance in my HPRA at the end ofthe Plan Year?
Any unused amounts left in your HPRA at the end of the Plan Year will be forfeited and given to your Employer to offset
administration expenses. Also, any uncashed reimbursement checks will be forfeited if not cashed by the end of the Plan
Year following the Plan Year in which the expenses for which the check was disbursed was incurred.
4. Cash Benefits
During anyone Plan Year, the Maximum Contribution Amount total a Participant can elect cannot exceed the sum of the Benefit
Package Options offered under Section 9 below. Any part of this annual benefit limit you do not apply toward tax-free benefits (or
the remainder of your annual pay if less than the unused portion of the Maximum Contribution Amount) will be paid to you as
regular, taxable salary.
5. Health FSA Benefits
Participation in the Medical Reimbursement Plan (Health FSA), if listed as a benefit offered under the Plan in Section 9 below,
allows you to purchase a specific level of Health FSA benefits, paying for coverage through the Benefit Election Form with the
Employer, in lieu of a corresponding amount of current pay, which means that the contribution you make will be with pre-tax funds.
This arrangement helps you because the level of coverage you elect is nontaxable, and you save social security and income taxes on
the amount of premiums you pay.
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Q-l. Who can participate in the Health FSA?
If you are eligible to be a participant in the Cafeteria Plan, you can participate in the Health FSA.
Q-2. How do I become a Participant?
You can participate by electing the Health FSA during the applicable Enrollment Periods described in Q-6 of Section 2. See
Q-6 of Section 2 to determine when your participation will begin. Effective date of participation will vary by Enrollment
Period. Once you elect benefits under a Health FSA, a Health FSA will be set up in your name to record your benefits and
the premiums you pay for such benefits during the Plan Year.
Q-3. What happens in fail to return my Benefit Election Form?
If you are not currently participating in the Plan and fail to return a Benefit Election Form before the end of the enrollment
period, it will be assumed that you have elected to receive your full compensation in cash and you cannot become a
Participant until the next Plan Year. The only exception to this is if you have experienced one of the qualifying events listed
in Q-9 under Section 2 above. If so, you must submit an Employee Statement of Qualifying Event form (stating the event)
and a Personal Benefit Election Change Request Form (stating the changes in elections) within 30 days of the event to
enroll.
If you have currently elected to participate in a Health FSA, it will be assumed that you do not want to continue
participation in the Health FSA and the deductions will cease.
See Q-8 under Section 2 above for further discussion.
Q-4. How is my Health FSA Account funded?
After you submit a Benefit Election Form specifying the amount you want deducted each pay period, that amount will be
deducted from your pay and credited to your Health FSA each pay period. This money will be available for reimbursement
of medical expenses. The available amount in your Health FSA Account at any particular time will be the total amount
elected for the Plan Year under your Health FSA less any reimbursements you may have already received.
Q-5. What annual benefits are available under the Health FSA, and how much will they cost?
You can choose any amount of annual benefits falling within the limits set in Section 9 below. You will be required to make
annual contribution corresponding to your chosen benefit level.
Q-6. How are my Health FSA benefits paid for?
You can specify on the Benefit Election Form the amount of Health FSA benefits you wish to pay for with your salary
reduction each year. This will be your Annual Election, and cannot exceed the maximum for a Health FSA set in 9 below.
The reimbursement benefits payable to you are actually funded by your employer. Thus, you can submit a claim and be
reimbursed for the full amount of the coverage you have elected (less any claims previously filed during the Plan Year) at
any time during the Plan Year unless you stop making contributions.
For example, if you have elected an annual salary conversion of $2,400 for eligible Health FSA benefits, then $2,400 would
be put in your Health FSA Account during the Plan Year. If you are paid semi-monthly, $100 a payday or $200 a month
would be placed in the Health FSA Account to pay for these expenses, but your reimbursements would not depend on the
amount you have paid in. You can file for all or part of this $2,400 reimbursement at any time during the Plan Year.
Q- 7. What amounts will be available for reimbursement at any particular time during the Plan Year?
If you have continued to pay the periodic premiums due for this benefit, the full annual amount of coverage you have
elected, less any reimbursements already received during the Plan Year, will be available at any time during the Plan Year.
Q-8. How do I receive Reimbursement under the Health FSA?
If you elect to participate in this Health FSA, you will have to take certain steps to be reimbursed for your eligible medical
expenses. You will be supplied with claim forms. When you incur an eligible expense payable from your Health FSA, fill
PAGE 9
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SUMMARY PLAN DESCRIPTION
POP PLUS FSAs
I
out a claim form and submit it to the Plan Administrator. If you have paid the premiums for the coverage you have elected,
you will be reimbursed for your eligible expenses in the processing cycle following the pay period in which you submitted
the claim. Remember, the amount you are reimbursed during the Plan Year cannot exceed the annual benefit amount you
elected. Also, no check will be written if the current amount payable to the Participant for claims is less than the Minimum
Check Amount as specified in Section 9 below. The Minimum Check Amount will not apply when processing claims
submitted during the last month of the Plan year or during the closing period.
At the end of the Plan Year, you will have a closing period (as stated in Section 9 below) to turn in claims for expenses
incurred during the Plan Year. No claims can be submitted for reimbursement after the closing period ends. Your Employer
may set a different closing period, called a "claims submission grace period" for employees terminating during the Plan
Year; if so, you will find this information in Section 9 below.
Please read and follow your Claims Filing Instructions carefully to ensure the prompt processing of your claims. Please note
that you can submit a claim for more than what you have paid in to date. The reimbursement will be made so long as (1) the
claim is equal to or less than the annual elected amount less any previous payments; and (2) the claim is not paid for or
payable from any other source.
Q-9. What is an "Eligible Expense"?
An "eligible expense" means any item which you could have claimed as a medical expense deduction on an itemized federal
income tax return, and which was not paid or payable by another source. The only exceptions are: (1) expenses for qualified
long-term care services, (2) expenses incurred for cosmetic surgery unless necessary to alleviate or prevent a physical or
mental condition, and (3) a Participant's insurance premium payments for health coverages, including premiums paid for
health coverage under a plan maintained by the employer or the employee's spouse or dependent. (Health Insurance
Premiums are eligible benefits under a Cafeteria Plan as stand-alone benefits, as discussed in Section 3 above.)
A partial list of eligible expenses included with the Claims Filing Instructions will help you determine if an expense is an
"eligible expense". If you have any doubts, you can also consult IRS Publication 17, "Your Federal Income Tax", or your
personal tax advisor.
Q-IO. Who is an "eligible dependent" for whom I can claim expenses for reimbursement?
You can claim reimbursement for eligible medical expenses incurred by you, your legal spouse, and any individual for
whom you will provide more than one-half of that dependent's support for the Plan Year (i.e. an individual who is
dependent as defined by Section 152 of the Code). Also, if you are the divorced parent ofa child, the child is considered a
dependent of both parents.
Q-II. When must a reimbursable expense be incurred?
Eligible expenses reimbursed under the Plan must be incurred during the Participant's period of coverage under the Plan.
Expenses are treated as having been incurred when the Participant is provided with the medical care that gives rise to the
medical expenses, not when the Participant is formally billed or charged for the services or pays for the medical care.
During your current participation year, you cannot be reimbursed for any expenses incurred before the Plan Effective Date,
before your Salary Reduction and Election Form becomes effective, expenses incurred after the date that you stop being
eligible under this Health FSA (except as described in Q-14 below) or for any expense incurred after the close of the Plan
Year.
Q-12. Can I change the election during the year?
Only if you experience one of the qualifying events listed in Q-6 under Section 2 above and follow the procedures outlined
within that question.
Q-13 . What happens if! still have a balance in my Account at the end of the Plan Year?
Any unused amounts left in your Account at the end of the Plan Year will be forfeited and returned to your employer to
offset administrative expenses and future costs. Also, any uncashed reimbursement checks will be forfeited if not cashed by
the end of the Plan Year following the Plan Year in which the expenses for which the check was disbursed was incurred.
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Q-14. Can I continue coverage in my Account?
Yes, you may be eligible for "continuation coverage" under the Plan. "Continuation Coverage" means your right, or your
Spouse and/or Dependents' right, to continue to be covered under the Health FSA Plan if participation otherwise would end
due to the occurrence of a "Qualifying Event." A Qualifying Event is:
. Termination of your employment (other than by reason of gross misconduct), or reduction of your work hours,
. Your death,
. Divorce or legal separation from your Spouse, or
. Your Dependent ceases to be a dependent.
In case of a Qualifying Event (other than a change in your employment status or your death), it will be your obligation to
inform the Plan Administrator of its occurrence within 60 days of the later of the Qualifying Event or the date that you lose
coverage as a result of the occurrence. The Plan Administrator, in turn, has a legal obligation to furnish you or your Spouse,
as the case may be, with written election forms to continue the coverages provided at stated premium costs with respect to
the Health FSA Plan. You will have 60 days from the later of the date coverage ends or the date that we send the notice to
make an election.
Generally, if you or your dependents experience a qualifying event, you and/or your covered dependents will be eligible for
continuation coverage for the remainder of the Plan Year in which the Qualifying Event occurs provided that the maximum
annual reimbursement amount you have available on the day before the qualifying event is greater than the amount that you
have contributed up to the day before the qualifying event. In some cases, you may continue coverage for longer (18 or 36
months, depending on the qualifying event) regardless of your account balance on the day before the qualifying event. You
will be notified by the Plan Administrator of your COBRA rights after you experience a qualifying event.
COBRA coverage will end on the earliest of the following to occur:
. The maximum duration of COBRA coverage,
. The date the employer terminates all group health plans,
. The date the covered individual fails to pay the required contribution. The first contribution is due no later than 45 days
after the election to continue coverage is made. All other contributions are due 30 days after the due date for that
month.
. After you elect COBRA continuation coverage, the date that you become covered under another plan under which you
are not subject to a pre-existing exclusion or limitation,
. After electing COBRA continuation coverage, the date that you become entitled to Medicare.
The COBRA notification you receive from the Plan Administrator will provide greater detail about your and your covered
dependents' right to elect coverage.
Q-15. What if I take a qualifYing leave of absence under the FMLA?
Coverage under the Health FSA Plan will be continued during an unpaid leave of absence under the Family and Medical Leave
Act of 1993 ("FMLA") in accordance with the rules and regulations of the FMLA and Q-ll of Section 2. Moreover, if you have
the option and choose not to continue coverage during an FMLA leave of absence or coverage is lost for the remainder of the
leave as a result of a failure to pay a required contribution, you have the right to the following reinstatement options:
(i) You may elect to reinstate the maximum annual reimbursement that you elected provided that any contributions missed
during the leave period are repaid upon return from leave. The coverage level reinstated will be reduced by
reimbursements received for expenses incurred prior to the date coverage terminates, or
(ii) The Participant may elect to reinstate the maximum annual reimbursement amount that you elected reduced by
contributions not made during the leave. Under this option (ii), the contribution for the remaining period following the
return from leave will be equal to the contribution required prior to leave. The coverage level reinstated will be reduced
further by any reimbursements received for expenses incurred prior to the date coverage terminated.
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(iii) Under no circumstances will expenses incurred during the period during which coverage was not effective be reimbursed.
6. Dependent Care Assistance Benefit
Another important component of your Employer's Cafeteria Plan is the Dependent Care Assistance Plan. Participation in this Plan
allows you to receive income tax-free reimbursement for some or all of your work-related dependent care expenses under a related
Dependent Care Assistance Plan (DCAP). A DCAP allows you to provide a source of pre-tax funds to reimburse you for your eligible
expenses. You do this by entering into a salary conversion agreement (Benefit Election Form) with the Employer instead of receiving
a corresponding amount of your regular pay. This arrangement saves you money; you pay less social security and income taxes
because the salary conversion paying for your elected benefits is not taxable.
Q-l. Who can participate in a DCAP?
If you are eligible to be a participant in the Cafeteria Plan, you can participate in the DCAP. If you are married, your spouse
must also work, go to school full time, or be incapable of self-care for you to be eligible. The dependent care services can
take place either inside or outside of your home as stated below.
Q-2. How do I become a Participant?
You can participate by electing the DCAP Benefit during the applicable Enrollment Periods. See Q-6 of Section 2 for your
effective date of participation. Effective dates of participation vary by Enrollment Period. Once you elect benefits under this
DCAP, a Dependent Care Expense Reimbursement Account (DCAP Account) will be set up in your name to record your
benefits and the contributions you make for such benefits during the Plan Year.
Q-3. What happens if! fail to return my Benefit Election form?
If you are not currently participating in the Plan and fail to return a Benefit Election Form before the end of the enrollment
period, it will be assumed that you have elected to receive your full compensation in cash and you cannot become a
Participant until the next Plan Year. The only exception to this is if you have experienced one of the qualifying events listed
in Q-9 under Section 2 above. If so, you must submit an Employee Statement of Qualifying Event form (stating the event)
and a Personal Benefit Election Change Request Form (stating the changes in elections) within 30 days of the event to
enroll.
If you have currently elected to participate in a DCAP and you fail to return the Benefit Election Form, it will be assumed
that you do not want to continue participation in the DCAP and the deductions will cease.
See Q-8 under Section 2 above for further discussion.
Q-4. How is my DCAP Account funded?
After you submit a Benefit Election Form specifying the amount you want deducted each pay period, that amount will be
deducted from your pay and credited to your DCAP Account each pay period. This money will be available for
reimbursement of your dependent care expenses. The available amount in your DCAP Account at any particular time will
be the amount credited to your DCAP Account to date less any reimbursements you may have already received.
Q-5. Are there any other limits on what DCAP benefits are tax free?
In addition to the dollar limitations in Section 9 below, the maximum amount of DCAP benefits you may exclude from
income during any calendar year cannot be more than:
. If you are Dot married as of the end of the year, your earned income for the year, or
. If you are married at the end of the year, the lesser of your earned income for the year, or your spouse's earned income.
If your spouse is a full-time student or is disabled, your spouse is considered under the federal tax rules to have a
monthly earned income of $200 (if you have only one dependent), or $400 (if you have two or more Dependents).
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Q-6. Is there any other way I can save taxes on my DCAP expenses?
Yes, you can claim the Household and Dependent Care Credit when filing your federal income tax return.
Q- 7. What is the Household and Dependent Care Credit?
The Household and Dependent Care Credit is an allowance for taking a percentage of your annual eligible work-related
dependent care expenses as a credit against your federal income tax liability under the Internal Revenue Code. In
determining the tax credit, you may take into account only $2,400 of such expenses for one dependent or $4,800 for two or
more dependents. Depending on your adjusted gross income, the percentage could be as much as 30% of your qualifYing
expenses (to a maximum credit amount of $720 for one dependent, or $1,420 for two or more dependents), to a minimum of
20% of such expenses (producing a maximum credit of $480 for one dependent, or $960 for two or more dependents).
(Remember, the adjusted gross income is the combined income for those who are married and filing a joint federal tax
return.) The maximum 30% rate is reduced by 1% (but not below 20%) for each $2,000 portion (or any fraction of $2,000)
of your adjusted gross income over $10,000.
Example: If you have $3,600 in eligible expenses for one dependent and your combined adjusted gross income is $20,000;
you calculate the credit by applying the appropriate percentage to the first $2,400 of the expenses. You determine this
percentage by subtracting one percentage point from 30% for each $2,000 your adjusted gross income exceeds $10,000.
Your gross income is $20,000, or $10,000 more than the $10,000 maximum. Divide this $10,000 by $2,000 to see how
many percentage points to subtract from 30% (one percentage point for each $2,000). In this case, you will subtract 5%
from 30%, leaving you with 25%. Your tax credit would be 25% of $2,400 or $600. If you had incurred the same expenses
for two or more dependents, your credit would be $3,600 X 25% or $900, because the entire expense would have been taken
into account since it is less than the $4,800 ceiling.
Q-8. Would I be better offwith a DCAP or claiming the Household and Dependent Care Credit?
If your income tax bracket does not exceed 15%, you will probably profit by not paying for the DCAP benefits through your
DCAP and instead claiming the credits for dependent care and earned income. As a rule, the more income taxes you are
required to pay, the more profitable it is to participate in the DCAP.
However, each Participant will have to determine the decision between taxable and tax-free benefits under the DCAP
individually since the actual determination of the preferable tax method depends on a number of factors such as one's tax
filing status (such as married, single, or head of household) and number of dependents.
Q-9. If I participate in the DCAP, can I claim the Household and Dependent Care Credit on my federal income
tax return?
If you participate in both, each dollar that you receive under the DCAP FSA reduces the amount of expenses that may be
taken into consideration under the Household and Dependent Care Credit (that is, the $2,400 and $4,800 amount).
Example: If you had $5,000 in dependent care expenses for 2001 for two children, but only elected $2000 for your DCAP,
you would still be eligible for a partial tax credit. You would calculate your tax credit by subtracting $2,000 (amount
reimbursed by DCAP) from $4,800 (the maximum allowed for the Household and Dependent Care Credit). This would
leave you with $2,800, your basis for the Household and Dependent Care Credit. You would then apply the formula for the
credit as stated in Q- 7 above.
Example: If you had $10,000 in dependent care expenses for 2001 and claimed the maximum $5,000 under a DCAP, you
cannot claim the other $5,000 as a Household and Dependent Care Credit on your federal income tax return.
Q-IO. Who is an "eligible dependent" for whom I can claim reimbursement?
You can be reimbursed for work-related dependent care expenses for (1) a child under age 13 living with you and for whom
you can claim a personal dependent exemption on your federal income tax return; and (2) a dependent or spouse who is
mentally or physically incapable of personal care.
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Q-ll. What is an "eligible expense"?
You can be reimbursed for work-related dependent care expenses for (1) a dependent under age 13 living with you and
whom you can claim as a dependent on your federal income tax return; and (2) a dependent or spouse who is mentally or
physically incapable of personal care.
Generally, these expenses must meet all the following conditions to qualify as eligible Dependent Care expenses:
1. The expenses are for services rendered after the date of your Dependent Care election and before the end of the Plan
Year.
2. The individual for whom you incurred the expenses is a:
. Dependent under age 13 whom you are entitled to a personal tax exemption as a dependent, or
. Spouse or other tax dependent who is physically or mentally incapable of personal care.
3. The expenses are incurred to enable you to be gainfully employed.
4. If the expenses are incurred for services outside your household for a Dependent who is age 13 or older, that
Dependent must spend at least 8 hours a day in your home.
5. If the incurred expenses are for services provided by a dependent care center (that is, a facility that provides care for
more than six individuals not residing at the facility), the center must comply with all applicable state and federal
laws.
6. The expenses cannot be paid or payable to a child of yours who is under age 19 at the end of the year when the services
were rendered or to an individual for whom you or your spouse is entitled to a personal tax exemption as a dependent.
7. This reimbursement (plus all other Dependent Care reimbursements during the same year) may not exceed the least of
the following limits:
. $5,000,
. $2,500 if you are married, but you and your Spouse file separate tax returns,
. Your taxable compensation (after your salary reduction under the Plan), or
. If you are married, your Spouse's actual or deemed earned income.
Your Spouse will be deemed to have earned income of $200 (for one Eligible Dependent) or $400 (for two Eligible
Dependents) for each month the Spouse is either (1) physically or mentally incapable of personal care or (2) a full-time
student. Your spouse is considered to be a full-time student if the spouse is deemed a full-time student by the "educational
institution" attended by the spouse during each of five calendar months during a Plan Year. An educational institution is
any educational institution which normally maintains a regular faculty and curriculum and normally has a regularly
enrolled body of student in attendance at the place where its educational activities are regularly carried on.
You are encouraged to consult your personal tax advisor or IRS Publication 17 "Your federal Income Tax" for further
information or clarification.
Q-12. How do I receive my benefits under the DCAP?
If you elect to participate in this Plan, you will have to take certain steps to be reimbursed for your eligible dependent care
expenses. You will be supplied with claim forms. When you incur an eligible expense payable from your DCAP Account,
fill out a claim form and submit it to the Plan Administrator and include a statement showing the dates of service, the name
of the Dependent, and the amount. You will be reimbursed for your eligible expenses in the next check processing cycle.
Your Plan Administrator will advise you how often the checks are processed.
The amount of your reimbursement will depend on your current Account Balance (deductions to date minus any previous
reimbursements). If your Account Balance is equal to or exceeds your claim, your claim for eligible expenses will be
reimbursed in full. If your claim exceeds your current Account balance, the excess part of the claim will be carried over into
the following pay cycles to be paid as your balance can cover it. In other words, as additional salary conversion amounts are
PAGE 14
CITY OF WEST UNIVERSITY PLACE
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SUMMARY PLAN DESCRIPTION
POP PLUS FSAs
credited to your Account raising your Account Balance, a reimbursement check will be processed automatically for any
unpaid portions of any properly submitted claims. Remember, no expenses can be reimbursed that exceed the payments you
have made up to that date minus any previous reimbursements.
You cannot be reimbursed for any expenses incurred before the Plan Effective Date, before your Benefit Election Form
becomes effective, or after the end of the Plan Year. You may be able to submit claims for reimbursement of an eligible
expense incurred after the date that you terminate or cease to be eligible for this Plan up to your account balance on the date
that you stopped being eligible. Also, no check will be written if the current amount payable to the Participant for claims is
less than the Minimum Check Amount as specified in Section 9 below. The Minimum Check Amount will not apply for
processing the final checks during any Plan Year.
At the end of the Plan Year, you will have a closing period (as stated in Section 9 below) to turn in claims for expenses
incurred during the Plan Year. No claims can be submitted for reimbursement after the closing period ends. Your Employer
may set a claims submission grace period for terminated employees; if so, you will find this information in Section 9 below.
Q-13. Will I be taxed on the nCAP benefits I receive?
You will not normally be taxed on your DCAP benefits up to the limits set out in Q-5 and Q-ll above. However, before you
can qualify for tax-free treatment, you are required to list the names and taxpayer identification numbers of any persons
providing your dependent care services during the calendar year for which you have claimed a tax-free reimbursement. (Be
sure to fill out all the spaces on your claim!)
Q-14. Can a relative provide the service?
Yes, unless the relative is your child who is under 19 at the end of the year or the relative is an individual for whom you or
your spouse is entitled to a personal tax exemption as a dependent.
Q-15. Can I change my election if I change day care providers during the year and the rates are different?
Yes, this will be considered a Change of Coverage (see Q-9 under Section 2 above). You will need to submit an Employee
Statement of Qualifying Event form (stating the event) and a Personal Benefit Election Change Request Form (stating the
changes in elections) within 30 days ofthe event to change the day care provider and the rates.
Q-16. Can I change my election if a relative starts keeping my children for free?
Yes, this will also qualify for the Change of Coverage discussed above. You would submit a Change of Status Form
changing providers with the rate being changed to zero. NOTE: You will not be able to change your election as a result of a
cost increase or decrease imposed by a relative.
Q-17. What happens if I still have a balance in my neAP Account at the end of the Plan Year?
Any unused amounts left in your Account at the end of the Plan Year cannot be carried over into the next year, but will be
forfeited and returned to your employer to offset administrative expenses and future costs. Also, any uncashed
reimbursement checks will be forfeited if not cashed by the end of the Plan Year following the Plan Year in which the
expenses for which the check was disbursed was incurred.
8. Claims Procedures
If your claim is for a benefit under one of the component Benefit Package Options, you will generally proceed under the claims
procedure applicable under the component Benefit Package Option. The following is the claims procedures for the Health FSA and
the DCAP. Also, if you are denied a benefit under this Plan (such as the ability to pay for premiums on a pre-tax basis) due to an
issue germane to your coverage under this Plan (i.e., such as a determination of: a Change in Status; a "significant" change in
premiums charged; or eligibility and participation matters under the Cafeteria Plan document), the claims procedure under this Plan
will apply, and you will be notified in writing by the Plan's Administrator within 90 days of the date you submitted your claim if the
claim is denied. Such notification will set out the reasons your claim was denied, and further advise you of what steps, if any, you
might take to validate the claim. It will further advise you of your right to request an administrative review of the denial of the claim.
You may request a review any time within the 60-day period after you have received notice that the claim was denied. You or your
PAGE 15
CITY OF WEST UNIVERSITY PLACE
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SUMMARY PLAN DESCRIPTION
POP PLUS FSAs
authorized representative will have the opportunity to review any important documents held by the Administrator, and to submit
comments and other supporting information. In most cases, a decision will be reached within 60 days of the date of your request for a
review.
9. Plan Information Summary
Please refer to the Addendum attached to this document for Section 9, the Plan Information Summary.
PAGE 16
CITY OF WEST UNIVERSITY PLACE
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PLAN SUMMARY INFORMATION
Name of Plan:
City of West University Place
Cafeteria Plan Document
Plan Administrator/Sponsor
City of West University Place
3800 University Blvd.
West University Place, Texas 77005-2802
Business Phone Number:
713/662-5827
Plan Administrator/Sponsor ID Number:
(ErN)
74-6001167
Plan Year:
January I
Plan Benefits:
Insurance Benefits
Medical Expense Reimbursement,
$5,000 annual maximum
Dependent Care Assistance, the maximum
provided by law.
Fiduciaries:
Address:
City of West University Place
3800 University Blvd.
West University Place, Texas 77005-2802
Designated Legal Agent:
Address:
City of West University Place
3800 University Blvd.
West University Place, Texas 77005-2802
Addendum 1
City of West University Place
3800 University Blvd.
713/662-5827/ Fax 713/349-2705
125 CAFETERIA PLAN ENROLLMENT/W AIVER FORM
Section I - Participant Data
Employer Name: CITY OF WEST UNIVERSITY PLACE
Participant Name:
Participant Address:
City:
Home Phone #:
Plan Year:
SSN:
Sex:
Date of Birth:
Marital Status:
Date of Hire:
State:
Email Address:
Annual Salary:
Zip:
Work Phone # :
Section II - Payroll Data
Pay Mode: 0 Weekly
OBi-Weekly
o Semi- Monthly
o Monthly
# Of Deduction in Plan Year:
o 48 0 52 0 26 0 24 0 12 0 Other:
First Pay Period the New Election will be deducted: ~ ~_
# of Hours Worked Per Week
Section III - Plan Elections
Indicate below the Cafeteria Plan options in which you would like to participate. This salary reduction agreement authorizes your
employer to make the following salary reductions on a pre-tax basis.
Annual
Amount
Medical Premium: $
Dental Premium: $
Group Term Life $
Administration Fees (if applicable) $
Other $
Other $
Total Premiums $
Benefit
Pay Period
Amount
Flexible Spending Annual Pay Period
Accounts Amount Amount
Unreimbursed
Medical Expense: $ $
Dependent
Care Expense: $ $
$
$
$
$
$
$
$
Total FSA
$
$
I hereby authorize the above payroll deduction be my contribution to the Cafeteria Plan indicated above. I understand that changes
can only be made by be at the end of the Plan Year unless the change is due to a status change. Any amount in my Cafeteria Plan
account not claimed by eligible expenses incurred during the plan year will be forfeited. My employer can reduce or cancel any of my
elections, if necessary, to comply with the Internal Revenue Code. If there is a rate increase my employer is able to automatically
increase my premium accordingly. If no change is made, my deductions will continue next year as shown with the exception of the
Flexible Spending Accounts. My social security benefits may be reduced by this election.
Signature of Participant
Date Signed:
Waiver of Participation:
I have reviewed the merits of the plan. I hereby waive my rights of participation. I understand that my next enrollment opportunity
will be on the plan anniversary date.
Signature of Participant
Date Signed: