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HomeMy WebLinkAboutR-96-11 RESOLUTION NO. R-96-11 A RESOLUTION OF THE CITY OF SEBASTIAN, INDIAN RIVER COUNTY, FLORIDA, ADOPTING THE ATTACHED PREMIUM CONVERSION PLAN FOR THE CITY OF SEBASTIAN; AUTHORIZING THE CITY MANAGER AND CITY CLERK TO SIGN, ON BEHALF OF THE CITY, THE PLAN DOCUMENT; PROVIDING FOR REPEAL OF RESOLUTIONS OR PARTS OF RESOLUTIONS IN CONFLICT HEREWITH; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the ci ty council desires to provide employees wi th a "Cafeteria Plan" wi thin the meaning of Section 125 of the Internal Revenue Code of 1986, as amended; and WHEREAS, the Ci ty council wants to provide benefits which an employee may elect to receive under the plan which are includable or excludable from the Employee's income under Section 125 (a) and other applicable sections of the Internal Revenue Code of 1986, as amended; and WHEREAS, the City needs an IRS-approved Summary plan Description. NOW, THEREFORE, BE IT RESOLVED as follows: SECTION 1 . That the attached Cafeteria plan is effective retroactive to October 1, 1995, and is hereby approved and adopted and that the duly authorized agents of the Employer are hereby authorized and directed to execute and deliver to the Administrator of the plan one or more couterparts of the Plan. SECTION 2. That the City Manager is authorized to execute and the City Clerk to attest, on behalf of the City, the plan Document which is attached to this Resolution as Exhibit "A" and by this reference is incorporated herein. Section 3. That the duly authorized agents of the Employer shall act as soon as possible to notify the employees of the City of Sebastian of the adoption of the Cafeteria plan by delivering to each employee a copy of the summary description of the plan in the form of the Summary plan Description presented to this Council, which form is hereby approved. Section 4. CONFLICT. That all resolutions or parts of resolutions in conflict herewith are hereby repealed. SECTION 5 . SEVERABILITY. That in the event a court of competent jurisdiction shall hold or determine that any part of this Resolution is invalid or unconstitutional, the remainder of the Resolution shall not be affected and it shall be presumed that the Ci ty Council of the Ci ty of Sebastian did not intend to enact such invalid or unconsti tutional provision. It shall further be assumed that the Ci ty Council would have enacted the remainder of this Resolution without such invalid and unconstitutional provision, thereby causing said remainder to remain in full force and effect. SECTION 6. This Resolution shall take effect immediately upon its adoption. member The ~J:&n~SOlution was moved seconded hy Council memb'::: ~t./i;uuS~ and, upon being put to a vote, the vote was as follows: for adoption by Council The motion was Council member Louise Cartwright Mayor Arthur L. Firtion vice Mayor Carolyn Corum Council member Norma Damp Council member Raymond J. Halloran The Mayor thereupon declared this Resolution duly passed and adopted this (-2 f-l!::: day of ~J ,1995. CITY OF SEBASTIAN, FLORIDA BY,t!JZ;/6f}2 Arthur L. Firtion, Mayor ATTEST: \~i.<r/,h1 {}~_ttj~!A~ Kathryn M. O'Halloran, CMC/AAE Approved as to Form and Content: ~ G.~t-CUM-O.\. Clifton McClelland, City Attorney , .. CITY OF SEBASTIAN PREMIUM CONVERSION PLAN AND ALL SUPPORTING FORMS HAVE BEEN PRODUCED FOR FLORIDA COMBINED LIFE INSURANCE COMPANY Copyright 1995 Corbel All Rights Reserved .. CITY OF SEBASTIAN PREMIUM CONVERSION PLAN ~ TABLE OF CONTENTS ARTICLE I DEFINITIONS ARTICLE II PARTICIPATION 2.1 ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 2.2 EFFECTIVE DATE OF PARTICIPATION ................. 3 2.3 TERMINATION OF PARTICIPATION. . . . . . . . . . . . . . . . . . .. 3 2.4 TERMINATION OF EMPLOYMENT .................... 4 ARTICLE III CONTRIBUTIONS TO THE PLAN 3.1 SALARY REDIRECTION . . . . . . . . . . . . . . . . . . . . . . . . . . .. 4 3.2 APPLICATION OF CONTRIBUTIONS. . . . . . . . . . . . . . . . . . .. 5 3.3 PERIODIC CONTRIBUTIONS ........ . . . . . . . . . . . . . . . .. 5 ARTICLE IV BENEFITS 4.1 BENEFIT OPTIONS ............................... 5 4.2 HEALTH INSURANCE BENEFIT ...................... 5 4.3 GROUP-TERM LIFE INSURANCE BENEFIT ............... 6 4.4 VISION INSURANCE BENEFIT . . . . . . . . . . . . . . . . . . . . . . .. 6 4.5 CASH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6 , 4.6 NONDISCRIMINATION REQUIREMENTS. . . . . . . . . . . . . . . .. 7 ARTICLE V P ARTICIP ANT ELECTIONS 5.1 INITIAL ELECTIONS .............................. 7 5.2 SUBSEQUENT ANNUAL ELECTIONS ................... 8 5.3 CHANGE OF ELECTIONS ....... . . . . . . . . . . . . . . . . . . .. 8 ARTICLE VI BENEFITS AND RIGHTS 6.1 CLAIM FOR BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9 6.2 NONASSIGNABILITY OF RIGHTS. . . . . . . . . . . . . . . . . . . . .. 10 ARTICLE VII ADMINISTRATION 7.1 PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . .. 11 7 .2 EXAMINATION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . .. 11 7.3 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . .. 12 7.4 INSURANCE CONTROL CLAUSE . . . . . . . . . . . . . . . . . . . . .. 12 7.5 INDEMNIFICATION OF ADMINISTRATOR ............... 12 ARTICLE VIII AMENDMENT OR TERMINATION OF PLAN 8.1 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12 ( 8.2 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13 ARTICLE IX MISCELLANEOUS 9.1 PLAN INTERPRETATION ........................... 13 9.2 GENDER AND NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . .. 13 9.3 WRITTEN DOCUMENT ............................ 13 9.4 EXCLUSIVE BENEFIT ............................. 13 9.5 PARTICIPANT'S RIGHTS ........................... 14 9.6 ACTION BY THE EMPLOYER ........................ 14 9.7 EMPLOYER'S PROTECTIVE CLAUSES .................. 14 9.8 NO GUARANTEE OF TAX CONSEQUENCES .............. 15 9.9 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS ...... 15 9.10 FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 9.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 9.12 SEVERABILITy.................................. 16 9.13 CAPTIONS..................................... 16 9.14 CONTINUATION OF COVERAGE . . . . . . . . . . . . . . . . . . . . .. 16 , CITY OF SEBASTIAN PREMIUM CONVERSION PLAN INTRODUCTION The Employer has amended this Plan effective October 1, 1995 to recognize the contribution made to the Employer by its Employees. Its purpose is to reward them by providing benefits for those Employees who shall qualify hereunder and their dependents and beneficiaries. The concept of this Plan is to allow Employees to choose among different types of benefits based on their own particular goals, desires and needs. This Plan is a restatement of a Plan which was originally effective on December 1, 1991. The Plan shall be known as CITY OF SEBASTIAN PREMIUM CONVERSION PLAN (the "Plan"). The intention of the Employer is that the Plan qualify as a "Cafeteria Plan" within the meaning of Section 125 of the Internal Revenue Code of 1986, as amended, and that the benefits which an Employee elects to receive under the Plan be includable or excludable from the Employee's income under Section 125(a) and other applicable sections of the Internal Revenue Code of 1986, as amended. ARTICLE I DEFINITIONS 1.1 "Administrator" means the individual(s) or corporation appointed by the Employer to carry out the administration of the Plan. In the event the Administrator has not been appointed, or resigns from a prior appointment, the Employer shall be deemed to be the Administrator. 1.2 "Affiliated Employer" means the Employer and any corporation which is a member of a controlled group of corporations (as defmed in Code Section 414(b)) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to Treasury regulations under Code Section 414(0). 1.3 "Benefit" means any of the optional benefit choices available to a Participant as outlined in Section 4. 1. 1.4 "Code" means the Internal Revenue Code of 1986, as amended or replaced from time to time. 1.5 "Dependent" means any individual who qualifies as a dependent under an Insurance Contract or under Code Section 152 (as modified by Code Section 105(b)). 1 ... 1.6 "Effective Date" means December 1, 1991. 1.7 "Election Period" means the period immediately preceding the beginning of each Plan Year established by the Administrator, such period to be applied on a uniform and nondiscriminatory basis for all Employees and Participants. However, an Employee's initial Election Period shall be determined pursuant to Section 5. 1. 1.8 "Eligible Employee" means any Employee who has satisfied the provisions of Section 2 .1. 1.9 "Employee" means any person who is employed by the Employer, but excludes any person who is employed as an independent contractor. The term Employee shall include leased employees within the meaning of Code Section 414(n)(2). 1.10 "Employer" means CITY OF SEBASTIAN and any successor which shall maintain this Plan; and any predecessor which has maintained this Plan. 1.11 "Highly Compensated Employee" means an Employee described in Code Section 414(q) and the Treasury regulations thereunder. 1.12 "Insurance Contract" means any contract issued by an Insurer underwriting a Benefit. 1.13 "Insurer" means any insurance company that underwrites a Benefit under this Plan. 1.14 "Key Employee" means an Employee described in Code Section 416(i)(I) and the Treasury regulations thereunder. 1.15 "Participant" means any Eligible Employee who becomes a Participant pursuant to Section 2.2 and has not for any reason become ineligible to participate further in the Plan. 1.16 "Plan" means this instrument, including all amendments thereto. 1.17 "Plan Year" means the 12-month period beginning October 1st and ending September 30th. The Plan Year shall be the coverage period for the Benefits provided for under this Plan. In the event a Participant commences participation during a Plan Year, then the initial coverage period shall be that portion of the Plan Year commencing on such Participant's date of entry and ending on the last day of such Plan Year. 1.18 "Premium Expenses" or "Premiums" mean the Participant's cost for the Benefits described in Section 4.1. 1.19 "Salary Redirection" means the contributions made by the Employer on behalf of Participants pursuant to Section 3 .1. 2 1.20 "Salary Redirection Agreement" means an agreement which is deemed to be entered into between the Participant and the Employer under which the Participant agrees to reduce his Compensation or to forego all or part of the increases in such Compensation and to have such amounts contributed by the Employer to the Plan on the Participant's behalf. The Salary Redirection Agreement shall apply only to Compensation that has not been actually or constructively received by the Participant as of the date of the agreement (after taking this Plan and Code Section 125 into account) and, subsequently does not become currently available to the Participant. 1.21 "Spouse" means the legally married husband or wife of a Participant, unless legally separated by court decree. ARTICLE II P ARTICIP A TION 2.1 ELIGIBILITY Any Eligible Employee shall be eligible to participate hereunder as of the date he satisfies the eligibility conditions for the Employer's group medical plan, the provisions of which are specifically incorporated herein by reference. However, any Eligible Employee who was a Participant in the Plan on the effective date of this amendment shall continue to be eligible to participate in the Plan. If a former Participant is rehired during the same Plan Year in which termination of employment occurs, and such former Participant had revoked existing Benefit elections and terminated the receipt of Benefits at the time of termination of employment, then such rehired former Participant shall be prohibited from making new Benefit elections for the remaining portion of the Plan Year. 2.2 EFFECTIVE DATE OF PARTICIPATION An Eligible Employee shall become a Participant effective as of the entry date under the Employer's group medical plan, the provisions of which are specifically incorporated herein by reference, unless such Employee elects, during the Election Period, not to participate in the Plan. 2.3 TERMINATION OF PARTICIPATION A Participant shall no longer participate in this Plan upon the occurrence of any of the following events: 3 (a) Section 2.4; His termination of employment, subject to the provisions of (b) (c) His death; or The termination of this Plan, subject to the provisions of Section 8.2. 2.4 TERMINATION OF EMPLOYMENT If a Participant's employment with the Employer is terminated for any reason other than death, his participation in the Plan shall be governed in accordance with the following: (a) With regard to Benefits which are insured, the Participant's participation in the Plan shall cease, subject to the Participant's right to continue coverage under any Insurance Contract for which premiums have already been paid. (b) This Section shall be applied and administered consistent with such further rights a Participant and his Dependents may be entitled to pursuant to Code Section 4980B and Section 9.14 of the Plan. ARTICLE III CONTRIBUTIONS TO THE PLAN 3.1 SALARY REDIRECTION Benefits under the Plan shall be financed by Salary Redirections sufficient to support Benefits that a Participant has elected hereunder and to pay the Participant's Premium Expenses. For new Participants, the Salary Redirection Agreement shall only be applicable from the first day of the pay period following the Employee's entry date up to and including the last day of the Plan Year. Any Salary Redirection shall be determined prior to the beginning of a Plan Year (subject to initial elections pursuant to Section 5.1) and prior to the end of the Election Period and shall be irrevocable for such Plan Year. However, a Participant may revoke a Benefit election or a Salary Redirection Agreement after the Plan Year has commenced and make a new election with respect to the remainder of the Plan Year, if both the revocation and the new election are on account of and consistent with a change in family status and such other permitted events as determined under Article V of the Plan and consistent with the rules and regulations of the Department of the Treasury. Salary Redirection amounts shall be contributed on a pro rata 4 basis for each pay period during the Plan Year. All individual Salary Redirection Agreements are deemed to be part of this Plan and incorporated by reference hereunder. 3 .2 APPLICATION OF CONTRIBUTIONS As soon as reasonably practical after each payroll period, the Employer shall apply the Salary Redirection to provide the Benefits elected by the affected Participants. 3.3 PERIODIC CONTRIBUTIONS Notwithstanding the requirement provided above and in other Articles of this Plan that Salary Redirections be contributed to the Plan by the Employer on behalf of an Employee on a level and pro rata basis for each payroll period, the Employer and Administrator may implement a procedure in which Salary Redirections are contributed throughout the Plan Year on a periodic basis that is not pro rata for each payroll period. ARTICLE IV BENEFITS 4.1 BENEFIT OPTIONS Each Participant shall have a sufficient portion of his Salary Redirections applied to the following insured benefits unless the Participant elects not to receive such benefits: (1) Dependent Health Insurance Benefit (2) Group- Term Life Insurance Benefit (3) Vision Insurance Benefit (4) Cash Benefit 4.2 HEALTH INSURANCE BENEFIT (a) Each Participant may elect coverage under a health and hospitalization Insurance Contract for his or her Dependents. (b) The Employer may select suitable health and hospitalization Insurance Contracts for use in providing this health insurance benefit, which policies will provide uniform benefits for all Participants electing this Benefit. 5 (c) The rights and conditions with respect to the benefits payable from such health and hospitalization Insurance Contract shall be determined therefrom, and such Insurance Contract shall be incorporated herein by reference. 4.3 GROUP- TERM LIFE INSURANCE BENEFIT (a) Each Participant may elect to be covered under the Employer's group-term life Insurance Contract. However, the amount of coverage hereunder on behalf of any Participant may not exceed $50,000. (b) The Employer may select suitable group-term life Insurance Contracts for use in providing this group-term life insurance benefit, which policies will provide benefits for all Participants electing this Benefit on a uniform basis. (c) The rights and conditions with respect to the benefits payable from such group-term life Insurance Contract shall be determined therefrom, and such group-term life Insurance Contract shall be incorporated herein by reference. 4.4 VISION INSURANCE BENEFIT (a) Each Participant may elect to be covered under the Employer's vision Insurance Contract. In addition, the Participant may elect either individual or family coverage. (b) The Employer may select suitable vision Insurance Contracts for use in providing this vision insurance benefit, which policies will provide uniform benefits for all Participants electing this Benefit. (c) The rights and conditions with respect to the benefits payable from such vision Insurance Contract shall be determined therefrom, and such vision Insurance Contract shall be incorporated herein by reference. 4.5 CASH BENEFIT If a Participant elects not to participate in the Plan, such Participant shall be deemed to have chosen the Cash Benefit as his sole Benefit option. 6 4.6 NONDISCRIMINATION REQUIREMENTS (a) It is the intent of this Plan to provide benefits to a classification of employees which the Secretary of the Treasury finds not to be discriminatory in favor of the group in whose favor discrimination may not occur under Code Section 125. (b) It is the intent of this Plan not to provide qualified benefits as defined under Code Section 125 to Key Employees in amounts that exceed 25 % of the aggregate of such Benefits provided for all Eligible Employees under the Plan. For purposes of the preceding sentence, qualified benefits shall not include benefits which (without regard to this paragraph) are includable in gross income. (c) If the Administrator deems it necessary to avoid discrimination or possible taxation to Key Employees or a group of employees in whose favor discrimination may not occur in violation of Code Section 125, it may, but shall not be required to, reduce contributions or non-taxable Benefits in order to assure compliance with this Section. Any act taken by the Administrator under this Section shall be carried out in a uniform and nondiscriminatory manner. If the Administrator decides to reduce contributions or non-taxable Benefits, it shall be done in the following manner. First, the non-taxable Benefits of the affected Participant (either an employee who is highly compensated or a Key Employee, whichever is applicable) who has the highest amount of non-taxable Benefits for the Plan Year shall have his non-taxable benefits reduced until the discrimination tests set forth in this Section are satisfied or until the amount of his non-taxable Benefits equals the non-taxable Benefits of the affected Participant who has the second highest amount of non-taxable Benefits. This process shall continue until the nondiscrimination tests set forth in this Section are satisfied. With respect to any affected Participant who has had Benefits reduced pursuant to this Section, the reduction shall be made proportionately among insured Benefits. Contributions which are not utilized to provide Benefits to any Participant by virtue of any administrative act under this paragraph shall be forfeited and deposited into the benefit plan surplus. ARTICLE V P ARTICIP ANT ELECTIONS 5.1 INITIAL ELECTIONS An Employee who meets the eligibility requirements of Section 2.1 on the first day of, or during, a Plan Year may elect not to participate in this Plan for all or the remainder of such Plan Year, provided he elects to do so before his effective date of participation pursuant to Section 2.2. However. if such Employee does not complete an election not to participate and deliver it to the Administrator before such date, his Election Period shall extend 30 calendar 7 days after such date, or for such further period as the Administrator shall determine and apply on a uniform and nondiscriminatory basis. However, any election during the extended 30-day election period pursuant to this Section 5.1 shall not be effective until the first pay period following the later of such Participant's effective date of participation pursuant to Section 2.2 or the date of the receipt of the election form by the Administrator. 5.2 SUBSEQUENT ANNUAL ELECTIONS During the Election Period prior to each subsequent Plan Year, each Participant shall be given the opportunity to elect not to participate in the Plan, on an election of benefits form to be provided by the Administrator, which Benefit options he wishes to select and purchase with his Salary Redirections. With regard to subsequent annual elections, the following options shall apply: (a) A Participant or Employee who elected not to participate may elect to participate for the next Plan Year. (b) A Participant may terminate his partIcIpation in the Plan by notifying the Administrator in writing during the Election Period that he does not want to participate in the Plan for the next Plan Year; (c) An Employee who elects not to participate for the Plan Year following the Election Period will have to wait until the next Election Period before again electing to participate in the Plan. 5.3 CHANGE OF ELECTIONS (a) Any Participant may change a Benefit election after the Plan Year (to which such election relates) has commenced and make new elections with respect to the remainder of such Plan Year if the changes are necessitated by and are consistent with a change in family status which is acceptable under rules and regulations adopted by the Department of the Treasury. Benefit election changes are consistent with family status changes only if the election changes are necessary or appropriate as a result of the family status change. Any new election under this Section 5.3 shall be effective at such time as the Administrator shall prescribe, but not earlier than the first pay period beginning after the election form is completed and returned to the Administrator. For the purposes of this paragraph, the following events shall be considered examples of a change in family status: (1) the marriage or divorce of the Participant; (2) the birth or adoption of a child by the Participant; 8 (3) the death of the Participant's spouse or a Dependent; (4) the termination or commencement of employment of the Participant's spouse; (5) the switching from part-time to full-time employment status (or from full-time to part-time status) by the Participant or the Participant's spouse; (6) the taking of an unpaid leave of absence by the Participant or the Participant's spouse; or (7) a significant change in health coverage attributable to the spouse's employment. (b) If the Premium Expense under a health insurance Benefit provided by an independent, third-party provider under the Plan increases or decreases during a Plan Year, then the Plan shall automatically increase or decrease, as the case may be, the Salary Redirections of all affected Participants for such health insurance Benefit. Alternatively, if the Premium Expense increases significantly, the Administrator shall permit the affected Participants to either make corresponding changes in their Premium payments or revoke their elections and, in lieu thereof, receive on a prospective basis coverage under another health plan with similar coverage. In addition, if the coverage under a health insurance Benefit provided by an independent, third-party provider is significantly curtailed or ceases during a Plan Year, affected Participants may revoke their elections of such health insurance Benefit and, in lieu thereof, elect to receive on a prospective basis coverage under another health plan with similar coverage. ARTICLE VI BENEFITS AND RIGHTS 6.1 CLAIM FOR BENEFITS (a) Any claim for Benefits underwritten by an Insurance Contract shall be made to the Insurer. If the Insurer denies any claim, the Participant or beneficiary shall follow the Insurer's claims review procedure. Any other claim for Benefits shall be made to the Administrator. If the Administrator denies a claim, the Administrator may provide notice to the Participant or beneficiary, in writing, within 90 days after the claim is filed unless special circumstances require an extension of time for processing the claim. If the Administrator does not notify the Participant of the denial of the claim within the 90 day period specified above, then the claim shall be deemed denied. The notice of a denial of 9 a claim shall be written in a manner calculated to be understood by the claimant and shall set forth; (1) specific references to the pertinent Plan provisions on which the denial is based; (2) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation as to why such information is necessary; and (3) an explanation of the Plan's claim procedure. (b) Within 60 days after receipt of the above material, the claimant shall have a reasonable opportunity to appeal the claim denial to the Administrator for a full and fair review. The claimant or his duly authorized representative may: (1) request a review upon written notice to the Administrator; (2) review pertinent documents; and (3) submit issues and comments in writing. (c) A decision on the review by the Administrator will be made not later than 60 days after receipt of a request for review, unless special circumstances require an extension of time for processing (such as the need to hold a hearing), in which event a decision should be rendered as soon as possible, but in no event later than 120 days after such receipt. The decision of the Administrator shall be written and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based. 6.2 NONASSIGNABILITY OF RIGHTS The right of any Participant to receive any reimbursement under the Plan shall not be alienable by the Participant by assignment or any other method, and shall not be subject to the rights of creditors, and any attempt to cause such right to be so subjected shall not be recognized, except to such extent as may be required by law. 10 ARTICLE VII ADMINISTRATION 7.1 PLAN ADMINISTRATION The operation of the Plan shall be under the supervision of the Administrator. It shall be a principal duty of the Administrator to see that the Plan is carried out in accordance with its terms, and for the exclusive benefit of Employees entitled to participate in the Plan. The Administrator shall have full power to administer the Plan in all of its details, subject, however, to the pertinent provisions of the Code. The Administrator's powers shall include, but shall not be limited to the following authority, in addition to all other powers provided by this Plan: (a) To make and enforce such rules and regulations as the Administrator deems necessary or proper for the efficient administration of the Plan; (b) To interpret the Plan, the Administrator's interpretations thereof in good faith to be fmal and conclusive on all persons claiming benefits by operation of the Plan; (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan and to receive benefits provided by operation of the Plan; (d) To reject elections or to limit contributions or Benefits for certain highly compensated participants if it deems such to be desirable in order to avoid discrimination under the Plan in violation of applicable provisions of the Code; (e) To provide Employees with a reasonable notification of their benefits available by operation of the Plan; (t) To appoint such agents, counsel, accountants, consultants, and actuaries as may be required to assist in administering the Plan. Any procedure, discretionary act, interpretation or construction taken by the Administrator shall be done in a nondiscriminatory manner based upon uniform principles consistently applied and shall be consistent with the intent that the Plan shall continue to comply with the terms of Code Section 125 and the Treasury regulations thereunder. 7.2 EXAMINATION OF RECORDS The Administrator shall make available to each Participant, Eligible Employee and any other Employee of the Employer such records as pertain to their interest under the Plan for examination at reasonable times during normal business hours. 11 7.3 PAYMENT OF EXPENSES Any reasonable administrative expenses shall be paid by the Employer unless the Employer determines that administrative costs shall be borne by the Participants under the Plan or by any Trust Fund which may be established hereunder. The Administrator may impose reasonable conditions for payments, provided that such conditions shall not discriminate in favor of highly compensated employees. 7.4 INSURANCE CONTROL CLAUSE In the event of a conflict between the terms of this Plan and the terms of an Insurance Contract of an independent third party Insurer whose product is then being used in conjunction with this Plan, the terms of the Insurance Contract shall control as to those Participants receiving coverage under such Insurance Contract. For this purpose, the Insurance Contract shall control in defIning the persons eligible for insurance, the dates of their eligibility, the conditions which must be satisfied to become insured, if any, the benefits Participants are entitled to and the circumstances under which insurance terminates. 7.5 INDEMNIFICATION OF ADMINISTRATOR The Employer agrees to indemnify and to defend to the fullest extent permitted by law any Employee serving as the Administrator or as a member of a committee designated as Administrator (including any Employee or former Employee who previously served as Administrator or as a member of such committee) against all liabilities, damages, costs and expenses (including attorney's fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. ARTICLE VIII AMENDMENT OR TERMINATION OF PLAN 8.1 AMENDMENT The Employer, at any time or from time to time, may amend any or all of the provisions of the Plan without the consent of any Employee or Participant. Any such amendment shall be adopted by formal action of the duly authorized agents of the Employer and executed by an agent or an Employee authorized to act on behalf of the Employer. No amendment shall have the effect of modifying any benefit election of any Participant in effect at the time of such amendment, unless such amendment is made to comply with Federal, state or local laws, statutes or regulations. 12 8.2 TERMINATION The Employer is establishing this Plan with the intent that it will be maintained for an indefinite period of time. Notwithstanding the foregoing, the Employer reserves the right to terminate this Plan, in whole or in part, at any time. In the event the Plan is terminated, no further contributions shall be made. Benefits under any Insurance Contract shall be paid in accordance with the terms of the Contract. ARTICLE IX MISCELLANEOUS 9.1 PLAN INTERPRETATION All provisions of this Plan shall be interpreted and applied in a uniform, nondiscriminatory manner. This Plan shall be read in its entirety and not severed except as provided in Section 9.12. 9.2 GENDER AND NUMBER Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply. 9.3 WRITTEN DOCUMENT This Plan, in conjunction with any separate written document which may be required by law, is intended to satisfy the written Plan requirement of Code Section 125 and any Treasury regulations thereunder relating to cafeteria plans. 9.4 EXCLUSIVE BENEFIT This Plan shall be maintained for the exclusive benefit of the Employees who participate in the Plan. 13 9.5 PARTICIPANT'S RIGHTS This Plan shall not be deemed to constitute an employment contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant or Employee at any time regardless of the effect which such discharge shall have upon him as a Participant of this Plan. 9.6 ACTION BY THE EMPLOYER Whenever the Employer under the terms of the Plan is permitted or required to do or perform any act or matter or thing, it shall be done and performed by a person duly authorized by its legally constituted authority. 9.7 EMPLOYER'S PROTECTIVE CLAUSES (a) Upon the failure of either the Participant or the Employer to obtain the insurance contemplated by this Plan (whether as a result of negligence, gross neglect or otherwise), the Participant's Benefits shall be limited to the insurance premium(s), if any, that remained unpaid for the period in question and the actual insurance proceeds, if any, received by the Employer or the Participant as a result of the Participant's claim. (b) The Employer's liability to the Participant shall only extend to and shall be limited to any payment actually received by the Employer from the Insurer. In the event that the full insurance Benefit contemplated is not promptly received by the Employer within a reasonable time after submission of a claim, then the Employer shall notify the Participant of such facts and the Employer shall no longer have any legal obligation whatsoever (except to execute any document called for by a settlement reached by the Participant). The Participant shall be free to settle, compromise or refuse to pursue the claim as the Participant, in his sole discretion, shall see fit. (c) The Employer shall not be responsible for the validity of any Insurance Contract issued hereunder or for the failure on the part of the Insurer to make payments provided for under any Insurance Contract. Once insurance is applied for or obtained, the Employer shall 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. 14 9.8 NO GUARANTEE OF TAX CONSEQUENCES Neither the Administrator nor the Employer makes any commitment or guarantee that any amounts paid to or for the benefit of a Participant under the 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 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. Notwithstanding the foregoing, the rights of Participants under this Plan shall be legally enforceable. 9.9 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS If any Participant receives one or more payments or reimbursements under the Plan that are not for a permitted Benefit, 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. However, such indemnification and reimbursement shall not exceed the amount of additional federal and state income tax (plus any penalties) that the Participant would have owed if the payments or reimbursements had been made to the Participant as regular cash compensation, plus the Participant's share of any Social Security tax that would have been paid on such compensation, less any such additional income and Social Security tax actually paid by the Participant. 9.10 FUNDING Unless otherwise required by law, contributions to the Plan need not be placed in trust or dedicated to a specific Benefit, but may instead be considered general assets of the Employer until the Premium Expense required under the Plan has been paid. Furthermore, and unless otherwise required by law, nothing herein shall be construed to require the Employer or the Administrator to maintain any fund or segregate any amount for the benefit of any Participant, and no Participant or other person shall have any claim against, right to, or security or other interest in, any fund, account or asset of the Employer from which any payment under the Plan may be made. 9.11 GOVERNING LAW This Plan is governed by the Code and the Treasury regulations issued thereunder (as they might be amended from time to time). In no event shall the Employer guarantee the favorable tax treatment sought by this Plan. To the extent not preempted by Federal law, the provisions of this Plan shall be construed, enforced and administered according to the laws of the State of Florida. 15 9.12 SEVERABILITY If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provisions of the Plan, and the Plan shall be construed and enforced as if such provision had not been included herein. 9.13 CAPTIONS The captions contained herein are inserted only as a matter of convenience and for reference, and in no way define, limit, enlarge or describe the scope or intent of the Plan, nor in any way shall affect the Plan or the construction of any provision thereof. 9.14 CONTINUATION OF COVERAGE Notwithstanding anything in the Plan to the contrary, in the event any benefit under this Plan subject to the continuation coverage requirement of Code Section 4980B becomes unavailable, each Participant will be entitled to continuation coverage as prescribed in Code Section 4980B. 16 IN WITNESS WHEREOF, this Plan document IS hereby executed this day of ~l-x'UG..(\...,1 ,19S.\..a. . \ ATTEST: CITY OF SEBASTIAN By ~~vJ.~~ EMPLOYER Thomas W. Frame City Manager 17 City of Sebastian 1225 MAIN STREET iJ SEBASTIAN. FLORIDA 32958 TELEPHONE (407) 589-5330 iJ FAX (407) 589-5570 CITY OF SEBASTIAN INTER-OFFICE lli/Ell10RAiVDUl14 TO: NlA YOR FIR TION AND MElYffiERS OF THE CITY COUNCIL DATE: FEBRUARY i5, 1996 THRU: JOEL L. KOFORD, CITY MANAGER CITY MANAGER'S OFFICE ul<) FROM: WENDY WIDMAl'IN, DIRECTOR HUMAN RESOURCES DEPARTMENT RE: FOLLOW-UP ON RES. NO R-96-il PREMIUM CONVERSION PLAN On the January 24, 1996 Regular City Councill'vleeting, the Council approved Resolution 96- 11 - Premium Conversion Plan with language change by Mrs. Carrwright and as amended by Mr. Koford. The City Manager recommended that action on this item, R-96-11, should include the following language: "subject to review and acceptance by the specialized consultant". (This is the employee benefit plan that allows the City to deduct the cost of certain employee-paid insurance premiums from an employee's paycheck before taxes are calculated on their bi-weekly wages.) Siver Insurance Management Consultants were utilized as the specialized consultant to review this Premium Conversion Plan to make sure it was in compliance with IRS regulations for Section 125 Plans and was in the best interests of the City. Their review detennined that the City's Premiwn Conversion Plan "appears to substanatively comply with the proposed regulations issued by the Internal Revenue Service for Section 125. The modifications and clarifications suggested below are intended to technically enhance the City's document." Their complete report is in my office, should you wish to review it in more detail. I will incorporate most of their suggestions, as I believe they clarify the Plan Document. If you have any questions on this, please do not hesitate to contact me. Insurance ~ SIVER 9400 Founh Street Nonh SL Petel1iburg. Florida 33702 P.O. Box 2\343 (33742) Telephone: (813) 577-2780 Fax: (813) 579-8692 TRANSMITTED VIA FACSIMILE AND OVERNIGHT February 2, 1996 Ms. Wendy Widmann Director of Human Resources City of Sebastian, Florida 12225 Main Street Sebastian, F1.. 32958 RE: Section 125 Plan Document Review Dear Ms. Widmann: This is in reply to the City of Sebastian's (City) request to review its current Section 125 Premium Conversion Plan Document and related issues. RECOMMENDATION In our opinion, the City's Section 125 Plan Document appears to substantively comply with the proposed regulations issued by the Internal Revenue Service for Section 125. The modifications and clarifications suggested below are intended to technically enhance the City's document. PLAN DOCUMENT REVIEW As a way of organizing our observations and suggestions, we will address our comments in document plan order. Our thoughts, suggestions, and/or observations are editorial and/or claritive in nature. SIVER INSURANCE MANAGEMENT CONSULTANTS Ms. Wendy Widmann February 2, 1996 Page 2 1. 2nd Cover Page - Because of the references to Florida Combined Life Insurance Company and Corbel, we think it would be more appropriate that this be the last page of the Plan Document. 2. 3rd Cover Page - We think this page should be the cover page of the document. Additionally, all of the historical dates regarding this document should appear on this page as well; Original Date: December 1, 1991 Effective Date of Reinstatement #1: October 1, 1995 Effective Date of this Reinstatement: February.u, 1996 3. Article I - Definitions a Section 1.1 - This first sentence should be reworded to clarify or be modified to read "administrator" means the individual(s) or corporation appointed by the Employer to cony out the administration of the Plan, as provided in Anicle VII. b. Section 1.4 - We suggest that this definition be restated as follows: "Code" means the Internal Revenue Code of 1986, as amended, supplemented, or replaced from time to time, including applicable final, temporary and proposed regulations issued by the Department of the Treasury. C. Section 1.20 - For clarity, we suggest the word "taxable" be inserted in the first sentence between the words "his Compensation". 4. Article II - Participation This section appears to comply with standard compliance language. 5. Article ill - Contributions to the Plan This section appears to comply with standard compliance language. ... ~ i." SlYER INSURANCE MANAGEMENT CONSULTANTS Ms. Wendy Widmann February 2, 1996 Page 3 6. Article IV - Benefits a. Section 4.2(a) - This item could be reworded for clarity and consistency with Section 4.4(a): (a) Each participant may elect to be covered under the employers health and hospitalization Insurance Contract for his or her dependents. In addition, the Participant may elect either individual or family coverage. b. Section 4.3(a) - For compliance purposes, we suggest that the following phrase be inserted prior to the text "$50,000" - "a total aggregate amount of $50,000." This will clarify the City's position regarding IRC Section 79. 7. Article V - Participant Elections a. Section 5.2(c) - For consistency, we suggest the word ''Participant'' replace the word "Employee". b. Section 5.2 - We suggest the addition of a letter (d). It could read as follows: (d) A Participant who fails to return a completed election of benefits fonn to the administrator on or before the specified due date for the Plan Year shall be deemed to have elected Taxable benefits ': 8. Article VI - Benefits and Rights This section appears to comply with standard compliance language. 9. Article vn - Administration a. Section 7.3 - We suggest for clarity and compliance purposes that this section could be restated as following: 7.3 COMPENSATION AND EXPENSES. The administrator shall serve without compensation for the Administrator services hereunder. All the expenses of the administrator shall be paid by the i. .. SlYER INSURANCE MANAGEMENT CONSULTANTS Ms. Wendy Widmann February 2, 1996 Page 4 Employer and the Employer shall furnish the Administrator with such clerical and other assistance as is necessary for the perfonnance of the Administrator's duties. b. Section 7.5 - We suggest replacing this section with the following: 7.05 INDEMNIFICATION OF ADMINISTRATOR In the event and to the extent not insured against by any insurance company pursuant to provisions of any applicable insurance policy, the Employer agrees to indemnify and to defend to the fullest extent permitted by law any Employee seTVing as the Administrator or as a member of a committee designated as Administrator (including any Employee or fonner Employee who shall have formerly seTVed as Administrator or as a member of such committee) against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in c01V1.ection with the Plan, if such act or omission shall have been in good faith. No Administrator shall be liable for the acts or omissions of the Group Plan administrator( s), any insurer or provider therewzder, or any other person or persons connected with the administration of the Group Plan. c. Section 7.6 - We suggest adding the following new section: 7.06 DELEGATION OF AUTHORITY. The Employer, in its sole discretion, may delegate that administration duties described in this Article VII to the position listed in Exhibit A, appended hereto. 10. Article VITI - Amendment or Termination of Plan This Article appears to comply with standard contract wording for Section 125 Plans. 11. Article IX - Miscellaneous This Article appears to comply with standard contract wording for Section 125 Plans. -, -.. . t SIVER INSURANCE MANAGEMENT CONSULTANTS Ms. Wendy Widmann February 2, 1996 Page 5 12. Other Items - We find the document lacked a signature page signed on behalf of the City and an adoption resolution page. We have enclosed an example of these documents for the City's use, together with an Exhibit A example. Please note, the Administrator's position does not necessarily have to be Manager of Employee Resources. GROUP TERM LIFE INSURANCE Attached to this document, please find a reprint of an article from Spencer's Research Reports that describes the requirements of IRC Section 79 in regards to the treatment of group term life insurance. The section that speaks directly to the $50,000 aggregate cap is entitled "Employee Contributions" on page 341.3.-4. Due to the number of suggested changes, we think the City should rewrite its plan once again, rather than modify through a plan amendment. If you have any questions or would like to discuss any of the suggested changes or modifications, please do not hesitate to call us. Siver Insurance Management Consultants does not engage in the practice of law. This recommendation should be reviewed by the City's attorney. Sincerely yours, SIVER INSURANCE MANAGEMENT CONSULTANTS ~<j~~' C ~~ Stephanie C. Shepp a, RIA Reviewed By: Robert F. McBurney, FLMI~ SCS/sg Encl.