Resolution Number 06-01-03-02RESOLUTION NO. 06-01-03-02
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN
CAPISTRANO, CALIFORNIA, ADOPTING THE CITY OF SAN JUAN
CAPISTRANO FLEXIBLE BENEFITS PLAN EFFECTIVE JANUARY 1,
2006.
WHEREAS, Section 37206 of the Government Code requires the City Council to
prescribe the time and method of paying salaries and wages of employees of the City;
and,
WHEREAS, employee benefits such as medical, dental and vision coverage
contribute to a total compensation package; and,
WHEREAS, the City has contracted the administrative functions of the City of
San Juan Capistrano Flexible Benefit Plan to a third party administrator since January
1, 2004; and,
WHEREAS, the City wishes to continue contracting the administrative functions
of the City of San Juan Capistrano Flexible Benefit Plan; and,
WHEREAS, the Administrator has been instructed to take such actions that are
deemed necessary and proper in order to execute the Plan, and to set up adequate
accounting and administrative procedures to provide benefits under the Plan; and,
WHEREAS, the City shall notify the employees of the Adoption of the Plan by
delivering to each employee a copy of the summary description of the Plan in the form
of the Summary Plan Description and Schedule of Benefit Options.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San
Juan Capistrano, hereby adopts the City of San Juan Capistrano Flexible Benefits Plan
and the Schedule of Benefit Options, both effective January 1, 2006, hereto attached as
"Exhibit A" and "Exhibit B", respectively.
PASSED, APPROVED, AND ADOPTED this 3rd day of January, 2006.
_ .'� 1", _Me,IN
AT
TEST:
' M G RET R. MONAHAN, CITY CLERK
Page 1 of 1 01-03-2006
STATE OF CALIFORNIA ) _
COUNTY OF ORANGE ) ss.
CITY OF SAN JUAN CAPISTRANO )
I, MARGARET R. MONAHAN, appointed City Clerk of the City of San Juan Capistrano, do hereby
certify that the foregoing Resolution No. 06-01-03-02 was duly adopted by the City Council of the
City of San Juan Capistrano at a Regular meeting thereof, held the 3'd day of January 2006, by
the following vote:
AYES: COUNCIL MEMBERS: Hart, Bathgate, Soto, Allevato and Mayor Swerdlin
NOES: COUNCIL MEMBER: None
ABSENT: COUNCI MR:No�
R. MONAHAN, City Clerk
C
Flex -SPD -072005
EXHIBIT A
CITY OF SAN JUAN CAPISTRANO
CITY OF SAN JUAN CAPISTRANO'S CAFETERIA PLAN
SUMMARY PLAN DESCRIPTION
For The
Cafeteria Plan
Healthcare Flexible Spending Account
Dependent Care Flexible Spending Account
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE PLAN............................................................... I
CAFETERIA PLAN COMPONENT SUMMARY................................................................ 2
Q-1.
What is the purpose of the Cafeteria Plan?............................................................................. 2
Q-2.
Who can participate in the Cafeteria Plan?............................................................................ 2
Q-3.
When does my participation in the Cafeteria Plan end? ......................................................... 2
Q-4.
How do I become a participant?............................................................................................. 3
Q-5.
What are the tax advantages and disadvantages of participating in the Cafeteria Plan?........ 4
Q-6.
What are the election periods for enrolling in the Cafeteria Plan? ......................................... 4
Q-7.
How is my Benefit Plan Option coverage paid for under this Plan? ...................................... 5
Q-8.
Under what circumstances can I change my electionduring the Plan Year? .......................... 6
Q-9.
What happens to my participation under the Cafeteria Plan if I take a leave of absence?..... 6
Q-10.
How long will the Cafeteria Plan remain in effect?............................................................... 8
Q-11.
What happens if my request for a benefit under this Cafeteria Plan is denied? ..................... 8
HEALTHCARE FSA COMPONENT SUMMARY .............. ................. ..................................... 9
Q-1.
Who can participate in the Healthcare FSA?..........................................................................
9
Q-2.
How do I become a Participant?.............................................................................................
9
Q-3.
What is my "Health Care Account"?.....................................................................................
10
Q-4.
When does coverage under the Healthcare FSA end?..........................................................
10
Q-5.
Can I Ever Change My Healthcare FSA election?...............................................................
10
Q-6.
What happens to my Health Care Account if I take an approved leave of absence? ...........
11
Q-7.
What is the maximum annual Health Care Reimbursement that I may elect under the
Healthcare FSA, and how much will it cost?.....................................................................
11
Q-8.
How are Health Care Reimbursement benefits paid for under this Plan? ............................
11
Q-9.
What amounts will be available for Health Care Reimbursement at any particular time
duringthe Plan Year?.........................................................................................................
11
Q-10.
How do I receive reimbursement under the Healthcare FSA? .............................................
12
Q-11.
What is an "Eligible Medical Expense"?...............................................................................
14
Q-12.
When must the expenses be incurred in order to receive reimbursement? ...........................
15
Q-13.
What if the Eligible Medical Expenses I incur during the Plan Year are less than the annual
amount I have elected for Healthcare Reimbursement?....................................................
15
Q-14
What happens if a Claim for Benefits under the Healthcare FSA is denied? .......................
16
Q-15.
What happens to unclaimed Health Care Reimbursements?................................................
16
Q-16.
What is COBRA continuation coverage?.............................................................................
16
Q-17.
What happens if I receive erroneous or excess reimbursements? ........................................
18
Q-18.
Will my health information be kept confidential?................................................................
18
Q-19.
How long will the Healthcare FSA remain in effect?...........................................................
19
Miscellaneous
Rights Under the Healthcare FSA...............................................................................
20
DEPENDENT CARE FSA SUMMARY .... ............................................................................. ......... 22
Q-1. Who can participate in the Plan?.......................................................................................... 22
Q-2. How do I become a Participant?........................................................................................... 22
Q-3. What is my 'Dependent Care Account"?.............................................................................. 22
Q-4. When does my coverage under the Dependent Care FSA end? ........................................... 22
Q-5. Can I ever change my Dependent Care FSA election?......................................................... 23
Flex -SPD -072005
Q-6. What happens to my Dependent Care Account if I take an unpaid leave of absence?......... 23
Q-7.
What is the maximum annual Dependent Care Reimbursement that I may elect under the
'
DependentCare FSA?........................................................................................................
23
Q-8.
How Do I Pay for Dependent Care Reimbursements?.........................................................
23
Q-9.
What is an 'Eligible Employment Related Expense" for which I can claim a
reimbursement?..................................................................................................................
24
Q-10.
How do I receive reimbursement under the Dependent Care FSA? .....................................
25
Q-11.
When must the expenses be incurred in order to receive reimbursement? ...........................
25
Q-12.
What if the Eligible Employment Related Expenses I incur during the Plan Year are less
than the annual amount of coverage I have elected for Dependent Care Reimbursement?
............................................................................................................................................
25
Q-13.
Will I be taxed on the Dependent Care Reimbursement benefits I receive? ........................
26
Q-14.
If I participate in the Dependent Care FSA, will I still be able to claim the household and
dependent care credit on my federal income tax return? ...................................................
26
Q-15.
What is the household and dependent care credit?...............................................................
26
Q-16.
What happens to unclaimed Dependent Care Reimbursements? .........................................
27
Q-17.
What happens if my claim for reimbursement under the Dependent Care FSA is denied?.
27
Q-18.
What happens if I receive erroneous or excess reimbursements? ........................................
27
Q-19.
How long will the Dependent Care FSA remain in effect? ..................................................
27
PLAN INFORMATION SUMMARY................................................................................................2s
APPENDIX 1. — CLAIMS REVIEW PROCEDURE CHART......................................................................................1
' APPENDIX II. — TAX ADVANTAGES EXAMPLE...................................................................................................1
APPENDIX III. - ELECTION CHANGE CHART.......................................................................................................1
Flex -SPD -072005 ii
CITY OF SAN JUAN CAPISTRANO --
CITY OF SAN JUAN CAPISTRANO'S CAFETERIA PLAN
SUMMARY PLAN DESCRIPTION
GENERAL INFORMATION ABOUT THE PLAN
City of San Juan Capistrano (the "Employer") is pleased to sponsor an employee benefit program
known as the City of San Juan Capistrano's Cafeteria Plan (the "Plan") for you and your fellow
employees. It is so-called because it lets you choose from several different benefit programs
(which we refer to herein as "Benefit Plan Options") according to your individual needs, and
allows you to use Pre-tax Contributions to pay for the benefits by entering into a salary reduction
arrangement with your Employer. This Plan helps you because the benefits you elect are
nontaxable (i.e., you save social security and income taxes on the amount of your salary
reduction). Alternatively, you may choose to pay for any of the available benefits with after-tax
contributions on a salary deduction basis to the extent described in your enrollment materials.
This Plan has three components:
• A Cafeteria Plan Component. The Cafeteria Plan Component allows you to pay your
share of certain underlying welfare benefit plans (called "Benefit Plan Options) with Pre-
tax Contributions.
• The Healthcare Flexible Spending Account ("Healthcare FSA"). The Healthcare FSA
allows you to elect to use a specified amount of Pre-tax Contributions to be used for
reimbursement of Eligible Medical Expenses. The Healthcare FSA is intended to qualify
as a Code Section 105 self-insured medical reimbursement plan.
• The Dependent Care Spending Account ("Dependent Care FSA"). The Dependent Care
FSA allows you to elect to use a specified amount of Pre-tax Contributions to be used for
reimbursement of Employment Related Expenses. The Dependent Care FSA is intended
to qualify as a Code Section 129 dependent care assistance plan.
Each of the three components is summarized in this document. Information relating to the Plan
that is specific to your Employer is described in the Plan Information Summary. For example,
you can find the identity of the Third Party Administrator, the Employer, and the Plan
Administrator in the Plan Information Summary as well as the Plan Number and any applicable
contact information. Each summary and the attached Appendices constitute the Summary Plan
Description for the City of San Juan Capistrano's Cafeteria Plan. The SPD (collectively, the
Summary Plan Description or "SPD") describes the basic features of the Plan, how it operates,
and how you can get the maximum advantage from it. The Plan is also established pursuant to a
plan document into which the SPD has been incorporated. However, if there is a conflict
between the official plan document and the SPD, the plan document will govern. Certain terms
in this Summary are capitalized. Capitalized terms reflect important terms that are specifically
defined in this Summary or in the Plan Document into which this Summary is incorporated. You
should pay special attention to these terms as they play an important role in defining your rights
and responsibilities under this Plan
Participation in the Plan does not give any Participant the right to be retained in the employ of
his or her Employer or any other right not specified in the Plan. If you have any questions
Flex -SPD -072005
regarding your rights and responsibilities under the Plan, you may also contact the Plan
' Administrator (who is identified in the Plan Information Summary).
CAFETERIA PLAN COMPONENT SUMMARY
Q-1. What is the purpose of the Cafeteria Plan?
The purpose of the Cafeteria Plan is to allow eligible employees to pay for certain benefit plans
(Benefit Plan Options) with pre-tax dollars ("Pre-tax Contributions"). The Benefit Plan Options
to which you may contribute with Pre-tax Contributions under this Cafeteria Plan are described
in the Plan Information Summary. Pre-tax Contributions are described in more detail below.
To the extent Health Savings Accounts are included as a Benefit Plan Option under this Plan as
set forth in the Plan Information Summary attached to this SPD, you may be able to contribute to
your personal Health Savings Account (as defined in Code Section 223) under this Plan. If you
are permitted to contribute to a Health Savings Account under this Plan, the rules regarding
Health Savings Account contributions will be set forth generally in Plan Information Summary.
Q-2. Who can participate in the Cafeteria Plan?
Each employee of the Employer (or an Affiliated Employer identified in the Plan Information
Summary) who satisfies the Cafeteria Plan Eligibility Requirements and is also eligible to
participate in any of the Benefit Plan Options will be eligible to participate in this Cafeteria Plan.
' If you meet these requirements, you may become a Participant on the Cafeteria Plan Eligibility
Date. The Cafeteria Plan Eligibility Requirements and Eligibility Date are described in the Plan
Information Summary. Those employees who actually participate in the Cafeteria Plan are called
"Participants". (See below for instructions on how to become a Participant.) You may only pay
for the coverage of yourself and your tax dependents as defined in Code Section 152 generally
(except as otherwise defined in Code Section 105(b) and the regulations issued under Code
Section 106) under this Plan and as set forth in the SPD.
The terms of eligibility of this Cafeteria Plan do not override the terms of eligibility of each of
the Benefit Plan Options. In other words, if you are eligible to participate in this Cafeteria Plan,
it does not necessarily mean you are eligible to participate in the Benefit Plan Options. For
details regarding eligibility provisions, benefit amounts, and premium schedules for each of the
Benefit Plan Options, please refer to the plan summary for each Benefit Plan Option. If you do
not have a summary for a Benefit Plan Option, you should contact the Plan Administrator for
information on how to obtain a copy.
Q-3. When does my participation in the Cafeteria Plan end?
Your coverage under the Cafeteria Plan ends on the earliest of the following to occur:
a) The date that you make an election not to participate in accordance with this Cafeteria
Plan Summary;
b) The date that you no longer satisfy the Eligibility Requirements of this Cafeteria Plan or
'all of the Benefit Plan Options;
C)
The date that you terminate employment with the Employer; or
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d) The date that the Cafeteria Plan is either terminated or amended to exclude you or the
class of employees of which you are a member.
If your employment with the Employer is terminated during the Plan Year or you otherwise cease
to be eligible, your active participation in the Cafeteria Plan will automatically cease, and you
will not be able to make any more Pre-tax Contributions under the Cafeteria Plan except as
otherwise provided pursuant to Employer policy or individual arrangement (e.g., a severance
arrangement where a former employee is permitted to continue paying for a Benefit Plan Option
out of severance pay on a pre-tax basis). If you are rehired within the same Plan Year and are
eligible for the Cafeteria Plan (or you become eligible again), you may make new elections if you
are rehired or become eligible again more than 30 days after you terminated employment or lost
eligibility (subject to any limitations imposed by the Benefit Plan Option(s)). If you are rehired
or again become eligible within 30 days or less of your termination date, your Cafeteria Plan
elections that were in effect when you terminated employment or stopped being eligible will be
reinstated and remain in effect for the remainder of the Plan Year (unless you are allowed to
change your election in accordance with the terms of the Plan).
Q-4. How do I become a participant?
If you have otherwise satisfied the Cafeteria Plan's eligibility requirements, you become a
Participant by signing an individual Salary Reduction Agreement (sometimes referred to as an
"Election Form") on which you agree to pay your share of the Benefit Plan Options that you
choose with Pre-tax Contributions. You will be provided with a Salary Reduction Agreement on
or before your Cafeteria Plan Eligibility Date. You must complete the form and submit it to the
Plan Administrator or the Third Party Administrator (per the instructions provided on or with
your Salary Reduction Agreement) during one of the election periods described in Q-8. below.
You may also enroll during the year if you previously elected not to participate and you
experience a change described below that allows you to become a participant during the year. If
that occurs, you must complete an election change form during the Election Change Period
described in Q-8. below. In no event can you become a Participant in this Cafeteria Plan prior to
the date you complete and properly submit the Salary Reduction Agreement. The Third Party
Administrator is identified in the Plan Information Summary.
In some cases, the Employer may require you to pay your share of the Benefit Plan Option
coverage that you elect with Pre-tax Contributions. If that is the case, your election to participate
in the Benefit Plan Option(s) will constitute an election under this Cafeteria Plan.
You may be required to complete a Salary Reduction Agreement via telephone or voice response
technology, electronic communication, or any other method prescribed by the Plan
Administrator. In order to utilize a telephone system or other electronic means, you may be
required to sign an authorization form authorizing issuance of personal identification number
("PIN") and allowing such PIN to serve as your electronic signature when utilizing the telephone
system or electronic means. The Plan Administrator and all parties involved with Plan
administration will be entitled to rely on your directions through use of the PIN as if such
directions were issued in writing and signed by you.
Flex -SPD -072005
Q-5. What are tax advantages and disadvantages of participating in the Cafeteria Plan?
You save both federal income tax and FICA (Social Security) taxes by participating in the
Cafeteria Plan. There is an example in the Plan Information Summary that illustrates the tax
savings you might experience as a result of participating in the Cafeteria Plan.
Cafeteria Plan participation will reduce the amount of your taxable compensation. Accordingly,
there could be a decrease in your Social Security benefits and/or other benefits (e.g., pension,
disability and life insurance) that are based on taxable compensation.
Q-6. What are the election periods for entering the Cafeteria Plan?
The Cafeteria Plan basically has three election periods: (1) the "Initial Election Period," (2) the
"Annual Election Period," and (3) the "Election Change Period, which is the period following
the date you have a Change in Status Event (described below). The Plan Year is generally a 12 -
month period (except during the initial or last Plan Year of the Plan). The beginning and ending
dates of the Plan Year are described in the Plan Information Summary. The following is a
summary of the Initial Election Period and the Annual Election Period.
6-a. What is the Initial Election Period?
If you want to participate in the Cafeteria Plan when you are first hired, you must enroll
during the "Initial Election Period" described in the enrollment materials you will receive.
' If you make an election during the Initial Election Period, your participation in this
Cafeteria Plan will begin on the later of your Eligibility Date or the first pay period
coinciding with or next following the date that your election is received. The effective
date of coverage under the Benefit Plan Options will be effective on the date established in
the governing documents of the Benefit Plan Options. The election that you make during
the Initial Election Period is effective for the remainder of the Plan Year and generally
cannot be changed during the Plan Year unless you have a Change in Status Event
described in Q -S. below. If you do not make an election during the Initial Election Period,
you will be deemed to have elected not to participate in this Cafeteria Plan for the
remainder of the Plan Year. Failure to make an election under this Cafeteria Plan generally
results in no coverage under the Benefit Plan Options; however, the Employer may provide
coverage under certain Benefit Plan Options automatically. These automatic benefits are
called "Default Benefits." Any Default Benefit provided by your Employer will be
identified in the enrollment material. In addition, your share of the contributions for such
Default Benefits may be automatically withdrawn from your pay on a pre-tax basis. You
will be notified in the enrollment material whether there will be a corresponding Pre-tax
Contribution for such default benefits.
6-b. What is the Annual Election Period?
The Cafeteria Plan also has an "Annual Election Period" during which you may enroll if
you did not enroll during the Initial Election Period or change your elections for the next
Plan Year. The Annual Election Period will be identified in the enrollment material
' distributed to you prior to the Annual Election Period. The election that you make during
the Annual Election Period is effective the first day of the next Plan Year and cannot be
changed during the entire Plan Year unless you have a Change in Status Event described
Flex -SPD -072005 4
below. If you fail to complete, sign and file a Salary Reduction Agreement during the
Annual Election Period, you may be deemed to have elected to continue participation in
the Cafeteria Plan with the same Benefit Plan Option elections that you had on the last day
of the Plan Year in which the Annual Election period occurred (adjusted to reflect any
increase/decrease in applicable premium/contributions). This is called an "Evergreen
Election." Alternatively, the Plan Administrator may deem you to have elected not to
participate in the Cafeteria Plan for the next Plan Year if you fail to make an election
during the Annual Election Period) . The consequences of failing to make an election
under this Cafeteria Plan during the Annual Election Period are described in the Plan
Information Summary. Special Rule for Reimbursement Accounts (and Health Savings
Account contribution elections, if offered under the Plan): Evergreen Elections do
not apply to Reimbursement Accounts (and Health Savings Account contribution
elections) unless specifically stated by the employer in the enrollment material.
Consequently, you generally must make an election each Annual Election Period in
order to participate in the Reimbursement Accounts during the next Plan Year.
Q-7. How is my Benefit Plan Option coverage paid for under this Plan?
You may be required to pay for any Benefit Plan Option coverage that you elect with Pre-tax
Contributions. Alternatively, the Employer may allow you to pay your share of the contributions
with after-tax contributions. The enrollment material you receive will indicate whether you have
to pay with Pre -Tax Contributions or whether you have an option to choose to pay with after-tax
contributions.
When you elect to participate both in a Benefit Plan Option and this Cafeteria Plan, an amount
equal to your share of the annual cost of those Benefit Plan Options that you choose divided by
the applicable number of pay periods you have during that Plan Year is deducted from each
paycheck after your election date. If you have chosen to use Pre-tax Contributions (or it is a plan
requirement), the deduction is made before any applicable federal and/or state taxes are withheld.
An Employer may choose to pay for a share of the cost of the Benefit Plan Options you choose
with Nonelective Employer Contributions. The amount of Nonelective Employer Contributions
that is applied by the Employer towards the cost of the Benefit Plan Option(s) for each
Participant and/or level of coverage is subject to the sole discretion of the Employer and it may
be adjusted upward or downward in the Employer's sole discretion at any time. The Nonelective
Employer Contribution amount will be calculated for each Plan Year in a uniform and
nondiscriminatory manner and may be based upon your dependent status, commencement or
termination date of your employment during the Plan Year, and such other factors that the
Employer deems relevant. hi no event will any Nonelective Contribution be disbursed to you in
the form of additional, taxable compensation except as otherwise provided in the enrollment
material or in the Plan Information Summary.
The Employer may provide you with employer contributions over which you have discretion to
choose how to apply to the various Benefit Plan Options available under the Cafeteria Plan.
These elective employer contributions are called "Flexible Credits" or "Benefit Credits". The
Flexible or Benefit Credit amounts provided by the Employer, if any, and any restrictions on
their use, will be set forth in the enrollment material.
Flex -SPD -072005 5
Q-8. Under what circumstances can I change my election during the Plan Year?
' Generally, you cannot change your election under this Cafeteria Plan during the Plan Year.
There are, however, a few exceptions. First, your election will automatically terminate if you
terminate employment or lose eligibility under this Cafeteria Plan or under all of the Benefit Plan
Options that you have chosen. Second, you may voluntarily change your election during the Plan
Year if you satisfy the following conditions (prescribed by federal law):
• You experience a "Change in Status Event' that affects your eligibility under this
Cafeteria Plan and/or a Benefit Plan Option; or
• You experience a significant cost or coverage change; and
You complete and submit a written Election Change Form within the Election Change
period described in the Plan Information Summary.
Change in Status Events and Cost or Coverage Changes recognized by this Cafeteria Plan, and
the rules surrounding election changes in the event you experience a Change in Status Event or
Cost or Coverage Change are described in the Election Change Chart attached to this SPD.
An election under this Cafeteria Plan may be modified 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 Cafeteria Plan from becoming discriminatory within the meaning of the
applicable federal income tax law.
I
If coverage under a Benefit Plan Option ends, the corresponding Pre-tax Contributions for that
coverage will automatically end. No election is needed to stop the contributions.
Q-9. What happens to my participation under the Cafeteria Plan if I take a leave of
absence?
The following is a general summary of the rules regarding participation in the Cafeteria Plan
(and the Benefit Plan Options) during a leave of absence. The specific election changes that you
can make under this Cafeteria Plan following a leave of absence are described in the Election
Change Chart and the rules regarding coverage under the Benefit Plan Options during a leave of
absence will be described in the Benefit Plan Option summaries. If there is a conflict between
the Election Change Chart/Benefit Plan Option Summaries and this Q-9, the Election Change
Chart or Benefit Plan Option summary, whichever is applicable, controls.
Flex -SPD -072005
• If you go on a qualifying unpaid leave under the Family and Medical Leave Act of 1993
(FMLA), the Employer will continue to maintain your Benefit Plan Options that provide
health coverage on the same terms and conditions as though you were still active to the
extent required by FMLA (e.g., the Employer will continue to pay its share of the
contribution to the extent you opt to continue coverage).
• Your Employer may elect to continue all health coverage for Participants while they are
on paid leave (provided Participants on non-FMLA paid leave are required to continue
coverage). If so, you will pay your share of the contributions by the method normally
used during any paid leave (for example, with Pre-tax Contributions if that is what was
used before the FMLA leave began).
• In the event of unpaid FMLA leave (or paid leave where coverage is not required to be
continued), if you opt to continue your group health coverage, you may pay your share of
the contribution in one of the following ways: (1) with after-tax dollars while you are on
leave, (2) by pre -paying all or a portion of your share of the contribution for the expected
duration of the leave with Pre-tax Contributions from your pre -leave compensation by
making a special election to that effect before the date such compensation would
normally be made available to you. However, pre -payments of Pre-tax Contributions
may not be utilized to fund coverage during the next Plan Year; or (3) by other
arrangements agreed upon between you and the Plan Administrator (for example, the
Plan Administrator may fund coverage during the leave and withhold amounts from your
compensation upon your return from leave).
The payment options provided by the Employer will be established in accordance with
Code Section 125, FMLA and the Employer's internal policies and procedures regarding
leaves of absence and will be applied uniformly to all Participants. Alternatively, the
Employer may require all Participants to continue coverage during the leave. If so, you
may elect to discontinue your share of the required contributions until you return from
leave. Upon return from leave, you will be required to repay the contribution not paid
during the leave in a manner agreed upon with the Administrator. The Election Change
Chart will let you know whether you are able to drop your coverage or whether you are
required to continue coverage during the leave.
• If your coverage ceases while on FMLA leave (e.g., for non-payment of required
contributions), you will be permitted to re-enter the Cafeteria Plan and the Benefit Plan
Option upon return from such leave on the same basis as you were participating in the
plans prior to the leave, or as otherwise required by the FMLA. Your coverage under the
Benefit Plan Options providing health coverage may be automatically reinstated
provided that coverage for Employees on non-FMLA leave is automatically reinstated
Upon return from leave.
• 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 the Employer.
• If you are commencing or returning from unpaid FMLA leave, your election under this
Cafeteria Plan for Benefit Plan Options providing non -health benefits shall be treated in
the same manner that elections for non -health Benefit Plan Options are treated with
respect to Participants commencing and returning from unpaid non-FMLA leave.
• If you go on an unpaid non-FMLA leave of absence (e.g., personal leave, sick leave, etc.)
that does not affect eligibility in this Cafeteria Plan or a Benefit Plan Option offered
Flex -SPD -072005 7
under this Cafeteria Plan, then you will continue to participate and the contribution due
' will be paid by pre -payment before going on leave, by after-tax contributions while on
leave, or with catch-up contributions after the leave ends, as may be determined by the
Administrator. If you go on an unpaid leave that affects eligibility under this Cafeteria
Plan or a Benefit Plan Option, the election change rules described herein will apply. The
Plan Administrator will have discretion to determine whether taking an unpaid non-
FMLA leave of absence affects eligibility.
Q-10. How long will the Cafeteria Plan remain in effect?
Although the Employer expects to maintain the Cafeteria Plan indefinitely, it has the right to
modify or terminate the Cafeteria Plan at any time and for any reason. Plan amendments and
terminations will be conducted in accordance with the terms of the Plan Document.
Q-11. What happens if my request for a benefit under this Cafeteria Plan (e.g. an election
change or other issue germane to Pre-tax Contributions) is denied?
You will have the right to a full and fair review process. You should refer to Appendix I for a
detailed summary of the Claims Procedures under this Plan.
Flex -SPD -072005
HEALTHCARE FSA COMPONENT SUMMARY
Q-1. Who can participate in the Healthcare FSA?
Each employee who satisfies the Healthcare FSA Eligibility requirements is eligible to
participate on the Healthcare FSA Eligibility Date. The Healthcare FSA Eligibility
Requirements and Eligibility Date are described in the Plan Information Summary.
Q-2. How do I become a Participant?
If you have otherwise satisfied the Healthcare FSA's Eligibility requirements, you become a
participant in the Healthcare FSA by electing Healthcare Reimbursement benefits during the
Initial or Annual Election Periods described in the Cafeteria Plan Summary. Your participation
in the Healthcare FSA will be effective on the date that you make the election or your Healthcare
FSA Eligibility Date, whichever is later. If you have made an election to participate and you
want to participate during the next Plan Year, you must make an election during the Annual
Election Period, even if you do not change your current election. Evergreen elections do not
apply to Healthcare FSA elections.
You may also become a participant if you experience a change in status event or cost or coverage
change that permits you to enroll mid year (see Q-8. of the Cafeteria Plan Summary for more
details regarding mid year election changes and the effective date of those changes).
Once you become a Participant, your "Eligible Dependents" also become covered. For purposes
of the Healthcare FSA, Eligible Dependents are the following:
a) Your legal Spouse (as determined by state law to the extent consistent with the federal
Defense of Marriage Act); and
b) Any other individual who would qualify as a tax Dependent under Code Section 105 and
the regulations issued by Treasury under Code Section 106).
If the Plan Administrator receives a qualified medical child support order (QMCSO) relating to
the Healthcare FSA, the Healthcare FSA will provide the health benefit coverage specified in the
order to the person or persons ("alternate recipients") named in the order to the extent the
QMCSO does not require coverage the Healthcare FSA does not otherwise provide. "Alternate
recipients" include any child of the participant who the Plan is required to cover pursuant to a
QMCSO. A "medical child support order" is a legal judgment, decree or order relating to
medical child support. A medical child support order is a QMCSO to the extent it satisfies
certain conditions required by law. Before providing any coverage to an alternate recipient, the
Plan Administrator must determine whether the medical child support order is a QMCSO. If the
Plan Administrator receives a medical child support order relating to your Healthcare Account, it
will notify you in writing, and after receiving the order, it will inform you of its determination of
whether or not the order is qualified. Upon request to the Plan Administrator, you may obtain,
without charge, a copy of the Plan's procedures governing qualified medical child support
orders.
NOTE: You may be able to elect to cover only yourself under the Healthcare FSA to the extent
chosen by your Employer in the Plan Information Summary. This would allow your spouse to
Flex -SPD -072005
establish a Health Savings Account as defined in Code Section 223. If this option is available, it
' will be described in more detail in the Plan Information Summary.
Q-3. What is my "Healthcare Account?"
If you elect to participate in the Healthcare FSA, the Employer will establish a "Healthcare
Account" to keep a record of the reimbursements you are entitled to, as well as the contributions
you elected to withhold for such benefits during the Plan Year. No actual account is established;
it is merely a bookkeeping account. Benefits under the Healthcare FSA are paid as needed from
the Employer's general assets except as otherwise set forth in the Plan Information Summary.
Q-4. When does coverage under the Healthcare FSA end?
Your coverage under the Healthcare FSA ends on the earlier of the following to occur:
a) The date that you elect not to participate in accordance with the Cafeteria Plan Summary;
b) The last day of the Plan Year unless you make an election during the Annual Election
Period;
c) The date that you no longer satisfy the Healthcare FSA Eligibility Requirements;
d) The date that you terminate employment; or
e) The date that the Plan is terminated or you or the class of eligible employees of which
you are a member are specifically excluded from the Plan. You may be entitled to elect
Continuation Coverage (as described in Q-16. below) under the Healthcare FSA once
your coverage ends because you terminate employment or experience a reduction in
hours of employment.
Coverage for your Eligible Dependents ends on earliest of the following to occur
a) The date your coverage ends;
b) The date that your dependents cease to be eligible dependents (e.g. you and your spouse
divorce);
c) The date the Plan is terminated or amended to exclude the individual or the class of
Dependents of which the individual is a member from coverage under the Healthcare
FSA.
You and/or your covered dependents may be entitled to continue coverage if coverage is lost for
certain reasons. The continuation of coverage provisions are described in more detail below.
Q-5. Can I ever change my Healthcare FSA election?
You can change your election under the Healthcare FSA in the following situations
a) For any reason during the Annual Election Period. You can change your election during
the Annual Election Period for any reason. The election change will be effective the first
day of the Plan Year following the end of the Annual Election Period.
b) Following a Change In Status Event. You may change your Healthcare FSA election
' during the Plan Year only if you experience an applicable Change in Status Event. See
Q -S. of the Cafeteria Plan Summary for more information on election changes.
Flex -SPD -072005 10
NOTE: You may not make Healthcare FSA election changes as a result of any cost or
coverage changes.
Q-6. What happens to my Healthcare Account if I take an approved leave of absence?
Refer to the Cafeteria Plan Summary and the Election Change Chart to determine what, if any,
specific changes you can make during a leave of absence. If your Healthcare FSA coverage
ceases during an FMLA leave, you may, upon returning from FMLA leave, elect to be reinstated
in the Healthcare FSA at either a) the same coverage level in effect before the FMLA leave (with
increased contributions for the remaining period of coverage) or b) at the same coverage level
that is reduced pro -rata for the period of FMLA leave during which you did not make any
contributions. Under either scenario, expenses incurred during the period that your Healthcare
FSA coverage was not in effect are not eligible for reimbursement under this Healthcare FSA.
Q-7. What is the maximum annual Healthcare Reimbursement that I may elect under
the Healthcare FSA, and how much will it cost?
You may elect any annual reimbursement amount subject to the maximum annual Healthcare
Reimbursement Amount and Minimum Reimbursement Amount described in the Plan
Information Summary. You will be required to pay the annual contribution equal to the coverage
level you have chosen reduced by any Nonelective Employer Contributions and/or Benefit
Credits allocated to your Healthcare Account.
Any change in your Healthcare FSA election also will change the maximum available
reimbursement for the period of coverage after the election. Such maximum available
reimbursements will be determined on a prospective basis only by a method determined by the
Plan Administrator that is in accordance with applicable law. The Plan Administrator (or its
designated claims administrator) will notify you of the applicable method when you make your
election change.
Q-8. How are Health Care Reimbursement benefits paid for under this Plan?
When you complete the Salary Reduction Agreement, you specify the amount of Healthcare
Reimbursement you wish to pay for with Pre-tax Contributions and/or Nonelective Employer
Contributions (or Benefit Credits), to the extent available. Your enrollment material will
indicate if Nonelective Contributions or Benefit Credits are available for Healthcare FSA
coverage. Thereafter, each paycheck will be reduced by an amount equal to a pro -rata share of
the annual contribution, reduced by any Nonelective Employer Contributions and/or Benefit
Credits allocated to your Healthcare Account.
Q-9. What amounts will be available for Healthcare Reimbursement at any particular
time during the Plan Year?
So long as coverage is effective, the full, annual amount of Healthcare Reimbursement you have
elected, reduced by the amount of previous Healthcare Reimbursements received during the
Year, will be available at any time during the Plan Year, without regard to how much you have
contributed.
Flex -SPD -072005 11
Q-10. How do I receive reimbursement under the Healthcare FSA?
' Under this Healthcare FSA, you have two reimbursement options. You can complete and submit
a written claim for reimbursement (see "Traditional Paper Claims" below for more information).
Alternatively, you can use an electronic payment card (see "Electronic Payment Card" below for
more information) to pay the expense. hi order to be eligible for the Electronic Payment Card,
you must agree to abide by the terms and conditions of the Electronic Payment Card Program
(the "Program") as set forth herein and in the Electronic Payment Cardholder Agreement (the
"Cardholder Agreement") including any fees applicable to participate in the program, limitations
as to card usage, the Plan's right to withhold and offset for ineligible claims, etc. The following
is a summary of how both options work.
Traditional Paper Claims: When you incur an Eligible Medical Expense, you may file a claim
with the Plan's Third Party Administrator by completing and submitting a Request for
Reimbursement Form. You may obtain a Request for Reimbursement Form from the Plan
Administrator or the Third Party Administrator. You must include with your Request for
Reimbursement Form a written statement from an independent third party (e.g., an itemized
statement, EOB, etc.) associated with each expense that indicates the following:
a) The nature of the expense (e.g. what type of service or treatment was provided). If the
expense is for an over the counter drug, the written statement must indicate the name of
the drug;
b) The date(s) of service;
' c) The name of the provider;
d) The amount of the expense; and
e) The patient's name
The Third Party Administrator will process the claim once it receives the Request for
Reimbursement Form from you. Reimbursement for expenses that are determined to be Eligible
Medical Expenses will be made as soon as possible after receiving the claim and processing it.
If the expense is determined to not be an "Eligible Medical Expense" you will receive
notification of this determination. You must submit all claims for reimbursement for Eligible
Medical Expenses during the Plan Year in which they were incurred or during the Run Out
Period. The Run Out Period is described in the Plan Information Summary.
Electronic Payment Card: The Electronic Payment Card allows you to pay for Eligible
Medical Expenses at the time that you incur the expense. Here is how the Electronic Payment
Card works.
a) You must make an election to use the card. In order to be eligible for the Electronic
Payment Card, you must agree to abide by the terms and conditions of the Program as set
forth herein and in the Electronic Payment Cardholder Agreement (the "Cardholder
Agreement") including any fees applicable to participate in the Program, limitations as to
card usage, the Plan's right to withhold and offset for ineligible claims, etc. You must
agree to abide by the terms of the Program both during the Initial Election Period and
during each Annual Election Period. A Cardholder Agreement will be provided to you.
' The card will be turned off effective the first day of each Plan Year if you do not
affirmatively agree to abide by the terms of the Program during the preceding Annual
Flex -SPD -072005 12
Election Period. The Cardholder Agreement is part of the terms and conditions of your
Plan and this SPD.
b) The card will be turned off when employment or coverage terminates. The card will be
turned off when you terminate employment or coverage under the Plan. You may not
use the card during any applicable COBRA continuation coverage period.
c) You must certify proper use of the card. As specified in the Cardholder Agreement, you
certify during the applicable Election Period that the amounts in your Healthcare FSA
will only be used for Eligible Medical Expenses (i.e. medical care expenses incurred by
you, your spouse, and your tax dependents) and that you have not been reimbursed for
the expense and that you will not seek reimbursement for the expense from any other
source. Failure to abide by this certification will result in termination of card use
privileges.
d) Healthcare FSA reimbursement under the card is limited to healthcare providers
(including pharmacies). Use of the card for Healthcare FSA expenses is limited to
merchants who are healthcare providers (doctors, pharmacies, etc.). As set forth in the
Cardholder Agreement, you will not be able to use the card at a regular retail store — e.g.,
a supermarket, grocery store, or discount store with a pharmacy.
e) You swipe the card at the health care provider like you do any other credit or debit card.
When you incur an Eligible Medical Expense at a doctor's office or pharmacy, such as a
co -payment or prescription drug expense, you swipe the card at the provider's office
much like you would a typical credit or debit card. The provider is paid for the expense
up to the maximum reimbursement amount available under the Healthcare FSA (or as
otherwise limited by the Program) at the time that you swipe the card. Every time you
swipe the card, you certify to the Plan that the expense for which payment under the
Healthcare FSA is being made is an Eligible Medical Expense and that you have not
been reimbursed from any other source nor will you seek reimbursement from another
source.
f) You must obtain and retain a receipt/third party statement each time you swipe the card.
You must obtain a third party statement from the healthcare provider (e.g., receipt,
invoice, etc.) that includes the following information each time you swipe the card:
• The nature of the expense (e.g. what type of service or treatment was provided).
If the expense is for an over the counter drug, the written statement must indicate
the name of the drug;
• The date(s) of service;
• The name of the provider;
• The amount of the expense; and
• The patient's name
You must retain this receipt for one year following the close of the Plan year in which
the expense is incurred. Even though payment is made under the card arrangement, a
written third party statement is required to be submitted (except as otherwise provided in
the Cardholder Agreement). You will receive a letter from the Claims Administrator that
a third party statement is needed. You must provide the third party statement to the
Claims Administrator within 45 days (or such longer period provided in the letter from
the Claims Administrator) of the request.
g) There are situations where the third party statement will not be required to be provided
to the Claims Administrator. There may be situations in which you will not be required
Flex -SPD -072005 13
to provide the written statement to the claims administrator. More detail as to which
situations apply under your Plan is specified in the Cardholder Agreement:
• Co -Pay Match: As specified in the Cardholder Agreement, no written statement
is necessary if the Electronic Payment Card payment matches a specific co-
payment you have under the component medical plan for the particular service
that was provided. For example, if you have a $10 co -pay for physician office
visits, and the payment was made to a physician office in the amount of $10, you
will not be required to provide the third party statement to the Claims
Administrator.
• Previously Approved Claim Match: As specified in the Cardholder
Agreement, no written statement is required if the expense is the same as the
amount, duration and provider as a previously approved expense For example,
the claims administrator approves a 30 count prescription with 3 refills that was
purchased at ABC Pharmacy. Each time the card is swiped for subsequent refills
at ABC Pharmacy the receipt need not be provided to the Claims Administrator
if the expense incurred is the same amount.
• Provider Match Program: As specified in the Cardholder Agreement, no third
party statement is required to be submitted to the Claims Administrator if the
electronic claim file is accompanied by an electronic or written confirmation
from the healthcare provider (e.g., your prescription benefits manager) that
identifies the nature of your expense and verifies the amount.
' Note: You should still obtain the third party receipt when you incur the expense and
swipe the card, even ifyou think it will not be needed, so that you will have it in the event
the Claims Administrator does request it.
h) You must payback any improperly paid claims. If you are unable to provide adequate or
timely substantiation as requested by the Claims Administrator, you must repay the Plan
for the unsubstantiated expense as set forth below. In addition, your usage of the card
may be terminated by the Employer.
i) You can use either the payment card or the traditional paper claims approach. You have
the choice as to how to submit your eligible claims. If you elect not to use the electronic
payment card, you may also submit claims under the Traditional Paper Claims approach
discussed above. Claims for which the Electronic Payment Card has been used cannot
be submitted as Traditional Paper Claims.
Q-11. What is an "Eligible Medical Expense"?
11-a. General Rule
An "Eligible Medical Expense" is an expense that has been incurred by you and/or your eligible
dependents that satisfies the following conditions:
a) The expense is for "medical care" as defined by Code Section 213(d); and
b) The expense has not been reimbursed by any other source and you will not seek
' reimbursement for the expense from any other source.
Flex -SPD -072005 14
The Code generally defines "medical care" as any amounts incurred to diagnose, treat or prevent
a specific medical condition or for purposes of affecting any function or structure of the body.
This includes, but is not limited to, both prescription and over the counter drugs (and over the
counter products & devices). Not every health related expense you or your eligible dependents
incur constitutes an expense for "medical care." For example, an expense is not for "medical
care", as that term is defined by the Code, if it is merely for the beneficial health of you and/or
your eligible dependents (e.g. vitamins or nutritional supplements that are not taken to treat a
specific medical condition) or for cosmetic purposes, unless necessary to correct a deformity
arising from illness, injury, or birth defect. You may, in the discretion of the Third Party
Administrator/Plan Administrator, be required to provide additional documentation from a
healthcare provider showing that you have a medical condition and/or the particular item is
necessary to treat a medical condition. Expenses for cosmetic purposes are also not reimbursable
unless they are necessary to correct an abnormality caused by illness, injury or birth defect.
In addition, certain expenses that might otherwise constitute "medical care" as defined by the
Code are not reimbursable under any Healthcare FSA (per IRS regulations):
a) Health insurance premiums;
b) Expenses incurred for qualified long term care services; and
c) Any other expenses that are specifically excluded by the Employer as set forth in the
Plan Information Summary.
11-b. Limited Reimbursement Option
You may be able to make a special election under this Healthcare FSA to limit the scope of
reimbursement that will enable you or your spouse to participate in a Health Savings Account (as
defined in Code Section 223). If that option is available, it will be described in more detail in the
Plan Information Summary.
Q-12. When must the expenses be incurred in order to receive reimbursement?
Eligible Medical Expenses must be incurred during the Plan Year and while you are a
participant in the Plan. "Incurred" means that the service or treatment giving rise to the expense
has been provided. If you pay for an expense before you are provided the service or treatment,
the expense may not be reimbursed until you have been provided the service or treatment. You
may not be reimbursed for any expenses arising before the Healthcare FSA becomes effective,
before your Salary Reduction Agreement or Election Form becomes effective, or for any
expenses incurred after the close of the Plan Year, or, after a separation from service or loss of
eligibility (except for expenses incurred during an applicable COBRA continuation period).
Q-13. What if the Eligible Medical Expenses I incur during the Plan Year are less than
the annual amount I have elected for Healthcare Reimbursement?
You will not be entitled to receive any direct or indirect payment of any amount that represents
the difference between the actual Eligible Medical Expenses you have incurred and the annual
coverage level you have elected. Any amount allocated to a Healthcare Account will be forfeited
by the Participant and restored to the Employer if it has not been applied to provide
reimbursement for expenses incurred during the Plan Year that are submitted for reimbursement
within the Run Out period described in the Plan Information Summary. Amounts so forfeited
Flex -SPD -072005 15
shall be used to offset administrative expenses and future costs, and/or applied in a manner that
' is consistent with applicable rules and regulations (per the Plan Administrator's sole discretion).
Q-14 What happens if a Claim for Benefits under the Healthcare FSA is denied?
You will have the right to a full and fair review process. You should refer to Appendix I for a
detailed summary of the Claims Procedures under this Plan.
Q-15. What happens to unclaimed Healthcare Reimbursements?
Any Healthcare Reimbursement benefit payments that are unclaimed (e.g., uncashed benefit
checks) by the close of the Plan Year following the Plan Year in which the Eligible Medical
Expense was incurred shall be forfeited.
Q-16. What is COBRA continuation coverage?
Federal law requires most private and governmental employers sponsoring group health plans to
offer employees and their families the opportunity for a temporary extension of healthcare
coverage (called "continuation coverage") at group rates in certain instances where coverage
under the plans would otherwise end. These rules apply to this Healthcare FSA unless the
Employer sponsoring the Healthcare FSA is not subject to these rules (e.g., the employer is a
"small employer" or the Healthcare FSA is a church Plan). The Plan Administrator can tell you
whether the Employer is subject to federal COBRA continuation rules (and thus subject to the
following rules). These rules are intended to summarize the continuation rights set forth under
' federal law. If federal law changes, only the rights provided under applicable federal law will
apply. To the extent that any greater rights are set forth herein, they shall not apply.
When Coverage May Be Continued
Only "Qualified Beneficiaries" are eligible to elect continuation coverage if they lose coverage
as a result of a Qualifying Event. A "Qualified Beneficiary" is the Participant, covered Spouse
and/or covered dependent child at the time of the qualifying event.
A Qualified Beneficiary has the right to continue coverage if he or she loses coverage (or should
have lost coverage) as a result of certain qualifying events. The table below describes the
qualifying events that may entitle a Qualified Beneficiary to continuation coverage:
Flex -SPD -072005 16
Covered Employee
Covered Spouse
Covered Dependent
1. Covered Employee's
Termination of
employment or
reduction in hours of
-employment
2. Divorce or Legal
-Separation
3. Child ceasing to be
an eligible dependent
4. Death of the covered
-employee
Flex -SPD -072005 16
Tyne of Continuation Coverage
If you choose continuation coverage, you may continue the level of coverage you had in effect
immediately preceding the qualifying event. However, if Plan benefits are modified for similarly
situated active employees, then they will be modified for you and other Qualified Beneficiaries
as well. After electing COBRA coverage, you will be eligible to make a change in your benefit
election with respect to the Healthcare FSA upon the occurrence of any event that permits a
similarly situated active employee to make a benefit election change during a Plan Year.
If you do not choose continuation coverage, your coverage under the Healthcare FSA will end
with the date you would otherwise lose coverage.
Notice Requirements
You or your covered Dependents (including your Spouse) must notify the COBRA Administrator
(if a COBRA Administrator is not identified in the Plan Information Summary, then contact the
Plan Administrator) in writing of a divorce, legal separation, or a child losing dependent status
under the Plan within 60 days of the later of (i) date of the event (ii) the date on which coverage
is lost because of the event. Your written notice must identify the qualifying event, the date of
the qualifying event and the qualified beneficiaries impacted by the qualifying event. When the
COBRA Administrator is notified that one of these events has occurred, the Plan Administrator
will in turn notify you that you have the right to choose continuation coverage by sending you the
appropriate election forms. Notice to an employee's Spouse is treated as notice to any covered
Dependents who reside with the Spouse. You may be required to provide additional
information/documentation to support that a particular qualifying event has occurred (e.g.
divorce decree).
An employee or covered Dependent is responsible for notifying the COBRA Administrator if he
or she becomes covered under another group health plan.
Election Procedures and Deadlines
Each qualified beneficiary is entitled to make a separate election for continuation coverage under
the Plan if they are not otherwise covered as a result of another Qualified Beneficiary's election.
In order to elect continuation coverage, you must complete the Election Form(s) and return it to
the COBRA Administrator identified in the Plan Information Summary within 60 days from the
date you would lose coverage for one of the reasons described above or the date you are sent
notice of your right to elect continuation coverage, whichever is later. Failure to return the
election form within the 60 -day period will be considered a waiver of your continuation coverage
rights.
Cost
You will have to pay the entire cost of your continuation coverage. The cost of your
continuation coverage will not exceed 102% of the applicable premium for the period of
continuation coverage. The first contribution after electing continuation coverage will be due 45
days after you make your election. Subsequent contributions are due the I" day of each month; --
however, you have a 30 -day grace period following the due date in which to make your
contribution. Failure to make contributions within this time period will result in automatic
termination of your continuation coverage.
Flex -SPD -072005 17
' When Continuation Coverage Ends
The maximum period for which coverage may be continued is the end of the Plan Year in which
the qualifying event occurs. However, in certain situations, the maximum duration of coverage
may be 18 or 36 months from the qualifying event (depending on the type of qualifying event and
the level of Non -Elective contributions provided by the Employer). You will be notified of the
applicable maximum duration of continuation coverage when you have a qualifying event.
Regardless of the maximum period, continuation coverage may end earlier for any of the
following reasons:
a) If the contribution for your continuation coverage is not paid on time or it is significantly
insufficient (Note: if your payment is insufficient by the lesser of 10% of the required
premium, or $50, you will be given 30 days to cure the shortfall);
b) If you become covered under another group health plan and are not actually subject to a
pre-existing condition exclusion limitation;
c) If you become entitled to Medicare; or
d) If the employer no longer provides group health coverage to any of its employees.
Q-17. What happens if I receive erroneous or excess reimbursements?
If, as of the end of any Plan Year, it is determined that you have received payments under this
Healthcare FSA that exceed the amount of Eligible Medical Expenses that have been properly
substantiated during the Plan Year as set forth in this SPD or reimbursements have been made in
' error (e.g. reimbursements were made for expenses incurred for the care of an individual who
was not a qualifying individual), the Plan Administrator may recoup the excess reimbursements
in one or more of the following ways:
a) The Plan Administrator will notify you of any such excess amount, and you will be
required to repay the excess amount to the Employer within sixty (60) days of receipt of
such notification;
b) The Plan Administrator may offset the excess reimbursement against any other Eligible
Medical Expenses submitted for reimbursement (regardless of the Plan Year in which
submitted); and/or
c) The Plan Administrator may withhold such amounts from your pay (to the extent
permitted under applicable law).
If the Plan Administrator is unable to recoup the excess reimbursement by the means set forth
above, the Plan Administrator will notify the Employer that the funds could not be recouped and
the Employer will treat the excess reimbursement as it would any other bad business debt. This
could result in adverse income tax consequences to you.
Q-18. Will my health information be kept confidential?
Under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") group health
plans such as the Healthcare FSA and the third party service providers are required to take steps
' to ensure that certain "protected health information" is kept confidential. You may receive a
separate notice that outlines the Employer's health privacy policies.
Flex -SPD -072005 18
Q-19. How long will the Healthcare FSA remain in effect?
Although the Employer expects to maintain the Plan indefinitely, it has the right to modify or
terminate the program at any time and for any reason.
Flex -SPD -072005 19
MISCELLANEOUS RIGHTS UNDER THE HEALTHCARE FSA
ERISA Rights (not applicable to non -ERISA Plans)
The Healthcare FSA Plan may be an ERISA welfare benefit plan if your employer is a private
employer. If this is an ERISA Plan, you are entitled to certain rights and protections under the
Employee Retirement Income Security Act ("ERISA"). ERISA provides that all plan participants
shall be entitled to:
Receive Information About Your Plan and Benefits
Examine, without charge, at the Plan Administrator's office and at other specified locations, such
as work -sites and union halls, all documents governing the plan, including insurance contracts,
collective bargaining agreements and a copy of the latest annual report (Form 5500 series) filed
by the plan with the U.S. Department of Labor and available at the Public Disclosure Room of
the Employee Benefits Security Administration.
Obtain, upon written request to the plan administrator, copies of all documents governing the
operation of the plan, including insurance contracts and collective bargaining agreements, and
copies of the latest annual report (Form 5500 series) and updated SPD. The Plan Administrator
may make a reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The Plan Administrator is required by
law to furnish each participant with a copy of this summary annual report.
' Continue Group Health Plan Coverage
You may continue healthcare coverage for yourself, Spouse or Dependent children if there is a
loss of coverage under the Plan as a result of a qualifying event. You or your eligible Dependents
will have to pay for such coverage. You should review Q-16. of this Healthcare FSA Summary
for more information concerning your COBRA continuation coverage rights.
(To the extent the Healthcare FSA is subject to HIPAA's portability rules) You may be eligible
for a reduction or elimination of exclusionary periods of coverage for preexisting condition under
your group health plan, if you move to another plan and you have creditable coverage from this
Plan. If you are eligible for this reduction or elimination, you will be provided a certificate of
creditable coverage, free of charge, from the Plan when you lose coverage under the Plan, when
you become entitled to elect COBRA continuation coverage, when your COBRA continuation
coverage ceases, if you request it before losing coverage, or if you request it up to 24 months
after losing coverage. Without evidence of creditable coverage, you may be subject to a
preexisting condition exclusion for 12 months (18 months for late enrollees) after your
enrollment date in your coverage in another plan.
Prudent Actions by Plan Fiduciaries
In addition to creating rights for plan participants, ERISA imposes duties upon the people who
are responsible for the operation of the employee benefit plan. The people who operate your
plan, called "fiduciaries" of the plan, have a duty to do so prudently and in the interest of the plan
participants and beneficiaries. No one, including your employer, your union, or any other
Flex -SPD -072005 20
person, may fire you or otherwise discriminate against you in any way to prevent you from
obtaining a welfare benefit from the plan, or from exercising your rights under ERISA.
Enforce Your Rights
If your claim for a welfare benefit under an ERISA -covered plan is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You have the right to have
the Plan review and reconsider your claim. Under ERISA, there are steps you can take to enforce
the above rights. For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court may require the
Plan Administrator to provide the materials and pay you up to $110 a day until you receive the
materials, unless the materials were not sent because of reasons beyond the control of the
Administrator. If you have a claim for benefits that is denied or ignored in whole or in part, you
may file suit in a state or federal court. In addition, if you disagree with the plan's decision or
lack thereof concerning the qualified status of a domestic relations order or a medical child
support order, you may file suit in Federal court. If it should happen that plan fiduciaries misuse
the Plan's money, or if you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful, the court may order
the person you have sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.
Assistance with Your Questions
If you have any questions about the Plan, you should contact the Plan Administrator. If you have
any questions about this statement or about your rights under ERISA, or if you need assistance
obtaining documents from the plan administrator, you should contact the nearest office of the
U.S. Department of Labor, Employee Benefits Security Administration listed in your telephone
directory, or the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C.,
20210. You may also obtain certain publications about your rights and responsibilities under
ERISA by calling the publications hotline of the Employee Benefits Security Administration.
Newborns' and Mothers' Health Protection Act of 1996
Group health plans and health insurance issuers generally may not, under federal law, restrict
benefits for any hospital length of stay in connection with childbirth for the mother or newborn
child to less than 48 hours following a vaginal delivery, or less than 96 hours following a
cesarean section. However, federal law generally does not prohibit the mother's or newborn's
attending provider, after consulting with the mother, from discharging the mother or her newborn
earlier than 48 hours (or 96 hours, as applicable). In any case, plans and issuers may not, under
federal law, require that a provider obtain authorization from the plan or the issuer for
prescribing a length of stay not in excess of 48 hours (or 96 hours).
Flex -SPD -072005 21
I
DEPENDENT CARE FSA COMPONENT SUMMARY
Q-1. Who can participate in the Plan?
Each employee who satisfies the Dependent Care FSA Eligibility Requirements is eligible to
participate in the Dependent Care FSA on the Dependent Care FSA Eligibility Date. The
Dependent Care FSA Eligibility Requirements and Eligibility Date are described in the Plan
Information Summary.
Q-2. How do I become a Participant?
If you have otherwise satisfied the Dependent Care FSA's Eligibility Requirements, you become
a participant in the Dependent Care FSA by electing Dependent Care Reimbursement benefits
during the Initial or Annual Election Periods described in Q-8. of the Cafeteria Plan Summary.
Your participation in the Dependent Care FSA will be effective on the date that you make the
election or your Dependent Care FSA Eligibility Date, whichever is later. If you have made an
election to participate and you want to participate during the next Plan Year, you must make an
election during the Annual Election Period, even if you do not change your current election.
Evergreen elections do not apply to Dependent Care FSA elections.
You may also become a participant if you experience a change in status event or cost or coverage
change that permits you to enroll mid year (see Q-8. of the Cafeteria Plan Summary for more
' details regarding mid year election changes and the effective date of those changes).
Q-3. What is my "Dependent Care Account"?
If you elect to participate in the Dependent Care FSA, the Employer will establish a "Dependent
Care Account" to keep a record of the reimbursements you are entitled to, as well as the
contributions you elected to withhold for such benefits during the Plan Year. No actual account
is established; it is merely a bookkeeping account. Benefits under the Dependent Care FSA are
paid as needed from the Employer's general assets except as otherwise set forth in the Plan
Information Summary.
Q-4. When does my coverage under the Dependent Care FSA end?
Your coverage under the Dependent Care FSA ends on the earlier of the following to occur:
a) The date that you elect not to participate in accordance with the Cafeteria Plan Summary;
b) The last day of the Plan Year unless you make an election during the Annual Election
Period;
c) The date that you no longer satisfy the Dependent Care FSA Eligibility Requirements;
d) The date that you terminate employment; or
e) The date that the Plan is terminated or you or the class of eligible employees of which
you are a member are specifically excluded from the Plan.
If you terminate employment or you cease to be eligible during the Plan Year, you may submit
for reimbursement Eligible Employment Related Expenses incurred after the date of separation
Flex -SPD -072005 22
up to the amount of your Dependent Care Account to the extent set forth in the Plan Information
Summary.
Q-5. Can I ever change my Dependent Care FSA election?
You can change your election under the Dependent Care FSA in the following situations:
a) For any reason during the Annual Election Period. You can change your election during
the Annual Election Period for any reason. The election change will be effective the first
day of the Plan Year following the end of the Annual Election Period.
b) Following a Change In Status Event or Cost or Coverage Change. You may change your
Dependent Care FSA election during the Plan Year only if you experience an applicable
Change in Status Event or there is a significant cost or coverage change. See Q-8. of the
Cafeteria Plan Summary for more information on election changes.
Q-6. What happens to my Dependent Care Account if I take an unpaid leave of absence?
Refer to the Cafeteria Plan Summary and the Election Change Chart to determine what, if any,
specific changes you can make during a leave of absence.
Q-7. What is the maximum annual Dependent Care Reimbursement that I may elect
under the Dependent Care FSA?
The annual amount cannot exceed the maximum Dependent Care Reimbursement amount
specified in Section 129 of the Internal Revenue Code. The maximum annual amount is
currently $5,000 per Plan Year if you are:
a) Married and file ajoint return;
b) Married but your Spouse maintains a separate residence for the last 6 months of the
calendar year, you file a separate tax return, and you furnish more than one-half the cost
of maintaining those Dependents for whom you are eligible to receive tax-free
reimbursements under the Dependent Care FSA; or
c) Single.
If you are married and reside together, but file a separate federal income tax return, the maximum
Dependent Care Reimbursement that you may elect is $2,500. In addition, the amount of
reimbursement that you receive on a tax free basis during the Plan Year cannot exceed the lesser
of your earned income (as defined in Code Section 32) or your spouse's earned income.
Your Spouse will be deemed to have earned income of $250 if you have one Qualifying
Individual and $500 if you have two or more Qualifying Individuals (described below), for each
month in which your Spouse is:
a) Physically or mentally incapable of caring for himself or herself; or
b) A full-time student (as defined by Code Section 21).
Q-8. How Do I Pay for Dependent Care Reimbursements?
When you complete the Salary Reduction Agreement, you specify the amount of Dependent Care
Reimbursement you wish to pay for with Pre-tax Contributions and/or Nonelective Employer
Flex -SPD -072005 23
Contributions (or Benefit Credits), to the extent available. Your enrollment material will
' indicate if Nonelective Contributions or Benefit Credits are available for Dependent Care FSA
coverage. Thereafter, each paycheck will be reduced by an amount equal to a pro -rata share of
the annual contribution, reduced by any Nonelective Employer Contributions and/or Benefit
Credits allocated to your Dependent Care Account.
Q-9. What is an "Eligible Employment Related Expense" for which I can claim a
reimbursement?
You may be reimbursed for work-related dependent care expenses ("Eligible Employment
Related Expenses"). Generally, an expense must meet all of the following conditions for it to be
an Eligible Employment Related Expense:
a) The expense is incurred for services rendered after the date of your election to receive
Dependent Care Reimbursement benefits and during the calendar year to which it
applies.
b) Each individual for whom you incur the expense is a "Qualifying Individual." A
Qualifying Individual is:
• An individual age 12 or under who is a "qualifying child" of the Employee as
defined in Code Section 152(a)(1). Generally speaking, a "qualifying child" is
child (including a brother, sister, step sibling) of the Employee or a descendant
of such child (e.g. a niece, nephew, grandchild) who shares the same principal
t place of abode with you for more than half the year and does not provide over
half of his/her support. In addition, a child of an Employee who is also a Code
Section 152 dependent of another individual cannot be a qualifying individual;
or
• A Spouse or other tax Dependent (as defined in Code Section 152) who is
physically or mentally incapable of caring for himself or herself and who has the
same principal place of abode as you for more than half of the year.
Note: There is a special rule for children of divorced parents. The child is a qualifying
individual of the "custodial parent', as defined in Code Section 152(e).
c) The expense is incurred for the care of a Qualifying Individual (as described above), or
for related household services, and is incurred to enable you (and your Spouse, if
applicable) to be gainfully employed. Expenses for overnight stays or overnight camp
are not eligible. Tuition expenses for kindergarten (or above) do not qualify.
d) If the expense is incurred for services outside your household and such expenses are
incurred for the care of a Qualifying Individual who is age 13 or older, such Dependent
regularly spends at least 8 hours per day in your home.
e) If the expense is incurred for services provided by a dependent care center (i.e., a facility
that provides care for more than 6 individuals not residing at the facility), the center
complies with all applicable state and local laws and regulations.
f) The expense is not paid or payable to a "child" (as defined in Code Section 152(£)(1)) of
yours who is under age 19 by the end of the year in which the expense is incurred or an
individual for whom you or your Spouse is entitled to a personal tax exemption as a
Dependent.
Flex -SPD -072005 24
g) You must supply the taxpayer identification number for each dependent care service
provider to the IRS with your annual tax return by completing IRS Form 2441.
You are encouraged to consult your personal tax advisor or IRS Publication 17 "Your Federal
Income Tax" for further guidance as to what is or is not an Eligible Employment Related
Expense if you have any doubts. In order to exclude from income the amounts you receive as
reimbursement for dependent care expenses, you are generally required to provide the name,
address and taxpayer identification number of the dependent care service provider on your
federal income tax return.
Q-10. How do I receive reimbursement under the Dependent Care FSA?
If you have elected to participate in the Dependent Care FSA, you will have to take certain steps
to be reimbursed for your Eligible Employment Related Expenses. When you incur an Eligible
Employment Related Expense, you may file a claim with the Plan's Third Party Administrator by
completing and submitting a Request for Reimbursement Form. You may obtain a Request for
Reimbursement Form from the Plan Administrator or the Third Party Administrator. If there are
enough credits to your Dependent Care Account, you will be reimbursed for your Eligible
Employment Related Expenses on the next scheduled processing date.
If your claim was for an amount that was more than your current Dependent Care Account
balance, the excess part of the claim will be carried over into following months, to be paid out as
your balance becomes adequate. Remember, though, that you can't be reimbursed for any total
expenses above your available, annual credits to your Dependent Care Account. You may not be
reimbursed for any expenses that arise before your Salary Reduction Agreement becomes
effective, or for any expense incurred after the close of the Plan Year.
To have your claims processed as soon as possible, please read the claims instructions you have
been furnished. Please note that it is not necessary that you have actually paid an amount due for
Eligible Employment Related Expenses -- only that you have incurred the expense, and that it is
not being paid for or reimbursed from any other source.
Q-11. When must the expenses be incurred in order to receive reimbursement?
Eligible Employment Related Expenses must be incurred during the Plan Year. You may not be
reimbursed for any expenses arising before the Dependent Care FSA becomes effective, before
your Salary Reduction Agreement or Election Form becomes effective, or for any expenses
incurred after the close of the Plan Year and unless noted otherwise in the Plan Information
Summary, after your participation in the Dependent Care FSA ends.
Q-12. What if the Eligible Employment Related Expenses I incur during the Plan Year
are less than the annual amount of coverage I have elected for Dependent Care
Reimbursement?
You will not be entitled to receive any direct or indirect payment of any amount that represents
the difference between the actual Eligible Employment Related Expenses you have incurred, on
the one hand, and the annual Dependent Care Reimbursement you have elected and paid for, on
the other. Any amount credited to a Dependent Care Account shall be forfeited by the
Flex -SPD -072005 25
Participant and restored to the Employer if it has not been applied to provide the elected
' reimbursement for any Plan Year by the end of the Run Out period following the end of the Plan
Year for which the election was effective. Amounts so forfeited shall be used to offset
reasonable administrative expenses and future costs or as otherwise permitted under applicable
law.
Q-13. Will I be taxed on the Dependent Care Reimbursement benefits I receive?
You will not normally be taxed on your Dependent Care Reimbursement so long as your family's
aggregate Dependent Care Reimbursement (under this Dependent Care FSA and/or another
employer's dependent care fsa) does not exceed the maximum annual reimbursement limits
described above. However, to qualify for tax-free treatment, you will be required to list the
names and taxpayer identification numbers on your annual tax return of any persons who
provided you with dependent care services during the calendar year for which you have claimed
a tax-free reimbursement.
Q-14. If I participate in the Dependent Care FSA, will I still be able to claim the
household and dependent care credit on my federal income tax return?
You may not claim any other tax benefit for the tax-free amounts received by you under this
Dependent Care FSA, although the balance of your Eligible Employment Related Expenses may
be eligible for the dependent care credit.
' Q-15. What is the household and dependent care credit?
The household and dependent care credit is an allowance for a percentage of your annual,
Eligible Employment Related Expenses as a credit against your federal income tax liability under
the U.S. Tax Code. In determining what the tax credit would be, you may take into account only
$3,000 of such expenses for one Qualifying Individual, or $6,000 for two or more Qualifying
Individuals. Depending on your adjusted gross income, the percentage could be as much as 35%
of your Eligible Employment Related Expenses (to a maximum credit amount of $1,050 for one
Qualifying Individual or $2,100 for two or more Qualifying Individuals,) to a minimum of 20%
of such expenses. The maximum 35% rate must be reduced by 1% (but not below 20%) for each
$2,000 portion (or any fraction of $2,000) of your adjusted gross income over $15,000.
Illustration: Assume you have one Qualifying Individual for whom you have incurred Eligible
Employment Related Expenses of $3,600, and that your adjusted gross income is $21,000. Since
only one Qualifying Individual is involved, the credit will be calculated by applying the
appropriate percentage to the first $3,000 of the expenses. The percentage is, in turn, arrived at
by subtracting one percentage point from 35% for each $2,000 of your adjusted gross income
over $15,000. The calculation is: 35% -- [($21,000 - 15,000)/$2,000 X 1%] = 32%. Thus, your
tax credit would be $3,000 X 32% _ $960. If you had incurred the same expenses for two or
more Qualifying Individuals, your credit would have been $3,600 X 32% _ $1,152, because the
entire expense would have been taken into account, not just the first $3,000.
Flex -SPD -072005 26
Q-16. What happens to unclaimed Dependent Care Reimbursements?
Any Dependent Care Reimbursements that are unclaimed (e.g., uncashed benefit checks) by the
close of the Plan Year following the Plan Year in which the Eligible Employment Related
Expense was incurred shall be forfeited.
Q-17. What happens if my claim for reimbursement under the Dependent Care FSA is
denied?
You will have the right to a full and fair review process. You should refer to Appendix IV for a
detailed summary of the Claims Procedures under this Plan
Q-18. What happens if I receive erroneous or excess reimbursements?
If, as of the end of any Plan Year, it is determined that you have received payments under this
Dependent Care FSA that exceed the amount of Eligible Employment Related Expenses that
have been properly substantiated during the Plan Year as as set forth in this SPD or
reimbursements have been made in error (e.g. reimbursements were made for expenses incurred
for the care of an individual who was not a qualifying individual), the Plan Administrator may
recoup the excess reimbursements in one or more of the following ways: (i) The Plan
Administrator will notify you of any such excess amount, and you will be required to repay the
excess amount to the Employer within sixty (60) days of receipt of such notification; (ii) The
Plan Administrator may offset the excess reimbursement against any other eligible Employment
Related Expenses submitted for reimbursement (regardless of the Plan Year in which submitted)
or (iii) withhold such amounts from your pay (to the extent permitted under applicable law. If
the Plan Administrator is unable to recoup the excess reimbursements by the means set forth in
(i) — (iii), the Plan Administrator will notify the Employer that the funds could not be recouped
and the Employer will treat the excess reimbursement as it would any other bad business debt.
This could result in adverse tax consequences to you.
Q-19. How long will the Dependent Care FSA remain in effect?
Although the Employer expects to maintain the Plan indefinitely, it has the right to modify or
terminate the program at any time for any reason.
Flex -SPD -072005 27
PLAN INFORMATION SUMMARY
This Appendix provides information specific to the City of San Juan Capistrano's
Cafeteria Plan. The Effective Date of this Plan Information Summary is January 1,
2006. This Plan Information Summary replaces and supersedes any other Plan
Information Summary with an earlier effective date.
I. EMPLOYER/PLAN SPONSOR/THIRD PARTY ADMINISTRATOR INFORMATION
1.
Name, address, and telephone number of the
Employer/Plan Sponsor:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano CA 92675
9494336313
2.
Name, address, and telephone number of the
Plan Administrator:
Plan Administrator
32400 Paseo Adelanto
Note: The Plan Administrator shall have the
San Juan Capistrano CA 92675
exclusive right to interpret the Plan and to
9494336313
decide all matters arising under the Plan,
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. The agent for service of legal
process is the Plan Administrator.
3.
Employer's federal tax identification
95-6006666
number:
4.
Plan Number:
501
5.
Effective Date of the Plan:
January 1, 2004
Note: This is the date that the Plan was first
established.
6.
Effective Date of this SPD:
January 1, 2006
Note: This is the most recent date of the
SPD other than the Plan Information
Summary and the Appendices.
7.
Plan Year:
January 1 through December 31
Flex -SPD -072005 28
U. CAFETERIA PLAN COMPONENT INFORMATION
(a) Eligibility Requirements and Eligibility Date. Each Employee who is eligible for
coverage or participation under any of the Benefit Plan Options will be eligible to participate in
this Plan on the first of the month following date of employment ("Cafeteria Plan Eligibility
Date").
The Employee's commencement of participation in the Plan is conditioned on the Employee
properly completing and submitting a Salary Reduction Agreement as summarized in this SPD.
Eligibility for coverage under any given Benefit Plan Option shall be determined not by this Plan
but by the terms of that Benefit Plan Option.
(b) Annual Election Rules. With respect to Benefit Plan Option elections (other than the
Healthcare FSA and Dependent FSA elections), failure to make an election during the Annual
Election Period will result in the one of following deemed election(s):
(N/A) The employee will be deemed to have elected not to participate during the
subsequent plan year. Coverage under the Benefit Plan Options offered under the Plan
will end the last day of the Plan Year made.
(X) The employee will be deemed to have elected to continue his or her Benefit Plan
Option elections in effect as of the end of the Plan Year in which the Annual Election
Period took place. This is called an "Evergreen election".
(c) Change of Election Period. If you experience a Change in Status Event or Cost or
Coverage Change as described in the Cafeteria Plan Summary and in the Election Change Chart,
you may make the permitted election changes described in the Election Change Chart if you
complete and submit an election change form within 30 days after the date of the event. If you
are participating in an insured arrangement that provides a longer election change period, the
election change period described in the insurance policy will apply.
(d) Benefit Plan Options. The Employer elects to offer to eligible Employees the following
Benefit Plan Option(s) subject to the terms and conditions of the Plan and the terms and
conditions of the Benefit Plan Options. These Benefit Plan Option(s) are specifically
incorporated herein by reference. The maximum Pre-tax Contributions a Participant can
contribute via the Salary Reduction Agreement is the aggregate cost of the applicable Benefit
Plan Options selected reduced any Nonelective Contributions made by the Employer. It is
intended that such Pre-tax Contribution amounts will, for tax purposes, constitute an Employer
contribution, but may constitute Employee contributions for state insurance law purposes.
Flex -SPD -072005 29
8. Adopting Employers participating in the
Plan:
N/A
9. Third Party Administrator:
CONEXIS Benefits Administrators, LP
U. CAFETERIA PLAN COMPONENT INFORMATION
(a) Eligibility Requirements and Eligibility Date. Each Employee who is eligible for
coverage or participation under any of the Benefit Plan Options will be eligible to participate in
this Plan on the first of the month following date of employment ("Cafeteria Plan Eligibility
Date").
The Employee's commencement of participation in the Plan is conditioned on the Employee
properly completing and submitting a Salary Reduction Agreement as summarized in this SPD.
Eligibility for coverage under any given Benefit Plan Option shall be determined not by this Plan
but by the terms of that Benefit Plan Option.
(b) Annual Election Rules. With respect to Benefit Plan Option elections (other than the
Healthcare FSA and Dependent FSA elections), failure to make an election during the Annual
Election Period will result in the one of following deemed election(s):
(N/A) The employee will be deemed to have elected not to participate during the
subsequent plan year. Coverage under the Benefit Plan Options offered under the Plan
will end the last day of the Plan Year made.
(X) The employee will be deemed to have elected to continue his or her Benefit Plan
Option elections in effect as of the end of the Plan Year in which the Annual Election
Period took place. This is called an "Evergreen election".
(c) Change of Election Period. If you experience a Change in Status Event or Cost or
Coverage Change as described in the Cafeteria Plan Summary and in the Election Change Chart,
you may make the permitted election changes described in the Election Change Chart if you
complete and submit an election change form within 30 days after the date of the event. If you
are participating in an insured arrangement that provides a longer election change period, the
election change period described in the insurance policy will apply.
(d) Benefit Plan Options. The Employer elects to offer to eligible Employees the following
Benefit Plan Option(s) subject to the terms and conditions of the Plan and the terms and
conditions of the Benefit Plan Options. These Benefit Plan Option(s) are specifically
incorporated herein by reference. The maximum Pre-tax Contributions a Participant can
contribute via the Salary Reduction Agreement is the aggregate cost of the applicable Benefit
Plan Options selected reduced any Nonelective Contributions made by the Employer. It is
intended that such Pre-tax Contribution amounts will, for tax purposes, constitute an Employer
contribution, but may constitute Employee contributions for state insurance law purposes.
Flex -SPD -072005 29
The following Benefit Plan Options are made available under the Plan to all those eligible
I
Employees who make an appropriate election.
1. Health Flexible Spending Account
2. Dependent Care Assistance Plan
3. Health Insurance
Flex -SPD -072005 30
III. HEALTHCARE FSA COMPONENT INFORMATION
(a) Healthcare FSA Eligibility Requirements and Eligibility Date. Each Employee who
is eligible for coverage in the Healthcare FSA will be eligible to participate in the Healthcare
FSA on the first of the month following date of employment ("Healthcare FSA Eligibility Date").
(b) Annual Healthcare Reimbursement Amounts. The Maximum Annual Reimbursement
Amount each year may not exceed the lesser of Healthcare FSA reimbursement amount elected
for that year or $3,500.00. The minimum reimbursement amount that may be elected under the
Healthcare FSA is $0.00.
(c) Run Out Period. The Run Out Period is the period during which expenses incurred
during a Plan Year must be submitted to be eligible for reimbursement.
The Run Out Period for active employees ends 90 days after the end of the Plan Year.
The Run Out Period for terminated employees ends 90 days after the end of the Plan
Year.
(d) COBRA Administrator. The COBRA administrator for the Healthcare FSA City of
San Juan Capistrano .
(e) Method of Funding: Healthcare FSA Benefits are paid from general assets.
Flex -SPD -072005 31
IV. DEPENDENT CARE FSA COMPONENT INFORMATION
' (a) Dependent Care FSA Eligibility Requirements and Eligibility Dates. Each
Employee who is eligible for coverage in the Dependent Care FSA will be eligible to participate
in the Dependent Care FSA on the first of the month following date of employment ("Dependent
Care FSA Eligibility Date").
J
(b). Run Out Period. The Run Out Period is the period during which expenses incurred
during a Plan Year must be submitted to be eligible for reimbursement.
The Run Out Period for active employees ends 90 days after the end of the Plan Year.
The Run Out Period for terminated employees ends 90 days after the end of the Plan
Year.
(c) Expense incurred after termination of employment. You may be reimbursed for
Eligible Employment Related Expenses incurred after you terminate employment up to the
amount in your account balance, subject to the reimbursement rules set forth in the SPD.
(d) Method of Funding. Dependent Care FSA Benefits are paid from general assets
Flex -SPD -072005 32
APPENDIX I
CLAIMS REVIEW PROCEDURE CHART
The Effective Date of this Appendix I is January 1, 2006. It should replace and
supersede any other Appendix I with an earlier date.
The Plan has established the following claims review procedure in the event you are denied a
benefit under this Plan. The procedure set forth below does not apply to benefit claims filed
under the Benefit Plan Options other than the Healthcare FSA and Dependant Care FSA.
Step 1: Notice is received from Third Party Administrator. If your claim is denied, you will
receive written notice from the Third Party Administrator that your claim is denied as soon as
reasonably possible but no later than 30 days after receipt of the claim. For reasons beyond the
control of the Third Party Administrator, the Third Party Administrator may take up to an
additional 15 days to review your claim. You will be provided written notice of the need for
additional time prior to the end of the 30 -day period. If the reason for the additional time is that
you need to provide additional information, you will have 45 days from the notice of the
extension to obtain that information. The time period during which the Third Party Administrator
must make a decision will be suspended until the earlier of the date that you provide the
information or the end of the 45 -day period.
Step 2: Review your notice carefully. Once you have received your notice from the Third Party
Administrator, review it carefully. The notice will contain:
a) The reason(s) for the denial and the Plan provisions on which the denial is based;
b) A description of any additional information necessary for you to perfect your claim, why
the information is necessary, and your time limit for submitting the information;
c) A description of the Plan's appeal procedures and the time limits applicable to such
procedures; and
d) A right to request all documentation relevant to your claim.
Step 3: If you disagree with the decision, file an Appeal. If you do not agree with the decision
of the Third Party Administrator and you wish to appeal, you must file your appeal no later than
180 days after receipt of the notice described in Step 1. You should submit all information
identified in the notice of denial as necessary to perfect your claim and any additional
information that you believe would support your claim.
Step 4: Notice of Denial is received from Third Party Administrator. If the claim is again
denied, you will be notified in writing as soon as possible but no later than 30 days after receipt
of the appeal by the Third Party Administrator.
Step 5: Review your notice carefully. You should take the same action that you took in Step 2
described above. The notice will contain the same type of information that is provided in the first
notice of denial provided by the Third Party Administrator.
Step 6: If you still disagree with the Third Party Administrator's decision, file a 2nd Level
Appeal with the Plan Administrator. If you still do not agree with the Third Party
Flex -SPD -072005 Appendix I - 1
Administrator's decision and you wish to appeal, you must file a written appeal with the Plan
' Administrator within the time period set forth in the first level appeal denial notice from the
Third Party Administrator. You should gather any additional information that is identified in the
notice as necessary to perfect your claim and any other information that you believe would
support your claim.
If the Plan Administrator denies your 2nd Level Appeal, you will receive notice within 30 days
after the Plan Administrator receives your claim. The notice will contain the same type of
information that was referenced in Step 1 above.
Important Information
Other important information regarding your appeals:
• (Healthcare FSA Only) Each level of appeal will be independent from the previous level
(i.e., the same person(s) or subordinates of the same person(s) involved in a prior level of
appeal will not be involved in the appeal);
• On each level of appeal, the claims reviewer will review relevant information that you
submit even if it is new information; and
• You cannot file suit in federal court until you have exhausted these appeals procedures.
Flex -SPD -072005 Appendix I - 2
APPENDIX II
TAX ADVANTAGES EXAMPLE
The Effective Date of this Appendix II is January 1, 2006. It should replace and
supersede any other Appendix II with an earlier date.
As indicated in the SPD, participating in the Plan can actually increase your take home pay.
Consider the following example:
You are married and have one child. The Employer pays for 80% of your medical insurance
premiums, but only 40% for your family. You pay $2,400 in premiums ($400 for your share of
the employee -only premium, plus $2,000 for family coverage under the Employer's major
medical insurance plan). You earn $50,000 and your spouse (a student) eams no income. You
file a joint tax return.
Flex -SPD -072005 Appendix II - 1
If you participate in
If you do not
the cafeteria plan
participate in the
cafeteria plan
1. Gross Income
$50,000
$50,000
2. Salary Reductions
$2,400 (pre-tax)
$0
for Premiums
J
3. Adjusted Gross
$47,600^
$50,000
Income
4. Standard
($9,700)
I°+" ($9,700)
Deduction
5. Exemptions
$9,300
$9,300
6. Taxable Income
$28 600
$31,000
7. Federal Income
($3,590)
($3,950)
Tax (Line 6 x
applicable tax
schedule)e.
8. FICA Tax (7.65%
($3,641)
";' ($3,825)
x Line 3 Amount
#'
9. After Tax
($0)
($2400)
Contributions
10. Pay after taxes
$40,365
$39,821
h
and contributions
11. Take home Pay
$544
Difference
I
"
Flex -SPD -072005 Appendix II - 1
APPENDIX III
ELECTION CHANGE CHART
The Effective Date of this Appendix III is January 1, 2006. It should replace and
supersede any other Appendix III with an earlier date.
The following is a summary of the election changes that are permitted under this Plan. Also,
election changes that are permitted under this Plan may not be permitted under the Benefit Plan
Option (e.g., the insurance carrier may not allow a change). If a change is not permitted under a
Benefit Plan Option, no election change is permitted under the Plan. Likewise, a Benefit Plan
Option may allow an election change that is not permitted by this Plan. In that case, your pre-tax
reduction may not be changed even though a coverage change is permitted. For a description of
the election change rules for Health Savings Accounts (if made available through the Plan), see
the Health Savings Account Contribution Appendix).
First, we describe the general rules regarding election changes that are established by the IRS.
Then, you should look to the chart to determine under what circumstances you are permitted to
make an election under this Plan and the scope of the changes you may make.
a) Change in Status. Election changes may be allowed if a Participant or a Participant's
Spouse or Dependent experiences one of the Change in Status Events set forth in the
chart. The election change must be on account of and correspond with the Change in
Status Event as determined by the Plan Administrator (or its designated Third Party
Administrator). With the exception of enrollment resulting from birth, placement for
adoption or adoption, all election changes are prospective (generally the tirst of the
month following the date you make a new election with the Third Party Administrator
but it may be earlier depending on the Employer's internal policies or procedures). As a
general rule, a desired election change will be found to be consistent with a Change in
Status Event if the event the Change in Status affects eligibility for coverage. A Change
in Status affects eligibility for coverage 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), a special rule governs which types of election
changes are consistent with the Change in Status. For a Change in Status
involving a divorce, annulment or legal separation, the death of a Spouse or
Dependent, or a Dependent ceasing to satisfy the eligibility requirements for
coverage, an election to cancel accident or health benefits for any individual
other than the Spouse involved in the divorce, annulment, or legal separation, the
deceased Spouse or Dependent, or the 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. However, there are instances in which you may be able to
increase your Pre-tax Contributions to pay for COBRA coverage of a Dependent.
Contact the Third Party Administrator for more information.
Flex -SPD -072005 Appendix III - I
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.
• Gain of Coverage Eligibility Under Another Employer's Plan. For a Change in
Status in which a Participant or his or her Spouse or Dependent gain eligibility
for coverage under another employer's cafeteria plan or benefit plan as a result
of a change in marital status or a change in the Participant's, the Participant's
Spouse's, or the Participant's Dependent's employment status, an election to
cease or decrease coverage for that individual under the Plan would correspond
with that Change in Status only if coverage for that individual becomes effective
or is increased under the other employer's plan.
• Dependent Care Reimbursement Plan Benefits With respect to the Dependent
Care FSA benefit, an election change is permitted 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) the election change is on
account of and corresponds with a Change in Status that affects the eligibility of
Dependent Care FSA 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 (if
offered under the Plan. See the list of Benefit Plan Options offered under the
Plan). For group term life insurance, disability income and accidental death and
dismemberment benefits only if a Participant experiences any Change in Status
(as described above), an election to either increase or decrease coverage is
permitted.
Flex -SPD -072005 Appendix III - 2
' Option that decreased in cost. For insignificant increases or decreases in the cost of
Benefit Plan Option options, however, Pre-tax Contributions will automatically be
adjusted to reflect the minor change in cost. The Plan Administrator will have final
Flex -SPD -072005 Appendix III - 3
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.
b) Special Enrollment Rights. If a Participant, Participant's Spouse and/or Dependent are
entitled to special enrollment rights under a Benefit Plan Option that is a group health
plan, an election change to correspond with the special enrollment right is permitted.
Thus, for example, if an otherwise eligible employee declined enrollment in medical
coverage for the employee or the employee's eligible Dependents because of outside
medical coverage and eligibility for such coverage is subsequently lost due to certain
reasons (i.e., due to legal separation, divorce, death, termination of employment,
reduction in hours, or exhaustion of COBRA period), the employee may be able to elect
medical coverage under the Plan for the employee and his or her eligible Dependents
who lost such coverage. Furthermore, if an otherwise eligible employee gains a new
Dependent as a result of marriage, birth, adoption, or placement for adoption, the
employee may also be able to enroll the employee, the employee's Spouse, and the
employee's newly acquired Dependent, provided that a request for enrollment is made
within the Election Change Period. 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 summary description for an explanation of special
enrollment rights.
c) Certain Judgments, Decrees and Orders. If a judgment, decree or order from a
divorce, separation, annulment or custody change requires a Dependent child (including
a foster child who is your tax Dependent) to be covered under this Plan, an election
change to provide coverage for the Dependent child identified in the order is permissible.
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.
d) Entitlement to Medicare or Medicaid. If a Participant or the Participant's Dependents
become entitled to Medicare or Medicaid, an election to cancel that person's accident or
health coverage is permitted. Similarly, if a Participant or Participant's Dependents who
have been entitled to Medicare or Medicaid loses eligibility for such, you may elect to
begin or increase that person's accident or health coverage.
e) Change in Cost. If the cost of a Benefit Plan Option significantly increases, a
Participant may choose either to make an increase in contributions, revoke the election
and receive coverage under another Benefit Plan Option that provides similar coverage,
or drop coverage altogether if no similar coverage exists. If the cost of a Benefit Plan
Option significantly decreases, a Participant who elected to participant in another Benefit
Plan Option may revoke the election and elect to receive coverage provided under the
Benefit Plan Option that decreased in cost. In addition, otherwise eligible employees
who elected not to participate in the Plan may elect to participate in the Benefit Plan
' Option that decreased in cost. For insignificant increases or decreases in the cost of
Benefit Plan Option options, however, Pre-tax Contributions will automatically be
adjusted to reflect the minor change in cost. The Plan Administrator will have final
Flex -SPD -072005 Appendix III - 3
authority to determine whether the requirements of this section are met. (Please note that
none of the above "Change in Cost" exceptions are applicable to a Healthcare FSA, to
the extent offered under the Plan.)
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.
f) Change in Coverage. If coverage under a Benefit Plan Option is significantly curtailed,
a Participant elect to revoke his or her election and elect coverage under another Benefit
Plan Option that provides similar coverage. If the significant curtailment amounts to a
complete loss of coverage, a Participant 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, a Participant may revoke his or her 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, a Participant 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) the
Plan Year for this Plan is different from the Plan Year of the other employer plan.
Finally, a Participant may change his or her election to add coverage under this Plan for
the Participant, the Participant's Spouse or Dependents if such individual(s) loses
coverage under any group health coverage sponsored by a governmental or educational
institution. The Plan Administrator will have final discretion to determine whether the
requirements of this section are met. (Please note that none of the above "Change in
Coverage" exceptions are applicable to the Healthcare FSA, to the extent offered under
the Plan.)
Flex -SPD -072005 Appendix III - 4
The following is a chart reflecting the election changes that may be made under the Plan with respect
to each Benefit Plan Option. ht addition, election changes that are permitted under this Plan are
subject to any limitations imposed by the Benefit Plan Options. If an election change is permitted by
this Plan but not by the Benefit Plan Option, no election change under this Plan is permitted.
Event
Major Medical
Dental and
Vision
Healthcare
FSA
Dependent
Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
1. Chanee in Status
A. Change in Employee's
Employee may
Same as previous
Employee may
Employee may
Employee may
Legal Marital Status
enroll or increase
column (Note:
enroll or increase
enroll or increase
enroll, increase,
election for newly-
HIPAA special
election for newly
to accommodate
decrease, or cease
eligible spouse and
enrollment rights
eligible spouse or
newly -eligible
coverage even
dependent children
likely do not
dependents, or
dependents or
when eligibility is
(Note: Under IRS
apply).
likely decrease
decrease or cease
not impacted.
"tag -along"
election if
coverage if new
interpretation, new
employee or
spouse is not
and preexisting
dependents become
employed or makes
dependents may be
an eligible
a Dependent Care
enrolled); coverage
dependent under
FSA coverage
option (e.g., HMO
new spouse's
election under
to PPO) change
health plan (Note:
spouse's plan.
may be made;
HIPAA special
employee may
enrollment rights
revoke or decrease
likely do not
employee's or
apply).
dependent's
coverage only
when such
coverage becomes
effective or is
increased under the
spouse's plan.
Also, see HIPAA
special enrollment
rule below.
2. Lose spouse (divorce,
Employee may
Same as previous
Employee may
Employee may
Employee may
legal separation, annulment,
revoke election
column (Note:
decrease election
enroll or increase
enroll, increase,
death of spouse) (See loss ol
only for spouse;
HIPAA special
for former spouse
to accommodate
decrease, or cease
dependent eligibility below
coverage option
enrollment rights
who loses
newly eligible
coverage even
for discussion of dependent
(e.g., HMO to
likely do not
eligibility (Note:
dependents (e.g.,
when eligibility is
eligibility loss following
PPO) change may
apply).
HIPAA special
due to death of
not impacted.
divorce, separation, etc.)
be made; employee
enrollment rights
spouse) or decrease
may elect coverage
likely do not
or cease coverage i
for self or
apply). Employee
eligibility is lost
dependents who
may enroll or
(e.g., because
lose eligibility
increase election
dependent now
under spouse's
where coverage
resides with ex -
plan if such
lost under spouse's
spouse).
individual loses
health plan.
eligibility as a
result of the
Flex -SPD -072005 Appendix III - 5
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
divorce,legal
separation,
annulment, or
death. (Note:
Under IRS "tag-
along"
interpretation, any
dependents may be
enrolled so long as
at least one
dependent has lost
coverage under the
spouse's plan.)
B. Change in the Number
of Employee's Dependents
Employee may
us
7�(Note:
Same as previous
Employee may
1. Gain Dependent
Employee may
(birth, adoption)
enroll or increasee:
columnote:
enroll or increase
enroll, increase,
coverage for
al
HIPAA specal
to accommodate
decrease, or cease
newly -eligible
hts
enrollment rights
newly eligible
coverage even
dependent (and ant
likely do not
dependents (and
when eligibility is
other dependents
apply).
apply).
any other
not impacted.
who were not
dependents who
previously covered
xere not previously
under IRS "tag-
covered under IRS
along" rule);
"tag -along" rule).
coverage option
(e.g., HMO to
PPO) change may
be made; employee
may revoke or
decrease
employee's or
dependent's
coverage if
employee becomes
eligible under
spouse's plan.
Also, see HIPAA
special enrollment
rule below.
2. Lose Dependent (death)
Employee may
Same as previous
Employee may
Employee may
Employee may
drop coverage only
column.
decrease or cease
decrease election
enroll, increase,
for the dependent
election for
for dependent who
decrease, or cease
who loses
dependent who
loses eligibility.
coverage even
eligibility;
loses eligibility.
when eligibility is
coverage option
not impacted.
(e.g., HMO to
PPO) change may
be made.
Flex -SPD -072005 Appendix III - 6
Event
C. Change in Employment
Status of Employee,
Spouse, or Dependent
That Affects Eligibility
Employment by Employee
Spouse, or Dependent (or
Other Change in
Employment Status) That
Triggers Eligibility
a. Commencement of
Employment by Employee
or Other Change in
Employment Status (e.g.,
PT to FT, hourly to
salaried, etc.) Triggering
Eligibility Under
Component Plan
b. Commencement of
Employment by Spouse or
Dependent or Other
Employment Event
Triggering Eligibility
Under Their Employer's
Plan
2. Termination of
Employment by Employee,
Spouse, or Dependent (or
Other Change in
Employment -Status) That
Causes Loss of Eligibility
a. t ermmanon m
Employee's Employment
or Other Change in
Employment Status (e.g.,
unpaid leave, FT to PT,
strike, salaried to hourly,
etc.) Resulting in a Loss of
Eligibility
Flex -SPD -072005
Major Medical Dental andI Healthcare Dependent
Vision FSA I Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
ided eligibilityl Same as previous Same as previous Same as previous Employee may
gained for this column. column. column. enroll, increase,
rage, employe decrease, or cease
may add coverage
for employee,
spouse, or
dependents and
coverage option
(e.g., HMO to
PPO) change may
nmpioyee may
evoke or decrease
election as to
employee's,
spouse's, or
dependent's
coverage if
employee, spouse
or dependent is
added to spouse's
or dependent's
option (e.g., HM,
to PPO) change
may be made.
hmpioyee may
revoke or decrease
election for
employee, spouse
or dependents who
lose eligibility
under the plan. In
addition, other
coverage even
when eligibility is
not impacted.
e as previous
Employee may
Employee may
Employee may
column.
apparently decrease
make or increase
enroll, increase,
or cease FSA
election to reflect
decrease or cease
election if gains
new eligibility
coverage even
eligibility for
(e.g., if spouse
when spouse's or
health coverage
previously did not
dependent's
under spouse's or
work). Employee
eligibility is not
dependent's plan.
may revoke
impacted.
election as to
dependent's
coverage if
dependent is added
to spouse's plan.
e as previous
name as previous
nmpioyee may
nmp'oyee may
column.
column.
revoke or decrease
enroll, increase,
election to reflect
decrease or cease
loss of eligibility.
coverage even
when eligibility is
not affected.
Appendix III - 7
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
dependents may
also be enrolled
under "tag -along"
rule. Coverage
option (HMO to
PPO) change may
be made.
1. Termination and Rehire
Prior elections at
Same as previous
Same as previous
Same as previous
Same as previous
Within 30 Days
termination are
column.
column.
column.
column.
reinstated unless
another event has
occurred that
allows a change (as
an alternative,
employer may
prohibit
participation until
next plan ear.
ii. Termination and Rehire
Employee may
Same as previous
Same as previous
Same as previous
Same as previous
After 30 Days
make new
column.
column.
column.
column.
elections.
b. Termination of Spouse's
Employee may
Same as previous
Employee may
Employee may
Employee may
or Dependent's
enroll or increase
column (Note:
enroll or increase
enroll or increase if
enroll, increase,
Employment (or other
election for
HIPAA special
FSA election if
spouse or
decrease or cease
change in employment
employee, spouse
enrollment rights
spouse or
dependent loses
even when
status resulting in a loss of
or dependents who
likely do not
dependent loses
eligibility for
eligibility is not
eligibility under their
lose eligibility
apply).
eligibility for
Dependent Care
affected.
employer's plan)
under spouse's or
health coverage
FSA. Employee
dependent's
(Note: HIPAA
may decrease or
employer's plan. In
special enrollment
cease Dependent
addition, other
rights likely do not
Care FSA election
previously eligible
apply).
if spouse's loss of
dependents may
employment
also be enrolled
renders dependents
under "tag -along"
ineligible.
rule. Coverage
option (e.g., HMO
to PPO) change
may be made; See
HIPAA special
enrollment rule
below.
D. Event Causing
Employee's Dependent to
Satisfy or Cease to Satisfy
Eligibility Requirements
(Also see discussion of
gain/loss of eligibility
under dependent or
spouse's employer's Ian
Flex -SPD -072005 Appendix III - 8
r
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
1. Event by Which
Employee may
Same as previous
Employee may
Employee may
Employee may
Dependent Satisfies
enroll or increase
column.
increase election or
increase election or
enroll, increase,
Eligibility Requirements
election for
enroll only if
enroll to take into
decrease or cease
Under Employer's Plan
affected dependent.
dependent gains
account expenses
even when
(attaining a specified age,
In addition,
eligibility under
of affected
eligibility is not
becoming single, becoming
employee may
Healthcare FSA.
dependent.
affected.
a student, etc.)
apparently add
previously eligible
(but not enrolled)
dependents under
"tag -along" rule;
coverage option
(e.g., HMO to
PPO) change may
be made.
2. Event by Which
Employee may
Same as previous
Employee may
Employee may
Employee may
Dependent Ceases to
decrease or revoke
column.
decrease election to
decrease or drop
enroll, increase,
Satisfy Eligibility
election only for
take into account
election to take into
decrease or cease
Requirements Under
affected dependent.
ineligibility of
account expenses
coverage even
Employer's Plan (attaining
Coverage option
expenses of
of affected
when eligibility is
a specified age, getting
(e.g., HMO to
affected dependent,
dependent.
not affected.
married, ceasing to be a
PPO) change may
but only if
student, etc.)
be made.
eligibility is lost.
E. Change in Place of
Residence of Employee,
Spouse, or Dependent
1. Move Triggers
Employee may
Same as previous
No change
N/A. Dependent
Employee may
Eligibility
enroll or increase
column.
allowed, even if
care eligibility is
increase or
election for newly
underlying health
not generally
decrease even if
eligible employee,
coverage change
affected by place of
spouse's or
Spouse, or
occurs.
residence (but see
dependent's
dependent. Also,
change in coverage
eligibility is not
other previously
below).
affected.
eligible dependents
may be re -enrolled
under "tag -along'
rule; coverage
option (e.g., HMO
to PPO) change
may be made.
2. Move Causes Loss of
Employee may
Same as previous
No change
N/A. Dependent
Employee may
Eligibility (e.g., employee
revoke election or
column.
allowed, even if
care eligibility is
enroll, increase,
or dependent moves
make new election
underlying health
not generally
decrease or cease
outside HMO service area)
if the change in
coverage change
affected by place of
even when
residence affects
occurs.
residence (but see
eligibility is not
the employee's,
change in coverage
affected.
spouse's or
below).
dependent's
eligibility for
coverage option.
Flex -SPD -072005 Appendix III - 9
Event
Major Medical
Dental and
Vision
Healthcare
FSA
Dependent
Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
II. Cost Changes With
Plan may
Same as
No change
Application is
Same as Major
AutomaticIncrea
/Decreasein
automatically
previous
permitted.
unclear.
Medical
Elective Contributions
Elective
increase or
column.
Presumably,
column.
(including employer
decrease (on a
plan may
motivated changes and
reasonable and
automatically
changes in employee
consistent basis)
increase or
contribution rates)
affected
decrease (on a
employees'
reasonable and
elective
consistent basis)
contributions
affected
under the plan,
employees'
so long as the
elective
terms of the
contributions
plan require
under the plan,
employees to
so long as the
make such
terms of the
corresponding
plan require
changes.
employees to
make such
corresponding
changes.
Ill. Significant Cost
Significant
Same as
No change
Same as Major
Same as Major
Changes
Cost Increase:
previous
permitted.
Medical column
Medical
Affected
column.
for significant
column.
employee may
cost increase,
increase
except no
election
change can be
correspondingly
made when the
OR revoke
cost change is
election and
imposed by a
elect coverage
dependent care
under another
provider who is
benefit package
a relative of the
option
employee.
providing
similar
coverage. If no
option
providing
similar coverage
is available,
employee may
revoke election.
Significant
Cost Decrease:
Employees may
elect coverage
(even if had not
participated
before) with
decreased cost,
and may drop
election for
Flex -SPD -072005 Appendix III - 10
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
similar coverage
option.
Though unclear,
it appears that
tag -along
concepts may
apply.
IV. Significant Coverage
Without Loss
Same as
No change
Same as Major
Curtailment (With or
of Coverage:
previous
permitted.
Medical
Without Loss of
Affected
column.
Election change
column.
Coverage)
participant may
may apparently
revoke election
be made
for curtailed
whenever there
coverage and
is a change in
make new
provider or a
prospective
change in hours
election for
of dependent
coverage under
care.
another benefit
package option
which provides
similar
coverage.
With Loss of
Coverage:
Affected
participant may
revoke election
for curtailed
coverage and
make new
prospective
election for
coverage under
another benefit
package option
which provides
similar coverage
OR drop
coverage if no
similar benefit
package option
is available.
V. Addition or
Eligible
Same as
No change
Eligible
Same as
Significant Improvement
employees
previous
permitted.
employees
previous
of Benefit Package
(whether
column.
(whether
column.
Option
currently
currently
Flex -SPD -072005 Appendix III - 11
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
participating or
participating or
not) may revoke
not) may revoke
their existing
their existing
election and
election and
elect the newly
elect the newly
added (or newly
added (or newly
improved)
improved)
option.
option.
Though unclear,
it appears that
tag -along
concepts may
apply.
VI. Change in Coverage
Employee may
Same as
No change
Employee may
Same as
Under Other Employer's
decrease or
previous
permitted.
decrease or
previous
Cafeteria Plan or
revoke election
column.
revoke election
column.
Qualified Benefits Plan
for employee,
for employee,
(In order for election
spouse or
spouse, or
changes to be permitted
dependents if
dependents if
under this exception, the
employee,
employee,
election change must be
spouse, or
spouse, or
on account of and
dependents have
dependents have
correspond with the
elected or
elected or
change in coverage under
received
received
the other employer's
corresponding
corresponding
increased
increased
cafeteria plan or qualified
coverage under
coverage under
benefits plan. In addition,
other employer
other employer
either (I) the plan of the
plan.
plan.
other employer must
permit elections specified
under the Regulations and
an election must actually
be made under such plan;
or (2) the employee's
cafeteria plan must permit
elections for a period of
coverage different from
that under the other
employer plan ("Election
Lock" rule).
A. Other Employer's
Employee may
Same as
No change
Employee may
Same as
Plan Increases Coverage
decrease or
previous
permitted.
decrease or
previous
revoke election
column.
revoke election
column.
for employee,
for employee,
spouse, or
spouse, or
dependents if
dependents if
employee,
employee,
spouse, or
spouse, or
dependents
dependents
have elected or
have elected or
received
received
corresponding
corresponding
Flex -SPD -072005 Appendix III - 12
'
Event
Major Medical
Dental and
Vision
Healthcare
FSA
Dependent
Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
changes can be
increased
permitted.
changes can be
increased
Employer
made under
made under
coverage under
made under
made under
coverage under
employer's
employer's
other
employer's
other
plan.
plan.
employer's
employer's plan
plan.
B. Other Employer's
Employee may
Same as
No change
Employee may
Same as
Plan Decreases or Ceases
enroll or
previous
permitted.
increase
previous
Coverage
increase
column.
election for
column.
election for
employee,
employee,
spouse, or
spouse, or
-
dependents if
dependents if
employee,
employee,
spouse, or
spouse, or
dependents
dependents
have elected or
have elected or
received
received
corresponding
corresponding
decreased
decreased
coverage under
coverage under
other
other
employer's
employer's
plan.
'
plan.
C. Open Enrollment
Corresponding
Corresponding
No change
Corresponding
Corresponding
Under Plan of Other
changes can be
changes can be
permitted.
changes can be
changes can be
Employer
made under
made under
made under
made under
employer's
employer's
employer's
employer's
Plan.
plan.
plan.
plan.
VII. FMLA Leave
(Employees can fund this
coverage by (1) pre-
paying their contribution
obligations on a pre-tax
basis (so long as the leave
does not straddle two
plan years); (2) making
contributions on a
month -by -month basis
(pre-tax if they are
receiving salary
continuation payments);
or (3) catching up on
their contributions upon
returning from the
leave.)
Flex -SPD -072005 Appendix III - 13
A. Employee's
Employee can Same as Same as Employee may Same as
Commencement of
make same previous previous revoke election previous
FMLA Leave
elections as column. column. and make column.
emolovee on another election
Flex -SPD -072005 Appendix III - 13
Event
Major Medical
Dental and
Vision
Healthcare
FSA
Dependent
Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
non-FMLA
as provided
leave. In
under FMLA.
addition, an
employer must
allow an
employee on
unpaid FMLA
leave either to
revoke coverage
or to continue
coverage but
allow employee
to discontinue
payment of his
or her share of
the contribution
during the leave
(the employer
may recover the
employee's
share of
contributions
when the
employee
returns to
work). FMLA
also allows an
employer to
require that
employees on
paid FMLA
leave continue
coverage if
employees on
non-FMLA paid
leave are
required to
continue
coverage.
B. Employee's Return
Employee may
Same as
Same as
Employee may
Same as
from FMLA Leave
make a new
previous
previous
make a new
previous
election if
column.
column. Note
election if
column.
coverage
that, upon
coverage
terminated
return, an
terminated
while on FMLA
employee
while on FMLA
leave. In
whose coverage
leave. In
addition, an
has lapsed has
addition, an
employer may
the right to
employer may
require an
resume
require an
employee to be
coverage at
employee to be
reinstated in his
prior coverage
reinstated in his
or her election
level (and make
or her election
upon return
up unpaid
upon return
from leave ifpremiums)
or at
from leave if
Flex -SPD -072005 Appendix III - 14
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
employees who
a level reduced
employees who
return from a
prorate for the
return from a
non-FMLA paid
missed
non-FMLA
leave are
contributions.
leave are
required to be
required to be
reinstated in
reinstated in
their elections.
their elections.
IX. HIPAA Special
Enrollment Rights (See
related exception for
addition of new
dependents)
Employee may
No change
No change
No change
No change
A. Special Enrollment
for Loss of Other Health
elect coverage
permitted,
permitted,
permitted.
permitted.
Coverage
for employee,
unless plan is
unless
spouse, or
subject to
healthcare FSA
dependent who
HIPAA.
is subject to
has lost other
HIPAA.
coverage
(COBRA
coverage
exhausted or
terminated, no
longer eligible
for non -
COBRA
coverage or
employer
contributions
for non -
COBRA
coverage
terminated, etc.)
Though unclear,
it appears that
tag -along
concepts may
apply.
B. Special Enrollment for
Employee may
No change
No change
No change
No change
Acquisition of New
elect coverage
permitted,
permitted,
permitted.
permitted.
Dependent by Birth,
for employee,
unless plan is
unless
Marriage, Adoption, or
spouse, or
subject to
healthcare FSA
Placement for Adoption
dependent.
HIPAA.
is subject to
(If newborn or newly
Example
HIPAA.
adopted child is enrolled
provides that
under HIPAA's special
election of
rules, child's coverage
coverage may
may be retroactive to date
also extend to
of birth, adoption, or
previously
placement for adoption;
Flex -SPD -072005 Appendix 111 - 15
Event
Major Medical
Dental and
Vision
Healthcare
FSA
Dependent
Care FSA
Employee
Group Life,
AD&D and
Disability
Coverage
employee may change
eligible (but not
salary reduction election
yet enrolled)
to pay for extra cost of
dependents.
child's coverage
retroactive to date of birth,
adoption, or placement for
adoption. For marriage,
coverage is effective
prospectively.
X. COBRA Events
Employee may
Same as
No change
No change
No change
increase pre-tax
previous
permitted.
permitted.
permitted.
contributions
column.
under
employer's plan
for coverage if
COBRA event
(or similar state
law
continuation
coverage event)
occurs with
respect to the
employee,
spouse,or
dependents with
respect to which
the COBRA
qualifying event
occurred (such
as a loss of
eligibility for
regular
coverage due to
loss of
dependent
status or a
reduction in
hours, etc.) and
if applicable,
the individual
stilt qualifies as
atax dependent
of employee.
XL Judgment, Decree, or
Order
A. Order That Requires
Employee may
Same as
Same as
No change
No change
Coverage for the Child
change election
previous
previous
permitted.
permitted.
Under Employee's Plan
to provide
column.
column.
coverage for the
child.
Though unclear,
Flex -SPD -072005 Appendix III - 16
1
Event
Major Medical
Dental and
Healthcare
Dependent
Employee
Vision
FSA
Care FSA
Group Life,
AD&D and
Disability
Coverage
it appears that
tag -along
concepts may
apply.
B. Order That Requires
Employee may
Same as
Same as
No change
No change
Spouse, Former Spouse,
change election
previous
previous
permitted.
permitted.
or Other Individual to
to cancel
column.
column.
Provide Coverage for the
coverage for the
Child
child.
XII. Medicare or
Medicaid
Employee may
Unlikely that
Employee may
No change
No change
A. Employee, Spouse, or
Dependent Enrolled in
elect to cancel
employee can
apparently
permitted.
permitted.
Employer's Accident or
or reduce
elect to drop
decrease or
Health Plan Becomes
coverage for
dental or vision
revoke election
Entitled to Medicare or
employee,
coverage;
or increase
Medicaid (other than
spouse, or
presumably,
election if
coverage solely for
dependent, as
employee must
Healthcare FSA
pediatric vaccines)
applicable.
retain coverage.
is dropped due
to
Medicare/Medic
aid and prior
employer
coverage was
more
comprehensive.
B. Employee, Spouse, or
Employee may
Unlikely that
Employee may
No change
No change
Dependent Loses
elect to
employee can
apparently
permitted.
permitted.
Eligibility for Medicare
commence or
elect to add
increase or
or Medicaid (other than
increase
dental or vision
decrease or
coverage solely for
coverage for
coverage;
revoke election
pediatric vaccines)
employee,
presumably,
where employer
spouse, or
employee
plan elected due
dependent, as
cannot.
to loss of
applicable.
eligibility for
Medicare/Medic
Though unclear,
aid is more
it appears that
comprehensive
tag -along
than
concepts may
Medicare/Medic
apply.
aid.
Flex -SPD -072005 Appendix III - 17
EXHIBIT A - CONTINUED
CITY OF SAN JUAN CAPISTRANO
CITY OF SAN JUAN CAPISTRANO'S CAFETERIA PLAN
This Document is effective January 1, 2006
125 -PD -072005
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS.................................................................................................................. 2
1.01
AFFILIATED EMPLOYER.......................................................................................................... 2
1.02
AFTER-TAX CONTRIBUTION(S)............................................................................................... 2
1.03
ANNIVERSARY DATE................................................................................................................ 2
1.04
BENEFIT PACKAGE OPTION(S)............................................................................................... 2
1.05
BOARD OF DIRECTORS............................................................................................................ 2
1.06
CHANGE IN STATUS................................................................................................................. 2
1.07
CODE.........................................................................................................................................2
1.08
COMPENSATION.......................................................................................................................2
1.09
DEPENDENT..............................................................................................................................2
1.10
EFFECTIVE DATE.....................................................................................................................2
1.11
EMPLOYEE...............................................................................................................................2
1.12
EMPLOYER...............................................................................................................................3
1.13
ERISA...................................................................................................................................... 3
1.14
HIGHLY COMPENSATED INDIVIDUAL..................................................................................... 3
1.15
KEY EMPLOYEE.......................................................................................................................3
1.16
NON ELECTIVE CONTRIBUTION(S)..........................................................................................3
1.17
PARTICIPANT............................................................................................................................3
1.18
PLAN......................................................................................................................................... 3
1.19
PLAN ADMINISTRATOR........................................................................................................... 3
1.20
PLAN YEAR............................................................................................................................... 3
1.21
PRE-TAX CONTRIBUTION(S)...................................................................................................4
1.22
QUALIFIED BENEFIT................................................................................................................ 4
1.23
SALARY REDUCTION AGREEMENT......................................................................................... 4
1.24
SPOUSE......................................................................................................................................4
1.25
SUMMARY PLAN DESCRIPTION OR SPD................................................................................. 4
1.26
STUDENT...................................................................................................................................4
ARTICLE II - ELIGIBILITY AND PARTICIPATION...................................................................... 4
2.01 ELIGIBILITY TO PARTICIPATE................................................................................................ 4
2.02 TERMINATION OF PARTICIPATION.........................................................................................4
2.03 QUALIFYING LEAVE UNDER FAMILY LEAVE ACT................................................................ 5
2.04 NON-FMLA LEAvE................................................................................................................. 5
ARTICLE III - PREMIUM ELECTIONS............................................................................................. 5
3.01
ELECTION OF CONTRIBUTIONS............................................................................................... 5
3.02I
INITIAL ELECTION PERIOD..................................................................................................... 5
3.03
ANNUAL ELECTION PERIOD.................................................................................................... 6
3.04
CHANGE OF ELECTIONS.......................................................................................................... 6
3.05
IMPACT OF TERMINATION OF EMPLOYMENT ON ELECTION OR CESSATION OF
ELIGIBILITY............................................................................................................................. 6
ARTICLE IV - PREMIUM PAYMENTS AND CREDITS AND DEBITS TO ACCOUNTS........... 6
4.01 SOURCE OF BENEFIT FUNDING............................................................................................... 6
4.02 REDUCTION OF CERTAIN ELECTIONS TO PREVENT DISCRIMINATION ................................ 7
125 -PD -072005
ARTICLEV - BENEFITS....................................................................................................................................7
'
5.01
QUALIFIED BENEFITS..............................................................................................................7
5.02
CASH BENEFIT......................................................................................................................... 7
9
ARTICLE
VI - PLAN ADMINISTRATION.......................................................................................... 7
EMPLOYER'S RIGHT TO TERMINATE.....................................................................................9
6.01
ALLOCATION OF AUTHORITY................................................................................................. 7
DETERMINATION OF EFFECTIVE DATE OF AMENDMENT OR TERMINATION ...................... 9
6.02
PROVISION FOR THIRD -PARTY PLAN SERVICE PROVIDERS.................................................8
IX - GENERAL PROVISIONS..........................................................................................10
6.03
FIDUCIARY LIABILITY.............................................................................................................8
9.01
6.04
COMPENSATION OF PLAN ADMINISTRATOR.......................................................................... 8
6.05
BONDING...................................................................................................................................8
10
6.06
PAYMENT OF ADMINISTRATIVE EXPENSES........................................................................... 8
REQUIREMENT FOR PROPER FORMS....................................................................................
6.07
FUNDING POLICY.....................................................................................................................8
ARTICLEVII - CLAIMS PROCEDURES.....................................................................................................9
ARTICLE VIII - AMENDMENT OR TERMINATION OF PLAN.........................................................9
125 -PD -072005 ii
8.01
PERMANENCY...........................................................................................................................9
8.02
EMPLOYER'S RIGHT TO AMEND.............................................................................................
9
8.03
EMPLOYER'S RIGHT TO TERMINATE.....................................................................................9
8.04
DETERMINATION OF EFFECTIVE DATE OF AMENDMENT OR TERMINATION ...................... 9
ARTICLE
IX - GENERAL PROVISIONS..........................................................................................10
9.01
NOT AN EMPLOYMENT CONTRACT......................................................................................
10
9.02
APPLICABLE LAWS................................................................................................................
10
9.03
REQUIREMENT FOR PROPER FORMS....................................................................................
10
9.04
MULTIPLE FUNCTIONS ....................
10
9.05
TAX EFFECTS.........................................................................................................................
10
9.06
GENDER AND NUMBER..........................................................................................................
10
9.07
HEADINGS...............................................................................................................................
10
9.08
INCORPORATION BY REFERENCE.........................................................................................
10
9.09
SEVERABILITY........................................................................................................................
10
9.10
EFFECT OF MISTAKE.............................................................................................................
10
125 -PD -072005 ii
PREAMBLE
Effective as of the date set forth below, City of San Juan Capistrano established the City of San Juan
Capistrano's Cafeteria Plan (the "Plan" or "Cafeteria Plan") for its Employees for purposes of providing
eligible Employees with the opportunity to choose from among the Benefit Package Options available
under the Plan. The Plan is intended to qualify as a cafeteria plan under the provisions of Code Section
125.
125 -PD -072005 -1-
CITY OF SAN JUAN CAPISTRANO
' City of San Juan Capistrano's Cafeteria Plan
ARTICLE I
DEFINITIONS
1.01 "Affiliated Employer" means any entity who is considered with the Employer to be a single
employer in accordance with Code Section 414(b), (c), or (m).
1.02 "After-tax Contribution(s)" means amounts withheld from an Employee's Compensation
pursuant to a Salary Reduction Agreement after all applicable state and federal taxes have been deducted.
Such amounts are withheld for purposes of purchasing one or more of the Benefit Package Options
available under the Plan.
1.03 "Anniversary Date" means the first day of any Plan Year.
1.04 "Benefit Package Option(s)" means those Qualified Benefits available to a Participant under
this Plan as set forth in the Summary Plan Description, as amended and/or restated from time to time.
1.05 "Board of Directors" means the Board of Directors or other governing body of the Employer
(the "Board"). The Board of Directors, upon adoption of this Plan, appoints the Plan Administrator to act
on the Employer's behalf in all matters regarding the Plan.
' 1.06 "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 Summary Plan
Description for requirements that must be met to permit certain mid -year election changes on account of
a Change in Status.
1.07 "Code" means the Internal Revenue Code of 1986, as amended.
1.08 "Compensation" means the cash wages or salary paid to an Employee by the Employer.
1.09 "Dependent" means any individual who is a tax dependent of the Participant as defined
generally in Code Section 152(a); however, that in the case of a health benefits, a Dependent shall be
defined as set forth in Code Section 105(b) and the regulations issued under Code Section 106. For
purposes of Dependent Care FSA (if offered under the Plan) a Dependent shall also be defined as in
Code Section 21(e)(5) (i.e., dependent of the parent with custody for the greatest portion of the year).
1.10 "Effective Date" of the Plan means January 1, 2004 This is the date the Plan was established.
It will not necessarily coincide with the date of this document as set forth in the title page.
1.11 "Employee" means an individual who the Employer classifies as a common-law employee and
who is on the Employer's W-2 payroll, but does not include any of the following: (a) any leased
employee (including, but not limited to, those individuals defined in Code § 414(n)); (b) an individual
classified by the Employer as a contract worker or independent contractor; (c) an individual classified by
the Employer as a temporary employee or casual employee, whether or not any such persons are on the
Employer's W-2 payroll; and (d) any individual who performs services for the Employer but who is paid
125 -PD -072005 -2-
by a temporary or other employment agency such as "Kelly," "Manpower," etc., or any employee covered
under a collective bargaining agreement, except as otherwise provided for in the collective bargaining
agreement.
1.12 "Employer" means the City of San Juan Capistrano and any Affiliated Employer who adopts
the Plan pursuant to authorization provided by the Employer. Notwithstanding the previous sentence
when the Plan provides that the Employer has a certain power (e.g., the appointment of a third party
administrator, entering into a contract with a third party insurer, or amendment or termination of the
Plan) the term "Employer" shall mean only City of San Juan Capistrano Affiliated Employers who adopt
the Plan shall be bound by the Plan as adopted and subsequently amended unless they clearly withdraw
from participation herein. Affiliated Employers who have adopted the Plan are set forth in the Summary
Plan Description.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
1.14 "Highly Compensated Individual" means an individual defined under Code Section 125(e), as
amended, as a "highly compensated individual" or a "highly compensated employee."
1.15 "Key Employee" means an individual who is a "key employee" as defined in Code Section
125(b)(2), as amended.
1.16 "Nonelective Contribution(s)" means any amount that the Employer, in its sole discretion, may
contribute on behalf of each Participant to provide benefits for such Participant and his or her
Dependents, if applicable, under one or more of the Benefit Package Option(s) offered under the Plan.
The amount of employer contribution that is applied towards the cost of the Benefit Package Option(s)
for each Participant and/or level of coverage shall be subject to the sole discretion of the Employer and
may be adjusted upward or downward at any time in the contributing Employer's sole discretion. The
amount shall be calculated for each Plan Year in a uniform and nondiscriminatory manner and may be
based upon the Participant's dependent status, commencement or termination date of the Participant's
employment during the Plan Year, and such other factors as the Employer shall prescribe. To the extent
set forth in the Summary Plan Description or enrollment material, the Employer may make Nonelective
Contributions available to Participants and allow Participants to allocate the Nonelective Contributions
among the various Benefit Package Options offered under the Plan in a manner set forth in the Summary
Plan Description or enrollment material. In no event will any Nonelective Contribution be disbursed to a
Participant in the form of additional, taxable Compensation except as otherwise provided in the Summary
Plan Description or enrollment material.
1.17 "Participant" means an Employee who becomes a Participant pursuant to Article II.
1.18 "Plan" means this Cafeteria Plan, as set forth herein.
1.19 "Plan Administrator" means the person(s) or Committee identified in the Summary Plan
Description that is appointed by the Employer with authority, discretion, and responsibility to manage
and direct the operation and administration of the Plan. If no such person is named, the Plan
Administrator shall be the Employer.
1.20 "Plan Year" shall be the period of coverage set forth in the Summary Plan Description.
125 -PD -072005 - 3 -
1.21 "Pre-tax Contribution(s)" means amounts withheld from an Employee's Compensation
pursuant to a Salary Reduction Agreement before any applicable state and federal taxes have been
deducted. The amounts are withheld for purposes of purchasing one or more of the Benefit Package
Options available under the Plan. This amount shall not exceed the premiums or contributions
attributable to the most costly Benefit Package Option afforded hereunder, and for purposes of Code
Section 125, shall be treated as an Employer contribution (this amount may, however, be treated as an
Employee contribution for purposes of state insurance laws).
1.22 "Qualified Benefit" means any benefit excluded from the Employee's taxable income under
Chapter 1 of the Code other than Sections 106(b), 117, 124, 127, or 132, and any other benefit permitted
by the Income Tax Regulations (i.e., any group -term life insurance coverage that is includable in gross
income by virtue of exceeding the dollar limitation on nontaxable coverage under Code Sec. 79).
Notwithstanding the previous sentence, long-term care insurance is not a "Qualified Benefit."
1.23 "Salary Reduction Agreement" means the actual or deemed agreement pursuant to which an
eligible Employee or Participant elects to contribute his share of the cost of chosen Benefit Package
Options with Pre-tax or After-tax Contributions and/or Benefit Credits (if offered under the Plan) in
accordance with Article III herein. If the Employer utilizes an interactive voice response (NR) system or
web -based program for enrollment, the Salary Reduction Agreement may be maintained on an electronic
database in accordance with all applicable federal and/or state laws.
1.24 "Spouse" means an individual who is legally married to a Participant (and who is treated as a
spouse under the Code).
' 1.25 "Summary Plan Description" or "SPD" means the Flexible Benefits Plan SPD 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.
1.26 "Student" means an individual who, during each of five (5) or more calendar months during the
Plan Year, is a full time student at any college or university, the primary function of which is the conduct
of formal instruction, and which routinely maintains a regular faculty and curriculum and normally has
an enrolled student body in attendance at the location where its educational activities are regularly
presented.
ARTICLE H
ELIGIBILITY AND PARTICIPATION
2.01 Eligibility to Participate. Each Employee who satisfies the eligibility requirements set forth in
the SPD shall be eligible to participate in this Plan as of the Eligibility Date set forth in the SPD.
Eligibility to participate in this Plan means only that the Eligible Employee is entitled to contribute his
share of the cost of applicable Benefit Package Options for which he is eligible with Pre-tax
Contributions. The provisions of this Article are not intended to override any eligibility requirement(s)
or waiting period(s) specified in the applicable Benefit Package Options and the terms of eligibility and
participation for the Benefit Package Option(s) offered under the Plan shall be subject to the
requirements specified in the governing documents of the Benefit Package Options.
' 2.02 Termination of Participation. Participation shall terminate on the earliest of the dates set forth
in the SPD.
125 -PD -072005 - 4 -
2.03 Qualifying Leave Under Family 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 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 option(s) 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.
2.04 Non-FMLA Leave. 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.
ARTICLE III
PREMIUM ELECTIONS
3.01 Election of Contributions. A Participant may elect any combination of Pre-tax Contributions or
After-tax Contributions (to the extent set forth in the enrollment material) to fund any Benefit Package
Option available under the Plan, provided that only Qualified Benefits may be funded with Pre-tax
Contributions. The Employer may, but is not required to, allocate Non -elective Contributions to one or
more Benefit Package Options offered under the Plan and to the extent set forth in the SPD or enrollment
material, may allow the Participants to allocate his allotted share of Nonelective Contributions among the
various Benefit Package Options in a manner set forth in the SPD or enrollment material.
3.02 Initial Election Period.
a) Currently Eligible Employees. An Employee who is eligible to become a Participant in this
Plan as of the Effective Date must complete, sign and file a Salary Reduction Agreement with the
Plan Administrator (or its designated third party administrator as set forth on the Salary
Reduction Agreement) during the election period (as specified by the Plan Administrator)
immediately preceding the Effective Date of the Plan in order to become a Participant on the
Effective Date. The elections made by the Participant on this initial Salary Reduction Agreement
shall be effective, subject to Section 3.04, for the Plan Year beginning on the Effective Date.
b) New Employees and Employees Who Have Not Yet Satisfied The Plan's Waiting Period.
An Employee who becomes eligible to become a Participant in this Plan after the Effective Date
must complete, sign and file a Salary Reduction Agreement with the Plan Administrator (or its
designated third party administrator as set forth on the Salary Reduction Agreement) during the
Initial Election Period set forth in the SPD or the enrollment material. Participation will
commence under this Plan as set forth in the SPD. Coverage under the component Benefit
125 -PD -072005 - 5 -
Package Options will be effective in accordance with the governing provisions of such Benefit
' Package Options.
c) Failure to Elect. An eligible Employee who fails to complete, sign and file a Salary Reduction
Agreement in accordance with paragraph (a) or (b) above during an initial election period may
become a Participant on a later date in accordance with Section 3.03, or 3.04.
3.03 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 become a Participant in this Plan, to continue participation in this Plan, or to modify or to 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 date on which the Annual
Election Period commences and ends will be set forth in the SPD or the enrollment material. An election
is made during the Annual Election Period in the manner set forth in the SPD. The consequences of
failing to make an election during the Annual Election Period will be set forth in the SPD.
3.04 Change of Elections. A Participant shall not make any changes to the Pre-tax Contribution
amount or, where applicable, to the Participant's elected allocation of Nonelective Contributions except
under the circumstances set forth in the SPD and for changes made during the Annual Election Period,
changes caused by termination of employment or cessation of eligibility, and changes pursuant to the
Family and Medical Leave Act. Except as provided in the SPD for HIPAA special enrollment rights
arising from the birth, adoption, or placement for adoption of a child, all election changes shall be
effective on a prospective basis only (i.e., election changes will become effective no earlier than the 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.
3.05 Impact of Termination of Employment on Election or Cessation of Eligibility. Termination
of employment or cessation of eligibility shall automatically revoke any Salary Reduction Agreement.
Except as provided below, if revocation occurs under this Section 3.05, no new election with respect to
Pre -Tax Contributions may be made by such Participant during the remainder of the Plan Year except as
set forth in the SPD.
ARTICLE IV
PREMIUM PAYMENTS AND CREDITS AND DEBITS TO ACCOUNTS
4.01 Source of Benefit Funding. The cost of coverage under the component Benefit Package
Options shall be funded by Participant's Pre-tax and/or After-tax Contributions and/or any Nonelective
Contributions provided by the Employer. The required contributions for each of the Benefit Package
Options offered under the Plan shall be made known to employees in enrollment materials. Pre-tax or
After-tax Contributions (as elected by the Employee on the Salary Reduction Agreement and permitted
by the Employer) shall equal the contributions required from the Participant less any available
Nonelective Contributions allocated thereto by the Employer, or where applicable, the Participant for
coverage of the Participant or the Participant's Spouse or Dependents under the Benefit Package Options
elected by the Participant under this Plan. Amounts withheld from a Participant's Compensation as Pre-
tax Contributions or After-tax Contributions shall be applied to fund benefits as soon as administratively
' feasible. The maximum amount of Pre-tax Contributions, plus any Nonelective Contributions made
available by the Employer, shall not exceed the aggregate cost of the Benefit Package Options elected.
125 -PD -072005 - 6 -
4.02 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.
ARTICLE V
BENEFITS
5.01 Qualified Benefits. The maximum benefit a Participant may elect under this Plan shall not
exceed the sum of the aggregate maximum premium and/or contribution for all Benefit Package
Option(s) set forth in the SPD.
5.02 Cash Benefit. 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 any applicable Nonelective Contributions may not be received in the form of cash
compensation, except as otherwise provided for in the SPD or the enrollment material.
ARTICLE VI
PLAN ADMINISTRATION
6.01 Allocation of Authority. The Board of Directors or applicable governing body (or an
authorized officer of the Employer) appoints a Plan Administrator that keeps the records for the Plan and
shall control and manage the operation and administration of the Plan. The Plan Administrator shall have
the exclusive right to interpret the Plan and to decide all matters arising thereunder, including the right to
make determinations of fact, and construe and interpret possible ambiguities, inconsistencies, or
omissions in the Plan and the SPD issued in connection with the Plan. All determinations of the Plan
Administrator with respect to any matter hereunder shall be conclusive and binding on all persons.
Without limiting the generality of the foregoing, the Plan Administrator shall have the following powers
and duties:
a) To require any person to furnish such reasonable information as he may request for the purpose
of the proper administration of the Plan as a condition to receiving any benefits under the Plan;
b) To make and enforce such rules and regulations and prescribe the use of such forms as he shall
deem necessary for the efficient administration of the Plan;
c) To decide on questions concerning the Plan and the eligibility of any Employee to participate in
the Plan and to make or revoke elections under the Plan, in accordance with the provisions of the
Plan;
d) To designate other persons to carry out any duty or power which may or may not otherwise be a
fiduciary responsibility of the Plan Administrator, under the terms of the Plan. Such entity will
be referred to as a third parry administrator and shall be identified in the SPD; —
125 -PD -072005 -7.
e) To keep records of all acts and determinations, and to keep all such records, books of account,
' data and other documents as may be necessary for the proper administration of the Plan;
f) To do all things necessary to operate and administer the Plan in accordance with its provisions.
6.02 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 th,
certificates, reports and opinions furnished thereby.
party administrator. Unless otherwise provided in
shall remain the obligation of the Employer.
Plan and may rely upon all tables, valuations,
Such entity will be identified in the SPD as a third
the service agreement, obligations under this Plan
6.03 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.
6.04 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 the Employer shall pay all reasonable expenses
incurred in the performance of their duties.
6.05 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.
6.06 Payment of Administrative Expenses. The Employer currently pays all reasonable expenses
incurred in administering the Plan.
6.07 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 Benefit Package Options offered under the Plan
and to replace any of such insurance companies or contracts. Any dividends, retroactive rate adjustments
or other refunds of any type that may become payable under any such insurance contract 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 that pertain to the
following:
a) Once insurance is applied for or obtained, the Employer will not be liable for any loss which may
result from the failure to pay premiums to the extent premium notices are not received by the
Employer;
b) To the extent premium notices are received by the Employer, the Employer's liability for the
payment of such premiums will be 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 that may
' result from the failure to pay an insurance premium if the benefits available under this Plan are
not enough to provide for such 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
125 -PD -072005 - 8 -
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.
ARTICLE VII
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 benefits available under this Plan (i.e., such as a determination of.
a Change in Status; change in cost or coverage; or eligibility and participation matters under this
Cafeteria Plan document), and to the extent offered under the Plan, claims for benefits under the
Reimbursement Accounts.
ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
8.01 Permanency. While the Employer fully expects that this Plan will continue indefinitely, due to
unforeseen, future business contingencies, permanency of the Plan will be subject to the Employer's right
to amend or terminate the Plan, as provided in Sections 8.02, and 8.03, below. Nothing in this Plan is
intended to be or shall be construed to entitle any Participant, retired or otherwise, to vested or non- _
terminable benefits.
8.02 Employer's Right to Amend. The Employer reserves the right to amend at any time any or all
of the provisions of the Plan. All amendments shall be made in writing and shall be approved by the
Employer in accordance with its normal procedures for transacting business (e.g., by approval by the
Board of Directors through a meeting or unanimous consent of all Board members). Such amendments
may apply retroactively or prospectively as set forth in the amendment. Each Benefit Package Option
shall be amended in accordance with the terms specified therein, or, if no amendment procedure is
prescribed, in accordance with this section. Any amendment made by the Employer shall be deemed to
be approved and adopted by any Affiliated Employer.
8.03 Employer's Right to Terminate. The Employer reserves the right to discontinue or terminate
the Plan without prejudice at any time and for any reason without prior notice. Such decision to
terminate the Plan shall be made in writing and shall be approved by the Employer in accordance with its
normal procedures for transacting business. Affiliated Employers may withdraw from participation in
the Plan, but may not terminate the Plan.
8.04 Determination of Effective Date of Amendment or Termination. Any such amendment,
discontinuance or termination shall be effective as of such date as the Employer shall determine.
125 -PD -072005 - 9 -
ARTICLE IX
' GENERAL PROVISIONS
9.01 Not an Employment Contract. Neither this Plan nor any action taken with respect to it shall
confer upon any person the right to continue employment with any Employer.
9.02 Applicable Laws. The provisions of the Plan shall be construed, administered and enforced
according to applicable federal law and the laws of the State of California to the extent not preempted.
9.03 Requirement for Proper Forms. All communications in connection with the Plan made by a
Participant shall become effective only when duly executed on any forms as may be required and
fumished by, and filed with, the Plan Administrator.
9.04 Multiple Functions. Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
9.05 Tax Effects. Neither the Employer, nor the Plan Administrator makes any warranty or other
representation as to whether any Pre-tax Contributions made to or on behalf of any Participant hereunder
will be treated as excludable from gross income for local, state, or federal income tax purposes. If for
any reason it is determined that any amount paid for the benefit of a Participant or Beneficiary are
includable in an Employee's gross income for local, federal, or state income tax purposes, then under no
circumstances shall the recipient have any recourse against the Plan Administrator or the Employer with
' respect to any increased taxes or other losses or damages suffered by the Employees as a result thereof.
The Plan is designed and is intended to be operated as a "cafeteria plan" under Section 125 of the Code.
9.06 Gender and Number. Masculine pronouns include the feminine as well as the neuter genders,
and the singular shall include the plural, unless indicated otherwise by the context.
9.07 Headings. The Article and Section headings contained herein are for convenience of reference
only, and shall not be construed as defining or limiting the matter contained thereunder.
9.08 Incorporation by Reference. The actual terms and conditions of the separate component
Benefit Package Options offered under this Plan are contained in separate, written documents governing
each respective benefit, and shall govern in the event of a conflict between the individual plan document,
and this Plan as to substantive content. To that end, each such separate document, as amended or
subsequently replaced, is hereby incorporated by reference as if fully recited herein. In addition, the SPD
for this Plan contains many of the actual terms and conditions of this Plan. To that end, the SPD, as
amended from time to time, is incorporated herein.
9.09 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.
9.10 Effect of Mistake. In the event of a mistake as to the eligibility or participation of an Employee,
or the allocations made to the account of any Participant, or the amount of distributions made or to be
made to a Participant or other person, the Plan Administrator shall, to the extent it deems possible, cause
to be allocated or cause to be withheld or accelerated, or otherwise make adjustment of, such amounts as
will in its judgment accord to such Participant or other person the credits to the account or distributions
125 -PD -072005 -to-
to which he is properly entitled under the Plan. Such action by the Administrator may include _
withholding of any amounts due the Plan or the Employer from Compensation paid by the Employer.
IN WITNESS WHEREOF, the Employer has executed this Cafeteria Plan as of the date set forth
below.
CITY OF SAN JUAN CAPISTRANO
By:%GQ�
Title:
Date:/ ,/o�
125 -PD -072005 - 11 -
EXHIBIT A — APPENDIX a
HEALTHCARE FLEXIBLE SPENDING ACCOUNT
APPENDIX A TO THE CITY OF SAN JUAN CAPISTRANO'S CAFETERIA PLAN
The Effective Date of this Document is January 1, 2006
HFSA-PD-072005
TABLE OF CONTENTS
ARTICLE IA - DEFINITIONS................................................................................................... 2
1.01A
Dependent...................................................................................................................2
1.02A
Effective Date.............................................................................................................. 2
1.03A
Eligible Medical Expenses......................................................................................... 2
1.04A
Healthcare Reimbursement....................................................................................... 2
1.05A
Highly Compensated Individual...............................................................................2
1.06A
Reimbursement Account or Account(s)................................................................... 2
ARTICLE HA - ELIGIBILITY AND PARTICIPATION....................................................... 2
2.01A
Eligibility to Participate............................................................................................. 2
2.02A
Termination of Participation..................................................................................... 2
2.03A
Qualifying Leave Under Family Leave Act............................................................. 2
ARTICLE IIIA - ELECTION TO PARTICIPATE PARTICIPATION................................3
3.01A
Initial Election Period................................................................................................3
3.02A
Annual Election Period..............................................................................................3
3.03A
Change of Elections....................................................................................................4
3.04A
Impact of Termination of Employment on Election or Cessation of Eligibility ... 4
3.05A
Reduction of Certain Elections to Prevent Discrimination....................................4
ARTICLE IVA - REIMBURSEMENTS...................................................................................14
4.01A
Healthcare Reimbursement.......................................................................................4
4.02A
Receiving Healthcare Reimbursement.....................................................................5
4.03A
Substantiation of Expenses........................................................................................ 5
4.04A
Repayment of Excess Reimbursements.................................................................... 5
4.05A
Reimbursement Following Cessation of Participation............................................5
4.06A
Coordination of Benefits Under HCRA...................................................................5
4.07A
Disbursement Reports................................................................................................ 6
4.08A
Reimbursement.......................................................................................................... 6
4.09A
Statements...................................................................................................................6
4.10A
Post -Mortem Payments..............................................................................................6
4.11A
Non alienation of Benefits..........................................................................................6
4.12A
Mental or Physical Incompetency............................................................................. 6
4.13A
Inability to Locate Payee........................................................................................... 6
4.14A
Tax Effects of Reimbursements................................................................................ 6
4.15A
Forfeiture of Unclaimed Reimbursement Account Benefits .................................. 6
ARTICLEVA - FUNDING AGENT.......................................................................................... 7
ARTICLE VIA - CLAIMS PROCEDURES.............................................................................. 7
ARTICLE VIIA - CONTINUATION COVERAGE UNDER COBRA..................................7
ARTICLEVIII - HH'AA Privacy............................................................................................... 7
8.01A
Scope and Purpose.....................................................................................................7
8.02A
Effective Date..............................................................................................................7
8.03A
Use and Disclosure of PHI ......................................................................................... 7
8.04A
Conditions Imposed on Employer............................................................................8
8.05A
Designated Employees Who May Receive PHI .......................................................8
14FSA-PD-072005
8.06A
Restrictions on Employees with Access to PHI........................................................ 8
8.07A
Policies and Procedures.............................................................................................8
'
8.08A
Organized Healthcare Arrangement ......•
8.09A
Privacy Official................................. „•..........•..•........•..•..................... ............ 8
8.10A
Noncompliance........................................................................................................... 9
8.11A
Definitions...................................................................................................................9
8.12A
Interpretations and Limited Authority....................................................................9
8.13A
Services Performed for the Employer......................................................................9
HFSA-PD-072005 11
PREAMBLE
Effective as of the Effective Date set forth below, City of San Juan Capistrano established this
Healthcare Flexible Spending Account (the Healthcare FSA) 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 contribute to a Healthcare
Reimbursement Account established pursuant to this Healthcare FSA Plan. This Healthcare FSA
is intended to provide reimbursement of certain Eligible Medical Expenses incurred by the
Participant and his eligible Dependents. The Employer intends that the Healthcare FSA qualify as
a Code Section 105 self-insured medical reimbursement plan, and that the benefits provided
under the Healthcare FSA be eligible for exclusion from the Participant's income for federal
income tax purposes under Section 105(b) of the Code. This Healthcare FSA is a component of,
and incorporated by reference into, the Cafeteria Plan and Articles VI, VII, VIII and IX of the
Cafeteria Plan document apply also to this Healthcare FSA.
HFSA-PD-072005
ARTICLE IA
DEFINITIONS
Unless otherwise specified, terms that are capitalized in this Appendix A have the same meaning
as the defined terms in the Cafeteria Plan. The definitions of terms defined in this Appendix A,
but not defined in the Cafeteria Plan, shall be applicable only with respect to this Appendix A. To
the extent a term is defined both in the Cafeteria Plan and in this Appendix A, the term as defined
in the Cafeteria Plan shall govern the interpretation of the Cafeteria Plan and the term as defined
in this Appendix A shall govern the interpretation of this Healthcare FSA.
1.01A "Dependent" means any individual who is a tax dependent of the Participant as defined
in Code Section 105(b).
1.02A "Effective Date" of this Healthcare FSA means January 1, 2004.
1.03A "Eligible Medical Expenses" means those expenses that are eligible for reimbursement
under this Healthcare FSA as set forth in the SPD.
1.04A "Healthcare Reimbursement" shall have the meaning assigned to it by Section 4.01A
of this Healthcare FSA.
1.05A "Highly Compensated Individual" means an individual defined under Code Section
105(h), as amended, as a "highly compensated individual" or a "highly compensated employee."
' 1.06A "Reimbursement Account" shall be the funding mechanism by which amounts are
withheld from an Employee's Compensation and retained for future Healthcare Reimbursement
(as defined in Section 1.04A herein). No money shall actually be allocated to any individual
Participant Account(s); any such Account(s) 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 the Participant Account(s).
ARTICLE IIA
ELIGIBILITY AND PARTICIPATION
2.01A Eligibility to Participate. Each Employee who satisfies the eligibility requirements set
forth in the SPD shall be eligible to participate in this Healthcare FSA as of the Healthcare FSA
Eligibility Date set forth in the SPD.
2.02A Termination of Participation. Participation shall terminate on the earliest of the dates
set forth in the SPD.
2.03A Qualifying Leave Under Family Leave Act. Notwithstanding any provision to the
contrary in this Healthcare FSA, 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 coverage under this Healthcare FSA 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 option(s)
provided by the Employer (as described above) will be set forth in the SPD and will be
HFSA-PD-072005
administered in accordance with the regulations issued under Code Section 125 and in accordance
with the FMLA.
2.04A. Non-FMLA Leave. If a Participant goes on an unpaid leave of absence that does not
affect eligibility under this Healthcare FSA, 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 Healthcare FSA, the election change rules in Section 3.03A
of this Healthcare FSA 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.
ARTICLE IIIA
ELECTION TO PARTICIPATE
3.01A Initial Election Period.
a) Currently Eligible Employees. An Employee who is eligible to become a Participant in
this Healthcare FSA as of the Effective Date must complete, sign and file a Salary
Reduction Agreement with the Plan Administrator (or its designated third party
administrator as set forth on the Salary Reduction Agreement) during the election period
(as specified by the Plan Administrator) immediately preceding the Effective Date of the
Healthcare FSA in order to become a Participant on the Effective Date. The elections
made by the Participant on this initial Salary Reduction Agreement shall be effective,
subject to Section 3.02A, for the Plan Year beginning on the Effective Date.
b) New Employees and Employees Who Have Not Yet Satisfied the Healthcare FSA's
Waiting Period. An Employee who becomes eligible to become a Participant in this
Healthcare FSA after the Effective Date must complete, sign and file a Salary Reduction
Agreement with the Plan Administrator (or its designated third party administrator as set
forth on the Salary Reduction Agreement) during the Initial Election Period set forth in
the SPD or the enrollment material. Participation will commence under this Healthcare
FSA as set forth in the SPD (but in no event prior to the election).
c) Failure to Elect. An eligible Employee who fails to complete, sign and file a Salary
Reduction Agreement in accordance with paragraph (a) or (b) above during an initial
election period may become a Participant on a later date in accordance with Section
3.02A or 3.03A.
3.02A. Annual Election Period. Each Employee who is a Participant in this Healthcare FSA or
who is eligible to become a Participant in this Healthcare FSA shall be notified, prior to each
Anniversary Date of this Healthcare FSA, of his right to become a Participant in this Healthcare
FSA, to continue participation in this Healthcare FSA, or to modify or to cease participation in
this Healthcare FSA, and shall be given a reasonable period of time in which to exercise such
right: such period of time shall be ]mown as the Annual Election Period. The date on which the
Annual Election Period commences and ends will be set forth in the SPD or the enrollment
material. An election is made during the Annual Election Period in the manner set forth in the
HFSA-PD-072005
SPD. The consequences of failing to make an election during the Annual Election Period will be
' set forth in the SPD.
3.03A Change of Elections. A Participant shall not make any changes to his or her election
except for election changes permitted under the SPD, and for changes made during the Annual
Election Period, changes caused by termination of employment or cessation of eligibility and
changes pursuant to the Family and Medical Leave Act. Except as provided in the SPD for
HIPAA special enrollment rights arising from the birth, adoption, or placement for adoption of a
child, all election changes shall be effective on a prospective basis only (i.e., election changes
will become effective no earlier than the 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.
3.04A Impact of Termination of Employment on Election or Cessation of Eligibility.
Termination of employment or cessation of eligibility shall automatically revoke any Salary
Reduction Agreement. Except as provided below, if revocation occurs under this Section 3.04A,
no new election with respect to the Healthcare FSA may be made during the remainder of the
Plan Year except as set forth in the SPD.
3.05A Reduction of Certain Elections to Prevent Discrimination. If the Plan Administrator
determines, before or during any Plan Year, that the Healthcare FSA may fail to satisfy for such
Plan Year any requirement imposed by the Code or any limitation on 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.
ARTICLE IVA
REIMBURSEMENTS
4.01A Healthcare Reimbursement. Each Participant's Healthcare FSA Reimbursement
Account will be credited with amounts withheld from the Participant's Compensation and any
Nonelective Contributions allocated thereto by the Employer or where applicable, the Participant.
The Account will be debited for Healthcare Reimbursements disbursed to the Participant in
accordance with this Article IVA. The entire amount elected by the Participant on the Salary
Reduction Agreement as an annual amount for the Plan Year for Healthcare Reimbursement less
any Healthcare Reimbursements already disbursed to the participant for Expenses incurred during
the Plan Year shall be available to the Participant at any time during the Plan Year without regard
to the amount of contributions made (provided that the periodic contributions have been made).
In no event will the amount of Healthcare Reimbursements in any Plan Year exceed the annual
amount specified for the Plan Year in the Salary Reduction Agreement for Healthcare
Reimbursement. Any amount credited to the Healthcare Account shall be forfeited by the
Participant and restored to the Employer if it has not been applied to provide Healthcare
Reimbursement within the run out period set forth in the SPD. Amounts so forfeited shall be
used in a manner that is permitted within the applicable Department of Labor or Internal Revenue
Service regulations. The maximum annual reimbursement under the Healthcare FSA shall be set
forth in the SPD. The Employer may establish a minimum annual reimbursement amount as set
I
forth in the SPD
HFSA-PD-072005 4
4.02A Receiving Healthcare Reimbursement. Payment shall be made to the Participant in
cash as reimbursement for Eligible Medical Expenses incurred by the Participant or his
Dependents while he is a Participant during the Plan Year for which the Participant's election is
effective provided that the substantiation requirements of Section 4.03A herein are satisfied.
However, if the employer so chooses, the participant may choose to make payment for eligible
medical expense with an electronic payment card arrangement. The terms of the electronic
payment card arrangement, if applicable, will be set forth in the SPD.
4.03A Substantiation of Expenses. Each Participant must submit an expense for
reimbursement in accordance with the terms of the SPD and provide the required substantiation
set forth in the SPD or as otherwise requested by the Plan Administrator (or its designee).
4.04A Repayment of Excess Reimbursements. If, as of the end of any Plan Year, it is
determined that a Participant has received payments under this Healthcare FSA that exceed the
amount of Eligible Medical Expenses that have been substantiated by such Participant during the
Plan Year as required by Section 4.03A herein or reimbursements have been made in error (e.g.
reimbursements were made for expenses incurred for the care of an individual who was not a
qualifying individual), the Plan Administrator shall recoup the excess reimbursements in one or
more of the following ways:
a) 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;
b) The Plan Administrator may offset the excess reimbursement against any other Eligible
Medical Expenses submitted for reimbursement (regardless of the Plan Year in which
submitted); and/or
c) The Plan Administrator may withhold such amounts from the Participant's pay (to the
extent permitted under applicable law).
If the Plan Administrator is unable to recoup the excess reimbursement through the means set
forth above, the Plan Administrator will notify the Employer that the funds could not be recouped
and the Employer will treat the excess reimbursement as it would any other bad business debt.
4.05A Reimbursement Following Cessation of Participation. Participants in the Healthcare
FSA may submit claims for reimbursement for Eligible Medical Expense incurred during the Plan
Year and before the date of participation in the Healthcare FSA ceases so long as the claim is
submitted prior to the end of the run out period set forth in the SPD. Unless a COBRA election is
made as set forth in the SPD, Participants shall not be entitled to receive reimbursement for
Eligible Medical Expenses incurred after employment and/or eligibility ceases under this Section.
Any unused reimbursement benefits at the expiration of the Plan Year (as set forth in the SPD)
shall be treated in accordance with Section 4.0 IA.
4.06A Coordination of Benefits under the Healthcare FSA. The Healthcare FSA is intended
to pay benefits solely for otherwise unreimbursed medical expenses. Accordingly, it shall not be
considered a group health plan for coordination of benefits purposes, and its benefits shall not be
taken into account when determining benefits payable under any other plan.
HFSA-PD-072005
4.07A Disbursement Reports. The Plan Administrator shall issue directions to the Employer
' concerning all benefits that are to be paid from the Employer's general assets pursuant to the
provisions of the Healthcare FSA.
4.08A Timing of Reimbursements. Reimbursements shall be made as soon as administratively
feasible after the Plan Administrator or its designee has received the required forms.
4.09A Statements. The Plan Administrator or its designated third party administrator may
periodically furnish each Participant with a statement, showing the amounts paid or expenses
incurred by the Employer in providing Healthcare Reimbursement under the Healthcare FSA.
4.10A Post -Mortem Payments. Any benefit payable under the Healthcare FSA after the death
of a Participant shall be paid to his surviving Spouse, or if no spouse, to his 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.
4.11A Non -Alienation of Benefits. Except as expressly provided by the Administrator, no
benefit under the Healthcare FSA shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. No
benefit under the Healthcare FSA shall in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person.
4.12A Mental or Physical Incompetency. Every person receiving or claiming benefits under
the Healthcare FSA shall be presumed to be mentally and physically competent and of age until
' the Plan Administrator receives a written notice, in a form and manner acceptable to it, that such
person is mentally or physically incompetent or a minor, and that a guardian, conservator or other
person legally vested with the care of his estate has been appointed.
4.13A 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 Healthcare FSA because he
cannot ascertain the identity or whereabouts of such Participants or other person after reasonable
efforts have been made to identify or locate such person, such payment and all subsequent
payments otherwise due to such Participant or other person shall be forfeited after a reasonable
time after the date any such payment first became due.
4.14A Tax Effects of Reimbursements. Neither the Employer, nor the Plan Administrator
makes any warranty or other representation as to whether any reimbursements made under the
Healthcare FSA will be treated as excludable from gross income for local, state, or federal
income tax purposes. If for any reason it is determined that any amount paid for the benefit of a
Participant or Beneficiary are includable in an Employee's gross income for local, federal, or state
income tax purposes, then under no circumstances shall the recipient have any recourse against
the Plan Administrator or the Employer with respect to any increased taxes or other losses or
damages suffered by the Employees as a result thereof. The Healthcare FSA is designed and is
intended to be operated as a self-insured medical reimbursement plan under Section 105 of the
Code.
4.15A Forfeiture of Unclaimed Reimbursement Account Benefits. Any Healthcare FSA
Reimbursement Account benefit payments that are unclaimed (e.g., uncashed benefit checks) by
the close of the Plan Year following the Plan Year in which the Eligible Medical Expense was
incurred shall be forfeited.
HFSA-PD-072005 6
ARTICLE VA
FUNDING AGENT
The Healthcare FSA shall be funded with amounts withheld from Compensation pursuant to
Salary Reduction Agreements, and/or Nonelective Contributions provided by the Employer, if
any. The Employer will apply all such amounts, without regard to their source, to pay for the
welfare benefits provided herein as soon as administratively feasible and to the extent applicable,
shall comply with all applicable regulations promulgated by the Department of Labor ("D.O.L.")
taking into consideration any enforcement procedures adopted by the D.O.L.
ARTICLE VIA
CLAIMSPROCEDI
The Healthcare FSA has established procedures for reviewing claims denied under this
Healthcare FSA and those claims review procedures are set forth in the SPD.
ARTICLE VIIA
CONTINUATION COVERAGE UNDER COBRA
The SPD includes COBRA continuation of coverage provisions that shall be applicable to the
Healthcare FSA, to the extent the plan sponsor is subject to COBRA (as it amended ERISA, the
Code, and the Public Health Service Act).
ARTICLE VIIIA
HIPAA PRIVACY AND SECURITY
8.01A Scope and Purpose. The Healthcare FSA (the "Plan") will use protected health
information ("PHP') to the extent of and in accordance with the uses and disclosures permitted by
the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). Specifically, the
Plan will use and disclose PHI for purposes related to healthcare treatment, payment for
healthcare and healthcare operations as set forth below.
8.02A Effective Date. This Article VIIIA is effective on April 14, 2003, or such later effective
date of the Privacy Rules with respect to the client).
8.03A Use and Disclosure of PHI.
a) General. The Plan will use PHI to the extent of and in accordance with the uses and
disclosures permitted by HIPAA, including but not limited to healthcare treatment,
payment for healthcare, healthcare operations and as required by law. The Privacy Notice
will list the specific uses and disclosure of PHI that will be made by the Plan.
b) Disclosure to the Employer. The Plan will disclose PHI to the Employer, or where
applicable, an Affiliate only upon receipt of written certification from the Employer that:
The Plan document has been amended to incorporate the provisions in this
Article VIIIA; and
The Employer agrees to implement the provisions in Section 8.04A herein.
HFSA-PD-072005
8.04A
Conditions Imposed on Employer. Notwithstanding any provision of the Plan to the
contrary, the Employer agrees:
a)
Not to use or disclose PHI other than as permitted or required by this Article VIIIA or as
required by law;
b)
To ensure that any agents, including a subcontractor, to whom the Employer provides
PHI received from the Plan agree to the same restrictions and conditions that apply to the
Employer with respect to PHI received or created on behalf of the Plan;
c)
Not use or disclose an individual's PHI for employment-related purposes (including
hiring, firing, promotion, assignment or scheduling) unless authorized by the Individual;
d)
Not to use or disclose an Individual's PHI in connection with any other non -health
benefit program or employee benefit plan of the Employer unless authorized by the
Individual;
e)
To report to the Plan any use or disclosure of PHI that is inconsistent with this Article
VIII, if it becomes aware of an inconsistent use or disclosure;
f)
To provide Individuals with access to PHI in accordance with 45 C.F.R. § 164.524;
g)
To make available PHI for amendment and incorporate any amendments to PHI in
accordance with 45 C.F.R. § 164.526;
h)
To make available the information required to provide an accounting of disclosures in
accordance with 45 C.F.R. § 164.528;
i)
To make internal practices, books and records relating to the use and disclosure of PHI
received from the Plan available to the Secretary of Health and Human Services for
purposes of determining the Plan's compliance with HIPAA;
j)
If feasible, to return or destroy all PHI received from the Plan that the Employer
maintains in any form, and retain no copies of such PHI when no longer needed for the
'
purpose for which disclosure was made. If return or destruction is not feasible, limit
further uses and disclosures to those purposes that make the return or destruction
infeasible; and
k)
To ensure adequate separation between the Plan and Employer as required by 45 C.F.R. §
164.504(f)(2)(iii) and described in this Article VIIIA.
8.05A Designated Employees Who May Receive PHI. In accordance with the Privacy Rules,
only certain Employees who perform Plan administrative functions may be given access to PHI.
Those Employees who have access to PHI from the Plan are listed in the Privacy Notice, either by
name or individual position.
8.06A Restrictions on Employees with Access to PHI. The Employees who have access to
PHI listed in the Privacy Notice may only use and disclose PHI for Plan Administration functions
that the Employer performs for the Plan, as set forth in the Privacy Notice, including but not
limited to, quality assurance, claims processing, auditing, and monitoring.
8.07A Policies and Procedures. The Employer will implement Policies and Procedures setting
forth operating rules to implement the provisions hereof.
8.08A Organized Healthcare Arrangement. The Plan Administrator intends the Plan to form
part of an Organized Healthcare Arrangement along with any other Benefit under a covered
health plan (under 45 C.F.R. § 160.103) provided by the Employer.
' 8.09A Privacy Official. The Plan shall designate a Privacy Official, who will be responsible
for the Plan's compliance with HIPAA. The Privacy Official may contract with or otherwise
utilize the services of attorneys, accountants, brokers, consultants, or other third party experts as
HFSA-PD-072005
the Privacy Official deems necessary or advisable. In addition and notwithstanding any provision
of this Plan to the contrary, the Privacy Official shall have the authority to and be responsible for:
a) Accepting and verifying the accuracy and completeness of any certification provided by
the Employer under this Article VIIIA;
b) Transmitting the certification to any third parties as may be necessary to permit them to
disclose PHI to Employer;
c) Establishing and implementing policies and procedures with respect to PHI that are
designed to ensure compliance by the Plan with the requirements of HIPAA;
d) Establishing and overseeing proper training of the Plan, or Employer personnel who will
have access to Protected Heath Information; and
e) Any other duty or responsibility that the Privacy Official, in his or her sole capacity,
deems necessary or appropriate to comply with the provisions of HIPAA and the
purposes of this Article VIIIA.
8.10A Noncompliance. The Employer shall provide a mechanism for resolving issues of
noncompliance, including disciplinary sanctions for personnel who do not comply with the
provisions of this Article VIIIA.
8.11A Definitions. As used in this Article VIIIA, each of the following capitalized terms shall
have the respective meaning given below:
• "Individual" means the person who is the subject of the heath information created,
received or maintained by the Plan or Employer.
• "Organized Healthcare Arrangement" means the relationship of separate legal entities
as defined in 45 C.F.R. § 160.103.
• "Privacy Notice" means the notice of the Plan's privacy practices distributed to Plan
participants in accordance with 45 C.F.R. § 164.520, as amended from time to time.
• "Privacy Rules" means the privacy provisions of HIPAA and the regulations in 45
C.F.R. Parts 160 and 164.
• "Protected Health Information or PHI" means individually identifiable health
information as defined in 45 C.F.R. § 160.103.
8.12A Interpretation and Limited Applicability. This Article VIII serves the sole purpose of
complying with the requirements of HIPAA and shall be interpreted and construed in a manner to
effectuate this purpose. Neither this Article VIII nor the duties, powers, responsibilities, and
obligations listed herein shall be taken into account in determining the amount or nature of the
benefits provided to any person covered under this Plan, nor shall they inure to the benefit of any
third parties. To the extent that any of the provisions of this Article VIII are no longer required by
HIPAA, they shall be deemed deleted and shall have no further force or effect.
8.13A Services Performed for the Employer. Notwithstanding any other provision of this
Plan to the contrary, all services performed by a business associate for the Plan in accordance
with the applicable service agreement shall be deemed to be performed on behalf of the Plan and
subject to the administrative simplification provisions of HIPAA contained in 45 C.F.R. parts 160
through 164, except services that relate to eligibility and enrollment in the Plan. If a business
HFSA-PD-072005
associate of the Plan performs any services that relate to eligibility and enrollment to the Plan,
these services shall be deemed to be performed on behalf of the Employer in its capacity as Plan
Sponsor and not on behalf of the Plan.
IN WITNESS WHEREOF, the Employer has executed this Healthcare FSA as of the date set
forth below.
City of San Juan Capistrano
By: �z 9�
Title:L M,,fyal (ire 1Z)1tJt ccP5 0 VeC+zX(
Date: 1 -Z�) 10('0
HFSA-PD-072005 10
L
EXHIBIT A — APPENDIX b
DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT
APPENDIX B TO THE CITY OF SAN JUAN CAPISTRANO'S CAFETERIA PLAN
DFSA-PD-072005
The Effective Date of this Document is January 1, 2006
TABLE OF CONTENTS
ARTICLE IB — DEFINITIONS................................................................................................... 2
1.01B Dependent...................................................................................................................2
1.02B Dependent Care Expense Reimbursement...............................................................2
1.03B Earned Income........................................................................................................... 2
1.04B Effective Date..............................................................................................................2
1.05B Eligible Employment Related Expenses................................................................... 2
1.06B Highly Compensated Individual............................................................................... 2
1.07B Reimbursement Account(s) or Account(s)............................................................... 2
1.08B Qualifying Individual.................................................................................................3
1.09B Qualifying Services..................................................................................................... 3
ARTICLE IIB — ELIGIBILITY AND PARTICIPATION.......................................................3
2.01B Eligibility to Participate.............................................................................................3
2.02B Termination of Participation..................................................................................... 3
2.03B Qualifying Leave Under Family Leave Act.............................................................3
ARTICLE IIIB — ELECTION TO PARTICIPATE PARTICIPATION................................4
3.01B Initial Election Period................................................................................................4
3.02B Annual Election Period.............................................................................................. 4
3.03B Change of Elections.................................................................................................... 4
3.04B Impact of Termination of Employment on Election or Cessation of Eligibility... 5
3.05B Reduction of Certain Elections to Prevent Discrimination....................................5
ARTICLE IVB — REIMBURSEMENTS.................................................................................... 5
4.0111
Dependent Care Reimbursement..............................................................................5
4.02B
Receiving Dependent Care Reimbursement............................................................ 5
4.03B
Substantiation of Expenses........................................................................................5
4.04B
Repayment of Excess Reimbursements.................................................................... 5
4.05B
Reimbursement Following Cessation of Participation............................................6
4.06B
Disbursement Reports................................................................................................6
4.07B
Reimbursement.......................................................................................................... 6
4.08B
Statements...................................................................................................................6
4.09B
Post -Mortem Payments..............................................................................................6
4.10B
Non alienation of Benefits..........................................................................................6
4.11B
Mental or Physical Incompetency............................................................................. 6
4.12B
Inability to Locate Payee........................................................................................... 7
4.13B
Tax Effects of Reimbursements................................................................................7
4.14B
Forfeiture of Unclaimed Reimbursement Account Benefits .................................. 7
ARTICLE VB — FUNDING AGENT
ARTICLE VIB — CLAIMS PROCEDURES.............................................................................. 7
DFSA-PD-072005
PREAMBLE
' Effective as of the date set forth below, City of San Juan Capistrano established this Dependent
Care Spending Account (the Dependent Care FSA) to help provide dependent care assistance 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 Dependent Care
Reimbursement Account established pursuant to this Dependent Care FSA. This Dependent Care
FSA is intended to provide reimbursement of certain Eligible Employment Related Expenses
incurred by the Participant for care of a Qualifying Individual. The Employer intends that the
Dependent Care FSA qualify as a Code Section 129 dependent care assistance plan, and that the
benefits provided under the Dependent Care FSA be eligible for exclusion from the Participant's
income for federal income tax purposes under Section 129 of the Code. This Dependent Care
FSA is a component of, and incorporated by reference into, the City of San Juan Capistrano's
Cafeteria Plan ("Cafeteria Plan") and Articles VI, IX and X of the Cafeteria Plan document apply
also to this Dependent Care FSA.
DFSA-PD-072005
ARTICLE IB
DEFINITIONS
Unless otherwise specified, terms that are capitalized in this Appendix B to the Cafeteria Plan
have the same meaning as the defined terms in the Cafeteria Plan. The definitions of terms
defined in this Appendix B, but not defined in the Cafeteria Plan, shall be applicable only with
respect to this Appendix B. To the extent a term is defined both in the Cafeteria Plan and in this
Appendix B, the term as defined in the Cafeteria Plan shall govern the interpretation of the
Cafeteria Plan and the tern as defined in this Appendix B shall govern the interpretation of this
Dependent Care FSA.
1.01B "Dependent" means any individual who is a tax dependent of the Participant as defined
in Code Section 152 except that a child with respect to whom Code Section 21(e)(5) applies shall
be considered a dependent of the custodial parent (as defined in Code Section 152(e)) for
purposes of this Dependent Care FSA. .
1.02B "Dependent Care Reimbursement" shall have the meaning assigned to it by Section
4.018 of this Dependent Care FSA.
1.03B "Earned Income" means all income derived from wages, salaries, tips, self-
employment, and other Compensation (such as disability or wage continuation benefits), but only
if such amounts are includible in gross income for the taxable year. Earned income does not
include any other amounts excluded from earned income under Code Section 32(c)(2), such as
amounts received under a pension or annuity, or pursuant to workers' compensation.
1.0413 "Effective Date" of this Dependent Care FSA means January 1, 2004.
1.05B "Eligible Employment Related Expenses" means those expenses that would be
considered to be employment-related expenses under Section 21(b)(2) of the Code (relating to
expenses for household and dependent care services necessary for gainful employment) if paid
for by the Employee to provide Qualifying Services other than amounts paid to:
a) An individual with respect to whom a Dependent deduction is allowable under Code
Section 151(c) to the Participant or his Spouse;
b) The Participant's Spouse; or
c) A child (as defined in Code Section 152(f)(1)) of the Participant who is under 19 years of
age at the end of the taxable year in which the expenses were incurred.
1.06B "Highly Compensated Individual" means an individual defined under Code Section
414(q), as amended, as a "highly compensated individual" or a "highly compensated employee."
1.0713 "Reimbursement Account(s)" shall be the funding mechanism by which amounts are
withheld from an Employee's Compensation and retained for future Dependent Care
Reimbursement (as defined in Section 1.0213 herein). No money shall actually be allocated to
any individual Participant Account(s); any such Account(s) 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 the
Participant Account(s).
DFSA-PD-072005
1.08B "Qualifying Individual" means:
' a) An individual age 12 or under who is a "qualifying child" of the Participant as defined in
Code Section 152(a)(1). Generally speaking, a "qualifying child" is a child (including a
brother, sister, step sibling) of the Participant or a descendant of such child (e.g. a niece,
nephew, grandchild) who shares the same principal place of abode with the Participant
for more than half the year and does not provide over half of his/her support. In addition,
a child of an Participant who is also a Code Section 152 dependent of another individual
cannot be a Qualifying Individual;
b) A Dependent of a Participant who is mentally or physically incapable of caring for
himself or herself and who has the same principal place of abode as the employee for
more than half the year; or
c) The Spouse of a Participant who is mentally or physically incapable of caring for himself
or herself and who has the same principal place of abode as the employee for more than
half the year.
A child of divorced parents will be considered a Qualifying Individual of the "custodial parent"
as defined in Code Section 152(e).
1.09B "Qualifying Services" means services relating to the care of a Qualifying Individual that
enable the Participant or his Spouse to remain gainfully employed which are performed:
' a) In the Participant's home; or
b) Outside the Participant's home for (i) the care of a Dependent of the Participant who is
under age 13, or (ii) the care of any other Qualifying Individual who resides at least eight
(8) hours per day in the Participant's household. If the expenses are incurred for services
provided by a dependent care center (i.e., a facility that provides care for more than 6
individuals not residing at the facility), the center must comply with all applicable state
and local laws and regulations.
ARTICLE IIB
ELIGIBILITY AND PARTICIPATION
2.01B Eligibility to Participate. Each Employee who satisfies the eligibility requirements set
forth in the SPD shall be eligible to participate in this Dependent Care FSA as of the Dependent
Care Eligibility Date set forth in the SPD.
2.02B Termination of Participation. Participation shall terminate on the earliest of the dates
set forth in the SPD.
2.03B Qualifying Leave under the Family and Medical Leave Act. Notwithstanding any
provision to the contrary in this Dependent Care FSA, 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 coverage under this
Dependent Care FSA in accordance with the SPD. The requirements for continuing coverage,
' procedures for FMLA leave and payment option(s) 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.
DFSA-PD-072005
ARTICLE IIIB
ELECTION TO PARTICIPATE
3.0111 Initial Election Period.
a) Currently Eligible Employees. An Employee who is eligible to become a Participant in
this Dependent Care FSA as of the Effective Date must complete, sign and file a Salary
Reduction Agreement with the Plan Administrator (or its designated third party
administrator as set forth on the Salary Reduction Agreement) during the election period
(as specified by the Plan Administrator) immediately preceding the Effective Date of the
Dependent Care FSA in order to become a Participant on the Effective Date. The
elections made by the Participant on this initial Salary Reduction Agreement shall be
effective, subject to Section 3.0213, for the Plan Year beginning on the Effective Date.
b) New Employees and Employees Who Have Not Yet Satisfied The Dependent Care
FSA's Waiting Period. An Employee who becomes eligible to become a Participant in
this Dependent Care FSA after the Effective Date must complete, sign and file a Salary
Reduction Agreement with the Plan Administrator (or its designated third party
administrator as set forth on the Salary Reduction Agreement) during the Initial Election
Period set forth in the SPD or the enrollment material. Participation will commence
under this Dependent Care FSA as set forth in the SPD (but in no event prior to the
election).
c) Failure to Elect. An eligible Employee who fails to complete, sign and file a Salary
Reduction Agreement in accordance with paragraph (a) or (b) above during an initial
election period may become a Participant on a later date in accordance with Section
3.02B or 3.03B.
3.02B Annual Election Period. Each Employee who is a Participant in this Dependent Care
FSA or who is eligible to become a Participant in this Dependent Care FSA shall be notified,
prior to each Anniversary Date of this Dependent Care FSA, of his right to become a Participant
in this Dependent Care FSA, to continue participation in this Dependent Care FSA, or to modify
or to cease participation in this Dependent Care FSA, 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 date on which the Annual Election Period commences and ends will be set forth in
the SPD or the enrollment material. An election is made during the Annual Election Period in the
manner set forth in the SPD. The consequences of failing to make an election during the Annual
Election Period will be set forth in the SPD.
3.03B Change of Elections. A Participant shall not make any changes to his or her election
except for election changes permitted under the SPD, and for changes made during the Annual
Election Period, changes caused by termination of employment or cessation of eligibility and
changes pursuant to the Family and Medical Leave Act. All election changes shall be effective
on a prospective basis only (i.e., election changes will become effective no earlier than the 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.
DFSA-PD-072005 4
3.04B Impact of Termination of Employment on Election or Cessation of Eligibility.
Termination of employment or cessation of eligibility shall automatically revoke any Salary
Reduction Agreement. Except as provided below, if revocation occurs under this Section 3.04B,
no new election with respect to the Dependent Care FSA may be made during the remainder of
the Plan Year except as set forth in the SPD.
3.05B Reduction of Certain Elections to Prevent Discrimination. If the Plan Administrator
determines, before or during any Plan Year, that the Dependent Care FSA may fail to satisfy for
such Plan Year any requirement imposed by the Code or any limitation on 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.
ARTICLE IVB
REIMBURSEMENTS
4.01B Dependent Care Reimbursement. Each Participant's Dependent Care FSA will be
credited for Dependent Care Reimbursement with amounts withheld from the Participant's
Compensation, and any Nonelective Contributions allocated thereto by the Employer or where
applicable, the Participant. The Dependent Care Account will be debited for Dependent Care
Reimbursements disbursed to the Participant in accordance with Article IVB of this document. In
the event that the amount in the 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 Dependent Care Reimbursements exceed the amount
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 Reimbursement for the Plan Year within the run
out period set forth in the SPD. Amounts so forfeited shall be used in a manner that is not
prohibited by applicable federal or state law. The maximum annual reimbursement amount shall
be set forth in the SPD. The Employer may establish a minimum annual reimbursement amount
as set forth in the SPD.
4.02B Receiving Dependent Care Reimbursement. Payment shall be made to the Participant
in cash as reimbursement for Eligible Employment Related Expenses incurred by him while a
Participant, during the Plan Year for which the Participant's election is effective, provided that the
substantiation requirements of Section 4.0313 herein are satisfied.
4.03B Substantiation of Expenses. Each Participant must submit an expense for
reimbursement in accordance with the terms of the SPD.
4.04B Repayment of Excess/Erroneous Reimbursements. If, as of the end of any Plan Year,
it is determined that a Participant has received payments under this Dependent Care FSA that
exceed the amount of Eligible Employment Related Expenses that have been properly
substantiated by such Participant during the Plan Year as required by Section 4.0313 herein or
reimbursements have been made in error (e.g. reimbursements were made for expenses incurred
for the care of an individual who was not a qualifying individual), the Plan Administrator shall
' recoup the excess reimbursements in one or more of the following ways:
DFSA-PD-072005
a) 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;
b) The Plan Administrator may offset the excess reimbursement against any other Eligible
Employment Related Expenses submitted for reimbursement (regardless of the Plan Year
in which submitted); and/or
c) The Plan Administrator may withhold such amounts from the Participant's pay (to the
extent permitted under applicable law.
If the Plan Administrator is unable to recoup the excess reimbursement through the means set
forth above, the Plan Administrator will notify the Employer that the funds could not be recouped
and the Employer will treat the excess reimbursement as it would any other bad business debt.
4.05B Reimbursement Following Cessation of Participation. Participants in the Dependent
Care FSA may submit claims for reimbursement for Eligible Employment Related Expenses
incurred during the Plan Year and before the date of participation in the Dependent Care FSA
ceases so long as the claim is submitted prior to the end of the run out period set forth in the SPD.
To the extent set forth in the SPD, Participants may submit claims for reimbursement of Eligible
Employment -Related Expenses incurred during the Plan Year and after they cease participation
so long as such claims are submitted prior to the end of the run out period. Any unused
reimbursement benefits at the expiration of the Plan Year (as set forth in the SPD) shall be treated
in accordance with Section 4.01 B.
4.06B Disbursement Reports. The Plan Administrator shall issue directions to the Employer
concerning all benefits that are to be paid from the Employer's general assets pursuant to the
provisions of the Dependent Care FSA.
4.07B Timing of Reimbursements. Reimbursements shall be made as soon as administratively
feasible after the required forms have been received by the Plan Administrator or its designee.
4.08B Statements. The Plan Administrator or its designated third party administrator may
periodically furnish each Participant with a statement, showing the amounts paid or expenses
incurred by the Employer in providing Dependent Care Reimbursement under the Dependent
Care FSA.
4.09B Post -Mortem Payments. Any benefit payable under the Dependent Care FSA after the
death of a Participant shall be paid to his surviving Spouse, otherwise, to his 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.
4.1011 Non -Alienation of Benefits. Except as expressly provided by the Administrator, no
benefit under the Dependent Care FSA shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void.
No benefit under the Dependent Care FSA shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person.
4.11B Mental or Physical Incompetency. Every person receiving or claiming benefits under
the Dependent Care FSA shall be presumed to be mentally and physically competent and of age
until the Plan Administrator receives a written notice, in a form and manner acceptable to it, that
DFSA-PD-072005 6
such person is mentally or physically incompetent or a minor, and that a guardian, conservator or
other person legally vested with the care of his estate has been appointed.
4.12B 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 Dependent Care FSA because he
cannot ascertain the identity or whereabouts of such Participants or other person after reasonable
efforts have been made to identify or locate such person, such payment and all subsequent
payments otherwise due to such Participant or other person shall be forfeited after a reasonable
time after the date any such payment first became due.
4.1313 Tax Effects of Reimbursements. Neither the Employer, nor the Plan Administrator
makes any warranty or other representation as to whether any reimbursements made under the
Dependent Care FSA will be treated as excludable from gross income for local, state, or federal
income tax purposes. If for any reason it is determined that any amount paid for the benefit of a
Participant or Beneficiary are includable in an Employee's gross income for local, federal, or state
income tax purposes, then under no circumstances shall the recipient have any recourse against
the Plan Administrator or the Employer with respect to any increased taxes or other losses or
damages suffered by the Employees as a result thereof. The Dependent Care FSA is designed
and is intended to be operated as a dependent care assistance plan under Section 129 of the Code.
4.1413 Forfeiture of Unclaimed Reimbursement Account Benefits. Any Dependent Care
FSA Reimbursement Account benefit payments that are unclaimed (e.g., uncashed benefit
checks) by the close of the Plan Year following the Plan Year in which the Eligible Employment
Related Expense was incurred shall be forfeited.
' ARTICLE VB
FUNDING AGENT
The Dependent Care FSA shall be funded with amounts withheld from Compensation pursuant to
Salary Reduction Agreements, and/or Nonelective Contributions provided by the Employer, if
any. The Employer will apply all such amounts, without regard to their source, to pay for the
welfare benefits provided herein as soon as administratively feasible and shall comply with all
applicable regulations.
ARTICLE VIB
CLAIMS PROCEDURES
The Plan has established procedures for reviewing claims denied under this Dependent Care FSA
and those claims review procedures are set forth in the SPD.
DFSA-PD-072005
IN WITNESS WHEREOF, the Employer has executed this Dependent Care FSA as of the date
set forth below.
City of San Juan Capistrano
Title: vw-114 . -5�/cJIC� l f�GTLQ
Date: (%
DFSA-PD-072005