HomeMy WebLinkAboutResolution - 2005-R0512 - Amendment - Lubbock Flexible Benefit Plan - Changes To FSADCA - 11/07/2005Resolution No. 2005-R0512
November 7, 2005
Item 5.17
RESOLUTION
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT the Mayor of the City of Lubbock BE and is hereby authorized and
directed to execute for and on behalf of the City of Lubbock, an Amendment to the City
of Lubbock Flexible Benefit Plan for changes to the rules of administration of the
Flexible Benefit Plan, (Flexible Spending Account and Dependant Care Account). Said
Amendment is attached hereto and incorporated in this Resolution as if fully set forth
herein and shall be included in the minutes of the Council.
Passed by the City Council this 7th day of NnveAuber , 2005.
UGAL, MAYOR
ATTEST:
Re ecca Garza, City Secretary
APPROVED AS TO CON NT:
Scott Snider, Director of Human Resources
APPROVED AS TO FORM:
CITY OF LUBBOCK
FLEXIBLE BENEFIT PLAN
AND ALL SUPPORTING FORMS HAVE BEEN PRODUCED FOR
ICON BENEFIT ADMINISTRATORS
Copyright 2004 SunGard Corbel
All Rights Reserved
CITY OF LUBBOCK
FLEXIBLE BENEFIT PLAN
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY...................................................................................................................3
2.2 EFFECTIVE DATE OF PARTICIPATION.......................................................................3
2.3 APPLICATION TO PARTICIPATE.................................................................................3
2.4 TERMINATION OF PARTICIPATION....................................................................
2.5 TERMINATION OF EMPLOYMENT...............................................................................3
2.6 DEATH..........................................................................................................................4
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 SALARY REDIRECTION...............................................................................................4
3.2 APPLICATION OF CONTRIBUTIONS...........................................................................5
3.3 PERIODIC CONTRIBUTIONS.......................................................................................5
ARTICLE IV
BENEFITS
4.1 BENEFIT OPTIONS.......................................................................................................5
4.2 HEALTH CARE REIMBURSEMENT PLAN BENEFIT....................................................5
4.3 DEPENDENT CARE ASSISTANCE PROGRAM BENEFIT...........................................5
4.4 NONDISCRIMINATION REQUIREMENTS. ....... ...................... .................. ................. 5
ARTICLE V
PARTICIPANT ELECTIONS
5.1 INITIAL ELECTIONS.....................................................................................................6
5.2 SUBSEQUENT ANNUAL ELECTIONS..........................................................................7
5.3 FAILURE TO ELECT.....................................................................................................7
5.4 CHANGE OF ELECTIONS............................................................................................7
ARTICLE VI
HEALTH CARE REIMBURSEMENT PLAN
6.1 ESTABLISHMENT OF PLAN.............................................................. ......... 10
................
6.2 DEFINITIONS.....................................................................10
6.3 FORFEITURES............................................................................................................11
6.4 LIMITATION ON ALLOCATIONS.................................................................................11
6.5 NONDISCRIMINATION REQUIREMENTS..................................................................11
6.6 COORDINATION WITH CAFETERIA PLAN................................................................12
6.7 HEALTH CARE REIMBURSEMENT PLAN CLAIMS...................................................12
ARTICLE VII
DEPENDENT CARE ASSISTANCE PROGRAM
7.1
ESTABLISHMENT OF PROGRAM..............................................................................13
7.2
DEFINITIONS.............................................................................••.•.............................13
7.3
DEPENDENT CARE ASSISTANCE ACCOUNTS........................................................14
7.4
INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS..............................14
7.5
DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS .............................14
7.6
ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT ......................15
7.7
ANNUAL STATEMENT OF BENEFITS........................................................................15
7.8
FORFEITURES............................................................................................................15
7.9
LIMITATION ON PAYMENTS......................................................................................15
7.10
NONDISCRIMINATION REQUIREMENTS ............................................. .........15
7.11
COORDINATION WITH CAFETERIA PLAN................................................................16
7.12
DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS...........................................16
ARTICLE VIII
BENEFITS AND RIGHTS
8.1 CLAIM FOR BENEFITS......................................................................17
8.2 APPLICATION OF BENEFIT PLAN SURPLUS............................................................18
ARTICLE IX
ADMINISTRATION
9.1 PLAN ADMINISTRATION............................................................................................18
9.2 EXAMINATION OF RECORDS....................................................................................19
9.3 PAYMENT OF EXPENSES.........................................................................................19
9.4 INDEMNIFICATION OF ADMINISTRATOR.................................................................19
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 AMENDMENT..............................................................................................................20
10.2 TERMINATION............................................................................................................20
ARTICLE XI
MISCELLANEOUS
11.1
PLAN INTERPRETATION............................................................................................20
11.2
GENDER AND NUMBER.............................................................................................20
11.3
WRITTEN DOCUMENT........................................................................................
..20
11.4
EXCLUSIVE BENEFIT.................................................................................................20
11.5
PARTICIPANT'S RIGHTS............................................................................................21
11.6
ACTION BY THE EMPLOYER.....................................................................................21
11.7
NO GUARANTEE OF TAX CONSEQUENCES............................................................21
11.8
INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS..........................................21
11.9
FUNDING....................................................................................................................21
11.10
GOVERNING LAW ............................. .........................................................................22
11.11
SEVERABILITY..........................................................
..22
11.12
CAPTIONS...........................................22
11.13
CONTINUATION OF COVERAGE...............................................................................22
11.14
FAMILY AND MEDICAL LEAVE ACT..........................................................................22
11.15
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT.........................22
11.16
UNIFORM SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT..........
22
11.17
COMPLIANCE WITH HIPAA PRIVACY STANDARDS................................................22
CITY OF LUBBOCK
FLEXIBLE BENEFIT PLAN
INTRODUCTION
The Employer has amended this Plan effective January 1, 2005, to recognize the
contribution made to the Employer by its Employees. Its purpose is to reward them by providing
benefits for those Employees who shall qualify hereunder and their dependents and
beneficiaries. The concept of this Plan is to allow Employees to choose among different types of
benefits based on their own particular goals, desires and needs. This Plan is a restatement of a
Plan which was originally effective on January 1, 2004. The Plan shall be known as City of
Lubbock Flexible Benefit Plan (the "Plan").
The intention of the Employer is that the Plan qualify as a "Cafeteria Plan" within
the meaning of Section 125 of the Internal Revenue Code of 1986, as amended, and that the
benefits which an Employee elects to receive under the Plan be includible or excludable from
the Employee's income under Section 125(a) and other applicable sections of the Internal
Revenue Code of 1986, as amended.
ARTICLE I
DEFINITIONS
1.1 "Administrator" means the individual(s) or corporation appointed by the Employer
to carry out the administration of the Plan. The Employer shall be empowered to appoint and
remove the Administrator from time to time as it deems necessary for the proper administration
of the Plan. In the event the Administrator has not been appointed, or resigns from a prior
appointment, the Employer shall be deemed to be the Administrator.
1.2 "Affiliated Employer" means the Employer and any corporation which is a
member of a controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which is under
common control (as defined in Code Section 414(c)) with the Employer; any organization
(whether or not incorporated) which is a member of an affiliated service group (as defined in
Code Section 414(m)) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Treasury regulations under Code Section 414(0).
1.3 "Benefit" means any of the optional benefit choices available to a Participant as
outlined in Section 4.1.
1.4 "Cafeteria Plan Benefit Dollars" means the amount available to Participants,
pursuant to Article III, to purchase Benefits. Each dollar contributed to this Plan shall be
converted into one Cafeteria Plan Benefit Dollar.
1.5 "Code" means the Internal Revenue Code of 1986, as amended or replaced from
time to time.
1.6 "Compensation" means the amounts received by the Participant from the
Employer during a Plan Year.
1.7 "Dependent" means any individual who qualifies as a dependent under Code
Section 152 (as modified by Code Section 105(b)).
1.8 "Effective Date" means January 1, 2004.
1.9 "Election Period" means the 30 day period immediately preceding the beginning
of each Plan Year. However, an Employee's initial Election Period shall be determined pursuant
to Section 5.1.
1.10 "Eligible Employee" means any Employee who has satisfied the provisions of
Section 2.1.
An individual shall not be an "Eligible Employee" if such individual is not reported
on the payroll records of the Employer as a common law employee. In particular, it is expressly
intended that individuals not treated as common law employees by the Employer on its payroll
records are not "Eligible Employees" and are excluded from Plan participation even if a court or
administrative agency determines that such individuals are common law employees and not
independent contractors.
1.11 "Employee" means any person who is employed by the Employer. The term
Employee shall include leased employees within the meaning of Code Section 414(n)(2).
1.12 "Employer" means City of Lubbock and any successor which shall maintain this
Plan; and any predecessor which has maintained this Plan.
1.13 "Grace Period" means a period of 2 Y2 months following the end of a Plan Year,
meaning a period extending through the 15th day of the third calendar month following a Plan
Year during which claims applicable to the immediately preceding Plan Year may continue to be
incurred.
1.14 "Key Employee" means an Employee described in Code Section 416(i)(1) and
the Treasury regulations thereunder.
1.15 "Participant" means any Eligible Employee who elects to become a Participant
pursuant to Section 2.3 and has not for any reason become ineligible to participate further in the
Plan.
1.16 "Plan" means this instrument, including all amendments thereto.
1.17 "Plan Year" means the 12 -month period beginning January 1 st and ending
December 31 st. The Plan Year shall be the coverage period for the Benefits provided for under
this Plan. In the event a Participant commences participation during a Plan Year, then the initial
coverage period shall be that portion of the Plan Year commencing on such Participant's date of
entry and ending on the last day of such Plan Year.
1.18 "Salary Redirection" means the contributions made by the Employer on behalf of
Participants pursuant to Section 3.1. These contributions shall be converted to Cafeteria Plan
Benefit Dollars and allocated to the funds or accounts established under the Plan pursuant to
the Participants' elections made under Article V.
1.19 "Salary Redirection Agreement" means an agreement between the Participant
and the Employer under which the Participant agrees to reduce his Compensation or to forego
all or part of the increases in such Compensation and to have such amounts contributed by the
Employer to the Plan on the Participant's behalf. The Salary Redirection Agreement shall apply
only to Compensation that has not been actually or constructively received by the Participant as
of the date of the agreement (after taking this Plan and Code Section 125 into account) and,
subsequently does not become currently available to the Participant.
1.20 "Spouse" means the legally married husband or wife of a Participant, unless
legally separated by court decree.
V,
ARTICLE II
PARTICIPATION
2.1 ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder as of his date of
employment (or the Effective Date of the Plan, if later). However, any Eligible Employee who
was a Participant in the Plan on the effective date of this amendment shall continue to be
eligible to participate in the Plan.
2.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the first day of
the first full pay period coinciding with or next following the date on which he met the eligibility
requirements of Section 2.1.
An Employee who is eligible to participate in this Plan shall, during the applicable
Election Period, complete an application to participate and election of benefits form which the
Administrator shall furnish to the Employee. The election made on such form shall be
irrevocable until the end of the applicable Plan Year unless the Participant is entitled to change
his Benefit elections pursuant to Section 5.4 hereof.
An Eligible Employee shall also be required to execute a Salary Redirection
Agreement during the Election Period for the Plan Year during which he wishes to participate in
this Plan. Any such Salary Redirection Agreement shall be effective for the first pay period
beginning on or after the Employee's effective date of participation pursuant to Section 2.2.
2.4 TERMINATION OF PARTICIPATION
A Participant shall no longer participate in this Plan upon the occurrence of any
of the following events:
(a) His termination of employment, subject to the provisions of
Section 2.5;
(b) His death, subject to the provisions of Section 2.6; or
(c) The termination of this Plan, subject to the provisions of Section
10.2.
2.5 TERMINATION OF EMPLOYMENT
If a Participant's employment with the Employer is terminated for any reason
other than death, his participation in the Plan shall be governed in accordance with the
following:
(a) With regard to the Dependent Care Assistance Program, the
Participant's participation in the Plan shall cease and no further Salary
Redirection contributions shall be made. However, such Participant may submit
claims for employment related Dependent Care Expense reimbursements for the
remainder of the Plan Year in which such termination occurs for 90 days after
3
termination, based on the level of his Dependent Care Assistance Account as of
his date of termination.
(b) With regard to the Health Care Reimbursement Plan, the
Participant's participation in the Plan shall cease and no further Salary
Redirection contributions shall be made. However, such Participant may submit
claims for expenses incurred during the portion of the Plan Year preceding his
date of termination up to 90 days after his termination.
(c) In the event a Participant terminates his participation in the Health
Care Reimbursement Plan during the Plan Year, if Salary Redirections are made
other than on a pro rata basis, upon termination the Participant shall be entitled
to a reimbursement for any Salary Redirection previously paid for coverage or
benefits relating to the period after the date of the Participant's separation from
service regardless of the Participant's claims or reimbursements as of such date.
(d) This Section shall be applied and administered consistent with
such further rights a Participant and his Dependents may be entitled to pursuant
to Code Section 4980E and Section 11.13 of the Plan.
2.6 DEATH
If a Participant dies, his participation in the Plan shall cease. However, such
Participant's beneficiaries, or the representative of his estate, may submit claims for expenses
or benefits for the remainder of the Plan Year or until the Cafeteria Plan Benefit Dollars
allocated to each specific benefit are exhausted. A Participant may designate a specific
beneficiary for this purpose. If no such beneficiary is specified, the Administrator may designate
the Participant's Spouse, one of his Dependents or a representative of his estate.
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.1 SALARY REDIRECTION
Benefits under the Plan shall be financed by Salary Redirections sufficient to
support Benefits that a Participant has elected hereunder. The salary administration program of
the Employer shall be revised to allow each Participant to agree to reduce his pay during a Plan
Year by an amount determined necessary to purchase the elected Benefit. The amount of such
Salary Redirection shall be specified in the Salary Redirection Agreement and shall be
applicable for a Plan Year. Notwithstanding the above, for new Participants, the Salary
Redirection Agreement shall only be applicable from the first day of the pay period following the
Employee's entry date up to and including the last day of the Plan Year. These contributions
shall be converted to Cafeteria Plan Benefit Dollars and allocated to the funds or accounts
established under the Plan pursuant to the Participants' elections made under Article V.
Any Salary Redirection shall be determined prior to the beginning of a Plan Year
(subject to initial elections pursuant to Section 5.1) and prior to the end of the Election Period
and shall be irrevocable for such Plan Year. However, a Participant may revoke a Benefit
election or a Salary Redirection Agreement after the Plan Year has commenced and make a
new election with respect to the remainder of the Plan Year, if both the revocation and the new
election are on account of and consistent with a change in status and such other permitted
events as determined under Article V of the Plan and consistent with the rules and regulations
of the Department of the Treasury. Salary Redirection amounts shall be contributed on a
pro rata basis for each pay period during the Plan Year. All individual Salary Redirection
Agreements are deemed to be part of this Plan and incorporated by reference hereunder.
3.2 APPLICATION OF CONTRIBUTIONS
As soon as reasonably practical after each payroll period, the Employer shall
apply the Salary Redirection to provide the Benefits elected by the affected Participants. Any
contribution made or withheld for the Health Care Reimbursement Fund or Dependent Care
Assistance Account shall be credited to such fund or account.
3.3 PERIODIC CONTRIBUTIONS
Notwithstanding the requirement provided above and in other Articles of this Plan
that Salary Redirections be contributed to the Plan by the Employer on behalf of an Employee
on a level and pro rata basis for each payroll period, the Employer and Administrator may
implement a procedure in which Salary Redirections are contributed throughout the Plan Year
on a periodic basis that is not pro rata for each payroll period. However, with regard to the
Health Care Reimbursement Plan, the payment schedule for the required contributions may not
be based on the rate or amount of reimbursements during the Plan Year. In the event Salary
Redirections are not made on a pro rata basis, upon termination of participation, a Participant
may be entitled to a refund of such Salary Redirections pursuant to Section 2.5.
ARTICLE IV
BENEFITS
4.1 BENEFIT OPTIONS
Each Participant may elect to have the amount of his Cafeteria Plan Benefit
Dollars applied to any one or more of the following optional Benefits:
(1) Health Care Reimbursement Plan
(2) Dependent Care Assistance Program
4.2 HEALTH CARE REIMBURSEMENT PLAN BENEFIT
Each Participant may elect coverage under the Health Care Reimbursement Plan
option, in which case Article VI shall apply.
4.3 DEPENDENT CARE ASSISTANCE PROGRAM BENEFIT
Each Participant may elect coverage under the Dependent Care Assistance
Program option, in which case Article VII shall apply.
4.4 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Plan to provide benefits to a classification of
employees which the Secretary of the Treasury finds not to be discriminatory in
favor of the group in whose favor discrimination may not occur under Code
Section 125.
(b) It is the intent of this Plan not to provide qualified benefits as
defined under Code Section 125 to Key Employees in amounts that exceed 25%
of the aggregate of such Benefits provided for all Eligible Employees under the
5
Plan. For purposes of the preceding sentence, qualified benefits shall not include
benefits which (without regard to this paragraph) are includible in gross income.
(c) If the Administrator deems it necessary to avoid discrimination or
possible taxation to Key Employees or a group of employees in whose favor
discrimination may not occur in violation of Code Section 125, it may, but shall
not be required to, reject any election or reduce contributions or non-taxable
Benefits in order to assure compliance with this Section. Any act taken by the
Administrator under this Section shall be carried out in a uniform and
nondiscriminatory manner. If the Administrator decides to reject any election or
reduce contributions or non-taxable Benefits, it shall be done in the following
manner. First, the non-taxable Benefits of the affected Participant (either an
employee who is highly compensated or a Key Employee, whichever is
applicable) who has the highest amount of non-taxable Benefits for the Plan Year
shall have his non-taxable benefits reduced until the discrimination tests set forth
in this Section are satisfied or until the amount of his non-taxable Benefits equals
the non-taxable Benefits of the affected Participant who has the second highest
amount of non-taxable Benefits. This process shall continue until the
nondiscrimination tests set forth in this Section are satisfied. With respect to any
affected Participant who has had Benefits reduced pursuant to this Section, the
reduction shall be made proportionately among Health Care Reimbursement
Plan Benefits and Dependent Care Assistance Program Benefits, and once all
these Benefits are expended,. Contributions which are not utilized to provide
Benefits to any Participant by virtue of any administrative act under this
paragraph shall be forfeited and deposited into the benefit plan surplus.
ARTICLE V
PARTICIPANT ELECTIONS
5.1 INITIAL ELECTIONS
An Employee who meets the eligibility requirements of Section 2.1 on the first
day of, or during, a Plan Year may elect to participate in this Plan for all or the remainder of
such Plan Year, provided he elects to do so before his effective date of participation pursuant to
Section 2.2. However, if such Employee does not complete an application to participate and
benefit election form and deliver it to the Administrator before such date, his Election Period
shall extend 30 calendar days after such date, or for such further period as the Administrator
shall determine and apply on a uniform and nondiscriminatory basis. However, any election
during the extended 30 -day election period pursuant to this Section 5.1 shall not be effective
until the first full pay period following the later of such Participant's effective date of participation
pursuant to Section 2.2 or the date of the receipt of the election form by the Administrator, and
shall be limited to the Benefit expenses incurred for the balance of the Plan Year for which the
election is made.
C.1
5.2 SUBSEQUENT ANNUAL ELECTIONS
During the Election Period prior to each subsequent Plan Year, each Participant
shall be given the opportunity to elect, on an election of benefits form to be provided by the
Administrator, which Benefit options he wishes to select and purchase with his Cafeteria Plan
Benefit Dollars. Any such election shall be effective for any Benefit expenses incurred during the
Plan Year which follows the end of the Election Period. With regard to subsequent annual
elections, the following options shall apply:
(a) A Participant or Employee who failed to initially elect to participate
may elect different or new Benefits under the Plan during the Election Period;
(b) A Participant may terminate his participation in the Plan by
notifying the Administrator in writing during the Election Period that he does not
want to participate in the Plan for the next Plan Year, or by not electing any
Benefit options;
(c) An Employee who elects not to participate for the Plan Year
following the Election Period will have to wait until the next Election Period before
again electing to participate in the Plan, except as provided for in Section 5.4.
5.3 FAILURE TO ELECT
Any Participant failing to complete an election of benefits form pursuant to
Section 5.2 by the end of the applicable Election Period shall be deemed to have elected not to
participate in the Plan for the upcoming Plan Year. No further Salary Redirections shall
therefore be authorized for such subsequent Plan Year.
5.4 CHANGE OF ELECTIONS
(a) Any Participant may change a Benefit election after the Plan Year
(to which such election relates) has commenced and make new elections with
respect to the remainder of such Plan Year if, under the facts and circumstances,
the changes are necessitated by and are consistent with a change in status which
is acceptable under rules and regulations adopted by the Department of the
Treasury, the provisions of which are incorporated by reference. Notwithstanding
anything herein to the contrary, if the rules and regulations conflict, then such rules
and regulations shall control.
In general, a change in election is not consistent if the change in status is
the Participant's divorce, annulment or legal separation from a spouse, the death
of a spouse or dependent, or a dependent ceasing to satisfy the eligibility
requirements for coverage, and the Participant's election under the Plan is to
cancel accident or health insurance coverage for any individual other than the one
involved in such event. In addition, if the Participant, spouse or dependent gains or
loses eligibility for coverage, then a Participant's election under the Plan to cease
or decrease coverage for that individual under the Plan corresponds with that
change in status only if coverage for that individual becomes applicable or is
increased under the family member plan.
Regardless of the consistency requirement, if the individual, the individual's
spouse, or dependent becomes eligible for continuation coverage under the
Employer's group health plan as provided in Code Section 4980B or any similar
state law, then the individual may elect to increase payments under this Plan in
7
order to pay for the continuation coverage. However, this does not apply for
COBRA eligibility due to divorce, annulment or legal separation.
Any new election shall be effective at such time as the Administrator shall
prescribe, but not earlier than the first pay period beginning after the election form
is completed and returned to the Administrator. For the purposes of this
subsection, a change in status shall only include the following events or other
events permitted by Treasury regulations:
(1) Legal Marital Status: events that change a Participant's legal
marital status, including marriage, divorce, death of a spouse, legal
separation or annulment;
(2) Number of Dependents: Events that change a Participant's number
of dependents, including birth, adoption, placement for adoption, or death
of a dependent;
(3) Employment Status: Any of the following events that change the
employment status of the Participant, spouse, or dependent: termination or
commencement of employment, a strike or lockout, commencement or
return from an unpaid leave of absence, or a change in worksite. In
addition, if the eligibility conditions of this Plan or other employee benefit
plan of the Employer of the Participant, spouse, or dependent depend on
the employment status of that individual and there is a change in that
individual's employment status with the consequence that the individual
becomes (or ceases to be) eligible under the plan, then that change
constitutes a change in employment under this subsection;
(4) Dependent satisfies or ceases to satisfy the eligibility requirements:
An event that causes the Participant's dependent to satisfy or cease to
satisfy the requirements for coverage due to attainment of age, student
status, or any similar circumstance; and
(5) Residency: A change in the place of residence of the Participant,
spouse or dependent.
For the Dependent Care Assistance Program, a dependent becoming or
ceasing to be a "Qualifying Dependent" as defined under Code Section 21(b) shall
also qualify as a change in status.
(b) Notwithstanding subsection (a), the Participants may change an
election for accident or health coverage during a Plan Year and make a new
election that corresponds with the special enrollment rights provided in Code
Section 9801(f). Such change shall take place on a prospective basis.
(c) Notwithstanding subsection (a), in the event of a judgment, decree,
or order ("order") resulting from a divorce, legal separation, annulment, or change
in legal custody (including a qualified medical child support order defined in ERISA
Section 609) which requires accident or health coverage for a Participant's child
(including a foster child who is a dependent of the Participant):
(1) The Plan may change an election to provide coverage for the child
if the order requires coverage under the Participant's plan; or
9
(2) The Participant shall be permitted to change an election to cancel
coverage for the child if the order requires the former spouse to provide
coverage for such child, under that individual's plan and such coverage is
actually provided.
(d) Notwithstanding subsection (a), a Participant may change elections
to cancel accident or health coverage for the Participant or the Participant's spouse
or dependent if the Participant or the Participant's spouse or dependent is enrolled
in the accident or health coverage of the Employer and becomes entitled to
coverage (i.e., enrolled) under Part A or Part B of the Title XVIII of the Social
Security Act (Medicare) or Title XIX of the Social Security Act (Medicaid), other
than coverage consisting solely of benefits under Section 1928 of the Social
Security Act (the program for distribution of pediatric vaccines). If the Participant or
the Participant's spouse or dependent who has been entitled to Medicaid or
Medicare coverage loses eligibility, that individual may prospectively elect
coverage under the Plan if a benefit package option under the Plan provides
similar coverage.
(e) If the cost of a Benefit provided under the Plan increases or
decreases during a Plan Year, then the Plan shall automatically increase or
decrease, as the case may be, the Salary Redirections of all affected Participants
for such Benefit. Alternatively, if the cost of a benefit package option increases
significantly, the Administrator shall permit the affected Participants to either
make corresponding changes in their payments or revoke their elections and, in
lieu thereof, receive on a prospective basis coverage under another benefit
package option with similar coverage, or drop coverage prospectively if there is
no benefit package option with similar coverage.
A cost increase or decrease refers to an increase or decrease in the
amount of elective contributions under the Plan, whether resulting from an action
taken by the Participants or an action taken by the Employer.
If the coverage under a Benefit is significantly curtailed or ceases during a
Plan Year, affected Participants may revoke their elections of such Benefit and,
in lieu thereof, elect to receive on a prospective basis coverage under another
plan with similar coverage, or drop coverage prospectively if no similar coverage
is offered.
If, during the period of coverage, a new benefit package option or other
coverage option is added, an existing benefit package option is significantly
improved, or an existing benefit package option or other coverage option is
eliminated, then the affected Participants may elect the newly -added option, or
elect another option if an option has been eliminated prospectively and make
corresponding election changes with respect to other benefit package options
providing similar coverage. In addition, those Eligible Employees who are not
participating in the Plan may opt to become Participants and elect the new or
newly improved benefit package option.
A Participant may make a prospective election change to add group
health coverage for the Participant, the Participant's spouse or dependent if such
individual loses group health coverage sponsored by a governmental or
educational institution, including a state children's health insurance program
under the Social Security Act, the Indian Health Service or a health program
offered by an Indian tribal government, a state health benefits risk pool, or a
foreign government group health plan.
E7
A Participant may make a prospective election change that is on account
of and corresponds with a change made under the plan of a spouse's, former
spouse's or dependent's employer if (1) the cafeteria plan or other benefits plan
of the spouse's, former spouse's or dependent's employer permits its participants
to make a change; or (2) the cafeteria plan permits participants to make an
election for a period of coverage that is different from the period of coverage
under the cafeteria plan of a spouse's, former spouse's or dependent's employer.
A Participant may make a prospective election change that is on account
of and corresponds with a change by the Participant in the dependent care
provider. The availability of dependent care services from a new childcare
provider is similar to a new benefit package option becoming available. A cost
change is allowable in the Dependent Care Assistance Program only if the cost
change is imposed by a dependent care provider who is not related to the
Participant, as defined in Code Section 152(a)(1) through (8).
A Participant shall not be permitted to change an election to the Health
Care Reimbursement Plan as a result of a cost or coverage change under this
subsection.
ARTICLE VI
HEALTH CARE REIMBURSEMENT PLAN
6.1 ESTABLISHMENT OF PLAN
This Health Care Reimbursement Plan is intended to qualify as a medical
reimbursement plan under Code Section 105 and shall be interpreted in a manner consistent
with such Code Section and the Treasury regulations thereunder. Participants who elect to
participate in this Health Care Reimbursement Plan may submit claims for the reimbursement of
Medical Expenses. All amounts reimbursed under this Health Care Reimbursement Plan shall
be periodically paid from amounts allocated to the Health Care Reimbursement Fund. Periodic
payments reimbursing Participants from the Health Care Reimbursement Fund shall in no event
occur less frequently than monthly.
6.2 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan, the terms below have the
following meaning:
(a) "Health Care Reimbursement Fund" means the fund established
for Participants pursuant to this Plan to which part of their Cafeteria Plan Benefit
Dollars may be allocated and from which all allowable Medical Expenses may be
reimbursed.
(b) "Health Care Reimbursement Plan" means the plan of benefits
contained in this Article, which provides for the reimbursement of eligible Medical
Expenses incurred by a Participant or his Dependents.
(c) "Highly Compensated Participant" means, for the purposes of this
Article and determining discrimination under Code Section 105(h), a participant
who is:
(1) one of the 5 highest paid officers;
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(2) a shareholder who owns (or is considered to own applying the
rules of Code Section 318) more than 10 percent in value of the stock of
the Employer; or
(3) among the highest paid 25 percent of all Employees (other than
exclusions permitted by Code Section 105(h)(3)(B) for those individuals
who are not Participants).
(d) "Medical Expenses" means any expense for medical care within
the meaning of the term "medical care" as defined in Code Section 213(d) *02ck
and the rulings and Treasury regulations thereunder*02cl, and not otherwise
used by the Participant as a deduction in determining his tax liability under the
Code. However, a Participant may not be reimbursed for the cost of other health
coverage such as premiums paid under plans maintained by the employer of the
Participant's spouse or individual policies maintained by the Participant or his
spouse or Dependent. Furthermore, a Participant may not be reimbursed for
"qualified long-term care services" as defined in Code Section 7702B(c)*02cm.
(e) The definitions of Article I are hereby incorporated by reference to
the extent necessary to interpret and apply the provisions of this Health Care
Reimbursement Plan.
6.3 FORFEITURES
The amount in the Health Care Reimbursement Fund as of the end of the Grace
Period following any Plan Year (and after the processing of all claims for such Plan Year
pursuant to Section 6.7 hereof) shall be forfeited and credited to the benefit plan surplus. In
such event, the Participant shall have no further claim to such amount for any reason, subject to
Section 8.2.
6.4 LIMITATION ON ALLOCATIONS
Notwithstanding any provision contained in this Health Care Reimbursement
Plan to the contrary, no more than $8,000 may be allocated to the Health Care Reimbursement
Fund by a Participant in or on account of any Plan Year.
6.5 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Health Care Reimbursement Plan not to
discriminate in violation of the Code and the Treasury regulations thereunder.
(b) If the Administrator deems it necessary to avoid discrimination
under this Health Care Reimbursement Plan, it may, but shall not be required to,
reject any elections or reduce contributions or Benefits in order to assure
compliance with this Section. Any act taken by the Administrator under this
Section shall be carried out in a uniform and nondiscriminatory manner. If the
Administrator decides to reject any elections or reduce contributions or Benefits,
it shall be done in the following manner. First, the Benefits designated for the
Health Care Reimbursement Fund by the member of the group in whose favor
discrimination may not occur pursuant to Code Section 105 that elected to
contribute the highest amount to the fund for the Plan Year shall be reduced until
the nondiscrimination tests set forth in this Section or the Code are satisfied, or
until the amount designated for the fund equals the amount designated for the
fund by the next member of the group in whose favor discrimination may not
11
occur pursuant to Code Section 105 who has elected the second highest
contribution to the Health Care Reimbursement Fund for the Plan Year. This
process shall continue until the nondiscrimination tests set forth in this Section or
the Code are satisfied. Contributions which are not utilized to provide Benefits to
any Participant by virtue of any administrative act under this paragraph shall be
forfeited and credited to the benefit plan surplus.
6.6 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive Benefits under
this Health Care Reimbursement Plan. The enrollment under the Cafeteria Plan shall constitute
enrollment under this Health Care Reimbursement Plan. In addition, other matters concerning
contributions, elections and the like shall be governed by the general provisions of the Cafeteria
Plan,
6.7 HEALTH CARE REIMBURSEMENT PLAN CLAIMS
(a) All Medical Expenses incurred by a Participant shall be
reimbursed during the Plan Year subject to Section 2.5, even though the
submission of such a claim occurs after his participation hereunder ceases; but
provided that the Medical Expenses were incurred during the applicable Plan
Year or during the Grace Period following the Plan Year. Medical Expenses are
treated as having been incurred when the Participant is provided with the medical
care that gives rise to the medical expenses, not when the Participant is formally
billed or charged for, or pays for the medical care.
(b) The Administrator shall direct the reimbursement to each eligible
Participant for all allowable Medical Expenses, up to a maximum of the amount
designated by the Participant for the Health Care Reimbursement Fund for the
Plan Year. Reimbursements shall be made available to the Participant
throughout the year without regard to the level of Cafeteria Plan Benefit Dollars
which have been allocated to the fund at any given point in time. Furthermore, a
Participant shall be entitled to reimbursements only for amounts in excess of any
payments or other reimbursements under any health care plan covering the
Participant and/or his Spouse or Dependents.
(c) Claims for the reimbursement of Medical Expenses incurred in
any Plan Year shall be paid as soon after a claim has been filed as is
administratively practicable; provided however, that if a Participant fails to submit
a claim within the 90 day period immediately following the close of the Grace
Period at the end of the Plan Year or 90 days after termination of employment,
those Medical Expense claims shall not be considered for reimbursement by the
Administrator.
(d) Reimbursement payments under this Plan shall be made directly
to the Participant. However, in the Administrator's discretion, payments may be
made directly to the service provider, The application for payment or
reimbursement shall be made to the Administrator on an acceptable form within a
reasonable time of incurring the debt or paying for the service. The application
shall include a written statement from an independent third party stating that the
Medical Expense has been incurred and the amount of such expense.
Furthermore, the Participant shall provide a written statement that the Medical
Expense has not been reimbursed or is not reimbursable under any other health
plan coverage and, if reimbursed from the Health Care Reimbursement Fund,
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such amount will not be claimed as a tax deduction. The Administrator shall
retain a file of all such applications.
ARTICLE VII
DEPENDENT CARE ASSISTANCE PROGRAM
7.1 ESTABLISHMENT OF PROGRAM
This Dependent Care Assistance Program is intended to qualify as a program
under Code Section 129 and shall be interpreted in a manner consistent with such Code
Section. Participants who elect to participate in this program may submit claims for the
reimbursement of Employment -Related Dependent Care Expenses. All amounts reimbursed
under this Dependent Care Assistance Program shall be paid from amounts allocated to the
Participant's Dependent Care Assistance Account.
7.2 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan the terms below shall have
the following meaning:
(a) "Dependent Care Assistance Account" means the account
established for a Participant pursuant to this Article to which part of his Cafeteria
Plan Benefit Dollars may be allocated and from which Empioyment-Related
Dependent Care Expenses of the Participant may be reimbursed.
(b) "Dependent Care Assistance Program" means the program of
benefits contained in this Article, which provides for the reimbursement of eligible
expenses for the care of the Qualifying Dependents of Participants.
(c) "Earned Income" means earned income as defined under Code
Section 32(c)(2), but excluding such amounts paid or incurred by the Employer
for dependent care assistance to the Participant.
(d) "Employment -Related Dependent Care Expenses" means the
amounts paid for expenses of a Participant for those services which if paid by the
Participant would be considered employment related expenses under Code
Section 21(b)(2). Generally, they shall include expenses for household services
and for the care of a Qualifying Dependent, to the extent that such expenses are
incurred to enable the Participant to be gainfully employed for any period for
which there are one or more Qualifying Dependents with respect to such
Participant. Employment -Related Dependent Care Expenses are treated as
having been incurred when the Participant's Qualifying Dependents are provided
with the dependent care that gives rise to the Employment -Related Dependent
Care Expenses, not when the Participant is formally billed or charged for, or pays
for the dependent care. The determination of whether an amount qualifies as an
Employment -Related Dependent Care Expense shall be made subject to the
following rules:
(1) If such amounts are paid for expenses incurred outside the
Participant's household, they shall constitute Employment -Related
Dependent Care Expenses only if incurred for a Qualifying Dependent as
defined in Section 7.2(e)(1) (or deemed to be, as described in Section
7.2(e)(1) pursuant to Section 7.2(e)(3)), or for a Qualifying Dependent as
defined in Section 7.2(e)(2) (or deemed to be, as described in Section
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7.2(e)(2) pursuant to Section 7.2(e)(3)) who regularly spends at least 8
hours per day in the Participant's household;
(2) If the expense is incurred outside the Participant's home at a
facility that provides care for a fee, payment, or grant for more than 6
individuals who do not regularly reside at the facility, the facility must
comply with all applicable state and local laws and regulations, including
licensing requirements, if any; and
(3) Employment -Related Dependent Care Expenses of a Participant
shall not include amounts paid or incurred to a child of such Participant
who is under the age of 19 or to an individual who is a dependent of such
Participant or such Participant's Spouse.
(e) "Qualifying Dependent" means, for Dependent Care Assistance
Program purposes,
(1) a Dependent of a Participant who is under the age of 13, with
respect to whom the Participant is entitled to an exemption under Code
Section 151(c);
(2) a Dependent or the Spouse of a Participant who is physically or
mentally incapable of caring for himself or herself; or
(3) a child that is deemed to be a Qualifying Dependent described in
paragraph (1) or (2) above, whichever is appropriate, pursuant to Code
Section 21(e)(5).
(f) The definitions of Article I are hereby incorporated by reference to
the extent necessary to interpret and apply the provisions of this Dependent Care
Assistance Program.
7.3 DEPENDENT CARE ASSISTANCE ACCOUNTS
The Administrator shall establish a Dependent Care Assistance Account for each
Participant who elects to apply Cafeteria Plan Benefit Dollars to Dependent Care Assistance
Program benefits.
7.4 INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be increased each pay
period by the portion of Cafeteria Plan Benefit Dollars that he has elected to apply toward his
Dependent Care Assistance Account pursuant to elections made under Article U hereof.
7.5 DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be reduced by the
amount of any Employment -Related Dependent Care Expense reimbursements paid or incurred
on behalf of a Participant pursuant to Section 7.12 hereof.
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7.6 ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT
Subject to limitations contained in Section 7.9 of this Program, and to the extent
of the amount contained in the Participant's Dependent Care Assistance Account, a Participant
who incurs Employment -Related Dependent Care Expenses shall be entitled to receive from the
Employer full reimbursement for the entire amount of such expenses incurred during the Plan
Year, including any claims incurred during the Grace Period, or portion thereof during which he
is a Participant.
7.7 ANNUAL STATEMENT OF BENEFITS
On or before January 31 st of each calendar year, the Employer shall furnish to
each Employee who was a Participant and received benefits under Section 7.6 during the prior
calendar year, a statement of all such benefits paid to or on behalf of such Participant during the
prior calendar year.
7.8 FORFEITURES
The amount in a Participant's Dependent Care Assistance Account as of the end
of the Grace Period following any Plan Year (and after the processing of all claims for such Plan
Year pursuant to Section 7.12 hereof) shall be forfeited and credited to the benefit plan surplus.
In such event, the Participant shall have no further claim to such amount for any reason.
7.9 LIMITATION ON PAYMENTS
Notwithstanding any provision contained in this Article to the contrary, amounts
paid from a Participant's Dependent Care Assistance Account in or on account of any taxable
year of the Participant shall not exceed the lesser of the Earned Income limitation described in
Code Section 129(b) or $5,000 ($2,500 if a separate tax return is filed by a Participant who is
married as determined under the rules of paragraphs (3) and (4) of Code Section 21(e)).
7.10 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Dependent Care Assistance Program that
contributions or benefits not discriminate in favor of the group of employees in
whose favor discrimination may not occur under Code Section 129(d).
(b) It is the intent of this Dependent Care Assistance Program that not
more than 25 percent of the amounts paid by the Employer for dependent care
assistance during the Plan Year will be provided for the class of individuals who
are shareholders or owners (or their Spouses or Dependents), each of whom (on
any day of the Plan Year) owns more than 5 percent of the stock or of the capital
or profits interest in the Employer.
(c) If the Administrator deems it necessary to avoid discrimination or
possible taxation to a group of employees in whose favor discrimination may not
occur in violation of Code Section 129 it may, but shall not be required to, reject
any elections or reduce contributions or non-taxable benefits in order to assure
compliance with this Section. Any act taken by the Administrator under this
Section shall be carried out in a uniform and nondiscriminatory manner. If the
Administrator decides to reject any elections or reduce contributions or Benefits,
it shall be done in the following manner. First, the Benefits designated for the
Dependent Care Assistance Account by the affected Participant that elected to
contribute the highest amount to such account for the Plan Year shall be reduced
until the nondiscrimination tests set forth in this Section are satisfied, or until the
15
amount designated for the account equals the amount designated for the account
of the affected Participant who has elected the second highest contribution to the
Dependent Care Assistance Account for the Plan Year. This process shall
continue until the nondiscrimination tests set forth in this Section are satisfied.
Contributions which are not utilized to provide Benefits to any Participant by
virtue of any administrative act under this paragraph shall be forfeited.
7.11 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive Benefits under
this Dependent Care Assistance Program. The enrollment and termination of participation under
the Cafeteria Plan shall constitute enrollment and termination of participation under this
Dependent Care Assistance Program. In addition, other matters concerning contributions,
elections and the like shall be governed by the general provisions of the Cafeteria Plan.
7.12 DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS
The Administrator shall direct the payment of all such Dependent Care
Assistance claims to the Participant upon the presentation to the Administrator of
documentation of such expenses in a form satisfactory to the Administrator. However, in the
Administrator's discretion, payments may be made directly to the service provider. In its
discretion in administering the Plan, the Administrator may utilize forms and require
documentation of costs as may be necessary to verify the claims submitted. At a minimum, the
form shall include a statement from an independent third party as proof that the expense has
been incurred and the amount of such expense. In addition, the Administrator may require that
each Participant who desires to receive reimbursement under this Program for
Employment -Related Dependent Care Expenses submit a statement which may contain some
or all of the following information:
(a) The Dependent or Dependents for whom the services were
performed;
(b) The nature of the services performed for the Participant, the cost
of which he wishes reimbursement;
(c) The relationship, if any, of the person performing the services to
the Participant;
(d) If the services are being performed by a child of the Participant,
the age of the child;
(e) A statement as to where the services were performed;
(f) If any of the services were performed outside the home, a
statement as to whether the Dependent for whom such services were performed
spends at least 8 hours a day in the Participant's household;
(g) If the services were being performed in a day care center, a
statement:
(1) that the day care center complies with all applicable laws and
regulations of the state of residence,
(2) that the day care center provides care for more than 6 individuals
(other than individuals residing at the center), and
16
(3) of the amount of fee paid to the provider.
(h) If the Participant is married, a statement containing the following:
(1) the Spouse's salary or wages if he or she is employed, or
(2) if the Participant's Spouse is not employed, that
(i) he or she is incapacitated, or
(ii) he or she is a full-time student attending an educational
institution and the months during the year which he or she
attended such institution.
(i) If a Participant fails to submit a claim within the 90 day period
immediately following the end of the Grace Period at the end of the Plan Year or
within the 90 day period immediately following termination of employment, those
claims shall not be considered for reimbursement by the Administrator.
ARTICLE VIII
BENEFITS AND RIGHTS
8.1 CLAIM FOR BENEFITS
(a) Any claim for Benefits shall be made to the Administrator. If the
Administrator denies a claim, the Administrator may provide notice to the
Participant or beneficiary, in writing, within 90 days after the claim is filed unless
special circumstances require an extension of time for processing the claim. If
the Administrator does not notify the Participant of the denial of the claim within
the 90 day period specified above, then the claim shall be deemed denied. The
notice of a denial of a claim shall be written in a manner calculated to be
understood by the claimant and shall set forth:
(1) specific references to the pertinent Plan provisions on which the
denial is based;
(2) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation as to why such
information is necessary; and
(3) an explanation of the Plan's claim procedure.
(b) Within 60 days after receipt of the above material, the claimant
shall have a reasonable opportunity to appeal the claim denial to the
Administrator for a full and fair review. The claimant or his duly authorized
representative may:
(1) request a review upon written notice to the Administrator;
(2) review pertinent documents; and
(3) submit issues and comments in writing.
17
(c) A decision on the review by the Administrator will be made not
later than 60 days after receipt of a request for review, unless special
circumstances require an extension of time for processing (such as the need to
hold a hearing), in which event a decision should be rendered as soon as
possible, but in no event later than 120 days after such receipt. The decision of
the Administrator shall be written and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, with
specific references to the pertinent Plan provisions on which the decision is
based.
(d) Any balance remaining in the Participant's Dependent Care
Assistance Program or Health Care Reimbursement Plan as of the end of the
Grace Period following each Plan Year shall be forfeited and deposited in the
benefit plan surplus of the Employer pursuant to Section 6.3 or Section 7.8,
whichever is applicable, unless the Participant had made a claim for such Plan
Year, in writing, which has been denied or is pending; in which event the amount
of the claim shall be held in his account until the claim appeal procedures set
forth above have been satisfied or the claim is paid. If any such claim is denied
on appeal, the amount held beyond the end of the Plan Year shall be forfeited
and credited to the benefit plan surplus.
8.2 APPLICATION OF BENEFIT PLAN SURPLUS
Any forfeited amounts credited to the benefit plan surplus by virtue of the failure
of a Participant to incur a qualified expense or seek reimbursement in a timely manner may, but
need not be, separately accounted for after the close of the Plan Year (or after such further time
specified herein for the filing of claims) in which such forfeitures arose. In no event shall such
amounts be carried over to reimburse a Participant for expenses incurred during a subsequent
Plan Year for the same or any other Benefit available under the Plan; nor shall amounts
forfeited by a particular Participant be made available to such Participant in any other form or
manner, except as permitted by Treasury regulations. Amounts in the benefit plan surplus shall
first be used to defray any administrative costs and experience losses and thereafter be
retained by the Employer.
ARTICLE IX
ADMINISTRATION
9.1 PLAN ADMINISTRATION
The operation of the Plan shall be under the supervision of the Administrator. It
shall be a principal duty of the Administrator to see that the Plan is carried out in accordance
with its terms, and for the exclusive benefit of Employees entitled to participate in the Plan. The
Administrator shall have full power to administer the Plan in all of its details, subject, however, to
the pertinent provisions of the Code. The Administrator's powers shall include, but shall not be
limited to the following authority, in addition to all other powers provided by this Plan:
(a) To make and enforce such rules and regulations as the
Administrator deems necessary or proper for the efficient administration of the
Plan;
(b) To interpret the Plan, the Administrator's interpretations thereof in
good faith to be final and conclusive on all persons claiming benefits by operation
of the Plan;
18
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan and to receive benefits provided by
operation of the Plan;
(d) To reject elections or to limit contributions or Benefits for certain
highly compensated participants if it deems such to be desirable in order to avoid
discrimination under the Plan in violation of applicable provisions of the Code;
(e) To provide Employees with a reasonable notification of their
benefits available by operation of the Plan;
(f) To approve reimbursement requests and to authorize the payment
of benefits; and
(g) To appoint such agents, counsel, accountants, consultants, and
actuaries as may be required to assist in administering the Plan.
Any procedure, discretionary act, interpretation or construction taken by the
Administrator shall be done in a nondiscriminatory manner based upon uniform principles
consistently applied and shall be consistent with the intent that the Plan shall continue to comply
with the terms of Code Section 125 and the Treasury regulations thereunder.
9.2 EXAMINATION OF RECORDS
The Administrator shall make available to each Participant, Eligible Employee
and any other Employee of the Employer such records as pertain to their interest under the Plan
for examination at reasonable times during normal business hours.
9.3 PAYMENT OF EXPENSES
Any reasonable administrative expenses shall be paid by the Employer unless
the Employer determines that administrative costs shall be borne by the Participants under the
Plan or by any Trust Fund which may be established hereunder. The Administrator may impose
reasonable conditions for payments, provided that such conditions shall not discriminate in favor
of highly compensated employees.
9.4 INDEMNIFICATION OF ADMINISTRATOR
The Employer agrees to indemnify and to defend to the fullest extent permitted
by law any Employee serving as the Administrator or as a member of a committee designated
as Administrator (including any Employee or former Employee who previously served as
Administrator or as a member of such committee) against all liabilities, damages, costs and
expenses (including attorney's fees and amounts paid in settlement of any claims approved by
the Employer) occasioned by any act or omission to act in connection with the Plan, if such act
or omission is in good faith.
19
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
10.1 AMENDMENT
The Employer, at any time or from time to time, may amend any or all of the
provisions of the Plan without the consent of any Employee or Participant. No amendment shall
have the effect of modifying any benefit election of any Participant in effect at the time of such
amendment, unless such amendment is made to comply with Federal, state or local laws,
statutes or regulations.
10.2 TERMINATION
The Employer is establishing this Plan with the intent that it will be maintained for
an indefinite period of time. Notwithstanding the foregoing, the Employer reserves the right to
terminate this Plan, in whole or in part, at any time. In the event the Plan is terminated, no
further contributions shall be made.
No further additions shall be made to the Health Care Reimbursement Fund or
Dependent Care Assistance Account, but all payments from such fund shall continue to be
made according to the elections in effect until 90 days after the termination date of the Plan. Any
amounts remaining in any such fund or account as of the end of such period shall be forfeited
and deposited in the benefit plan surplus after the expiration of the filing period.
ARTICLE XI
MISCELLANEOUS
11.1 PLAN INTERPRETATION
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. This Plan shall be read in its entirety and not severed except as
provided in Section 11.11.
11.2 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender in all cases
where they would so apply, and whenever any words are used herein in the singular or plural
form, they shall be construed as though they were also used in the other form in all cases where
they would so apply.
11.3 WRITTEN DOCUMENT
This Plan, in conjunction with any separate written document which may be
required by law, is intended to satisfy the written Plan requirement of Code Section 125 and any
Treasury regulations thereunder relating to cafeteria plans.
11.4 EXCLUSIVE BENEFIT
This Plan shall be maintained for the exclusive benefit of the Employees who
participate in the Plan.
20
11.5 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute an employment contract between the
Employer and any Participant or to be a consideration or an inducement for the employment of
any Participant or Employee. Nothing contained in this Plan shall be deemed to give any
Participant or Employee the right to be retained in the service of the Employer or to interfere
with the right of the Employer to discharge any Participant or Employee at any time regardless
of the effect which such discharge shall have upon him as a Participant of this Plan.
11.6 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required to
do or perform any act or matter or thing, it shall be done and performed by a person duly
authorized by its legally constituted authority.
11.7 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Administrator nor the Employer makes any commitment or guarantee
that any amounts paid to or for the benefit of a Participant under the Plan will be excludable
from the Participant's gross income for federal or state income tax purposes, or that any other
federal or state tax treatment will apply to or be available to any Participant. It shall be the
obligation of each Participant to determine whether each payment under the Plan is excludable
from the Participant's gross income for federal and state income tax purposes, and to notify the
Employer if the Participant has reason to believe that any such payment is not so excludable.
Notwithstanding the foregoing, the rights of Participants under this Plan shall be legally
enforceable.
11.8 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or reimbursements under the
Plan that are not for a permitted Benefit, such Participant shall indemnify and reimburse the
Employer for any liability it may incur for failure to withhold federal or state income tax or Social
Security tax from such payments or reimbursements. However, such indemnification and
reimbursement shall not exceed the amount of additional federal and state income tax (plus any
penalties) that the Participant would have owed if the payments or reimbursements had been
made to the Participant as regular cash compensation, plus the Participant's share of any Social
Security tax that would have been paid on such compensation, less any such additional income
and Social Security tax actually paid by the Participant.
11.9 FUNDING
Unless otherwise required by law, contributions to the Plan need not be placed in
trust or dedicated to a specific Benefit, but may instead be considered general assets of the
Employer. Furthermore, and unless otherwise required by law, nothing herein shall be
construed to require the Employer or the Administrator to maintain any fund or segregate any
amount for the benefit of any Participant, and no Participant or other person shall have any
claim against, right to, or security or other interest in, any fund, account or asset of the Employer
from which any payment under the Plan may be made.
21
11.10 GOVERNING LAW
This Plan is governed by the Code and the Treasury regulations issued
thereunder (as they might be amended from time to time). In no event shall the Employer
guarantee the favorable tax treatment sought by this Plan. To the extent not preempted by
Federal law, the provisions of this Plan shall be construed, enforced and administered according
to the laws of the State of Texas.
11.11 SEVERABILITY
If any provision of the Plan is held invalid or unenforceable, its invalidity or
unenforceability shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provision had not been included herein.
11.12 CAPTIONS
The captions contained herein are inserted only as a matter of convenience and
for reference, and in no way define, limit, enlarge or describe the scope or intent of the Plan, nor
in any way shall affect the Plan or the construction of any provision thereof.
11.13 CONTINUATION OF COVERAGE
Notwithstanding anything in the Plan to the contrary, in the event any benefit
under this Plan subject to the continuation coverage requirement of Code Section 4980B
becomes unavailable, each Participant will be entitled to continuation coverage as prescribed in
Code Section 4980B.
11.14 FAMILY AND MEDICAL LEAVE ACT
Notwithstanding anything in the Plan to the contrary, in the event any benefit
under this Plan becomes subject to the requirements of the Family and Medical Leave Act and
regulations thereunder, this Plan shall be operated in accordance with Regulation 1.125-3.
11.15 HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
Notwithstanding anything in this Plan to the contrary, this Plan shall be operated in
accordance with HIPAA and regulations thereunder.
11.16 UNIFORM SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
Notwithstanding any provision of this Plan to the contrary, contributions, benefits
and service credit with respect to qualified military service shall be provided in accordance with
USERRA and the regulations thereunder.
11.17 COMPLIANCE WITH HIPAA PRIVACY STANDARDS
(a) If the Health Care Reimbursement Plan under this Cafeteria Plan
is subject to the Standards for Privacy of Individually Identifiable Health
Information (45 CFR Part 164, the "Privacy Standards"), then this Section shall
apply.
(b) The Plan shall not disclose Protected Health Information to any
member of the Employer's workforce unless each of the conditions set out in this
Section are met. "Protected Health Information" shall have the same definition as
set forth in the Privacy Standards but generally shall mean individually
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identifiable information about the past, present or future physical or mental health
or condition of an individual, including information about treatment or payment for
treatment.
(c) Protected Health Information disclosed to members of the
Employer's workforce shall be used or disclosed by them only for purposes of
Plan administrative functions. The Plan's administrative functions shall include
all Plan payment functions and health care operations. The terms "payment" and
"health care operations" shall have the same definitions as set out in the Privacy
Standards, but the term "payment" generally shall mean activities taken to
determine or fulfill Plan responsibilities with respect to eligibility, coverage,
provision of benefits, or reimbursement for health care.
(d) The Plan shall disclose Protected Health Information only to
members of the Employer's workforce who are authorized to receive such
Protected Health Information, and only to the extent and in the minimum amount
necessary for that person to perform his or her duties with respect to the Plan.
"Members of the Employer's workforce" shall refer to all employees and other
persons under the control of the Employer. The Employer shall keep an updated
list of those authorized to receive Protected Health Information.
to:
(1) An authorized member of the Employer's workforce who receives
Protected Health Information shall use or disclose the Protected Health
Information only to the extent necessary to perform his or her duties with
respect to the Plan.
(2) In the event that any member of the Employer's workforce uses or
discloses Protected Health Information other than as permitted by this
Section and the Privacy Standards, the incident shall be reported to the
Plan's privacy officer. The privacy officer shall take appropriate action,
including:
(i) investigation of the incident to determine whether the
breach occurred inadvertently, through negligence or deliberately;
whether there is a pattern of breaches; and the degree of harm
caused by the breach;
(ii) appropriate sanctions against the persons causing the
breach which, depending upon the nature of the breach, may
include oral or written reprimand, additional training, or termination
of employment;
(iii) mitigation of any harm caused by the breach, to the
extent practicable; and
(iv) documentation of the incident and all actions taken to
resolve the issue and mitigate any damages.
(e) The Employer must provide certification to the Plan that it agrees
(1) Not use or further disclose the information other than as permitted
or required by the Plan documents or as required by law;
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(2) Ensure that any agent or subcontractor, to whom it provides
Protected Health Information received from the Plan, agrees to the same
restrictions and conditions that apply to the Employer with respect to such
information;
(3) Not use or disclose Protected Health Information for employment-
related actions and decisions or in connection with any other benefit or
employee benefit plan of the Employer;
(4) Report to the Plan any use or disclosure of the Protected Health
Information of which it becomes aware that is inconsistent with the uses
or disclosures permitted by this Section, or required by law;
(5) Make available Protected Health Information to individual Plan
members in accordance with Section 164.524 of the Privacy Standards;
(6) Make available Protected Health Information for amendment by
individual Plan members and incorporate any amendments to Protected
Health Information in accordance with Section 164.526 of the Privacy
Standards;
(7) Make available the Protected Health Information required to
provide an accounting of disclosures to individual Plan members in
accordance with Section 164.528 of the Privacy Standards;
(8) Make its internal practices, books and records relating to the use
and disclosure of Protected Health Information received from the Plan
available to the Department of Health and Human Services for purposes
of determining compliance by the Plan with the Privacy Standards;
(9) If feasible, return or destroy all Protected Health Information
received from the Plan that the Employer still maintains in any form, and
retain no copies of such information when no longer needed for the
purpose for which disclosure was made, except that, if such return or
destruction is not feasible, limit further uses and disclosures to those
purposes that make the return or destruction of the information infeasible;
and
(10) Ensure the adequate separation between the Plan and members
of the Employer's workforce, as required by Section 164.504(0(2)(iii) of
the Privacy Standards and set out in (d) above.
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IN WITNESS WHEREOF, this Plan document is hereby executed this
7th day of November, 2005
exp r
WIT ESSES AS TO EMPLOYER
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