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HomeMy WebLinkAboutRES 061102-L - Amend Employee CafeteriaA RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS, AMENDING AND RESTATING THE EMPLOYEE CAFETERIA PLAN; AMENDING, RESTATING AND RENAMING THE CITY OF GEORGETOWN CHILD AND DEPENDENT CARE REIMBURSEMENT PLAN; AMENDING, RESTATING, AND RENAMING THE CHILD AND DEPENDENT CARE REIMBURSEMENT PLAN; AUTHORIZING THE APPROPRIATE CITY OFFICIALS TO EXECUTE THE NECESSARY DOCUMENTS; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Georgetown, "Texas (the "City'') has previously adopted the City of Georgetown Employee Cafeteria Plan, the City of Georgetown Child and Dependent Care Reimbursement Plan, and the City of Georgetown Health Expense Reimbursement Plan (collectively, the "Plans ") for the benefit of the eligible employees of the City; and WHEREAS, the City desires to update the Plans to reflect statutory and regulatory changes and to incorporate certain design changes to the Plans; and WHEREAS, pursuant to Article VI of each of the Plans, the City has the authority to amend the Plans. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS, THAT: Section 1: The facts and recitations contained in the preamble of this resolution are hereby found and declared to be true and correct, and are incorporated by reference herein and expressly made a part hereof, as if copied verbatim. The City Council hereby finds that this resolution implements Finance Policy 1 of the Century Plan - Policy Plan Element, which states: "The City will conduct all municipal operations in an efficient business -like manner "; and further finds that the adoption of this resolution is not inconsistent or in conflict with any other Century Plan Policies, as required by Section 2.03 of the Administrative Chapter of the Policy Plan. Section 2: The City of Georgetown Employee Cafeteria Plan is hereby amended and restated, effective October 1, 2001, pursuant to the terms of the instrument entitled "City of Georgetown Employee Cafeteria Plan," a copy of which is attached hereto and is hereby directed to be marked for identification and filed with the records of the City, and the same is hereby approved and adopted on behalf of the City. Section 3: Effective October 1, 2001, the City of Georgetown Child and Dependent Care Reimbursement Plan be and hereby is renamed the "City of Georgetown Day Care Spending Account Arrangement" and amended and restated pursuant to the terms of the instrument entitled Resolution No. © /% %, — Z_ Amending the Employee Cafeteria Plan Page 1 of 2 June 11, 2002 "City of Georgetown Day Care Spending Account Arrangement," a copy of which is attached hereto and is hereby directed to be marked for identification and filed with the records of the City, and the same is hereby approved and adopted on behalf of the City. Section 4: That, effective October 1, 2001, the City of Georgetown Health Expense Reimbursement Plan be and hereby is renamed the "City of Georgetown Health Care Spending Account Arrangement" and amended and restated pursuant to the terms of the instrument entitled "City of Georgetown Health Care Spending Account Arrangement," a copy of which is attached hereto and is hereby directed to be marked for identification and filed with the records of the City, and the same is hereby approved and adopted on behalf of the City; and Section 5: That the appropriate officers of the City are hereby authorized and directed to do and perform all such acts and things, to sign such documents or instruments, and to take any Other steps they or any of them may deem, necessary, advisable, convenient or proper to effectuate the same and accomplish the purpose of the foregoing. Section 6: This Resolution shall be effective immediately upon adoption. PASSED and APPROVED on June 11, 2002. CITY OF GEORGETOWN, TEXAS By: Gar Nelon, Mayor ATTEST: Sandra D. Lee, City Secretary APPROVED AS TO FORM: 4&-Za�L Patricia E. Carls, Brown & Carls, LLP City Attorney Resolution No. Amending the Employee Cafeteria Plan Page 2 of 2 June 11, 2002 11 py I DI will Amended And Restated Effective as of October 1, 2001 CITY OF GEORGETOWN EMPLOYEE CAFETERIA PLAN TABLE OF CONTENTS Article Page IDEFINITIONS ...................................................................................... ..............................1 1.01 "Anniversary Date" ................................................................... ..............................1 1.02 "Annual Benefit" ....................................................................... ..............................1 1.03 "Annual Election Period" .......................................................... ..............................1 1.04 "Benefits" .................................................................................. ..............................1 1.05 "Change in Family Status" ........................................................ ..............................1 1.06 " City" ......................................................................................... ..............................2 1.07 "City Contribution ..................................................................... ..............................2 1.08 "City Council" ........................................................................... ..............................2 1.09 "Code" ...................................................................................... ............................... 2 1.10 "Compensation" ....................................................................... ............................... 2 1.11 "Effective Date" ....................................................................... ............................... 2 1.12 "Election Period" ....................................................................... ..............................2 1.13 "Employee" .............................................................................. ............................... 2 1.14 "Enrollment Form." .................................................................... ..............................3 1.15 "Entry Date" ............................................................................. ............................... 3 1.16 "Fiduciary " ............................................................................... ............................... 3 1.17 "FMLA" ................................................................................... ............................... 3 1.18 "FMLA Leave" ......................................................................... ............................... 3 1.19 "Initial Election Period" ........................................................... ............................... 3 1.20 "Life Event" ............................................................................. ............................... 3 1.21 "Named Fiduciary ...................................................................... ..............................4 1.22 "Participant" .............................................................................. ..............................4 1.23 "Plan" ........................................................................................ ..............................4 1.24 "Plan Administrator" ................................................................. ..............................4 1.25 "Plan Year" ................................................................................ ..............................4 1.26 "Qualified Benefit" .................................................................... ..............................4 1.27 "Reimbursable Expense" ........................................................... ..............................4 1.28 "Service" ................................................................................... ..............................5 1.29 "Uniformed Services" .............................................................. ............................... 5 1.30 " USERRA ................................................................................................................ 5 II ELIGIBILITY AND PARTICIPATION ............................................... ..............................5 2.01 Eligibility ................................................................................... ..............................5 2.02 Entry Date ................................................................................. ............................... 5 2.03 Termination of Participation ..................................................... ..............................6 2.04 Participation During FMLA Leaves of Absence ...................... ............................... 6 2.05 Participation During a Leaves of Absence pursuant to USERRA ..........................7 2.06 Participation During an Approved Unpaid Leave of Absence . ............................... 8 2.07 Participation During an Approved Paid Leave of Absence ..... ............................... 9 i IIIBENEFIT ELECTIONS ....................................................................... ............................... 9 3.01 Enrollment Form ...................................................................... ............................... 9 3.02 Election of Benefits .................................................................. ............................... 9 3.03 Election Period; Completion of Enrollment Form ................... ............................... 9 3.04 Annual Election Period ............................................................ .............................10 3.05 Changes of Benefit Elections ................................................... .............................10 IV PARTICIPANT BENEFIT ACCOUNTS ............................................ .............................11 4.01 Provision for Participant Accounts ......................................... ............................... 11 4.02 Crediting Participant Accounts ................................................ .............................11 4.03 Debiting Participant Accounts .................................................. .............................12 4.04 Nature of Participant Accounts ................................................ .............................12 4.05 Allocations Irrevocable During Plan Year ............................... .............................12 4.06 Forfeiture of Unused Account Balances .................................. .............................12 4.07 Reduction of Certain Elections to Prevent Discrimination ...... .............................12 4.08 Modification of Elections due to Premium Increases .............. .............................13 VBENEFITS ........................................................................................... .............................13 5.01 Benefits Available Under the Plan ........................................... .............................13 5.02 Cash Benefit ............................................................................. .............................16 5.03 Requirement that Participant Contributions be by Salary Reduction ....................16 5.04 Continuation of Coverage ........................................................ .............................16 5.05 Continuation Coverage for Employees in the Uniformed Services ......................17 5.06 Effect of Qualified Benefit Plans or Arrangements ................. .............................17 VIPLAN ADMINISTRATION ................................................................ .............................17 6.01 Allocation of Authority ............................................................ .............................17 6.02 Resignation Or Removal .......................................................... .............................18 6.03 Provision for Third -Party Plan Service Providers .................... .............................18 6.04 Several Fiduciary Liability ....................................................... .............................19 6.05 Compensation of Plan Administrator ....................................... .............................19 6.06 Bonding .................................................................................... .............................19 6.07 Payment of Administrative Expenses ...................................... .............................19 6.08 Funding Policy ......................................................................... .............................19 6.09 Source of Payments .................................................................. .............................19 6.10 Disbursement Reports .............................................................. .............................19 6.11 Timeliness of Payments ............................................................ .............................20 6.12 Requirement that Participants Substantiate Reimbursable Expenses ....................20 VIIINSURERS ......................................................................................... ............................... 20 7.01 Provisions Relating to Insurers ................................................. .............................20 7.02 Conflicting Provisions .............................................................. .............................20 VIIICLAIMS PROCEDURES .................................................................. ............................... 20 8.01 Procedure if Benefits are Denied Under the Plan ..................... .............................20 8.02 Requirement for Written Notice of Claim Denial .................... .............................21 8.03 Right to Request Hearing on Benefit Denial .......................... ............................... 21 ii 8.04 Disposition of Disputed Claims ............................................. ............................... 21 8.05 Preservation of Remedies ......................................................... .............................22 8.06 Claim Procedure for Insurance Benefits .................................. .............................22 IX AMENDMENT OR TERMINATION OF PLAN ............................. ............................... 22 9.01 Permanency ............................................................................ ............................... 22 9.02 City's Right to Amend ........................................................... ............................... 22 9.03 City's Right to Terminate ......................................................... .............................23 9.04 Determination of Effective Date of Amendment or Termination ......................... 23 XGENERAL PROVISIONS ................................................................... .............................23 10.01 Not an Employment Contract ................................................... .............................23 10.02 Applicable Laws ....................................................................... .............................23 10.03 Post - Mortem Payments .......................................................... ............................... 23 10.04 Nonalienation of Benefits ......................................................... .............................23 10.05 Mental or Physical Incompetency ............................................ .............................24 10.06 Inability to Locate Payee .......................................................... .............................24 10.07 Requirement for Proper Forms ............................................... ............................... 24 10.08 Multiple Functions ................................................................. ............................... 24 10.09 Tax Effects ............................................................................... .............................24 10.10 Gender and Number ............................................................... ............................... 25 10.11 Headings ................................................................................. ............................... 25 10.12 Incorporation by Reference .................................................... ............................... 25 10.13 Severability ............................................................................... .............................25 iii CITY OF GEORGETOWN EMPLOYEE CAFETERIA PLAN THIS PLAN sets forth the terms and conditions of the continuing City of Georgetown, Texas (the "City ") Employee Cafeteria Plan as follows: The City established the City of Georgetown Employee Cafeteria Plan (the "Cafeteria Plan" or " Plan ") under Section 125 of the Internal Revenue Code of 1986 (the "Code ") effective as of October 1, 1990. The City now desires to amend and restate the Plan effective as of the Effective Date. The purpose of the Plan is to continue to provide participating Employees with the opportunity to convert taxable compensation to non - taxable benefits by allowing those Employees to pay selected premiums and/ ❑or Plan contributions for certain benefits available to them under the Plan. The Plan is intended to be a cafeteria plan meeting the requirements of Code Section 125, as amended. ARTICLE I DEFINITIONS The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context: 1.01 "Anniversary Date" means the first day of each Plan Year. 1.02 "Annual Benefit" means a benefit elected hereunder and provided during the Plan Year. 1.03 "Annual Election Period" means the recurring Election Period beginning thirty (30) days prior to the Anniversary Date and ending on the Anniversary Date. 1.04 `Benefits" means those benefits or coverages available for election by a Participant under Article V. 1.05 "Change in Family Status" means, and is limited to: (1) a change in a Participant's legal marital status, including marriage, death of spouse, divorce, or annulment; (2) a change in a Participant's number of dependents, including birth, adoption, placement for adoption, or death of a dependent; (3) a termination or commencement of employment by the Participant, the Participant's spouse, or a dependent of the Participant; (4) a change in the employment status of the Participant, the Participant's spouse, or a dependent of the Participant with the result being that the individual becomes (or ceases to be) eligible under their respective plan, including a switch between part-time and full -time employment, a strike or lockout, a commencement of or return from an unpaid leave of absence, or a change in worksite; (5) a change, or in the eligibility conditions of the Participant's, the Participant's spouse's, or the Participant's dependent's employer's 1 cafeteria plan or other employee benefit plan with the consequence that such individual becomes or ceases to be eligible under such plan; (6) an event that causes a Participant's dependent to satisfy or cease to satisfy the requirements for coverage due to attainment of age, student status, or any similar circumstance provided in this Plan, if any; (7) a change in the place of residence of the Participant, the Participant's spouse, or a dependent of the Participant; (8) effective January 1, 2002, for purposes of adoption assistance, if any, provided under the Plan, the commencement or termination of an adoption proceeding; or (9) such other events which are permitted changes in elections with respect to dependent care flexible spending accounts pursuant to Section 125 of the Code, or the regulations thereunder. 1.06 "City" means the City of Georgetown. 1.07 "City Contribution means the amount by which an Employee has elected to reduce his cash compensation from the City and that is available to the Employee for the purpose of receiving Qualified Benefits under the Plan. 1.08 "City Council' means the City of Georgetown City Council, as constituted from time to time. 1.09 "Code" means the Internal Revenue Code of 1986, as amended. 1.10 "Compensation" means the salary paid to an Employee by the City, including: (a) any elective contribution made to any qualified retirement plan maintained by the City as a result of a salary reduction agreement entered into by the Participant under Code Section 401(k) (if any), or a Code Section 414(h) pick up contribution (if any), or a salary reduction agreement for a contribution to a Code Section 457 plan, and (b) any City contributions made to this Plan (or any other Code Section 125 plan) as the result of a salary reduction agreement. 1.11 "Effective Date" means October 1, 2001, as to this restatement, except (i) as otherwise provided herein and (ii) any provision of the Plan required by law to have an earlier effective date will be effective as of such date. The original effective date of the Plan was October 1, 1990. 1.12 "Election Period" means the period during which an Employee may elect to participate in the Plan; such Election Period for an Employee shall be his Initial Election Period or any subsequent Annual Election Period. 1.13 "Employee" means (a) any individual in a legal employer - employee relationship with the City for federal withholding tax purposes who works for the City on a regular full - time basis and is regularly scheduled to work at least 30 hours per week and is designated as a regular full -time employee on the City's payroll records or (b) a regular part-time employee who is regularly scheduled to work at least 20 hours per week, less than 30 hours per week, and is designated as a regular part-time employee on the City's payroll 2 records, and is expected to work at least 1,000 hours (excluding overtime) during a twelve month period. Such term includes "former employees" for the limited purpose of allowing continued eligibility for certain benefits hereunder for the remainder of the Plan Year in which an employee ceases to be employed by the City, or, if longer, the period during which a former employee has elected to continue coverage following termination of employment, as provided by 42 U.S.C. 300bb -1, et seq. Such term does not include temporary or seasonal employees who are hired for a pre - established period during annual peak workload periods and are designated as such in the City's payroll records. Such term does not include temporary on -call employees who are hired to work on temporary assignments as needed and are designated as such on the City's payroll records. 1.14 "Enrollment Form" means the individual participant enrollment form or forms promulgated by the Plan Administrator by which an eligible Employee or Participant enrolls in the Plan and elects Benefits in accordance with Article III and otherwise agrees to a reduction of his salary or other compensation to provide funds for the benefits described in this Plan. 1.15 "Entry Date" means the Employee's date of hire if the Employee completes the enrollment forms and returns them to the City's Human Resources Department within 30 days of the Employee's date of hire. Any Employee who does not enter at his date of hire shall enter the Plan on the first day of the Plan Year following the Open Enrollment Period during which he enrolls in the Plan. 1.16 "Fiduciary" means any person who has discretionary authority with respect to administration of the Plan, handling of the Plan's assets, or acts as a professional investment advisor or fund manager with respect to the Plan's assets. 1.17 "FMLA" means the Family and Medical Leave Act of 1993. 1.18 "FMLA Leave" means a leave of absence that the City is required to extend to an Employee under the provisions of the FMLA. 1.19 "Initial Election Period" means (i) the 30 -day period immediately preceding October 1, 2001, or (ii) the 30 -day period beginning on the day an Employee first is hired or employed as an Employee eligible to participate in the Plan. 1.20 "Life Event" also known as a "changes in status" event means, and is limited to: (1) a change in a Participant's legal marital status, including marriage, death of spouse, divorce, or annulment; (2) a change in a Participant's number of dependents, including birth, adoption, placement for adoption, or death of a dependent; (3) a termination or commencement of employment by the Participant, the Participant's spouse, or a dependent of the Participant; (4) a change in the employment status of the Participant, the Participant's spouse, or a dependent of the Participant with the result being that the individual becomes (or ceases to be) eligible under their respective plan, including a switch between part -time and full -time employment, a strike or lockout, a commencement of or return from an unpaid leave of absence, or a change in worksite; 3 (5) a change, or in the eligibility conditions of the Participant's, the Participant's spouse's, or the Participant's dependent's employer's cafeteria plan or other employee benefit plan with the consequence that such individual becomes or ceases to be eligible under such plan; (6) an event that causes a Participant's dependent to satisfy or cease to satisfy the requirements for coverage due to attainment of age, student status, or any similar circumstance provided in this Plan, if any; (7) a change in the place of residence of the Participant, the Participant's spouse, or a dependent of the Participant; (8) effective January 1, 2002, for purposes of adoption assistance, if any, provided under the Plan, the commencement or termination of an adoption proceeding; (9) a special enrollment under the Health Insurance Portability and Accountability Act of 1996; (10) a change in coverage required by a Qualified Medical Child Support Order, as defined in the Medical Coverage or in the Health Care Spending Arrangement, or a National Medical Support Notice, as defined in the Medical Coverage or in the Health Care Spending Arrangement, deemed to be a Qualified Medical Child Support Order to the extent permitted under Section 125 of the Code or the regulations thereunder; (11) a change in the Participant's, spouse's or dependent's entitlement to (actual enrollment in) Medicare or Medicaid (other than coverage solely of benefits under Section 1928 of the Social Security Act (the program for distribution of pediatric vaccines)); (12) the Employee, Employee's spouse or Employee's dependent becomes eligible for COBRA continuation coverage under the Employer's plan or a similar state law permits the Employee to elect to increase payments under this Plan to pay for the COBRA continuation coverage; and (13) any other events which are change in status or other events permitting changes in health or life benefit elections pursuant to Section 125 of the Code, or the regulations thereunder. 1.21 "Named Fiduciary" means the City and the Plan Administrator. 1.22 "Participant" means an Employee or dependent who participates in the Plan under Article II. 1.23 "Plan" means the City of Georgetown Employee Cafeteria Plan, as amended. 1.24 "Plan Administrator" means the person or persons appointed by the City with authority 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 City. 1.25 "Plan Year" means the annual accounting period of the Plan, which shall begin on October 1 and end on the next following September 30. 1.26 "Qualified Benefit" means any benefit excluded from taxation under Chapter 1 of the Code (other than Sections 117, 124, 127, or 132) including (a) any group -term life insurance coverage that is includible in gross income only by virtue of exceeding the dollar limitation on nontaxable coverage under Code Section 79; and (b) any other benefit permitted by the U.S. Department of Treasury regulations. 1.27 "Reimbursable Expense" means any out -of- pocket expense of a Participant that qualifies for reimbursement under either the Health Care Spending Account Arrangement S as a qualified medical expense under Code Section 213(d) or the Day Care Spending Account Arrangement as an employment - related expense under Code Section 21(b)(2). 1.28 "Service" means performance of service for the City as an Employee for at least one (1) hour during a month in the 12- consecutive month period beginning on an Employee's hire date, and each anniversary thereof, for which the Employee is compensated or entitled to be compensated. 1.29 "Uniformed Services" means the Armed Forces, the Army National Guard, and the Air National Guard when engaged in active duty for training, inactive duty training, or full - time National Guard duty, the commissioned corps of the Public Health Service, and any other category of persons designated by the President of the United States in time of war or emergency. 1.30 "USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.01 Eligibility Each employee of the City who is classified as an Employee shall be eligible to participate in the Plan on the later of (1) the Effective Date for Employees employed on the Effective Date who were hired prior to the Effective Date, or (2) the Entry Date for an employee who is first hired as an Employee by the City, provided such Employee has executed and completed an election to participate, and returned it to the City, or party designated by the City, within 30 days of his date of hire as an Employee or classification as an Employee. 2.02 Entry Date Each Employee of the City who meets the eligibility requirements of Section 2.01 as of the Effective Date shall become a Participant on the Effective Date. Each Employee of the City who (i) meets the eligibility requirements of Section 2.01 after the Effective Date, and (ii) files an Enrollment Form within 30 days of his hire as an Eligible Employee shall become a Participant effective as of the date he becomes eligible to participate in any Qualified Benefit. Each Employee who meets the eligibility requirements of Section 2.01 and did not enroll at his initial hire date and is not enrolling pursuant to a Life Event or a Change in Family Status and who filed an Enrollment Form during an Annual Election Period shall become a Participant on the Entry Date provided such Employee has completed and filed the Enrollment Form(s) in accordance with Article III. Notwithstanding anything to the contrary in this Section or Section 2.01, an Employee shall not become a Participant prior to the time he is eligible for any Qualified Benefit made available under the Plan. Further, an Employee's eligibility for 5 participation in any Qualified Benefit shall be determined under the terms of such Qualified Benefit program or arrangement. 2.03 Termination of Participation Participation shall terminate as of the earlier of: (a) the date the Plan terminates; (b) the last day of the month on or following the date on which the Participant ceases to be an Employee of the City; provided, however, that a Participant who continues to receive compensation (other than retirement pay or severance pay) from the City shall remain eligible until the earlier of: (i) the end of the Plan Year in which he /Oshe ceases to be an eligible Employee, or (ii) the date for which such compensation ceases to be paid; (c) the date a Participant ceases to meet the eligibility requirements of Section 2.01 of this Plan; or (d) with respect to each of the benefits offered under Section 5.01(c), the date a Participant ceases to meet the eligibility requirements of any of each of the benefits enumerated in Section 5.01(c). Coverage shall be lost and participation shall terminate with respect to such benefit pursuant to the provisions of each such benefit or, if no date is designated, as of the date the Participant ceases to meet the eligibility requirements. Any Employee whose participation has terminated and has ceased to be a Participant shall be treated as a new Employee and may again become a Participant at the time specified in Section 2 02 if, and when, he meets the requirements of Section 2.01, provided that at least 30 days have passed between such Participant's termination and the date he is rehired as an Employee by the City. Notwithstanding any other provision herein, nothing contained in this Plan shall have the effect of negating the rights of any Participant, or beneficiary of any Participant, to continuation of medical benefits, as may otherwise be required by (i) 42 U.S.C. § 300bb -1, et seq. and the regulations thereunder, if any, or (ii) the provisions of the Health Care Spending Account Arrangement. 2.04 Participation During FMLA Leaves of Absence (a) An Employee who is not at work because of an unpaid FMLA Leave, may, at the Employee's option, continue any or all benefits under the Plan that the Employee elected during the period of absence so long as the Employee continues to make any required contributions. For the period of the absence, the Employee may choose to make these contributions by: 6 (i) remitting payment to the City on or before each pay period for which the contributions would have been deducted from the Employee's paycheck if leave had not been taken, provided that any delinquent payments must be made within 30 days of their due date; and, provided further, that if payment is not made as described in this paragraph, effective as of January 1, 2002, the City may without the prior request of the Employee, continue the benefits and recoup the Employee's share of the cost under subparagraph (iii) below; (ii) at the Employee's request, prepaying the amounts that will become due during the leave out of one or more of the Employee's paychecks preceding the leave; or (iii) effective as of January 1, 2002, at the Employee's request, making up the amounts that became due during the leave out of one or more of the Employee's paychecks or by remitting one or more payments following the leave. Any Employee who is not at work because of an unpaid FMLA Leave, who returns to active employment within twelve (12) weeks shall be eligible to return and immediately participate in the same Benefits which the Participant had elected to participate in prior to taking the unpaid FMLA Leave, subject to any changes in Benefits that affect the workforce as a whole, provided the Participant returns to employment in the same benefit eligibility status as he was in prior to taking the leave of absence, and provided the Employee makes all required elections to participate in the Plan on a timely basis. 2.05 Participation During a Leaves of Absence pursuant to USERRA (a) An Employee who is not at work because of an unpaid period of duty in the Uniformed Services, may, at the Employee's election, continue any or all benefits under the Plan that the Employee elected during the period of absence, so long as the Employee satisfies the necessary provisions, and makes any required contributions provided under USERRA. (b) The maximum period of coverage for an Employee, an Employee's spouse, and/or an Employee's dependents, if any, under an unpaid period of duty in the Uniformed Services, shall governed under the applicable limitations and provisions contained in USERRA. (c) An Employee who elects to continue coverage under this Plan shall pay -- (1) not more than the Employee's share, if any, for coverage under the Plan as an Employee if the Employee performs service in the Uniformed Services for less than 31 days; or (2) not more than 102 percent of the full premium under the Plan (determined in the same manner as the applicable premium under Section 4980B(f)(4) of the Code) associated with such coverage for the Employer's other 7 Employees, if the Employee performs service in the Uniformed Services for 31 days or more. (d) During the period of service in the Uniformed Services, the Employee may pay the necessary costs associated with coverage under this Plan, if any, by -- (1) remitting payment to the City on or before each pay period for which the contributions would have been deducted from the Employee's paycheck had the Employee not been absent serving in the Uniformed Services, provided that any delinquent payments must be made within 30 days of their due date; or (2) at the Employee's request, prepaying the amounts that will become due during the period of service in the Uniformed Services, out of one or more of the Employee's paychecks preceding such period of service in the Uniformed Services. (e) Any Employee who is not at work because of service in the Uniformed Services, who returns to active employment within the relevant time period specified in section (b) above, shall be eligible to return and immediately participate in the same Benefits which the Participant had elected to participate in prior to serving in the Uniformed Services, subject to any changes in Benefits that affect the workforce as a whole, provided the Participant returns to employment in the same benefit eligibility status as he was in prior to serving in the Uniformed Services, and provided the Employee makes all required elections to participate in the Plan on a timely basis. 2.06 Participation During an Approved Unpaid Leave of Absence (a) A Participant who is absent from work on an approved unpaid leave of absence (for a purpose other than that described in Sections 2.04 or 2.05) for a period of time that is intended to extend beyond the end of the current Plan Year shall cease participation as of the day on which his leave of absence begins. Treatment of such a former Participant during his period of leave, and upon his reentry at the end of such leave, will be in accordance with uniform and nondiscriminatory written procedures established by the City which employed the Participant as of the date his leave of absence began. (b) A Participant who is absent from work on an approved unpaid leave of absence (for a purpose other than that described in Section 2.04 or 2.05) for a period of time that is not intended to extend beyond the end of the current Plan Year shall not cease participation during the period of approved unpaid leave. Upon the Participant's return from his unpaid leave of absence, the Participant's cash compensation for the remaining pay periods in the Plan Year will be reduced so that the total amount reduced for the entire Plan Year will equal the cost of the benefit elected by the Participant pursuant to Section 3.03. Rl 2.07 Participation During an Approved Paid Leave of Absence An Employee who is absent from work for any paid leave of absence must continue any and all benefits elected under this Plan, and Employee contributions for those benefits that the Employee chooses to continue while on the leave of absence will continue to be deducted from the Employee's paychecks during the absence. ARTICLE III BENEFIT ELECTIONS 3.01 Enrollment Form The Enrollment Form shall contain such information as the Plan Administrator may deem appropriate, including, where applicable: (a) Name of the Participant, (b) Benefits available pursuant to Article V, (c) Benefits elected by the Participant, (d) The Plan Year, or other period of time, for which such elections are effective, (e) Specific amounts to be allocated to the Individual Benefit Account for each elected Benefit, (f) A provision by which an Employee agrees to a salary reduction to the extent that employee contributions are required to purchase benefits elected under the Plan, and (g) Amount of any salary reduction agreed to pursuant to Section 3.02. 3.02 Election of Benefits A Participant may elect any of the Benefits available under Article V or any combination thereof, in accordance with the following provisions of this Article III, by entering into a salary reduction agreement in the form of the Enrollment Form provided by the Plan Administrator. This election shall include the specific amounts to be allocated to the Individual Benefit Account for each Benefit elected. 3.03 Election Period; Completion of Enrollment Form (a) Eligibility on Effective Date. An Employee who was eligible to become a Participant as of the Effective Date must have completed, signed and filed an Enrollment Form with the Plan Administrator during the Initial Election Period in order to become a Participant on the Effective Date. The elections made by the Participant on this Enrollment Form shall be effective, subject to the terms of the Qualified Benefit and Sections 3.04 and 3.05, for the Plan Year beginning on the Effective Date. (b) Eligibility After Effective Date. An Employee who becomes eligible to become a Participant after the Effective Date may elect to participate by completing, E signing and filing an Enrollment Form with the Plan Administrator during his Initial Election Period or during any subsequent Annual Election Period or within 30 days of a Life Event or a Change in Family Status. The elections made by the Participant on his Enrollment Form shall be effective, subject to the terms of the Qualified Benefit and Sections 3.04 and 3.05, for the period beginning on the Entry Date and ending on the last day of the Plan Year within which such participation began. (c) Failure to File Enrollment Form. An Employee who fails to complete, sign and file an Enrollment Form with the Plan Administrator in accordance with paragraph (a) or (b) above during his Initial Election Period may become a Participant on a later date by completing, signing and filing an Enrollment Form with the Plan Administrator during any subsequent Annual Election Period or in accordance with Sections 3.05(a) or 3.05(b). 3.04 Annual Election Period Each Participant shall complete, sign and file an Enrollment Form during each Annual Election Period. The elections made by the Participant on an Enrollment Form shall be effective, subject to Section 3.05, for the entire Plan Year beginning on the applicable Anniversary Date. A Participant who fails to complete, sign and file an Enrollment Form during any Annual Election Period as required by this Section 3.04 shall be deemed to have elected not to continue participation in the Plan for the succeeding Plan Year. 3.05 Changes of Benefit Elections Changes in any and all Benefit elections shall be allowed only in accordance with Sections 3.05(a) and 3.05(b) below. (a) Occurrence of a Life Event. A Participant may change or terminate the election of any and all Benefits available under Article V (and the corresponding salary reduction agreement referenced in Section 3.02), other than the Day Care Spending Account Benefit (Section 5.01(b)) which shall be governed by Section 3.05(b), within thirty (30) days of the occurrence of a Life Event. A change or termination of a Benefit election or salary reduction agreement due to the occurrence of a Life Event must be made in accordance with the consistency rules regarding accident or health coverage, and group -term life insurance, as provided in the Code, and the regulations thereunder. An Employee who is eligible to become a Participant but failed to complete an Enrollment Form during his Initial Election Period pursuant to Section 3.03(a) or (b) may become a Participant and file an Enrollment Form within thirty (30) days of the occurrence of a Life Event. Any such change must be consistent with, and as a result of, the Life Event. Elections made pursuant to this Section 3.05(a) shall be effective for the balance of the Plan Year in which the election is made and shall be effective beginning on the first day of the pay period next following the day the new Enrollment Form is filed with the Plan Administrator, except for Life Events which trigger a dependent special enrollment period, in which case the election shall be effective on the date the dependent coverage is made available in accordance with the Health Insurance Portability and Accountability Act of 1996, as amended and the regulations issued thereunder for birth, adoption or placement for adoption, or on the first day of the month following the request for enrollment as the result of the marriage which triggers the election as provided in Code Section 9801(f)(2)(C). (b) Occurrence of a Change in Family Status. A Participant may change or terminate an election pertaining to the Day Care Spending Account Benefit within thirty (30) days of the occurrence of a Change in Family Status, as defined in Section 1.05. A change or termination of the Day Care Spending Account Benefit election or salary reduction agreement due to the occurrence of a Change in Family Status must be made in accordance with the consistency rules regarding such benefits provided in the Code, and the regulations thereunder. An Employee who becomes eligible to become a Participant due to a Change in Family Status may become a Participant and file an Enrollment Form within thirty (30) days of the Change in Family Status. Any such change must be consistent with and as a result of such Change in Family Status. Elections or election changes, made pursuant to this Section 3.05(b) shall be effective for the balance of the Plan Year in which the election is made and shall be effective beginning on the first day of the pay period next following the day the new Enrollment Form is filed with the Plan Administrator. ARTICLE IV PARTICIPANT BENEFIT ACCOUNTS 4.01 Provision for Participant Accounts During the applicable Election Period determined under Article III, an Employee may enter into a salary reduction agreement with the City. For bookkeeping purposes, the Plan Administrator shall maintain a Participant Account for each Participant. The Participant Account shall be divided into two or more sub - accounts (hereinafter referred to collectively as "Individual Benefit Accounts "). If Health Care Spending Account Benefits are elected, a Health Care Spending Account shall be created. Likewise, if Day Care Spending Account Benefits are elected, a Day Care Spending Account shall be created. 4.02 Crediting Participant Accounts Amounts credited to a Participant's Account shall be allocated, on the date credited, to the respective Individual Benefit Accounts of the Participant pursuant to the elections made by the Participant in accordance with Article V. 11 4.03 Debiting Participant Accounts All payments of benefit amounts under the Plan shall be debited against the appropriate Individual Benefit Account, as provided in this Article IV or Section 5.01. 4.04 Nature of Participant Accounts No money shall actually be allocated to any Participant Account or Individual Benefit Account; any such Account shall be of a memorandum nature, maintained by the Plan Administrator for accounting purposes, and shall not be representative of any identifiable City assets. No interest will be credited to or paid on amounts credited to the Participant Account or any Individual Benefit Account. 4.05 Allocations Irrevocable During Plan Year Except as provided in Section 3.05 and 4.08, neither (a) the amounts to be credited to a Participant Account during a Plan Year nor (b) the allocation of such amounts to the appropriate Individual Benefit Accounts of a Participant can be changed during the Plan Year. 4.06 Forfeiture of Unused Account Balances Any amount allocated to an Individual Benefit Account shall be forfeited by the Participant and restored to the City if it has not been applied to provide the elected Benefit for any Plan Year by December 31S` following the end of the Plan Year for which the election was effective. Amounts so forfeited shall be applied by the City to reduce future administrative costs of the City in operating the Plan. 4.07 Deduction of Certain Elections to Prevent Discrimination The Plan Administrator shall have the power to reduce or revoke the benefit elections of certain employees if such a reduction is necessary to prevent the Plan from becoming discriminatory within the meaning of Code Section 125(b). The Plan Administrator's power to reduce benefits extends to the following cases: (a) In the case that Health Care Spending Account Benefits have been elected by an Employee who is "Highly Compensated" within the meaning of Code Section 125(e); (b) In the case that Day Care Spending Account Benefits have been elected by an Employee who is "Highly Compensated" within the meaning of Code Section 129(d)(2); (c) In each other case of benefits elected, if the Employee is considered to be "Highly Compensated" within the meaning of Code Section 125(e), or is otherwise a "Key Employee" within the meaning of Code Section 416(1)(1), and the regulations thereunder. 12 4.08 Modification of Elections due to Premium Increases The Plan Administrator shall automatically increase or decrease the amount of a Participant's salary reduction during the Plan Year in response to an appropriate change in the premiums charged by an insurer for any of the insured benefits elected hereunder, commensurate with the time that the insurer has made such premium change effective. Unless the Participant is entitled to a change of election under Section 3.05(a), 3.05(b), or 4.08, the adjusted salary reduction amount shall be in effect until the end of the Plan Year coverage period, or earlier change in premiums required by the insurer, or by another insurer providing substituted coverage during the Plan Year. ARTICLE V BENEFITS 5.01 Benefits Available Under the Plan The Qualified Benefits which may be made available for election under this Plan include one or more of the following: (a) Health Care Spending Account Benefit. Pursuant to a separate, written document, a copy of which is attached hereto and made a part hereof, the City maintains a self - funded Health Care Spending Account Arrangement. Under such Arrangement, payment shall be made to the Participant in cash as reimbursement for health - related expenses incurred during the Plan Year for which the Participant's election is effective, by the Participant or his dependents, which -- (1) are not covered, paid or reimbursed from any other source; (2) meet the tax - deductibility criteria as a medical or dental expense under Section 213 of the Code, as amended and the regulations thereunder; and (3) have not been taken as a deduction from income on the Participant's federal income tax return in any tax year. For purposes of this Section 5.01(a), the term "dependents" shall include any person who is a dependent as defined in Code Section 152, as amended, and the regulations thereunder. Not more than the amount specified in the Participant's Enrollment Form can be allocated for this Benefit during any Plan Year. In no event may the annual benefit provided for any Participant during any Plan Year under this Section exceed $5,000. To receive benefits under this Section, the Participant must file a written claim for benefits with the Plan Administrator on the form provided by the Plan Administrator, which shall include substantiation of any such claims prior to being eligible to receive reimbursement for eligible health care expenses under this part. 13 (b) Day Care Spending Account Benefit. Pursuant to a separate, written document, a copy of which is attached hereto and made a part hereof, the City maintains a Day Care Spending Account Arrangement. Under such Arrangement, payment shall be made either (1) to the Participant in cash as reimbursement for dependant care expenses incurred during the Plan Year, or (2) directly to a provider of Qualifying Services, as defined by the Day Care Spending Account Arrangement; and in accordance with the provisions of the Day Care Spending Account Arrangement. Not more than the amount specified in the Participant's Enrollment Form can be allocated for this Benefit during any Plan Year. The maximum amount provided under this form of benefit during any Plan Year may not exceed the earned income of an unmarried Participant, or the lesser of the earned income of the Participant or the Participant's spouse, if he or she is married. In no event may the annual benefit provided for any Participant during any Plan Year under this Section exceed $5,000, or, if the Participant is married and files a separate tax return, $2,500. To receive benefits under this Section, the Participant must either file a written claim for benefits with the Plan Administrator on the form provided by the Plan Administrator, which shall include substantiation of any such claims prior to being eligible to receive reimbursement for eligible dependent care expenses under this part or submit written authorization for direct deposit to the Plan Administrator. The Plan Administrator shall be entitled to rely on any written statements made by the Participant or any of his dependents concerning compliance with Code Sections 21 and 129, and shall be under no duty to make investigation of the accuracy of such statements. (c) Insurance Premium Benefits. Payment of insurance premiums under this provision shall be made to the appropriate insurer of amounts equal to the premiums otherwise payable by (or on behalf of) the Participant during the Plan Year, for coverage of the Participant, or the Participant's spouse or dependents, under some or all of the insurance programs maintained by the City pursuant to this Plan, as set out below. The maximum benefit under this Section shall be the amount of premiums due during the Plan Year. In the event of premium changes that become effective during a Plan Year, a Participant's existing election as to a salary reduction shall automatically be adjusted to reflect the increases or decreases, as provided in Section 4.08, above. Unless otherwise requested, all of a Participant's insurance premiums will be paid through salary reduction pursuant to Section 3.02 hereof. (1) Medical Coverage. The City may maintain a medical plan. Each Participant shall have the right to elect to take one of the medical coverage options, according to the terms and conditions contained in the plan documents of such health care program. Each Participant may specify on his or her Enrollment Form the amounts to be credited to his or her Participant Account. The amount that must be allocated for this Benefit, if it is chosen, is the amount necessary to provide the Participant's premium contribution for the coverage the Participant selected that is provided under such plan. Such Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. 14 (2) Dental Coverage. The City may maintain a dental plan. Each Participant shall have the right to elect to take the dental coverage, if available, according to the terms and conditions contained in the plan documents of such dental insurance program. Each Participant may specify on his or her Enrollment Form the amounts to be credited to his or her Participant Account. The amount that must be allocated for this Benefit, if it is chosen, is the amount, if any, necessary to provide the Participant's premium contribution for the coverage provided under such plan. Such Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. (3) Life Insurance Coverage. The City may maintain a group term life insurance plan. Each Participant shall have the right to elect to take incremental increases in the coverage under the group term life insurance program, if available, according to the terms and conditions contained in the plan documents of such group term life insurance program. Each Participant may specify on his or her Enrollment Form the amounts of coverage elected and the amounts to be credited to his or her Participant Account. The amount that must be allocated for this Benefit, if it is chosen, is the amount necessary to provide the Participant's premium contribution for the coverage provided under such plan. Such Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. (4) Accidental Death and Dismemberment (AD &D) Coverage. The City may maintain an accidental death and dismemberment plan. Each Participant shall have the right to elect to take the accidental death and dismemberment program, if available, according to the terms and conditions contained in the plan documents of such accidental death and dismemberment program. Each Participant may specify on his or her Enrollment Form the amounts to be credited to his or her Participant Account. The amount that must be allocated for this Benefit, if it is chosen, is the amount necessary to provide the Participant's premium contribution for the coverage provided under such plan. Such Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. (5) Long -Term Disability Coverage. The City may maintain a long -term disability plan. Each Participant shall have the right to elect to purchase additional amounts of the long -term disability coverage, if available, according to the terms and conditions contained in the plan documents of such lonb term disability insurance program. Each Participant may specify on his or her Enrollment Form the amounts to be credited to his or her Participant Account. The amount that must be allocated for this Benefit, if it is chosen, is the amount necessary to provide the Participant's premium contribution for the coverage provided under such plan. Such 15 Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. (6) Vision Coverage. The City may maintain a vision plan. Each Participant shall have the right to elect to take the vision coverage, if available, according to the terms and conditions contained in the plan documents of such vision insurance program. Each Participant may specify on his or her Enrollment Form the amounts to be credited to his or her Participant Account, The amount that must be allocated for this Benefit, if it is chosen, is the amount necessary to provide the Participant's premium contribution for the coverage provided under such plan. Such Benefit will be provided by the City directly to the insurer or provider on the Participant's behalf. 5.02 Cash Benefit In lieu of the Qualified Benefits herein provided, to the extent that a Participant waives benefits thereunder, such Participant shall be deemed to have elected to receive such compensation amounts not elected as benefits hereunder as a taxable benefit in the form of cash compensation. No set amount is allocated to a participant or refunded if no benefits are elected. Any Employer contributions toward the benefits shall be made solely in the Employer's discretion. 5.03 Requirement that Participant Contributions be by Salary Reduction Subject to Sections 2.04 and 2.05, any employee contributions required toward the purchase of the qualified benefits selected under Article V shall be made by a reduction in Participant's taxable Compensation (to the extent such benefits would be considered to be tax -free under Chapter 1 of the Code); however, the maximum amount of City Contributions under the Plan for any Participant shall be the sum of the Participant's costs of the most expensive benefits provided to the Participant under this Plan. 5.04 Continuation of Coverage Each benefit plan made available under Article V that is considered to be a "group health plan" under Code Section 5000(b)(1) because employees and their families are provided with health care benefits within the meaning of Code Section 213(d)(1), including the Health Care Spending Account Benefit, shall contain the necessary provisions required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA "), as set forth in 42 U.S.C. § 300bb -1 et seq., to assure that such benefits may be continued on or after the occurrence of the qualifying events defined in 42 U.S.C. § 300bb -1 et seq. Each benefit plan made available under Article V that is considered to be a "group health plan" under code Section 5000(b)(1) as described above, excluding the Health Care Spending Account Benefit, shall contain the necessary provisions required by the Health Insurance Portability and Accountability Act of 1996, the Newborns and Mothers' Health Protection Act of 1996, and the Mental Health Parity Act of 1996 as set forth in Code Sections 9801 through 9833. 16 5.05 Continuation Coverage for Employees in the Uniformed Services For purposes of Section 5.04, an Employee who is absent from work for more than 31 days in order to fulfill a period of duty in the Uniformed Services experiences a qualifying event for all purposes of COBRA as of the first day of the Employee's absence for such duty beyond the 31 days of absence for such duty and the coverage under USERRA for the 18 months beyond the initial 31 days of coverage shall qualify as alternate coverage that satisfies the COBRA coverage requirements. Such an individual and any of the individual's covered dependents shall be treated as any other qualified beneficiary under 42 U.S.C. § 300bb -1 et seq. for all purposes of COBRA. 5.06 Effect of Qualified Benefit Plans or Arrangements While the election to provide for the payment of his share of the cost of benefit coverage elected by the Participant under the benefit plans or arrangements comprising the Qualified Benefits may be made under the Plan, the benefits will not be provided by the Plan but by such benefit plans or arrangements. The types and amounts of benefits available under such benefit plans or arrangements and the terms and conditions of such coverage are set forth in such plans or arrangements, which shall include, without limitation, any group insurance contracts, group health care service contracts, and prepaid health plan contracts, if any, that constitute or are incorporated by reference into such benefit plans or arrangements. ARTICLE VI PLAN ADMINISTRATION 6.01 Allocation of Authority Except as to those functions reserved within the Plan to the appropriate officers of the City or the City Council, the Plan Administrator shall control and manage the operation and Administration of the Plan. The Plan Administrator shall have the exclusive right (except as to matters reserved to the appropriate officers of the City and/or the City Council by the Plan or which such officers and/Dor the City Council may reserve to such officers and/or the City Council) to interpret the Plan and to decide all matters arising thereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions. All determinations of the Plan Administrator, the appropriate officers of the City, or the City Council 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 maintain complete and accurate records of all Plan transactions, contributions, and distributions. The Plan Administrator shall maintain the books of accounts, records, and other data in the manner necessary for proper administration of the Plan and to meet all applicable disclosure and reporting requirements; 17 (b) 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; (c) To make and enforce such rules and regulations and prescribe the use of such forms as the Plan Administrator shall deem necessary for the efficient administration of the Plan; (d) To decide on questions concerning the Plan and the eligibility of any employee to participate in the Plan, in accordance with the provisions of the Plan; (e) To determine the amount of benefits which shall be payable to any person in accordance with the provisions of the Plan; to inform the City or insurer, as appropriate, of the amount of such Benefits; and to provide a full and fair review to any Participant whose claim for benefits has been denied in whole or in part; (f) To designate other persons to carry out any duty or power which would otherwise be a fiduciary responsibility of the Plan Administrator, under the terms of the Plan. (g) To furnish the Participants, upon request, with information which the Participants may require for tax or other purposes; (h) To perform any and all other acts necessary or appropriate for the proper management and administration of the Plan. 6.02 Resignation Or Removal An acting Plan Administrator may resign upon thirty (30) days prior written notice to the City. The City may remove any third party Administrator who is not employed by the City by giving three (3) days written notice in advance to the acting Plan Administrator. The City may remove any non -third party Administrator who is employed by the City at any time. No prior written notice is required to remove a non -third party Administrator. In the event of the resignation or removal of an Administrator, the City may act as Plan Administrator or shall appoint a successor Plan Administrator if the City intends to continue the Plan. During any period in which selection of an Plan Administrator is pending, the City shall act as Plan Administrator. 6.03 Provision for Third -Party Plan Service Providers The Plan Administrator, subject to approval of the City, may employ the services of such persons as it may deem necessary or desirable in connection with the operation of the Plan. The Plan Administrator, the City (and any person to whom it may delegate any duty or power in connection with the administration of the Plan), and all persons connected therewith may rely upon all tables, valuations, certificates, reports and opinions furnished by any duly appointed actuary, accountant, (including Employees who are actuaries or accountants), consultant, third party administration service provider, legal counsel, or other specialist, and they shall be fully protected in respect to any action taken . or permitted in good faith in reliance thereon. All actions so taken or permitted shall be conclusive and binding as to all persons. 6.04 Several Fiduciary Liability To the extent permitted bylaw, neither the Plan Administrator nor any other person shall incur any liability for any acts or for failure to act except for his own willful misconduct or willful breach of this Plan. 6.05 Compensation of Plan Administrator Unless otherwise agreed to by the City, the Plan Administrator shall serve without compensation for services rendered in such capacity, but all reasonable expenses incurred in the performance of his duties shall be paid by the City. 6.06 Bonding Unless otherwise determined by the City, 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. 6.07 Payment of Administrative Expenses All expenses for the management and administration of the Plan shall be paid by the City. 6.08 Funding Policy The City shall have no obligation, but shall have the right, to enter into a contract with one or more insurance companies for the purposes of providing any benefits under the Plan, to replace any of such insurance companies or contracts, or to establish any fund or trust for the payment of benefits under this Plan. Any dividends, retroactive rate adjustments or other refunds of any type which may become payable under any such insurance contract shall not be assets of the Plan but shall be the property of, and shall be retained by, the City. 6.09 Source of Payments The City's general assets, any insurance company contracts purchased or held by the City, or any trust or fund established by the City to provide the benefits described in this Plan shall be the sole sources of benefits under the Plan. No Employee or beneficiary shall have any right to, or interest in, any assets of the City upon termination of employment or otherwise, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or beneficiary. 6.10 Disbursement Reports The Plan Administrator shall issue directions to the City concerning all benefits which are to be paid from the Employer's general assets pursuant to the provisions of the Plan. Wt 6.11 Timeliness of Payments Payments shall be made as soon as administratively feasible after the required forms and documentation have been received by the Plan Administrator. 6.12 Requirement that Participants Substantiate Reimbursable Expenses Each Participant must submit a written claim form to the Plan Administrator to receive reimbursements from his Health Care Spending Account, or Day Care Spending Account, on a form provided by the Plan Administrator, along with such evidence as the Plan Administrator shall reasonably deem necessary so as to substantiate the nature, the amount, and timeliness of any expenses that may be reimbursed. Such request must be submitted within a reasonable time before a processing period to receive a reimbursement for his Reimbursable Expenses on such processing payment date. Year -end expense reimbursement claims must be submitted to the Plan Administrator on or before December 31st following the close of the Plan Year for which the Benefit election is effective, and during which such expense was incurred, in order to be eligible for reimbursement. ARTICLE VII INSURERS 7.01 Provisions Relating to Insurers No insurer shall be required to issue an insurance policy or contract that is inconsistent with the purposes of this Plan, nor be bound to take any action not in accordance with the terms of any policy or contract issued in connection with this Plan. The insurer shall not be deemed to be a party to this Plan, nor shall it be bound to interpret the construction or validity of the Plan. 7.02 Conflicting Provisions If any provision of any insurance policy or contract conflicts with the provisions of this Plan, the provisions of the Plan shall prevail. ARTICLE VIII CLAIMS PROCEDURES 8.01 Procedure if Benefits are Denied Under the Plan Except as otherwise provided herein, any Participant, beneficiary, or his duly authorized representative may file a claim for a plan benefit to which the claimant believes that he is entitled, but that has been previously denied by the Plan Administrator or his designee. Such a claim must be in writing and delivered to the Plan Administrator or his designee in person or by mail, postage paid. Within ninety (90) days after receipt of such claim, 20 the Plan Administrator or his designee shall send to the claimant, in writing, notice of the granting or denying, in whole or in part, of such claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension exceed ninety (90) days from the end of the initial period. If such extension is necessary, the claimant will be given a written notice to this effect prior to the expiration of the initial 90 -day period. The Plan Administrator or his designee shall have full discretion to deny or grant a claim in whole or in part. If notice of the denial of a claim is not furnished in accordance with this Section 8.01 and Section 8.02, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to review pursuant to Sections 8.03 and 8.04. 8.02 Requirement for Written Notice of Claim Denial The Plan Administrator or his designee shall provide a written notice to every claimant who is denied a claim for benefits. Such notice shall contain the following information, set forth in a manner calculated to be understood by the claimant: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent Plan provisions on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material is necessary, and (d) An explanation of the Plan's claim review procedure. 8.03 Right to Request Hearing on Benefit Denial Within sixty (60) days after the receipt by the claimant of written notification of the denial (in whole or in part) of his claim, the claimant or his duly authorized representative, upon written application to the Plan Administrator, in person or by certified mail, postage prepaid, may request a review of such denial, may review pertinent documents, and may submit issues and comments in writing. 8.04 Disposition of Disputed Claims Upon receipt of a request for review, the Plan Administrator shall make a prompt decision on the review matter. The decision on such review shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan or insurance policy provisions on which the decision was based. The decision upon review shall be made not later than sixty (60) days after the Plan Administrator's receipt of a request for a review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered not later than one hundred twenty (120) days after receipt of a request for review. If an extension is necessary, the claimant shall be given written notice of the extension prior to the expiration of the initial sixty (60) day period. If notice of the decision on the review is not furnished in accordance with this Section 8.04, the 21 claim shall be deemed denied and the Claimant shall be permitted to exercise his right to legal remedy pursuant to Section 8.05. 8.05 Preservation of Remedies After exhaustion of the claims procedure as provided under this Plan, nothing shall prevent any person from pursuing any other legal or equitable remedy. 8.06 Claim Procedure for Insurance Benefits Notwithstanding the foregoing provisions of this Article VIII, any claim for benefits under any of the insurance benefits described in Section 5.0 1(c) of this Plan shall not be subject to review under this Plan. All claims for benefits under the plans or programs referred to in Section 5.01(c) shall be governed by the terms of those policies, contracts or programs. All claims for benefits that are provided through insurance policies, contracts or other medical plans, whether such contracts or plans are between the insurer (or medical plan) and the City or the insurer and the Participant shall be made by filing a claim for benefits in accordance with the claims procedure set forth under the insurance policy, contract or medical plan. Neither the Plan Administrator nor the City has the authority or responsibility for processing, reviewing or paying such claims. All benefits provided under any insurance policy or contract are the sole responsibility of such insurer. All disputes regarding those claims shall be resolved in accordance with the procedure set forth in the separate description concerning those benefits. ARTICLE IX AMENDMENT OR TERMINATION OF PLAN 9.01 Permanency While the City fully expects that this Plan will continue indefinitely, permanency of the Plan will be subject to the City's right to amend or terminate the Plan, as provided in Sections 9.02 and 9.03, below. 9.02 City's Right to Amend The City reserves the right to amend the Plan at any time, and from time -to -time, for any reason. The City may delegate its respective right to amend this Plan to an individual, group or panel chosen by such City. The City may revoke its respective delegation of authority to amend this Plan at any time without prior notice. Any such amendment may be made effective retroactively if deemed necessary or appropriate to meet the requirements of (i) Code Section 125, or (ii) any similar provisions of subsequent revenue or other laws, or (iii) the rules and regulation in effect under any of such laws or (iv) governmental regulations or other policies; provided, however, that subject to Section 4.06, no such modifications or amendment shall make it possible for any Account Balance to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their beneficiaries under the Plan. 22 9.03 City's Right to Terminate The City reserves the right to discontinue or terminate the Plan at any time without prior notice. Furthermore, the Plan will also automatically terminate as to the City if the City (1) is legally dissolved, (2) makes a general assignment for the benefit of its creditors, (3) files for liquidation under the Bankruptcy Code, or (4) merges or consolidates with any other entity and it is not the surviving entity, or if it sells or transfers substantially all of its assets, or goes out of business. 9.04 Determination of Effective Date of Amendment or Termination Any such amendment, discontinuance or termination shall be effective as of such date as the authorized party shall determine. Subject to Section 4.06, no amendment, discontinuance or termination shall allow the return to the City of any Account Balance nor its use for any purpose other than for the exclusive benefit of providing the benefits hereunder to the Participants and their Beneficiaries. ARTICLE X GENERAL PROVISIONS 10.01 Not an Employment Contract Neither this Plan nor any action taken with respect to it shall confer upon any person the right to continued employment with the City. 10.02 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 Texas. 10.03 Post - Mortem Payments Any Benefit payable under the Plan after the death of a Participant shall be paid to his surviving spouse (if any) or any other designated beneficiary, 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, or it may pay such amount into any court of appropriate jurisdiction. In either event, neither the Plan Administrator, nor the City, shall be under any further liability to any person. 10.04 Nonalienation of Benefits No benefit under the Plan 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 Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person. If any person entitled to benefits under the Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, 23 assign, pledge, encumber or charge any benefit under the Plan, or if any attempt is made to subject any such benefit to the debts, contracts, liabilities, engagements or torts of the person entitled to any such benefit, except as specifically provided in the Plan, then such benefit shall cease and terminate at the discretion of the Plan Administrator, and he may hold or apply the same or any part thereof for the benefit of any dependent or beneficiary of such person, in such manner and proportion as he may deem proper. Notwithstanding the above, a Participant or a Covered Spouse or Dependent may assign his rights to reimbursement for any medical claim under Code Section 213(d) that is covered by the Medical Plan, Dental Plan or Vision Plan, if any, to the health care provider who provided covered services to such person. 10.05 Mental or Physical Incompetency If the Plan Administrator determines that any person entitled to payments under the Plan is incompetent by reason of physical or mental disability, as established by a court of competent jurisdiction, the Plan Administrator may cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of amounts so paid. Payments made pursuant to this Section shall completely discharge the Plan Administrator and the City from further liability hereunder. 10.06 Inability to Locate Payee If the Plan Administrator is unable to make payment to any Participant or other person to whom a payment is due under the Plan because he cannot ascertain the identity or whereabouts of such Participant or other person after reasonable efforts have been made to identify or locate such person (including a notice of the payment so due mailed to the last known address of such Participant or other person as shown on the records of the City), such payment and all subsequent payments otherwise due to such Participant or other person shall be forfeited to the City seven (7) years after the date any such payment first became due. 10.07 Requirement for Proper Forms All communications in connection with the Plan made by a Participant shall become effective only when duly executed on any forms as may be required and furnished by, and filed with, the Plan Administrator. 10.08 Multiple Functions Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 10.09 Tax Effects Neither the City nor the Plan Administrator is liable for any tax which may become payable, either by the Participant or the Plan, or makes any warranty or other representation as to whether any payments made to or on behalf of any Participant 24 hereunder will be treated as excludable from gross income for state or federal income tax purposes. 10.10 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. 10.11 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. 10.12 Incorporation by Reference The actual terms and conditions of the separate benefits offered under this Plan are contained in separate, written documents governing each respective benefit, and shall govern in the event of a conflict between the individual plan document and this Plan as to substantive content. To that end, each such separate document, as amended and subsequently replaced, is hereby incorporated by reference as if fully recited herein. 10.13 Severability Should any part of this Plan subsequently be invalidated by a court of competent jurisdiction, the remainder thereof shall be given effect to the maximum extent possible. IN WITNESS WHEREOF, this Plan has been executed this . &ay of Lit , 2002. 769975_3.DOC 5/2/02 25 THE CITY OF GEORGETOWN By: Na e: tr r Me lon Title: 0o r Amended and Restated Effective as of October 1, 2001 CITY OF GEORGETOWN DAY CARE SPENDING ACCOUNT ARRANGEMENT i Article Page PREAMBLE...................................................................................................... ..............................1 IDEFINITIONS ...................................................................................... ..............................1 1.01 "Benefits" .................................................................................. ..............................1 1.02 "Clty„ ....................................................................................... ..............................1 1.03 "Dependent" .............................................................................. ..............................1 1.04 "Earned Income" ....................................................................... ..............................1 1.05 "Educational Institution" ........................................................... ..............................1 1.06 "Effective Date" ........................................................................ ..............................1 1.07 `Eligible Employment- Related Expenses" ............................... ..............................2 1.08 " Married" ................................................................................... ..............................2 1.09 "Qualifying Day Care Center" .................................................. ..............................2 1.10 "Qualifying Employment- Related Expenses" ........................... ..............................2 1.11 "Qualifying Individual" ............................................................. ..............................2 1.12 "Qualifying Services" ................................................................ ..............................2 1.13 " Services" .................................................................................. ..............................3 1.14 " Spouse" .................................................................................... ..............................3 1.15 "Student" .................................................................................. ..............................3 IIELIGIBILITY ...................................................................................... ............................... 3 III COVERAGE AMOUNTS AND PREMIUMS ..................................... ..............................3 3.01 Available Levels of Benefits .................................................... ............................... 3 3.02 Required Premiums .................................................................. ............................... 3 3.03 Payment of Premiums ............................................................... ..............................4 3.04 Return of Premiums .................................................................. ..............................4 IVBENEFITS ............................................................................................ ..............................4 4.01 Eligibility for Benefits ............................................................... ..............................4 4.02 Claims for Benefits .................................................................... ..............................4 4.03 Required Information ............................................................... ............................... 5 4.04 Repayment of Excess Reimbursements ................................... ............................... 5 4.05 Termination of Employment .................................................... ............................... 5 VBENEFIT LIMITATIONS ................................................................... ............................... 6 5.01 Source of Payments ................................................................... ..............................6 5.02 Earned Income Limitation ......................................................... ..............................6 5.03 Dollar Limitation ................................................................. ............................... 6 5.04 Forfeiture of Unused Account Balances ................................... ..............................7 - 1 - VIMISCELLANEOUS .............................................................................. ..............................7 6.01 Plan Administration ................................................................... ..............................7 6.02 Claims Procedure ...................................................................... ..............................7 6.03 Amendment or Termination of the Pl an .................................... ..............................7 6.04 General Provisions .................................................................... ..............................7 6.05 Participant Statements .............................................................. ............................... 7 6.06 Participant's Need to File Form 2441 with the IRS .................. ..............................7 -ii - CITY OF GEORGETOWN Fgq,_J ' �. THIS INSTRUMENT made and published by the City of Georgetown, Texas (hereinafter called "City) reflects the City of Georgetown. Day Care Spending Account Arrangement (the "Arrangement "), which was approved by the City Council on September 11, 1990, which, prior to this amendment and restatement was named the "City of Georgetown Child and Dependent Care Reimbursement Plan," and which forms a part of and is incorporated by reference into the City of Georgetown Employee Cafeteria Plan (hereinafter referred to as the "Cafeteria Plan" or "Plan "), as follows: This Arrangement was established to reimburse the eligible Employees of the City for the cost of dependent care expenses incurred by them incidental to their being employed. It is intended that the Arrangement meet the requirements for qualification under Section 129(d)(1) of the Code, and that benefits paid employees hereunder be excludible from their gross incomes by virtue of Section 129(a) of the Code. ARTICLE I DEFINITIONS The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context: 1.01 "Benefits" means any amounts paid to a Participant in the Cafeteria Plan under this Arrangement as reimbursement for Qualifying Employment- Related Expenses paid or incurred by the Participant during a Plan Year. 1.02 "City" means the City of Georgetown, Texas. 1.03 "Dependent" means any individual who is a dependent of the Participant within the purview of Section 152(a) of the Code. 1.04 "Earned Income" means all income derived from wages, salaries, tips, self - employment, and other employee compensation (such as disability or wage continuation benefits), but does not include (a) any amounts received pursuant to this Arrangement or any other dependent care assistance program under Section 129 of the Code, (b) any amount received as a pension or annuity, or (c) workers' compensation. 1.05 "Educational Institution" means 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. 1.06 "Effective Date" means October 1, 2001, as to this restatement, except (i) as otherwise provided herein and (ii) any provision of the Arrangement required by law to have an -1- earlier effective date will be effective as of such date. The original effective date of the Arrangement was October 1, 1990. 1.07 "Eligible Employment - Related Expenses" means those Qualifying Employment - Related Expenses (as defined below) paid or incurred incident to maintaining employment, other than amounts paid to: (a) an individual with respect to whom a deduction is allowable under Code Section 151(e) to the Participant or his spouse; (b) the Participant's spouse; or (c) a child of the Participant who is under 19 years of age. 1.08 "Married" for purposes of determining the maximum amount of available benefits under this Arrangement, means not legally separated or divorced from a spouse, but does not include the situation where the Participant, although legally married, provides more than one -half the cost of maintaining the principal abode of the Qualifying Individual or Individuals, the person to whom the Participant is legally married maintains a separate residence for the last six months of the taxable year, and the Participant files a separate federal income tax return. 1.09 "Qualifying Day Care Center" means a child day care center which (a) complies with all applicable state and local licensing laws and regulations of the jurisdiction in which it is operated; (b) provides care for more than six (6) individuals (other than the individuals who reside at such day care center); and (c) receives a fee, payment or grant in return for services to individuals for whom it provides services, without regard to whether such facility is operated for a profit. 1.10 "Qualifying 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 the household and dependent care services necessary for gainful employment) if paid for by the Employee. 1.11 "Qualifying Individual" means: (a) a Dependent of the Participant who is under the age of thirteen (13); (b) a Dependent of a Participant who is mentally or physically incapable of caring for himself or herself; or (c) a Spouse of a Participant who is mentally or physically incapable of caring for himself or herself. 1.12 "Qualifying Services" means services performed: (a) in the Participant's home; or N (b) outside the Participant's home for (1) the care of a Dependent of the Participant who is under age 13 provided such services are not for an overnight camp or for any school expenses for schooling beyond the kindergarten year, or (2) the care of any other Qualifying Individual who resides at least eight (8) hours per day in the Participant's household. 1.13 "Services" means the services performed relating to the care of a Qualifying Individual that enable the Participant or his spouse to maintain gainfully employed. 1.14 "Spouse" means an individual who is legally married to a Participant, but shall not include an individual legally separated from the Participant under a divorce or separate maintenance decree, nor shall it include an individual who, although married to the Participant, files a separate federal income tax return, maintains a separate, principle residence from the Participant during the last six months of the taxable year, and does not furnish more than one -half the cost of maintaining the principle place of abode of the qualifying individual. 1.15 "Student" means an individual who, during each of five (5) or more calendar months during the Plan Year, is a full time student at an Educational Institution. 1.16 All of the definitions set forth in Article I of the City's Cafeteria Plan and not otherwise defined herein shall have the same meaning in this Arrangement, and all such definitions are hereby incorporated by reference into this Arrangement. ARTICLE II ELIGIBILITY Each Employee of the City who is a Participant in the City's Cafeteria Plan and who has elected Day Care Spending Account Benefits pursuant to the Enrollment Form in becoming a member of such Cafeteria Plan shall automatically be a Participant in this Arrangement as of the later of (1) the date his participation in such Cafeteria Plan becomes effective, (2) when he elects coverage under this Arrangement, or (3) for a Plan Year in which he is hired or rehired by the City, in accordance with the procedures of the Plan Administrator applied consistently and on a nondiscriminatory basis. ARTICLE III COVERAGE AMOUNTS AND PREMIUMS 3.01 Available Levels of Benefits A Participant may choose his or her applicable level of Day Care Spending Account Benefit, however, the maximum amount provided under this benefit during any Plan Year may not exceed the earned income of an unmarried Participant, or the lesser of the earned income of the Participant or the Participant's Spouse, if he or she is Married. Furthermore, in no event may the annual benefit provided pursuant to the Day Care Spending Account Arrangement exceed $5,000, or if the Participant is Married and files a separate tax return, $2,500. 3.02 Required Premiums -3- As a condition to continued eligibility to receive benefits under this Arrangement, a Participant shall make the contributions corresponding to the benefit level selected. 3.03 Payment of Premiums The normal mode of payment of contributions for a Plan Year shall be by deduction from the Participant's paychecks during the Coverage Period, pursuant to the Participant's Enrollment Form. 3.04 Return of Premiums If the Participant revokes an election of benefits under this Arrangement by virtue of termination of employment, the Plan Administrator shall refund any portion of those contributions which may be inadvertently withheld from such Participant's compensation earned after the date of the Participant's separation from service. ARTICLE IV BENEFITS 4.01 Eligibility for Benefits Each Participant in the Arrangement shall be entitled to a benefit hereunder for all Eligible Employment- Related Expenses incurred by him or her on or after the effective date of participation, subject to the limitations contained in Section 3.01 and Article V, below. 4.02 Claims for Benefits No benefit shall be paid hereunder unless a Participant has first submitted a written claim for benefits to the Plan Administrator, on a form specified by the Plan Administrator, and pursuant to the procedures set out in the City's Cafeteria Plan. Upon receipt of a properly documented claim, the City shall pay the Participant the benefits provided under this Arrangement within the time specified for payment under such Cafeteria Plan; however, the amount paid by the City to the Participant shall not exceed the lesser of: (i) the amount of the documented claim, or (ii) the total amount of salary reduction contributions made by the Participant during the Plan Year to date reduced by the total amount of reimbursements already made to or on behalf of the Participant under this Arrangement by the City during the Plan Year. A Participant may submit a claim for reimbursement for a Qualifying Employment - Related Expense arising during the Plan Year at any time during the period that begins when the expense is incurred, and ends December 31 following the close of the Plan Year during which the expense is incurred. Notwithstanding anything contained in this Section 4.02 and subject to the requirements set forth in Section 4.03 below, the Participant may authorize the City to directly pay benefit amounts on a bi- weekly basis to a provider of Qualifying Services by submitting a written authorization for direct deposit to the Plan Administrator, on a form specified by the Plan Administrator. However, in no event shall such amounts exceed the lesser of (i) the total cost of such Qualifying Services or (ii) the amounts set forth in Section 3.01 above. M The Plan Administrator may set a dollar limit for the minimum amount of reimbursements made; however, there shall be no such minimum requirement if the Participant's total account balance under this Arrangement is less than the minimum. 4.03 Required Information Each Participant's claim of benefits shall contain a written statement containing such information as the Plan Administrator may deem appropriate, including: (a) the Dependent or Dependents for whom services have been performed; (b) the nature of the services performed on behalf of the Participant; (c) the amount of the requested reimbursement; (d) the place where any services are being performed; (e) if services are to be performed outside the Participant's household, a statement as to whether the Dependent being provided with such services spends at least eight (8) hours per day in such household; (f) if services are being performed in a day care center that regularly provides dependent care services for more than six (6) individuals on a nonresident basis, a statement that such facility meets the criteria for qualification set out in Section 1.09 above, and Code Section 21(b)(1)(C); (g) if the Participant is Married, a statement of (1) the Spouse's salary and wages, if employed, or (2) if the Spouse is not employed, a statement that (i) he or she is incapacitated, or (ii) he or she is a full time student at an Educational Institution and the months of the Plan Year that such Spouse will be in attendance at such Institution; (h) receipts or a signed statement from the service provider; and G) the name and address of the service provider. 4.04 Repayment of Excess Reimbursements If, as of the end of any Plan Year, it is determined that a Participant has received payments under this Arrangement that exceed the amount of Qualifying Employment - Related Expenses that have been substantiated by such Participant during the Plan Year, the Plan Administrator shall give the Participant prompt written notice of any such excess amount, and the Participant shall repay the amount of such excess to the City within sixty (60) days of receipt of such notification. Each Employee, by becoming a Participant in the Plan, authorizes the City to withhold amounts from such Participant's Compensation or to offset any such indebtedness against amounts payable hereunder. 4.05 Termination of Employment If a Participant ceases to be an Employee of the City, such Participant shall continue to be treated as an active Participant for the remainder of the Plan Year in which termination -5- occurs to the extent of any outstanding credit balance remaining in such employee's Day Care Spending Account; provided, however, that contributions to such Participant's Day Care Spending Account shall cease as of the first day of the first pay period following the termination of his employment. Such Participant shall have the right to submit a claim . for reimbursement for any Qualifying Employment- Related Expense arising during the Plan Year of termination at any time prior to December 31 following the close of such Plan Year. ARTICLE V BENEFIT LIMITATIONS 5.01 Source of Payments All benefits derived hereunder shall be paid exclusively from the Participant's Day Care Spending Account under the City's Cafeteria Plan. In no event shall benefit payments hereunder exceed the amounts available for reimbursement under such Day Care Spending Account, net of any required administrative service fees and charges. 5.02 Earned Income Limitation (a) No payment otherwise due a Participant hereunder shall exceed the lesser of: (1) the Participant's Earned Income for the applicable month; (2) if the Participant is married, the Earned Income of the Participant's Spouse for such month; or (3) the balance standing to the Participant's credit in his Day Care Spending Account under the City's Cafeteria Plan. (b) For purposes of paragraph (a), a Spouse of a Participant who is not employed during a month in which the Participant incurs Eligible Employment - Related Expenses and which Spouse is either incapacitated or is a Student shall be deemed to have Earned Income for such month equal to: (1) $200, if there is one (1) Qualifying Individual for whom the Participant incurs Eligible Employment- Related Expenses, or (2) $400, if there are more than one Qualifying Individual for whom the Participant incurs Eligible Employment - Related Expenses. 5.03 Dollar Limitation In no event may benefits provided for any Participant during any Plan Year exceed Five Thousand Dollars ($5,000), or, if the Participant is married (as defined in Code Section 21(e)(3) -(4)) and files a separate federal income tax return, Two Thousand Five Hundred Dollars ($2,500). The City is not responsible for determining the limitation applicable to a Participant and shall rely solely on the Participant's representation regarding his marital and federal tax return filing status contained in his Enrollment Form and/or claim for benefits. -6- 5.04 Forfeiture of Unused Account Balances Any amount allocated to a Participant's Day Care Spending Account shall be forfeited by the Participant and restored to the City if it has not been applied to provide the elected Benefit for any Plan Year by December 31 following the end of the Plan Year for which the election was effective. Amounts so forfeited shall be applied by the City to reduce future administrative costs of the City in operating the Arrangement. ARTICLE VI MISCELLANEOUS 6.01 Plan Administration The provisions of the Cafeteria Plan as set forth in Article VI relating to the administration of the Plan also shall apply to this Arrangement. 6.02 Claims Procedure The provisions of the Cafeteria Plan as set forth in Article VIII relating to claims procedures also shall apply to this Arrangement. 6.03 Amendment or Termination of the Plan The provisions of the Cafeteria Plan as set forth in Article IX relating to amendment or termination of the Plan also shall apply to this Arrangement. 6.04 General Provisions The provisions of the Cafeteria Plan as set forth in Article X relating to general provisions of the Plan also shall apply to this Arrangement. 6.05 Participant Statements The Plan Administrator shall indicate the amount of reimbursement benefits made pursuant to this Arrangement during the preceding calendar year on the Form W -2 Wage and Tax Statement of each Participant electing benefits hereunder on or before January 31 after each year that this Arrangement is in effect. 6.06 Participant's Need to File Form 2441 with the IRS The Plan Administrator shall inform Participants in this Arrangement that the IRS requires participants in a day care flexible spending arrangement (such as this Arrangement) to include Form 2441 with their annual income tax return. IN WITNESS WHEREOF, this Arrangement has been executed this /!° day of 7bt , 2002. -7- I la I Still .., Amended And Restated Effective as of October 1, 2001 CITY OF GEORGETOWN HEALTH CARE SPENDING ACCOUNT ARRANGEMENT Article Page IDEFINITIONS ...................................................................................... ..............................1 1.01 "Benefits" .................................................................................. ..............................1 1.02 " City ........................................................................................... ..............................1 1.03 "Coverage Period" ..................................................................... ..............................1 1.04 "Dependent" .............................................................................. ..............................1 1.05 "Effective Date" ........................................................................ ..............................1 1.06 "Eligible Health Care Expenses" .............................................. ..............................2 1.07 "National Medical Support Notice" .......................................... ..............................2 1.08 "Qualified Medical Child Support Order" ................................ ..............................2 1.09 " Spouse" .................................................................................... ..............................3 IIELIGIBILITY ....................................................................................... ..............................3 III COVERAGE AMOUNTS AND PREMIUMS ..................................... ..............................3 3.01 Available Levels of Benefits .................................................... ............................... 3 3.02 Required Premiums ................................................................... ..............................4 3.03 Payment of Premiums ............................................................... ..............................4 3.04 Return of Premiums .................................................................. ..............................4 IVBENEFITS ............................................................................................ ..............................4 4.01 Eligibility for Benefits ............................................................... ..............................4 4.02 Claims for Benefits .................................................................... ..............................4 4.03 Required Information ................................................................ ..............................5 4.04 Termination of Employment .................................................... ............................... 5 VCONTINUATION COVERAGE .......................................................... ..............................6 5.01 Continuation Coverage after Termination of Normal Participation ........................6 5.02 Qualified Beneficiary ................................................................ ..............................6 5.03 Qualifying Event ...................................................................... ............................... 6 5.04 Benefits Available under Continuation Coverage ..................... ..............................7 5.05 Notice Requirements ................................................................ ............................... 7 5.06 Election Period ......................................................................... ............................... 8 5.07 Duration of Continuation Coverage ......................................... ............................... 8 VIBENEFIT LIMITATIONS ................................................................... .............................10 6.01 Source of Payments .................................................................. .............................10 6.02 Dollar Limitation ...................................................................... .............................10 6.03 Automatic Adjustments ............................................................ .............................10 6.04 Forfeiture of Unused Account Balances .................................. .............................10 i VIIEXPERIENCE REFUNDS ............................................................................................... Il 7.01 Unused Coverage ut Plan Year End ...................................................................... D 7.07 Determination and Declaration of Experience Dividends ..................................... ll VIII QUALIFIED MEDICAL CHILD SUPPORT ORDERS .................................................. lI 8.01 Notification of Receipt of Child Support Order .................................................... ll 8.02 Procedures {0 Determine if Medical Child Support Order is Qualified Medical ChildSupport Order .............................................................................................. \2 8.03 Procedures to Review Medical Support Notice to Verify if a National Medical Support Notice i8 to be Treated as u Qualified Medical Child Support Order ...... l3 8.04 Treatment of Alternate Recipient under Qualified Medical Child Support Order l4 8.05 Cost 0fQualified Medical Child Suppor{)zdcrBeuofito.,.........—...........'—......14 8.06 Qualified Medical Child Support Order and Medicaid ......................................... l4 8.07 Payments or Reimbursements under u Qualified Medical Child Support Order.. 14 8.08 Alternate Recipient ----..---.-------------.--------..I4 IXMIS ---..----.---..--------.--------------.l5 4.01 Plan Administration ............................................................................................... 15 9]02 Claims Procedure --------.--------.---_----.---_---.l5 0.03 Amendment orTermination V[ Plan ...................................................................... l5 9.04 Genera} Provisions —.---.-------.—~-------..---.-----..I5 ii HEALTH CARE SPENDING ACCOUNT ARRANGEMENT THIS INSTRUMENT made and published the City of Georgetown, Texas (hereinafter called "City ") reflects the City of Georgetown Health Care Spending Account Arrangement (the "Arrangement "), which was approved by the City Council on September 11, 1990, which prior to this amendment and restatement was named the "City of Georgetown Health Expense Reimbursement Plan," and which forms a part of and is incorporated by reference into the City of Georgetown Employee Cafeteria Plan (hereinafter referred to as the "Cafeteria Plan" or "Plan "), as follows: This Arrangement was established to reimburse the eligible employees of the City for the cost of health care expenses incurred by them, their spouses and dependents. It is intended that the Arrangement meet the requirements for qualification under Code Section 105, and that benefits paid employees hereunder be excludible from their gross incomes by virtue of Section 105(b). ARTICLE I DEFINITIONS The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context: 1.01 `Benefits" means any amounts paid to a Participant in the Cafeteria Plan under this Arrangement as reimbursement for Eligible Health Care Expenses incurred by the Participant during a Plan Year by him, his spouse or his dependents (as defined by Code Section 152). 1.02 "City" means the City of Georgetown, Texas. 1.03 "Coverage Period" means the Plan Year during which the benefits provided by this Arrangement shall be available to a Participant hereunder. 1.04 "Dependent" means any individual who is a dependent of the Participant within the purview of Code Section 152 or covered pursuant to a Qualified Medical Child Support Order or a National Medical Support Notice which is decreed to be a Qualified Medical Child Support Order. 1.05 "Effective Date "means October 1, 2001, as to this restatement, except (i) as otherwise provided herein and (ii) any provision of the Arrangement required by law to have an earlier effective date will be effective as of such date. The original effective date of the Arrangement was October 1, 1990. 0 1.06 "Eligible Health Care Expenses" means those expenses incurred by the Employee, or the Employee's dependents, on or after the effective date of the Employee's participation herein and during the Plan Year otherwise allowable as deductions under Code Section 213 (without regard to the limitations contained in Section 213(a)), but shall not include an expense incurred for the payment of premiums under any health insurance plan, whether or not sponsored by the City, or any amounts paid for long term care service within the meaning of Code Section 7702(B)(s) or qualified long term care contracts within the meaning of the Code Section 7702(B)(b). For purposes of this Arrangement, an expense is "incurred" when the Participant or beneficiary is furnished the health care or services giving rise to the claimed expense or is otherwise deemed to have been incurred pursuant to applicable rules promulgated pursuant to the Code. 1.07 "National Medical Support Notice" means an appropriately completed notice which is promulgated pursuant to Section 401(b) of the Child Support Performance and Incentive Act of 1998. A National Medical Support Notice shall be deemed to be a Qualified Medical Child Support Order if the National Medical Support Notice does not require the Plan to provide any type of form of benefit, or any option, not otherwise provided under this Plan, except to the extent necessary to meet the requirements of a law relating to medical child support described in Section 1908 of the Social Security Act, and the National Medical Support Notice clearly specifies the following: (a) the name and the last known mailing address (if any) of the Participant and the name and mailing address of each alternate recipient (an official of a State or political subdivision may be substituted for the mailing address of any alternate recipient, if provided for in the National Medical Support Notice); (b) a reasonable description of the type of coverage to be provided to each alternate recipient, or the manner in which such type of coverage is to be determined; and (c) the period for which the National Medical Support Notice applies. 1.08 "Qualified Medical Child Support Order" means a medical child support order which creates or recognizes the existence of an alternate recipient's right to, or assigns to an alternate recipient the right to, receive benefits for which a participant or beneficiary is eligible under a group health plan, and which clearly specifies: (a) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate recipient covered by the order, except that, to the extent provided in the order, the name and mailing address of an official of a State or a political subdivision thereof may be substituted for the mailing address of any such alternate recipient; (b) a reasonable description of the type of coverage to be provided by the plan to each such alternate recipient, or the manner in which such type of coverage is to be determined; and 2 (c) the period to which such order applies. In no event, however, shall a medical child support order be deemed a Qualified Medical Child Support Order if such order requires this Arrangement to provide any type or form of benefit, or any option, which is not otherwise provided under this Arrangement, except to the extent necessary to meet the requirements of a law relating to medical child support described in section 1908 of the Social Security Act (Title 42). 1.09 "Spouse" means an individual who is legally married to a Participant, but shall not include an individual separated from the Participant under a legal separation decree. 1.10 All of the definitions set forth in Article I of the City's Cafeteria Plan and not otherwise defined herein shall have the same meaning in this Arrangement as in the City's Cafeteria Plan, and all such definitions are hereby incorporated by reference into this Arrangement. ARTICLE II ELIGIBILITY Each Employee of the City who is eligible to participate in the City's Cafeteria Plan and who has completed, signed and filed an Enrollment Form that provides funding for a Health Care Spending Account Benefit shall automatically be a Participant in this Arrangement as of the later of (1) the date his participation in such Cafeteria Plan becomes effective, (2) when he elects coverage under this Arrangement, or (3) for a Plan Year in which he is hired or rehired by the City, in accordance with procedures of the Plan Administrator applied consistently and on a nondiscriminatory basis. ARTICLE III COVERAGE AMOUNTS AND PREMIUMS 3.01 Available Levels of Benefits A Participant may elect his or her applicable level of Health Care Spending Account Benefit, with a maximum of $5,000 per Plan Year. During the Plan Year, Participants shall be entitled to receive reimbursement for eligible expenses up to the amount of the Health Care Spending Account Benefit elected for such Plan Year, regardless of the amount of premiums paid by the Participant at the time the eligible expense is incurred. Once the period for which the election was made begins (generally this will be the Plan Year), the election may not be changed during the election period, unless a Life Event occurs, or the Employee separates from service with the City, as provided in Section 4.04 of this Plan. In the event that a Life Event occurs, an Employee may only change his election to the extent that the election change is consistent with the Life Event which has transpired. 3 3.02 Required Premiums As a condition to continued eligibility to receive benefits under this Arrangement, a Participant shall pay the premiums corresponding to the benefit level selected. 3.03 Payment of Premiums The normal mode of payment of premiums due for a Plan Year shall be by deduction from the Participant's paychecks during the Coverage Period, pursuant to the Participant's Enrollment Form. 3.04 Return of Premiums If the Participant revokes an election of benefits under this Arrangement by virtue of termination of employment, the Plan Administrator shall refund any portion of premiums which may be inadvertently withheld from such Participant's compensation earned after the date of the Participant's separation from service. ARTICLE IV BENEFITS 4.01 Eligibility for Benefits Each Participant in the Arrangement shall be entitled to a benefit hereunder for all Eligible Health Care Expenses incurred by him on or after the effective date of his participation (and on or after the Effective Date of the Arrangement), subject to the limitations contained in Section 3.01 and this Article IV. 4.02 Claims for Benefits No benefit shall be paid hereunder unless a Participant has first submitted a written claim for benefits to the Plan Administrator on a form specified by the Plan Administrator. Claims which have been denied in whole or in part, may be appealed pursuant to the procedures set out in the City's Cafeteria Plan. Upon receipt of a properly documented claim, the City shall pay the Participant the benefits provided under this Arrangement within the time specified for payment under such Cafeteria Plan; however, the amount paid by the City to the Participant shall not exceed the lesser of: (i) the amount of the documented claim, or (ii) the amount the Participant has elected as his applicable level of Health Care Spending Account Benefit for the Plan Year reduced by the total amount of reimbursements already made by the City to on or behalf of the Participant under this Arrangement during the Plan Year. Participants may submit a claim for reimbursement for a Qualifying Expense arising during the Plan Year at any time during the period that begins when the expense is incurred, and ends December 31 following the close of the Plan Year. ►I The Plan Administrator may set a dollar limit for the minimum amount of reimbursements made; however, there shall be no such minimum requirement if the Participant's total account balance under this Arrangement is less than the minimum. 4.03 .Required Information Each Participant's claim for benefits shall contain a written statement containing such information as the Plan Administrator may deem appropriate, including: (a) receipts reflecting the medical expenses incurred; (b) the person or persons on whose behalf Eligible Health Care Expenses have been incurred; (c) the nature of the expenses so incurred; (d) the amount of the requested reimbursement; and (e) evidence that such expenses have not otherwise been paid through insurance or reimbursed from any other source. 4.04 Termination of Employment In the event a Participant ceases to be an Employee of the City, his participation in the Arrangement shall cease on the date his employment terminated unless the Participant elects to continue participating as provided below. The Arrangement shall reimburse any eligible expenses (up to the amount of the Participant's annual benefit chosen pursuant to Section 3.01, less prior benefits paid during the Plan Year) that are incurred during the Plan Year period of participation that ends on the day the Participant's coverage terminates. However, no reimbursement will be made for any Eligible Health Care Expense incurred during a period for which the Participant has not paid the required premiums under the Arrangement. The Participant shall be entitled to submit a claim for reimbursement of Eligible Health Care Expenses at any time on or before December 31 following the close of the Plan Year. Notwithstanding the foregoing provisions of this Section 4.04, upon termination of employment, a Participant may elect to continue participating in the Arrangement until the end of the Plan Year in which such Participant terminates employment by signing an authorization form provided by the Plan Administrator to have the remaining premiums for the balance of the Plan Year withheld from such Participant's final paycheck on a pre- tax basis. As provided in Section 5.07, a Participant's duration of Continuation Coverage, if Continuation Coverage is elected under Article V, will be reduced by the number of full months between such Participant's termination of employment and the last day of the Plan Year during which the Participant terminates employment, if the Participant elects to continue participating in the Arrangement as provided in this paragraph. 5 Notwithstanding the preceding paragraphs, the Participant (and his dependents) shall have the right to elect Continuation Coverage under Article V. ARTICLE V CONTINUATION COVERAGE 5.01 Continuation Coverage after Termination of Normal Participation During any calendar year following a calendar year during which the City has twenty (20) or more employees on a typical business day, each person who is a Qualified Beneficiary shall have the right to elect to continue coverage under this Arrangement upon the occurrence of a Qualifying Event that would otherwise result in such person losing coverage hereunder. Such extended coverage under the Arrangement is known as "Continuation Coverage ". 5.02 Qualified Beneficiary A "Qualified Beneficiary" is any person who, as of the day before a Qualifying Event, (a) is an employee of the City covered under the Arrangement as of such day (such persons are called "Covered Employees "), (b) the spouse of the Covered Employee, or (c) a dependent of the Covered Employee. A Covered Employee can be a Qualified Beneficiary only if the Qualifying Event consists of termination of employment (for any reason other than gross misconduct) or reduction of hours of the Covered Employee's employment. A person is not a Qualified Beneficiary if, as of the date of the Qualifying Event, either the individual is covered under the Arrangement by virtue of the election of continuation coverage by another person and is not already a Qualified Beneficiary by reason of a prior Qualifying Event, or is entitled to Medicare coverage under Title XVIII of the Social Security Act. Furthermore, an individual who fails to elect Continuation Coverage within the election period provided in Section 5.06, below shall not be considered to be a Qualified Beneficiary. 5.03 Qualifying Event Any of the following shall be considered as a "Qualifying Event ": (a) death of a Covered Employee; (b) termination (other than by reason of gross misconduct) of the Covered Employee's employment or reduction of hours of employment below any minimum level of hours required for participation herein; (c) divorce of a Covered Employee from the employee's spouse; (d) a Covered Employee's becoming entitled to receive Medicare benefits under Title XVIII of the Social Security Act; R (e) a dependent child of a Covered Employee ceasing to be a dependent under the terms of the Plan; or (f) if a Participant is on a Family and Medical Leave and notifies the Plan Administrator/ 0 City that they will not return to work, then the Qualifying Event resulting in the loss of coverage shall be deemed to occur on the day following the date the Participant notifies the City of his intent not to return to work. A notification to the City that the Participant will not return to work from a Family and Medical Leave terminates the leave for COBRA purposes on the date the notice is given to the City; thus, resulting in the loss of coverage and termination of the leave on the date following the date notification of the Participant's intent not to return to work is given to the City. 5.04 Benefits Available under Continuation Coverage Each person who is eligible to elect to continue coverage under Article V shall have the right to continue the level of coverage in effect for the Covered Employee on the day before the Qualifying Event. The maximum coverage amount that may be continued by the Participant or any of his eligible dependents shall be the amount of the annual benefit that was in effect when the termination of normal coverage occurred reduced by the amount of benefits paid out prior to termination of normal coverage shall continue until the end of the Plan Year in which the Qualifying Event occurs. Effective as of the beginning of the next Plan Year following the termination of the Participant's normal coverage and continuing until the end of such Plan Year (unless such coverage is otherwise terminated under Section 5.07), the annual coverage amount for the Participant shall equal the annualized amount of coverage elected by the Participant on the day prior to the occurrence of his Qualifying Event; provided the Participant does not otherwise experience a Life Event during this period, in which case the Participant may change his annual coverage amount in accordance with section 3.05 of the Plan. Notwithstanding the foregoing, Participants electing Continuation Coverage shall have the same right to alter their coverage amount during Annual Election Periods (or any other open enrollment periods which might arise) as similarly situated active employees. 5.05 Notice Requirements (a) When an Employee becomes covered under this Arrangement, the Plan Administrator must inform the Participant (and spouse, if any) in writing of the rights to continued coverage, as described in Article V. (b) The City shall give the Plan Administrator written notice of a Qualifying Event described in Section 5.03(a), (b) or (d) within thirty (30) days of the occurrence thereof. (c) Within fourteen (14) days of receipt of the City's notice, the Plan Administrator shall furnish each Qualifying Beneficiary with written notification of the termination of regular coverage under the Arrangement, as well as a recital of the 7 rights of any such Beneficiary to elect Continuation Coverage, as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA "), as set forth in 42 USC §§ 300bb -1 et seq. in accordance with the terms of this Arrangement. (d) In the case of a Qualifying Event described in Section 5.03(c) or (e), a Covered Employee or a Qualified Beneficiary who is a spouse or dependent of such Employee must notify the Plan Administrator within sixty (60) days of the occurrence thereof. The Plan Administrator shall give written notification of Conversion Coverage rights to any other affected Qualified Beneficiary within fourteen (14) days of receipt of the notice described in this Section 5.05(d). (e) Any Qualified Beneficiary who is determined, under Title II or XVI of the Social Security Act, to have been disabled at the time of a Qualifying Event described in Section 5.03(b) and (f) for periods on or before December 31, 1996, and any Qualified Beneficiary who is determined under Title II or XVI of the Social Security Act to have been disabled within 60 days of the Qualifying Event described in Section 5.03(b) and (f), effective on and after January 1, 1997, shall notify the Plan Administrator of the determination of his /Oher disabled status within 60 days of the determination of his /Oher disabled status and shall notify the Plan Administrator within 30 days of any determination that he /Oshe is no longer disabled under Title II or XVI of the Social Security Act. Notwithstanding any of the foregoing, notification to a Qualified Beneficiary who is a spouse of a Covered Employee is treated as notification to all other Qualified Beneficiaries residing with that person at the time notification is made. 5.06 Election Period Any Qualified Beneficiary entitled to Continuation Coverage shall have (i) 60 days from the date of receipt of the notice required by Section 5.05, in the case of occurrence of a Qualifying Event, or (ii) if later, 60 days from the loss of benefits under this Arrangement, in which to return a signed election to the Plan Administrator indicating the choice to continue benefits under this Arrangement. 5.07 Duration of Continuation Coverage (a) Maximum Period. In general, Continuation Coverage shall extend for a maximum period of up to 18 months after the date that regular coverage ceased due to occurrence of a Qualifying Event. If, however, one of the following events occurs, the maximum period of Continuation Coverage may be extended: (1) In the event that a Participant becomes entitled to Medicare, divorces, or dies, the Participant's Spouse and Dependents who are Qualified Beneficiaries, may extend Continuation Coverage from 18 months, or 29 months in the case of a disabled Qualified Beneficiary (as provided in subpart (c) below), to 36 months. (2) In the event that a Dependent child of a Participant loses "dependent child" status under the Plan, he /Oshe may receive up to a total of 36 months of coverage. (3) In the event that a covered family member of a Participant, who has been terminated or whose hours have been reduced, becomes disabled under Title II or XVI of the Social Security Act (42 U.S.C. 401 -433 or 1381- 1385) within 60 days of the Qualifying Event or the date on which regular coverage under this Plan ceases, Continuation Coverage may be extended from 18 months up to 29 months for the disabled Qualified Beneficiary and his /Oher covered family members who are also Qualified Beneficiaries as the result of the same qualifying event, provided the applicable legal requirements are met. (4) In the event that a second or additional Qualifying Event occurs during the initial 18 month Continuation Coverage period, or during the extended 29 month period for a disabled Qualified Beneficiary or a family member of the disabled Qualified Beneficiary, the period may be extended up to 36 months from the date of the earlier Qualifying Event. (b) Events Terminating COBRA Continuation Coverage Prior to the Expiration of the Maximum Period. The following events will terminate COBRA continuation coverage on the date on which they occur: (1) The date on which the City ceases to provide any group health plan to any Employee; (2) If a premium is unpaid when due, the date that is thirty (30) days after the first day on which a premium is due under this Plan, or, if later, the date on which Covered Employees would lose their coverage under this Plan due to failure to pay premiums when due; however, in the event the premium paid is not significantly less then the premium due, the premium shall be deemed paid in full. In the event the premium paid is significantly less than the premium due, then the Plan Administrator must notify the Qualified Beneficiary of the deficiency in payment and provide the Qualified Beneficiary an additional thirty (30) days in which to pay the deficiency. If the premium deficiency is not paid within such thirty (30)- day period, the Plan Administrator shall terminate the Qualified Beneficiary's coverage retroactively to the last day of the period for which payment was received in full; (3) The date on which the Qualified Beneficiary first becomes entitled to benefits under Title XVIH of the United States Social Security Act after electing COBRA coverage; or (4) The date on which the Qualified Beneficiary first becomes, after the date of the election, covered under any other group health plan, as an employee 9 or otherwise; provided that such other plan does not contain any exclusion or limitation for preexisting conditions with respect to the Qualified Beneficiary for periods prior to January 1, 1997. For periods on and after January 1, 1997, the date on which the Qualified Beneficiary first becomes, after the date of the election, covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary other than an exclusion or limitation that does not apply to (or is satisfied by) such beneficiary by reason of chapter 100 of the Internal Revenue Code, part 7 of Title I of the Employee Retirement Income Security Act of 1974, or title XXVII of the Public Health Service Act. ARTICLE VI BENEFIT LIMITATIONS 6.01 Source of Payments All benefits derived hereunder shall be paid exclusively from the Participant's Health Care Spending Account (if any) under the City's Cafeteria Plan. The amount available for reimbursement shall, at all times during the Plan Year, be equal to the amount of coverage purchased by the Participant, less any previous reimbursements made during the Plan Year Coverage Period. However, no benefits will be payable with respect to a Coverage Period for which the Participant has failed to make required contributions. 6.02 Dollar Limitation In no event may the annual value of benefits provided hereunder for any Participant pursuant to the Participant's Enrollment Form exceed $5,000. 6.03 Automatic Adjustments Before or during the Plan Year, the Plan Administrator shall have the right to make automatic, downward adjustments to the benefit election made by any Participant who is considered to be "Highly Compensated" within the meaning of Code Section 105(h)(5) in order to prevent this Arrangement from becoming discriminatory within the meaning of Section 105(h)(4). 6.04 Forfeiture of Unused Account Balances Any amount allocated to a Participant's Health Care Spending Account shall be forfeited by the Participant and restored to the City if it has not been applied to provide the elected Benefit for any Plan Year by December 31 following the end of the Plan Year for which the election was effective. Amounts so forfeited shall, as determined by the City in its sole discretion, (i) be allocated pursuant to Article VII, (ii) be used by the City to reduce future administrative costs of the City in operating the Arrangement, (iii) used to offset losses resulting from benefit payments to Participants under this Arrangement in excess 10 of the actual Compensation reduction contributions under this Arrangement, (iv) to the extent permitted by applicable law, remain the property of the City, or (v) be applied under any combination of clauses (i) — (iv) above. In no event may a credit balance of a Participant under this Arrangement be carried forward into a succeeding Plan Year except as provided in Article VII. ARTICLE VII EXPERIENCE REFUNDS 7.01 Unused Coverage at Plan Year End No Participant shall have the right to receive a benefit from the Arrangement in the form of cash or other taxable or nontaxable benefit (including health coverage for an additional period) from the Arrangement that reflects the amount by which the level of coverage selected by the Participant prior to the beginning of the Coverage Period exceeds the Participant's incurred health care expenses for such Plan Year. 7.02 Determination and Declaration of Experience Dividends If the Arrangement pays out less benefits and operating expenses than total premiums received with respect to the Plan Year Coverage Period, if the City so elects, 120 days after the close of the Plan Year, the City shall determine the excess of premiums received over claims paid during the preceding Plan Year, and shall declare an "experience dividend" to the extent of such excess. 7.03 Allocation of Experience Dividends If the City has determined, in its discretion, to allocate the experience dividend, if any, for a Plan Year, the experience dividend determined pursuant to Section 7.02 shall either be allocated and distributed to each Participant in cash in the proportion which the annual benefit elected by each Participant bears to the aggregate annual benefit amounts elected by all Participants as a whole or shall be used to provide future benefits in the City's sole discretion. Only those Participants who are actively employed by the City (or who are active Participants under the Continuation Coverage provisions of Article V) will be taken into account either for the purposes of determining an individual allocation amount, aggregate benefits elected by all Participants, or for eligibility to receive a pro rata share of the experience dividend determined pursuant to this Article. ARTICLE VIII QUALIFIED MEDICAL CHILD SUPPORT ORDERS 8.01 Notification of Receipt of Child Support Order Upon receipt by the Plan Administrator of a medical child support order or National Medical Child Support Order, the Plan Administrator shall notify the Participant and the 11 potential alternative recipient of the child support order that they have received the medical child support order within fifteen (15) days of the Plan Administrator's receipt of the medical child support order. The notification shall describe the procedures for determining whether the child support order is a Qualified Medical Child Support Order as defined in Section 609 of the Employee Retirement Income Security Act. The procedures shall permit a potential alternative recipient to designate a representative to receive copies of notices with respect to a medical child support order. The Plan Administrator shall determine if the medical child support order is a Qualified Medical Child Support Order within sixty (60) days of receipt of such order, unless circumstances cause a delay, if a delay is required, the potential alternate recipient shall be notified of any such delay in writing. 8.02 Procedures to Determine if Medical Child Support Order is a Qualified Medical Child Support Order The Plan Administrator shall review the medical child support order or request legal counsel to review the medical child support order and verify that the following items are appropriately addressed in the medical child support order: (a) the medical child support order must create or recognize the existence of an alternate recipient's right to receive benefits for which the Participant or beneficiary is eligible under the Plan or to assign those rights; (b) the medical child support order must identify the Plan(s) to which it applies and the parties that will be responsible for paying for the benefits that are the subject of the order; (c) the medical child support order must clearly specify the name and last known mailing address of each alternate recipient covered by the order; (d) the medical child support order must specify in a reasonable description the type of coverage to be provided by the Plan to each alternate recipient or the manner in which the type of coverage is to be determined; (e) the medical child support order must specify that the order applies to this Plan and the period to which the order applies; (f) the medical child support order must not require the Plan to provide any type or form of benefit not otherwise provided under the Plan; and (g) the medical child support order must be issued by either a court of competent jurisdiction or pursuant to a competent administrative process having the effect of law under State law and it must clearly be an order, judgment, decree, approval of a settlement, or a National Medical Support Notice. If the Plan Administrator determines the medical child support order satisfies all of the above requirements, then the Plan Administrator shall notify, in writing, each of the alternate recipient(s) and the Participant or beneficiary related to such alternate 12 recipient(s) that the order is a Qualified Medical Child Support Order. The Plan Administrator would also notify the Participant that they must execute a new Salary Redirection Election to cover the cost of such coverage or otherwise notify the party responsible for paying for the coverage of their obligations with respect to payment for the coverage. If the Plan Administrator determines that the Order is not a Qualified Medical. Child Support Order, then the Plan Administrator shall notify, in writing, each of the proposed alternate recipient(s) and the related Participant or beneficiary that the order is not a Qualified Medical Child Support Order and why the order failed to qualify as such and of their right to appeal such decision. 8.43 Procedures to Review Medical Support Notice to Verify if a National Medical Support Notice is to be Treated as a Qualified Medical Child Support Order (a) The Plan Administrator shall review each medical support notice received to determine if it was appropriately completed in accordance with the Plan's procedures and to determine if it complies with all of the following: (1) the medical support notice must clearly specify the name and last known mailing address (if any) of the Participant and the name and address of each alternate recipient covered by the notice, except that, to the extent provided in the notice, the name and mailing address of an official of a State or political subdivision thereof may be substituted for the name and address of the alternate recipient; (2) a reasonable description of the type of coverage to be provided to each such alternate recipient, or the manner in which such type of coverage is to be determined; (3) the period to which the notice applies; and (4) the notice may not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, except to the extent it is necessary to meet the requirements of a law relating to medical child support described in Section 1908 of the Social Security Act (as added by Section 13822 of the Omnibus Budget Reconciliation Act of 1993). The Employer and the Plan Administrator shall furnish such notices and process the review of any medical support notice in compliance with Section 609(a)(5)(C) of ERISA. A notice which satisfies subsections (1) through (4) above shall be deemed to be a Qualified Medical Child Support Order. (b) Once a notice is deemed to be a Qualified Medical Child Support Order, the Plan Administrator shall, within 40 business days of the date of the notice: (1) notify the State agency issuing the notice with respect to the child whether coverage of the child is available under the terms of the Plan, and if so, whether such child is covered under the Plan and either the effective date of coverage, or if necessary, any steps to be taken by the custodial parent 13 (or by the State official or political subdivision thereof substituted for the name of the child) to effectuate coverage; and (2) provide the custodial parent (or such substituted official) a description of the coverage available and any forms or documents necessary to effectuate such coverage. 8.04 Treatment of Alternate Recipient under Qualified Medical Child Support Order The Plan Administrator shall treat each alternate recipient under a Qualified Medical Child Support Order as a Participant under the Plan for all reporting and disclosure requirements imposed by the Employee Retirement Income Security Act. 8.05 Cost of Qualified Medical Child Support Order Benefits The cost of the coverage provided under the Qualified Medical Child Support Order shall be paid by the party designated as responsible for paying for such coverage in the order. In the event the medical child support order does not specify the party responsible for payment for the alternate recipient's coverage under the medical child support order, then the Plan shall deny the medical child support order and send copies of the qualified medical child support order procedures to counsel for the parties, or file an appropriate pleading in either the Federal district court or in the domestic relations court to have the order revised to qualify as a Qualified Medical Child Support Order. 8.06 Qualified Medical Child Support Order and Medicaid The Plan Administrator shall not consider the alternate recipient's eligibility for Medicaid when enrolling the alternate recipient in the Plan. The Plan shall comply with the alternate recipient's assignment rights under Medicaid, if any. 8.07 Payments or Reimbursements under a Qualified Medical Child Support Order The Plan Administrator shall be able to pay or reimburse the alternate recipient or the alternate recipient's custodial parent for any benefit payments due under the Plan to or on behalf of the alternate recipient. 8.08 Alternate Recipient An alternate recipient is the individual designated as the person entitled to receive health care coverage under the Qualified Medical Child Support Order. 14 ARTICLE IX MISCELLANEOUS 9.01 Plan Administration The provisions of the Cafeteria Plan as set forth in Article VI relating to the administration of the Plan also shall apply to this Arrangement. 9.02 Claims Procedure The provisions of the Cafeteria Plan as set forth in Article VIII relating to claims procedures also shall apply to this Arrangement. 9.03 Amendment or Termination of Plan The provisions of the Cafeteria Plan as set forth in Article IX relating to amendment or termination of the Plan also shall apply to this Arrangement. 9.04 General Provisions The provisions of the Cafeteria Plan as set forth in Article X relating to general provisions of the Plan also shall apply to this Arrangement. 9.05 Participant Statements The Plan Administrator shall furnish each Participant with a statement of his Health Care Spending Account within ninety (90) days after the close of each Plan Year. The Plan Administrator may also furnish statements to Participants more frequently. IN WITNESS WHEREOF, this arrangement has been executed this //A day of 077 .t- , 2002. 769947_3.DOC 5/2/02 15 THE CITrY OF GEORGETOWN Name: - ff Z I V Title: Ty 1,&Vor�"