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Home My WebLink About09.b. Consider authorizing Board participation in Cafeteria PlanCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: June 16, 2011 Subject: ADOPT RESOLUTION NO. 2011 -024 AUTHORIZING BOARD PARTICIPATION IN THE DISTRICT'S HEALTH FLEXIBLE SPENDING ARRANGEMENT; ADOPT THE SUMMARY OF MATERIAL MODIFICATIONS AND AMENDMENT NO. 1 TO THE HEALTH FLEXIBLE SPENDING ARRANGEMENT Submitted By: Initiating DeptJDiv.: RANDALL M. MUSGRAVES ADMINISTRATION DIRECTOR OF ADMINISTRATION REVIEWED AND RECOMMENDED FOR BOARD ACTION: K. Alm C - - District Counsel C?. 6. James . Kelly, General anager ISSUE: Board adoption is required of Resolution No. 2011 -024; Summary of Material Modifications and Amendment No. 1 to the Health Flexible Spending Arrangement to authorize Board Member participation in the District's Health Flexible Spending plan. RECOMMENDATION: Adopt Resolution No. 2011 -024; and adopt the Summary of Material Modifications and Amendment No. 1 to the Health Flexible Spending Arrangement. FINANCIAL IMPACTS: Board participation in the District's Health Flexible Spending plan allows Board members either reimbursement of qualified medical expenses or maintaining medical coverage paid by the District. It is anticipated that a savings to the District will occur. The savings is unknown and is dependent upon the number of Board Members that elect to utilize the District's Health Flexible Spending plan rather than have the District pay premiums for coverage. ALTERNATIVES /CONSIDERATIONS: Reject implementation of Board Member participation in the District's Health Flexible Spending plan in lieu of health coverage. BACKGROUND: At the May 11, 2011 Human Resources Committee meeting, staff was directed to proceed with the necessary documents to allow the Board of Directors to participate in the District's Health Flexible Spending Arrangement of the Cafeteria Plan. Staff identified the need to create a resolution authorizing the participation and a change to the Health Flexible Spending Arrangement plan document. This was reported to the Board by the Committee at the May 19th Board meeting. The Health Flexible Spending Arrangement is already provided to all employees and is not a new benefit to the District. Authorizing Board participation is new, resulting in anticipated health premium savings to the District. POSITION PAPER Board Meeting Date: June 16, 2011 subject ADOPT RESOLUTION NO. 2011 -024 AUTHORIZING BOARD PARTICIPATION IN THE DISTRICT'S HEALTH FLEXIBLE SPENDING ARRANGEMENT; ADOPT THE SUMMARY OF MATERIAL MODIFICATIONS AND AMENDMENT NO. 1 TO THE HEALTH FLEXIBLE SPENDING ARRANGEMENT Board participation is recommended to be effective July 1, 2011 since June medical premiums have been paid. For the remainder of this year 2011, a Board member can receive the $2,500 contribution limit because the benefit is being provided for the remaining six months. This contribution amount is recommended by the Human Resources Committee and is displayed in the documents. The amount is based upon a $416.66 per month, which is based upon the $5,000 annual limit. However, because the Board's participation is for six months in calendar year 2011, the Board could adopt the $425 per month amount provided to the District's Management Group. This would yield a $2,550 total. The Board has the option for 2011 of either $2,500 or $2,550. Even though the Committee is recommending the $2,500 limit, they wanted to ensure the Board was aware of the $2,550 option. It is a $50 issue for 2011. In calendar year 2012, the maximum annual amount for medical reimbursement remains at $5,000. That equates to $416.66 per month, a little less than the $425 per month benefit amount allotted to Managers. Managers can use the difference for other benefits. Board members cannot due to existing State laws limiting Board Member compensation. The attached documents reflect the $5,000 annual limit for Board members. Staff has been advised that on January 1, 2013, new IRS regulations will go into effect. One of the changes is that the Health Flexible Spending plan amount decreases to $2,500 annually. Current District labor agreements (3) end as of April 17, 2012. Changes to the IRS Section 125 Cafeteria Plan maybe negotiated and may affect the Board's participation in the program. Allowing Board Member participation in the Cafeteria Plan could provide the District with annual cost savings due to the elimination of medical plan premiums offset by the amount reimbursed through the Health Flexible Spending plan. Board Member participation is voluntary. Board Members could receive health coverage or participate in the District's Health Flexible Spending plan, but not both. RECOMMENDED BOARD ACTION: Adopt Resolution No. 2011 -024; and adopt the Summary of Material Modifications and Amendment No. 1 to the Health Flexible POSITION PAPER Board Meeting Date: June 16, 2011 subject. ADOPT RESOLUTION NO. 2011 -024 AUTHORIZING BOARD PARTICIPATION IN THE DISTRICT'S HEALTH FLEXIBLE SPENDING ARRANGEMENT; ADOPT THE SUMMARY OF MATERIAL MODIFICATIONS AND AMENDMENT NO. 1 TO THE HEALTH FLEXIBLE SPENDING ARRANGEMENT Spending Arrangement authorizing Board Member participation in the District's Health Flexible Spending plan. RESOLUTION NO. 2011 -024 A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FOR BOARD PARTICIPATION IN THE DISTRICT'S HEALTH FLEXIBLE SPENDING ARRANGEMENT WHEREAS, the Central Contra Costa Sanitary District (the "District ") adopted the District Health Flexible Spending Arrangement Plan (the "Health Flexible Spending Arrangement Plan ") on May 1, 1989 for the benefit of eligible employees; and WHEREAS, the Health Flexible Spending Arrangement Plan document currently defines "eligible employees" to only include employees represented by the Management Support Confidential Group, the Management Group, the General Manager, the Secretary of the District and any person who is covered by a collective bargaining agreement; and WHEREAS, the District's Board of Directors are not allowed by State law to participate in the District's "in lieu of medical insurance" payment program; and WHEREAS, some members of the Board of Directors have elected to receive medical coverage from District medical providers, at the full premium cost to the District, because they could not participate in the "in lieu of medical insurance" payment program; and WHEREAS, the Board of Directors desire to reduce the cost of the District for Board member medical coverage when a member of the District's Board of Directors is eligible for primary group health plan coverage through his or her employer, and secondary group health plan coverage through the District; and WHEREAS, the Health Flexible Spending Arrangement Plan is currently limited to $5,000 and the IRS is proposing to reduce the limit to $2,500 in 2013; and WHEREAS, the Board of Directors would like to reduce the cost of the District by permitting eligible members of the District's Board of Directors who are not covered by a District group health plan to participate in the District's Health Flexible Spending Arrangement Plan; and WHEREAS, pursuant to State law and the Internal Revenue Code, members of the District's Board of Directors are eligible employees who may participate in the Health Flexible Spending Arrangement Plan; and WHEREAS, Article VIII, Section 8.3 of the Health Flexible Spending Arrangement Plan provides the District with the authority to amend the Health Flexible Spending Arrangement Plan in whole or in part at any time. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra Costa Sanitary District as follows: THAT participation in the District's Health Flexible Spending Arrangement Plan is authorized for members of the District's Board of Directors who (i) are not covered by a District group health plan, and (ii) are not "highly compensated individuals" as defined under Internal Revenue Code section 105(h); and THAT eligible members of the District's Board of Directors are eligible to receive District contributions effective July 1, 2011; and THAT eligible members of the District's Board of Directors are eligible to receive District contributions up to $2,500 for calendar year 2011; and THAT eligible members of the District's Board of Directors are eligible to receive District contributions up to $5,000 for calendar year 2012; and THAT eligible members of the District's Board of Directors may not elect to receive cash in lieu of contributions from the District, and any amounts not used by the end of the calendar year will be forfeited; and THAT District Board members are subject to the same rules and regulations (as described in the Health. Flexible Spending Arrangement Plan document) that apply to all other eligible employees participating in the Health Flexible Spending Arrangement Plan; and THAT the participation of District Board members in the Health Flexible Spending Arrangement Plan will result in savings to the Operations and Maintenance Fund; and THAT District staff is directed to modify the Health Flexible Spending Arrangement Plan documents to allow for Board member participation in lieu of receiving primary group health plan coverage. PASSED AND ADOPTED this 16th day of June 2011, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: Barbara D. Hockett President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Elaine R. Boehme, CIVIC Secretary of the Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District CENTRAL CONTRA COSTA SANITARY DISTRICT HEALTH FLEXIBLE SPENDING ARRANGEMENT SUMMARY OF MATERIAL MODIFICATIONS Effective July 1, 2011 This notice summarizes changes to the Central Contra Costa Sanitary District Health Flexible Spending Arrangement (the "Health Flexible Spending Arrangement Plan" or the "Health Care Spending Account ") that are effective as of July 1, 2011. This is a legally required notice for employees who are eligible to participate in the Health Flexible Spending Arrangement Plan and is considered a Summary of Material Modification ( "SMM ") to the Health Flexible Spending Arrangement Plan. You should review this information carefully and keep it with your Summary Plan Description for future reference. Expanded Definition of Eligible Employee Effective July 1, 2011, members of the Central Contra Costa Sanitary District's (the "District ") Board of Directors who (i) are not covered by a District group health plan, and (ii) are not "highly compensated individuals" as defined under Internal Revenue Code section 105(h), may participate in the District's Health Care Spending Account. Such members of the District's Board of Directors are eligible to receive District contributions of up to $5,000 per Plan Year. These District contributions may be used for out -of- pocket expenses incurred for health or dental care (e.g., payment for deductibles or co- insurance) during the Plan Year. However, eligible members of the District's Board of Directors may not elect to receive cash in lieu of contributions from the District, and any amounts not used by the end of the Plan Year will be forfeited. #1176612 1 AMENDMENT NO. 1 TO CENTRAL CONTRA COSTA SANITARY DISTRICT HEALTH FLEXIBLE SPENDING ARRANGEMENT The Central Contra Costa Sanitary District Health Flexible Spending Arrangement (hereinafter Health Flexible Spending Arrangement Plan) is hereby amended as follows effective as of July 1, 2011. 1. Section 1.2 is amended in its entirety to read as follows: 1.2 Eligible Employees Any of the following employees of the Employer: (a) employees represented by the Management Support/Confidential Group or the Management Group; (b) the General Manager; (c) the Secretary of the District; (d) members of the District's Board of Directors who (i) are not receiving coverage under the Employer's group health plan, and (ii) are not "highly compensated individuals" as defined under Internal Revenue Code section 105(h); and (e) any person who is covered by a collective bargaining agreement which provides for inclusion in this Health Flexible Spending Arrangement. Any person who performs service for the Employer solely as an independent contractor shall not be an Eligible Employee. 1 2. Section 4.2 is amended in its entirety to read as follows: 4.2 Employer Credits (a) If so elected by a Participant in accordance with the Section 125 Cafeteria Plan, Employer Credits provided under Section 3.2 of the Section 125 Cafeteria Plan shall be available under the Health Flexible Spending Arrangement for the Eligible Employees described in Article II, Sections 1.2 (a), (b), (c), and (e) of this Health Flexible Spending Arrangement Plan. (b) The District will credit each Eligible Employee who is a member of the District's Board of Directors with up to $5,000 in Employer Credits per Period of Coverage. Such members of the District's Board of Directors may not elect to receive cash in lieu of the Employer Credits described in this Section 4.2. 2 AMENDMENT OF THE HEALTH FLEXIBLE SPENDING ARRANGEMENT PLAN As evidence of its amendment of the Health Flexible Spending Arrangement Plan, the Central Contra Costa Sanitary District has caused this instrument to be signed by its officers thereunder duly authorized hereto this day of 32011. IC President, Board of Directors (Date) For: THE CENTRAL CONTRA COSTA SANITARY DISTRICT ATTEST: (Sign Name) (Date) Elaine Boehme, Secretary of the District (Print Name and Title) (Seal) Approved as to form Elizabeth Loh, Attorney Trucker Huss 3