HomeMy WebLinkAbout03.d. Approve an amendment to the District’s Section 125 Cafeteria Plan adding a grace period option allowing employees to incur and be reimbursed for eligible expenses up to March 15 of the following plan yearCentral Contra Costa Sanitary District
' .d.
BOARD OF DIRECTORS
POSITION PAPER
Board Meeting Date: March 6, 2014
subject: APPROVE AN AMENDMENT TO THE CENTRAL CONTRA COSTA
SANITARY DISTRICT'S SECTION 125 CAFETERIA PLAN ADDING A GRACE
PERIOD OPTION, AND AUTHORIZE THE BOARD PRESIDENT TO EXECUTE THE
REVISED CONTRACT
Submitted By: Initiating Dept./Div.:
Roger S. Bailey Administration /Human Resources
General Manager
REVIEWED AND RECOMMENDED FOR BOARD ACTION.
l
T. Vassallo — Finance Manager I �] (, I �-,,
T. O'Malley— Human Resources Manager R. Bailey
General Manager
ISSUE: Board of Directors' approval is needed when making an amendment to the
Central Contra Costa Sanitary District's Section 125 Cafeteria Plan.
RECOMMENDATION: Approve an amendment to the Central Contra Costa Sanitary
District's Section 125 Cafeteria Plan and authorize the Board President to execute the
revised contract. This amendment will grant employees a "grace period" up to March
15th of the following plan year to incur eligible expenses and to be reimbursed for those
eligible expenses in the same manner as if the expenses were incurred during the plan
year.
FINANCIAL IMPACTS: The employer contributions to the Cafeteria Plan remain the
same. The annual amount of unused funds returned to the District is anticipated to be
lower since the change allows for a longer reimbursement period.
ALTERNATIVES /CONSIDERATIONS: Do not authorize an amendment to the Central
Contra Costa Sanitary District's Section 125 Cafeteria to grant employees the "grace
period ".
BACKGROUND: Recently, the Internal Revenue Service (IRS) authorized changes
which can be made to Section 125 plans, specifically the Health Flexible Spending
Accounts (FSA).
Prior to this change, the IRS required the forfeiture of any unused balances that
remained in employees' accounts at the end of the calendar year. The IRS has now
loosened the "use- it -or- lose -it" rule and has given employers several options as to how
these plans can be structured in the future.
POSITION PAPER
Board Meeting Date: March 6, 2014
subject: APPROVE AN AMENDMENT TO THE CENTRAL CONTRA COSTA
SANITARY DISTRICT'S SECTION 125 CAFETERIA PLAN ADDING A GRACE
PERIOD OPTION, AND AUTHORIZE THE BOARD PRESIDENT TO EXECUTE THE
REVISED CONTRACT.
Currently, the District provides all employees with a Cafeteria Plan contribution per the
Memoranda of Understanding (MOU). Employees may elect several options within the
Cafeteria Plan, including the Health FSA. Employees may also elect to contribute
additional monies above and beyond what is contributed on their behalf by the District.
However, effective in 2013, the maximum that can be contributed to a Health FSA
cannot exceed $2,500 (indexed for inflation) per plan year.
The District contributions to the Cafeteria Plan are outlined below. Employees can elect
to take the contribution in cash with the exception of $50 which must be allocated to
one option within the Cafeteria Plan.
Bargaining Unit
Benefit
Management Group
$425
Management Support/Confidential Group
$220
Public Employees Union, Local #1
$100
As the monies that are not spent at the end of the calendar year are returned to the
District, the table below details the total dollar amounts of unused funds by plan year:
Plan Year
Amount of Unused
Funds
2004
$18,268.89
2005
$19,713.43
2006
$16,147.76
2007
$15,432.28
2008
$ 9,124.94
2009
$ 8,671.85
2010
$ 8,273.10
2011
$ 8,020.23
2012
$12,472.88
2013
$18,167.64
Since 2004, the participants in the Health FSA plan, on average, have lost over
$13,429.30.
At this time, the District has the following two options or may choose to make no
changes to the structure of the plan.
C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCGSC5G \PP - Modifications to
Section 125 Cafeteria Plan.doc
POSITION PAPER
Board Meeting Date: March 6, 2014
subject APPROVE AN AMENDMENT TO THE CENTRAL CONTRA COSTA
SANITARY DISTRICT'S SECTION 125 CAFETERIA PLAN ADDING A GRACE
PERIOD OPTION, AND AUTHORIZE THE BOARD PRESIDENT TO EXECUTE THE
REVISED CONTRACT.
1. Employees may carry over Up to $500 of unused monies into the following plan
year. (The plan year maximum of $2,500 would not apply to the carry over
amount.)
2. Employees may be granted a "grace period" up to March 15th of the following
plan year to incur eligible expenses and shall be reimbursed in the same manner
as if the expenses were incurred during the plan year. This will allow employees
to potentially utilize up to $5,000 up to the end of the grace period.
Per the newly released IRS regulations, the plan cannot offer BOTH the carry over and
the grace period. The regulations also allow employers to not offer either of these
options to employees.
COMMITTEE RECOMMENDATION: This matter was discussed at the Administration
Committee meeting on January 22, 2014. The Committee recommended that the
Board authorize an amendment to the Section 125 Cafeteria Plan allowing the grace
period option.
RECOMMENDED BOARD ACTION: Approve an amendment to the Central Contra
Costa Sanitary District's Section 125 Cafeteria Plan and authorize the Board President
to execute the revised contract. This amendment will grant employees a "grace period"
up to March 15th of the following plan year to incur eligible expenses and to be
reimbursed for those eligible expenses in the same manner as if the expenses were
incurred during the plan year.
C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \PP - Modifications to
Section 125 Cafeteria Plan.doc