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Res 61-02RESOLUTION NO. 61-02 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, ADOPTING A RETIREMENT HEALTH SAVINGS PROGRAM; PROVIDING FOR CONFLICTS; SUPERSEDING AND REPEALING PREVIOUS PLANS; PROVIDING FOR SEVERABILITY; PROVIDING AN EFFECTIVE DATE. WHERF_~S, the City Commission wishes to adopt a Retirement Health Savings Program (VantageCare) for all employees. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DFJ.RAY BEACH, FLORIDA: Section 1. A. That the City adopt a Retirement Health Savings Program to provide retired employees benefits for all medical expenses eligible under section 213 of the Internal Revenue Code. That the program provide for a voluntary, irrevocable election by employees to parddpate. C. That the program be funded by employer pick-up of unused accrued employee sick and vacation leave. D. That a copy of the to be adopted plan is attached hereto. C. That the adoption extends to the plan adoption agreement and polities also attached D. That the City through its authorized officials execute such documents as may be necessary to implement the plan. E. That the City may amend the plan from time to time by resolution as may be necessary or appropriate. Section 2. That this resolution shall supersede any and all conflicting provisions of any previously adopted resolutions dealing with plans to provide retiree benefits eligible under section 213 of the Internal Revenue Code. Section 3. That the Retiree Health Savings Program adopted herein shall supersede any such similar or equivalent plan previously adopted, and that any and all such similar or equivalent plans are hereby repealed. Section 4. That should any section or provision of this resolution or any portion thereof, any paragraph, sentence, or word be declared by a court of competent jurisdiction to be invalid, such decision shall not affect the validity of the remainder hereof as a whole or part thereof other than the part declared to be invalid. Section 5. That this resolution shall take effect orl~'~/~ .2002. PASSED and ADOPTED this ,2002. CITY CLERK MAYOR 2 RES. NO. 61-02 VantageCare Retirement Health Savings Plan Implementation Data Form - Page I Instructions to Employer:. Provide necessary information to establish your plan properly. ICMA RETIREMENT CORPORATION Please contact your New Business Analyst at 1-800-326-7272, if you have any questions. I ICMA-RC Use Only: I 1. Employer Number General Information 2. (902) Employer's Full Name: 3. (924) Street Address: ! 0<3 (925) 5 6. (918) City: ~')~y' ~ (919) State: ~=i.~ (920) Zip Code: '.:5~,ci'~ '-~ (633) Primary Contact/Plan Coordinator Name: (634) Primary Contact 1'hie: Plan Implementation Informetion ICMA Retiremen (631) Primary Contact Telephone R ~ '4-Vl'~ - "~ i I ~.. (632) Fax t:. (~'~) 9. (PT00) E-mail Address:..~;~;-~*"~t'~ ~_ C~ .~ 10. (882) Employer*s Federal Tax Identification Number. 11. #of Employees: '"'/(,,2.. 12. # of Employees Eligible for Plan Participation: 13. ~ of Employees Eligible to Receive Medical Beoefks: 14. Plan Level Quarterly Statements: (Note: * = default)_ a. Sort Order. (629) I~l S=SSN* ~ b. Output Media: (627) _~, P=Paper* ~ c. Type: (626)~ S=Summary* I~l N=Name M=Microfiche O=Detail ~ B=Bound 15. (611) Contribution Information: (Note: * = default) a. Frequenc~ (check one): (~ (0}Bi-weekly* I:] (4) Monthly ~ {8) Semi-quarterly ~ (1)Weekly {:} (5) Semi-Monthly ~1 {9) Bi-annually I~ (2) Semi-weekly [~ {6) Bi-quarterly [~ (10) Annually I~ {3)Bi-monthly ~ {7)Quarterly [~ (11)Semi-annually ~[, ( ) Other:. b. Deposit Medium: (624) 1:::31 Check* ~ Wire I~1 EFT c. Data Medium: EZ Link Required to participate in RHS Plan d. First Contribution Date Following Implementation: Corporal,on · Ann. Records Managemen! Unit · P.O. Box 96220 · Washington. DC 20090-6220 · Toll Free 1-800-669-7400 20 VantageCare Retirement Health Savings Plan Implementation Data Form - Page 2 Plan Contacts Ill any item #16-21 is left blank, the Pnmary Contact in O, f5 will receive mailings Peyroll Contact Information Please indicate alternate addresses in Comments Section Contribution Contact Information Trustee Contact Information Billing (Fees) Contact Information Comments: (Alternate Addresses for #16-20) 16. PT01 1200) (200) {420) 17. PT08 (200) (2OO) (420) 18. PT09 (200) (200) (42O) 19. PT02 20. PT05 21. PT06 ICMA RETIREMENT CORPORATION ICMA-RC Use Only: ', 11. Employer Number Contact Signature: Contact Name:, GLENDA RIVERA PAYROLL ADMINISTRATOR Contact T~le: Telephone: (561) 24.3.-7124 \ /,) Fax: {561)243-7166 Contact Name: BAP, BARA TURNER Contact Trtle: , ACCOUNTING ASSISTANT Telephone: (,561) 243-7126 Fax: (561) 2~3-7166 Contact Signature:, ,, Contact Name:, Coma ct T~tle: ,, Fax: L-.._) GLENDA RIVERA PAYROLL ADMINISTRATOR Telephone: (561"1243-7124 Fax: ( 561)--243-7166 Telephone: ( ) (200) Contact Name: (200) Contact T~le: (420) (200) Trustee Name: ~"~; (200) TrusteeT~tle: T=;, -"a a,~ac--Z- (200) Trustee Address: Street. Zip City State (420) Telephone:( ) Fax: ( (200) Contact Name:. GLENDA RIVERA (200} Contact T~tle:, PAYROLL ADMINISTRATOR Fax:( 56)-243-7166 Telephone: { ~,,61. r243-?124 ICMA Ret~rernem Corporation - Ann. Records Management Un,t · P.O. Box 96220 · Washin. gton, DC 20090-6220 · Toll Free 1-800-669-7400 21 EMPLOYER VANTAGECARE RETIREMENT HEALTH SAVINGS (RHS) PLAN ADOPTION AGREEMENT Plan Number: 8 Employer Retirement Health Savings Plan Name: .L~..,~"f', I. Employer Name: ('.~,-'~ o~ ~"~.z..r~,-¢. II. The Employer he~'eby attests that it is a unit of a state or local government or an agency or instrumen- tality of one or more units of a state or local government. II1. The Effective Date of the Plan: I~,~.,;~'~- IV. The Employer intends to utilize the Trust to fund only welfare benefits pursuant to the following wel- fare benefit plan{s) established by the Employer: V. Eligil~le Groups and Participant Eligibility Requirements A. The following group or groups of Employees are eligible to participate in the VantageCare Retire- ment Health Savings Plan: ' All Employees All Full-~me Employees No~-Union Employees Public Safety Employees -- Police Public Safety Employees -- Firefighters General Employees Collectively-Bargained Employees (Specify unit) Other {specify below) The group specified must correspond to a group of the same designation that is defined in the stat- utes, ordinances, rules, regulations, personnel manuals or other material in effect in the state or locality of the Employer. ,~[ If this box is checked, in lieu of mandatory participation, the Employer provides for a one-time irrevocable election by eligible Employees to participate in RHS. Until such time as the election is made, the Employee shall not participate in the Plan or receive contributions pursuant to Section VI. Newly eligible Employees shall be provided an election window of .~1~ days (no more than 60) from the date of initial eligibility during which they may make the election to participate. Participa- tion may begin no earlier than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to participate may be made in a later year. An annual election window of ~.'~ days (no more than 60) shall be provided during which the election may be made. The election window shall run from ..~{o~' I to ~ (insert your annual time frame for the election window, e.g. October I to November 29). Participation may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. 10 If the Employer's underlying welfare benefit plan or funding under this VantageCare Retirement Health Savings Plan is in whole or part a non-collectively bargained, self-insured plan, the nondiscrimination requirements of Internal Revenue Code (IRC) Section 105(h) wilt apply. These rules may impose taxation on the benefits received by highly compensated Employees if the Plan discriminates in favor of highly compensated Employees in terms of eligibility or benefits. The Employer should discuss these rules with appropriate counsel. Participant Eligibility 1. Minimum period of service required for participation is ~ (write N/A if an Employee is eligible to participate or to elect to participate immediately upon employment). 2. Minimum age required for eligibility to participate is Iii t~ (write N/A if no minimum age is required), VI. Contribution Sources and Amounts A. Mandatory Contributions Direct Employer Contributions The Employer shall ~:ontribute on behalf of each Participant .. for the Plan Year. klI~, % of earnings ors I~)~ Definition of earnings: . Employee Mandatory Ann~al Leave Contributions The Employer will make mandatory contributions of annual leave as follows: Accrued Sick Leave' Accrued Vacation* Other* (describe) I~1 Yes I~1 Yes ~ No ~ NO Yes I~1 No Please provide the formula f~)r determining the Accrued Leave contribution: An Employee shall not have the right to discontinue or vary the rate of annual leave contribu- tions. 3. Employee Mandatory Compensation Contributions The Employer will make mandatory contributions of Employee compensation as follows: I~l Reduction in Salary - I,~)R % of earnings (as defined in VI.A.1.) or $ ~/}~r will be contributed for the Plan Year. 11 i~ Decreased Merit or Pay Plan Adjustment - All or a portion of the Employees' annual merit or pay plan adjustment will be contributed as follows: , , An Employee shall not have the right to discontinue or vary the rate of mandatory contributions of Employee compensation. Elective Contributio,ns 1. Voluntary After-Tax Contributions Each Emi;)loyee may contribute up to ~ i f~ % of earnings (as defined in VI.A.I.) or $. ~ 113 for the Plan Year on a voluntary after-tax basis. In no event may aggregate Employee voluntary after-tax contributions exceed 25% of total contributions in any Plan Year. An Employee shall have the right to discontinue or vary the rate of elective after-tax contribu- tions of Employee earnings. By adopting this section, the Employer acknowledges that the Internal Revenue Service has declined to rule on Employee after tax contributions in an integral part trust. ICMA-RC has obtained the advice of counsel that such contributions are allowable in an insubstantial amount (i.e. no more than 25% of total contributions in any Plan Year). The Employer should discuss this issue with appropriate counsel. Elective Pre-Tax Contributions The Employer will permit each Employee to make the following elections to make pre-tax contributions to the Plan: ao Irrevocable Election for Pre-Tax Contributions from Compensation: A one-time, irrevocable election of the amount of Employer contributions of compensation made on his or her behalf. {~1 Yes ~No The Employer limits the amount elected to either a fixed percentage or a range of percent ages of an Employee's earnings (as shown below): up to I,~ ~. ~- % of earnings (as defined in VI.A.I.) or $ Iv ) I~ for the Plan Year. Newly eligible Employees shall be provided an election window of t~)~ days (no more than 60) from the date of initial eligibility during which they may make the election to contribute. Contributions may begin no earlier than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibiliw, the election to contribute may be made in a later year. An annual election window of i,~ ~ ~ ....... days (no more than 60) shall be provided ,d~Jring which the election may be made. The election window shall run from. I',~i~ to t'~l~ (insert your annual time frame for the election window). Contributions may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. 12 Co Irrevocable Election for Pre-Tax Contributions of Accrued Leave: A one-time, irrevocable election of the amount of employer contributions of Employee accrued ,~ sick '[~ vacation O other (describe) leave made on his or her behalf. ~Yes [~1 No The Employer limits the amount elected as shown below: Newly eligible Employees shall be provided an election window of 2~O days (no more than 60) from the date of initial eligibility during which they may make the election to contribute. Contributions may begin no earlier than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to contribute may be made in a later year. An annual election window of. ..... I~c3 days (no more than 60) shall be. provided during which the election may be made. The election window shall run from ~ i to~ (insert your annual time frame for the election window). Contributions may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. Annual Prospective Election for Pre-Tax Contributions of Leave: An annual, irrevocable election to have his or her {~sick ~ vacation Oother . (describe) leave to be accrued in the next calendar year contributed to the Plan on his or her behalf. Yes ]~No The Employer limits the amount elected as shown below: Contributions of future leave accruals will be remitted to the Plan [~1 as earned ~ at the end of the calendar year. The election to contribute must be made in the calendar year before the year in which contributions are to begin. Once made, the election shall apply to succeeding calendar years unless otherwise revised or revoked by the Employee on an annual basis. An annual election window of .. ~,i } ~ days (no more than 60) is provided during which eligible Employees may make the election to contribute. The election window shall run from I,J I ~ to I~ J4:~ (insert your annual time frame for the election window). By adopting section a, b, and/or c, the Employer acknowledges that the Internal Revenue Service has not ruled on irrevocable election contributions in an integral part trust. ICMA- RC has obtained the advice of counsel that such contributions are allowable under the conditions outlined in this Adoption Agreement. The Employer should discuss this issue with appropriate counsel. 13 C. Limits on Total Contributions The total contribution on behalf.each Participant (including both Mandatory and Elective Contributions) for each Plan Year shall not exceed the following limit(s): [~1 ~ iA % of earnings {as defined in VI,A. 1.). ~ There is no Plan-defined limit on the percentage or dollar amount o~ that may be contributed. ~,.~..',~,[,,-~, ·. .::> ~t.,. ~..>i~ ~ C-~..~~'"~ ......... Limits on ma~v~oum contr~Dutmn types are aefined w~tn~n the appropriate sectmn aoove. See Section V.A. for a discussion of nondiscrimination rules that may apply to non-collectively bargained self-insured Plans. VII. Vesting Schedule i~) Ttte account is 100% vested at all times, unless specified otherwise in B. below. B. The following vesting schedule applies to Direct Employer Contributions outlined in VI.A.I: Years of Specified Service Percent ~ Vestinq . , % % % % % % The account will become 100% vested upon the death, disability, retirement, or attainment of benefit eligibility by a Participant. Definition of retirement: t~i ~ I~ . D. Any period of service by a Participant prior to a rehire of the Participant by the Employer shall not count toward the vesting schedule outlined in B. above. VIII. Forfeiture Provisions Please complete this Section if a vesting schedule is indicated in Section VII. B. Upon separation from the service of the Employer, a Participant's non-vested funds shall: J~ Remain in the Trust to be reallocated among all Plan Participants as Employer Contributions for the next and succeeding contribution cycle(s). J~l Remain in the Trust to be reallocated on an equal dollar basis among all Plan Participants. ,. 14 IX. Xo Remain in the Trust to be reallocated among all Plan Participants based upon Participant account balances. Revert to the Employer. Eligibility Requirements to Receive Medical Benefit Payments from the VantageCare Retirement Health Savings Plan A. A Participant is eligible to receive benefits: At retirement only (as defined in Section VII.C.) At separation from service with the following restrictions At age only At retirement and age At retirement or age A Participant who dies or becomes totally and permanently disabled (as defined by the Social Security Administration) will become immediately eligible to receive medical benefit payments from his/her VantageCare Retirement Health Savings Plan account. Permissible Medical Benefit Payments Benefits eligible for payment consist of: All Medical Expenses eligible under IRC Section 213~ OR B. The following Medical Expenses (select only the expenses you wish to cover under the VantageCare Retirement Health Savings Plan): Medical Insurance Premiums Medical Out-of-Pocket Expenses# .Medicare Part B Insurance Premiums .Medicare Supplement Insurance Premiums .COBRA Premiums ,Dental Insurance Premiums .Dental Out-of-Pocket Expenses~ Long Term Care Insurance Premiums Long Term Care Benefits~ .Other (Must be eligible under IRC Section 213) XI. * See Section V.A. for a discussion of nondiscrimination rules which may apply to non-collectively bargained, self-insured Plans. Death Benefit A. In the event of a Participant's death, the following shall apply: Account Transfer: The surviving spouse and/or surviving eligible dependents (as defined in Section XIII.F.) of the deceased Participant are immediately eligible to maintain the account and utilize it to fund eligible medical benefits specified in Section X above. 15 Upon notification of a Participant's death, the Participant's account balance will be transferred into the Vantagepoint Money Market Fund~. The account balance may be reallocated by the surviwng spouse or dependents. ~Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. Vantagepoint Mutual Funds are distributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SIPC. In the event of an Account Transfer, if a Participant's account balance has not been fully utilized upon the death of the eligible spouse, the account balance may continue to be utilized to pay benefits of eligible dependents who have not reached the age of 19 (or 24 for full-time students). If no eligible dependents survive the spouse, the remaining account balance will be paid to the eligible spouse's estate as soon as practical. After the death of the spouse, upon the attainment of age 19 (or 24 for full-time students) by all eligible dependents, any remaining account balance will be paid to such dependent(s). Upon the death of all eligible dependents, the balance will be paid to the estate of the last dependent to die as soon as practical. The age limit for eligible dependents may be waived if the individual is incapable of self-sustaining employment by reason of mental or physical handicap and the incapacitation occurred prior to the Participant's death. The account balance may continue to be utilized to pay benefits of the individual if he or she qualified as a dependent of the Participant during the Participant's life, and the Plan has received due proof of incapacity within 31 days of when the individual's coverage under the Plan would otherwise terminate. The individual's coyerage may be continued as long as the individual remains incapaci- tated. The Plan may request proof of the continued existence of such incapacity from time to time. There will be no elective withholding of federal, state, or local taxes for death benefit lump sum account payments to the Participant's spouse's estate, dependent(s), or dependent's estates. If there are no living spouse or dependents at the time of death of the Participant, the account will be paid to the designated beneficiary(les) as an Account Distribution in the year of payout as elected in B. below. If there are no living beneficiary(les), the account will be paid to the Partici- pant's estate in the year of payout as elected in B. below. There will be no elective withholding of federal, state, or local taxes for death benefit lump sum account payments to beneficiary(les) or the Participant's estate. If this box is checked, in lieu of an Account Transfer, the following shall apply in the case of the death of the Participant. Account Distribution: The Employee's account balance will be paid to the Participant's designated beneficiary(les). Upon notification of a Participant's death, the Participant's account balance will be transferred into the Vantagepoint Money Market Fund~. The account balance may be reallocated by the desig- nated benefician/(ies). *' Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there can be no assurance that the Fund will be able to main- tain a stable net asset value of $1.00 per share. Vantagepoint Mutual Funds are distributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/ SlPC. If there are no living beneficiary(les), the account will be paid to the Participant's estate. There will be no elective withholding of federal, state, or local taxes for death benefit lump sum account payments to benefician/{ies) or the Participant's estate. 16 B. In the event of an Account Distribution due to the Participant's death, the death benefits will be paid in the calendar year following the calendar year of the Participant's death. If this box is checked, in lieu of the above paragraph, death benefits will be paid in the calendar year of the Participant's death. The Employer is responsible for reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. XII. Severance Benefit A. No severance benefit shall be provided under this VantageCare Retirement Health Savings Plan unless otherwise provided in B. below. B. [~ If this box is checked, the Employer's VantageCare Retirement Health Savings Plan provides for the payment of the Participant's account balance to the Participant upon termination of employ- ment in advance of retirement (as defined in Section VII.C.) or prior to becoming eligible for medi- cal benefits under the Plan. The following termination events qualify the Participant for severance benefits: If the Plan provides severance, benefits, the vested value of the Participant's account will be paid as a lump sum to the Participant upon notification from the Employer that the Participant has termi- nated employment and is eligible to receive a severance benefit. All severance benefits will be paid as a lump sum. The Employer will be responsible for reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Healrh Savings Plan Employer Manual. Xlll. The Plan will operate according to the following provisions: A. Employer Responsibilities 1. The Employer will submit all VantageCare Retirement Health Savings Plan contribution data via electronic submission. Participant status updates and/or changes or personal information updates and/or changes (Participants' termination dates, Participants' benefit eligibility dates, etc.) will be provided via electronic submission. B. Participant account administration fees will be paid through the redemption of Participant account shares, unless agreed upon otherwise in the Administrative Services Agreement. C. Employer plan fees will be paid by the Employer as outlined in the Administrative Services Agreement. D. Assignment of benefits is not permitted. E. Payments to'an alternate payee (payee other than a Participant) are not permitted with the exception of reimbursement of health insurance premiums to the Employer. F. An eligible dependent is the Participant's lawful spouse and any other individual who is a person described in IRC Section 152(a}. 17 XIV. Upon termination of employment prior to a Participant becoming eligible for medical benefits from a VantageCare Retirement Health Savings Plan account, Participant accounts that are $5,000 or less will be considered De Minimis, and will be paid to the Participant, H. The Employer will be responsible for withholding, reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. The Employer hereby acknowledges it understands that failure to properly fill out this Employer VantageCare Retirement Health Savings Plan Adoption Agreement may result in the loss of tax exemption of the Trust and/or loss of tax-deferred status for Employer contributions. EMPLOYER By: Title: Attest: .... Accepted': Vantagepoint Transfer Agents, LLC Corporate Treasurer 18 To: From: Date: David T. Harden, City Manager Joseph M. S .~~nance Director July 3, 2002 Subject. VantageCare Retiree Health Savings Plan The International City Manager's Association (ICMA) has recently presented their VantageCare Retiree Health Savings Plan. This plan allows all employees to make an election to either receive payment for their accrued sick or vacation leave at termination or to have the City deposit, all or a portion of, their accrued leave into the plan For those deposits made to the plan the deposit can be pretax at the time of deposit and, if used for eligible health care costs after retirement, will be tax free upon distribution. In the past, employees retiring and terminating from the City have been paid for their appropriate amounts of sick and vacation leave in their final paychecks. These paychecks usually had 20-25% taken out due to payroll taxes and thus the employee lost a substantial amount of these funds at the point he/she retired. This plan will allow for the deposit of accumulated leave without payroll taxes. Thus, the employee can use the entire proceeds from the accumulated leave to pay medical premiums (City group health plan, Medicare and Medicare supplement plan premiums, COBRA premiums, or other health plan premiums), unreimbursed medical plan costs (co-payments, deductibles), dental costs, vision costs and unreimbursed medical and prescription costs as long as they are eligible Section 213 (Internal Revenue Code) costs. The employee will be required to make an election in the year preceding termination from the City for retirement purposes. The funds elected to be deposited into the plan can only be used for these aforementioned purposes These funds cannot be taken out for any other reason other than the death of the employee. The spouse or dependents can then use these funds for eligible purposes until their death with no tax or receive the balance of the funds with taxes being imposed. We would ask that the attached resolution and accompanying plan documents be submitted to the City Commission for approval. CC: Ned Gusty, Human Resources Director Susan Ruby, City Attorney RESOLUTION NO. 61-02 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, ADOPTING A RETIREMENT HEALTH SAVINGS PROGRAM; PROVIDING FOR CONFLICTS; SUPERSEDING AND REPEALING PREVIOUS PLANS; PROVIDING FOR SEVERABILITY; PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Commission 'wishes to adopt a Retirement Health Savings Program (VantageCare) for all employees. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA: Section 1. A. That the City adopt a Retirement Health Savings Program to provide retired employees benefits for all medical expenses eligible under section 213 of the Internal Revenue Code. That the program provide'for a voluntary, irrevocable election by employees to participate. C. That the program be funded by employer pick-up of unused accrued employee sick and vacation leave. That a copy of the to be adopted plan is attached hereto. That the adoption extends to the plan adoption agreement and policies also attached C. hereto. D. That the City through its authorized officials execute such documents as may be necessary to implement the plan. E. That the City may amend the plan from time to time by resolution as may be necessary or appropriate. Section 2. That this resolution shall supersede any and all conflicting provisions of any previously adopted resolutions dealing with plans to provide retiree benefits eligible under section 213 of the Internal Revenue Code. Section 3. That the Retiree Health Savings Program adopted herein shall supersede any such similar or equivalent plan previously adopted, and that any and all such similar or equivalent plans are hereby repealed. Section 4. That should any section or provision of this resolution or any portion thereof, any paragraph, sentence, or word be declared by a court of competent jurisdiction to be invalid, such decision shall not affect the validity of the remainder hereof as a whole or part thereof other than the part declared to be invalid. Section 5. That this resolution shall take effect on ,2002. PASSED and ADOPTED this ~ day of ,2002. ATTEST: MAYOR CITY CLERK 2 RES. NO. 61-02 VantageCare Retirement Health Savings Plan Implementation Data Form - Page I Instructions to Employer: Prowde necessary information to establish your plan properly. ICMA RETIREMENT CORPORATION Please contact your New Business Analyst at 1-800-326-7272, if you have any questions. I ICMA-RC Use 0nly: I 1. Employer Number General Information 2. (902) Employer's Full Name: ~_~ 'r',,1 ,~= -~-,?--~"I' .t~..y~ 3 (924) Street Address: I O~::~ ~ ,~' , \ ~-t- I~'~/:~,., , (925) Plan Implementation Intormation 4 (918) c~y: ---~~'r' ~Sz-.-~-~ (919) State: ";~L-. (920) Zip Code: 6. {634) 7. (631) 9 (PT00) E-mail Address: ~-~-"'3t"~ _~,.C_.; .. 10. (882) Employer's Federal Tax Identification Number: 11. 13. (633) Primary Contact/Plan Coordinator Name: ~_.~-~7_..F,~ ~ , <~ ~-OP-~ Primary Contact Tr~le: ~ -; r~ ,~¥~0..~ Primary Contact Telephone #:( .~i~ ) 'Z-~ -- '") t I ~ (8) Sem~-quarterly (9) Bi-annually (10) Annually (11) Semi-annually # of Employees: ' ~ I~-~Z- 12. # of Employees Eligible for Plan Participation: '"/--~ -7 # of Employees Ehg~ble to Receive Medical Be.0efits: '-/E> ~ L 14. Plan Level Quarterly Statements: (Note: * = default)_ a. Sort Order: (629) [~ S=SSN* J~ N=Name b Output Media: (627) _~, P=Paper* ~ M=Microfiche ~1 B=Bound c. Type: (626)j~ S=Summary* ~ D=Detail 15. (611) Contribution Information: (Note: * = default) a. Frequency: (check one): ~1 (0) Bi-weekly* [~1 (4) Monthly ~] (1)Weekly ~ (5)Semi-Monthly ~ (2) Semi-weekly ~ (6) Bi-quarterly ~ (3) B~-monthly [~ (7) Quarterly ~, ( ) Other: L3p3r4 ~>~'pi~;k';"~O~ b. Deposit Medium: (624) I~l Check* ~J~ Wire EFT c. Data Medium: EZ Link Required to participate in RHS Plan d. First Contribution Date Following Implementation: j~j~,-~J%-r' J ICMA Retirement Corporation · Attn Records Management Umt · P O Box 96220 - Washington. DC 20090-6220 · Toll Free 1-800-669-7400 20 VantageCare Retirement Health Savings Plan Implementation Data Form - Page 2 IPlan Contacts (If any item #16-21 ,s left blank, the Primary Contact in O. #5 will recmve maihngs Payroll Contact Information Please indicate alternate addresses in Comments Section Contribution Contact Information Trustee Contact Information Billing (Fees) Contact Information Comments: (Alternate Addresses for #16-20) 16. PT01 (200) (200) (420) 17 PT08 (200) (200) (420) 18. PT09 (200) 1200) (420) 19. PT02 20. PT05 21. PT06 ICMA RETIREMENT CORPORATION ICMA-RC Use Only. 1 Employer Number Contact Signature: J'~z~ Contact Name: GLENDA RIVERA Conta ct T~tle: PAYROLL ADMINISTRATOR Telephone: (5_~.243,7124 ~ ~. Fax. (561)243-7166 Contact Name. BARBARA TURNER Contact Title: ACCOUNTING ASSISTANT TeLephone: (561) Contact Signature: Contact Name 243-7126 Fax: (561.) 2..__43-7166 Contact Title:. Telephone. ( ) Fax:( ) (200) Contact Name: (200) Contact Title' GLENDA RIVERA PAYROLL ADMINISTRATOR {420) Telephone: ~61'1243-7124 Fax: (56!)-243-7166 (200) Trustee Name: ~'~;'---,,-P~ I'~ . ..~,~-~'~-o.~'~ (200) Trustee 'l~tle' (200) Trustee Address: Street City State Zip (420) Telephone:( ) Fax:l ). (200) Contact Name:. (200) Contact Title' GLENDA RIVERA PAYROLL ADMINISTRATOR (421) Telephone' ( 5.61. r243-7124 Fax:( 56~-243-7166 ICMA Ret,rernent Corporat,on - Ak'tn Records Management Un,t · P.O Box 96220 · Wash~n. gton, DC 20090-6220 · Toll Free 1-800-669-7400 21 EMPLOYER VANTAGECARE RETIREMENT HEALTH SAVINGS (RHS) PLAN ADOPTION AGREEMENT Plan Number: 8 Employer Retirement Health Savings Plan Name: ]_~,~,,"~-'~' I. Employer Name: (~,--~ ~ Y~'4_,I-~', II. The Employer hereby attests that ~t ~s a unit of a state or local government or an agency or mstrumen- tality of one or more units of a state or local government. III. The Effective Date of the Plan: ~,~;%"~ i '~-~O~_ IV. The Employer intends to utilize the Trust to fund only welfare benefits pursuant to the following wel- fare benefit plan(s) established by the Employer: V. Eligible Groups and Participant Eligibility Requirements A. The following group or groups of Employees are eligible to participate in the VantageCare Retire- ment Health Savings Plan: All Employees All Full-'l~me Employees Non-Union Employees Public Safety Employees -- Police Public Safety Employees -- Firefighters General Employees Collectively-Bargained Employees (Specify unit). Other (specify below) The group specified must correspond to a group of the same designation that is defined in the stat- utes, ordinances, rules, regulations, personnel manuals or other material in effect in the state or locality of the Employer. ~[ If this box is checked, in lieu of mandatory participation, the Employer provides for a one-time irrevocable election by eligible Employees to participate in RHS. Until such time as the election is made, the Employee shall not participate in the Plan or receive contributions pursuant to Section Vt. Newly eligible Employees shall be provided an election window of ,~) days (no more than 60) from the date of initial eligibility during which they may make the election to participate. Part~cipa- tion may begin no earher than the calendar month following the end of the elect~on window. If the Employee does not make the election in the year of initial eligibility, the election to participate may be made in a later year. An annual election window of ~,~J days (no more than 60) shall be provided during which the election may be made. The election window shall run from IN[o~,° i to _~'~,-~-~ ~ (insert your annual time frame for the election window, e.g. October 1 to November 29). Participation may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. 10 If the Employer's underlying welfare benefit plan or funding under th~s VantageCare Retirement Health Savings Plan is in whole or part a non-collectively bargained, self-insured plan, the nondiscrimination requirements of Internal Revenue Code (IRC) Section 105(h) will apply. These rules may ~mpose taxation on the benefits received by h~ghly compensated Employees if the Plan discriminates in favor of highly compensated Employees in terms of eligibility or benefits. The Employer should d~scuss these rules with appropriate counsel. Participant Eligibility 1. Minimum period of service required for participation is ~tA (write N/A if an Employee is eligible to participate or to elect to participate immediately upon employment). 2. Minimum age required for eligibility to participate is ."ii/~ (write N/A ~f no minimum age is required). VI. Contribution Sources and Amounts A. Mandatory Contributions Direct Employer Contributions The Employer shall contribute on behalf of each Participant . for the Plan Year. I'~IIA % of earnings or $ ~ ~ Definition of earnings: Employee Mandatory Annual Leave Contributions The Employer will make mandatory contributions of annual leave as follows: Accrued Sick Leave* [~1 Yes Accrued Vacation* [~1 Yes Other* (describe) ,~ No ~ NO Yes ~ No * Please provide the formula f~r determining the Accrued Leave contribution: An Employee shall not have the right to discontinue or vary the rate of annual leave contribu- tions. 3. Employee Mandatory Compensation Contributions The Employer will make mandatory contributions of Employee compensation as follows: ~1 Reduction in Salary - I,~)~ % of earnings (as defined in VI.A.1.) or $ ~Ji~' willbe contributed for the Plan Year. 11 L.~ Decreased Merit or Pay Plan Adjustment - All or a portion of the Employees' annual merit or pay plan adjustment will be contributed as follows: ~)~ An Employee shall not have the right to discontinue or vary the rate of mandatory contributions of Employee compensation. B, Elective Contributions Voluntary After-Tax Contributions Each Eml~loyee may contribute up to ~ i ^ % of earnings (as defined in VI.A.1.) or ~ I ~ for the Plan Year on a voluntary after-tax bas~s. In no event may aggregate Employee voluntary after-tax contributions exceed 25% of total contributions in any Plan Year. An Employee shall have the right to discontinue or vary the rate of elective after-tax contribu- tions of Employee earnings. By adopting this section, the Employer acknowledges that the internal Revenue Service has declined to rule on Employee after tax contributions in an ~ntegral part trust. ICMAoRC has obtained the advice of counsel that such contributions are allowable in an insubstantJal amount (i.e. no more than 25% of total contributions in any Plan Year). The Employer should d~scuss this issue with appropriate counsel. 2. Elective Pre-Tax Contributions The Employer will permit each Employee to make the following elections to make pre-tax contributions to the Plan: ao Irrevocable Election for Pre-Tax Contributions from Compensation: A one-time, irrevocable election of the amount of Employer contributions of compensation made on his or her behalf. Yes '~No The Employer limits the amount elected to either a fixed percentage or a range of percent ages of an Employee's earnings (as shown below): up to ~ ! ~, % of earnings (as defined in VI.A.1.) or $ I~ ) I~ for the Plan Year. Newly eligible Employees shall be provided an election window of ~i~ days (no more than 60) from the date of initial ehgibility during which they may make the election to contribute. Contributions may begin no earher than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to contribute may be made in a later year. An annual election window of N ~ ~A- .... days (no more than 60) shall be provided ,d~uring which the election may be made. The elect~on window shall run from .t~t~ to ~/¢~ (insert your annual time frame for the election window). Contributions may begin no earlier than the calendar year following the year of the elect~on. Once made, the election is irrevocable and may not be revoked. 12 Irrevocable Election for Pre-Tax Contributions of Accrued Leave: A one-tIme, irrevocable election of the amount of employer contributions of Employee accrued ~ s~ck ~ vacation ~1 other (describe) leave made on his or her behalf. ~L, Yes ~1 No The Employer limits the amount elected as shown below: Newly eligible E.mployees shall be provided an election window of 50 .days (no more than 60) from the date of initial eligibihty during which they may make the elect~on to contribute. Contributions may beg~n no earlier than the calendar month following the end of the elect~on window. If the Employee does not matte the election in the year of initial eligibility, the election to contribute may be made in a later year. An annual election window of ~,~ days (no more than 60) shall b, provided during which the election may be made. The elect~on window shall run from~ J to ~__./., ~'O (insert your annual time frame for the election window). Contributions may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may. not be revoked. Annual Prospective Election for Pre-Tax Contributions of Leave: An annual, irrevocable election to have his or her Qsick Q vacation Qother (describe) leave to be accrued in the next calendar year contributed to the Plan on his or her behalf. Yes '~'No The Employer limits the amount elected as shown below: Contributions of future leave accruals will be remitted to the Plan ~1 as earned [~1 at the end of the calendal year. The election to contribute must be made in the calendar year before the year in which contributions are to begin. Once made, the election shall apply to succeeding calendar years unless otherwsse revised or revoked by the Employee on an annual basis. An annual election window of ~4 ~ ~ days (no more than 60) is provided during which eligible Employees ma~, make the election to contribute. The election window shall run from 1~ j ~,, to ~,o/4:~ (insert your annual time frame for the election window). By adopting section a, b, and/or c, the Employer acknowledges that the Internal Revenue Service has not ruled on irrevocable election contributions in an integral part trust. ICMA- RC has obtained the advice of counsel that such contributions are allowable under the conditions outlined in th~s Adoption Agreement. The Employer should discuss this issue with appropriate counsel. 13 C. Limits on Total Contributions The total contribution on behalf, each Participant (including both Mandatory and Elective Contributions) for each Plan Year shall not exceed the following limit(s). [~1 ~ iA % of earnings (as defined ~n VI.A.1.). ,~ There is no Plan-defined limit on the percentage or dollar amount of ~rn!n.~c that may be contributed. ~..~..',~:~.~,~.~,, ~>:~<~x,rr-, o~ ~ ~ ~ ~~ . .~. ~.~-~ ~~~ ........ L~m~on m~w~dual contr~buuon types are defined w~tmn the appropriate section above. See Section V.A. for a discussion of nondiscrimination rules that may apply to non-collectively bargained self-insured Plans. VII. Vesting Schedule (~ Tl~e account is 100% vested at all t~mes, unless specified otherwise in B. below. B. The following vesting schedule applies to Direct Employer Contributions outlined ~n VI.A.I: Years of Specified Service Percent Completed Vestin(] % % ~% % % % % ~% ~% The account will become 100% vested upon the death, disability, reUrement, or attainment of benefit eligibility by a Participant. Definition of retirement: D. Any period of service by a Participant prior to a rehire of the Participant by the Employer shall not count toward the vesting schedule outlined in B. above. VIII. Forfeiture Provisions Please complete this Section if a vesting schedule is indicated in Section VII. B. Upon separation from the service of the Employer, a Participant's non-vested funds shall: I~l Remain in the Trust to be reallocated among all Plan Participants as Employer Contributions for the next and succeeding contribution cycle(s). ~1 Remain in the Trust to be reallocated on an equal dollar bas~s among all Plan Participants. IX. Remain in the Trust to be reallocated among all Plan Participants based upon Participant account balances. [~1 Revert to the Employer. Eligibility Requirements to Receive Medical Benefit Payments from the VantageCare Retirement Health Savings Plan A. A Participant is eligible to receive benefits: At retirement only (as defined in Section VII.C.) At separation from service with the following restrictions At age only ~ ~-'z'xJ~ T'1--~-'%--~' At retirement and age At retirement or age A Participant who dies or becomes totally and permanently disabled (as defined by the Social Security Administration) will become ~mmediately eligible to receive medical benefit payments from his/her VantageCare Retirement Health Savings Plan account. X. Permissible Medical Benefit Payments Benefits eligible for payment consist of: A. ,'~ All Medical Expenses eligible under IRC Section 213' OR B. The following Medical Expenses (select only the expenses you wish to cover under the VantageCare Retirement Health Savings Plan): Medical Insurance Premiums Medical Out-of-Pocket Expenses* Medicare Part B Insurance Premiums Medicare Supplement Insurance Premiums COBRA Premiums Dental Insurance Premiums Dental Out-of-Pocket Expenses* Long Term Care Insurance Premiums Long Term Care Benefits* Other (Must be eligible under IRC Section 213) * See Section V.A. for a discussion of nondiscrimination rules which may apply to non-collectively bargained, self-insured Plans. Xl. Death Benefit A. In the event of a Participant's death, the following shall apply: Account Transfer' The surviving spouse and/or surviving eligible dependents (as defined in Section XIII.F.) of the deceased Partmipant are immediately eligible to maintain the account and utihze it to fund ehgible medical benefits specified in Section X above. 15 Upon notification of a Participant's death, the Participant's account balance will be transferred into the Vantagepoint Money Market Fund*. The account balance may be reallocated by the surviving spouse or dependents. *Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there can be no assurance that the Fund wdl be able to maintain a stable net asset value of $1 O0 per share. Vantagepomt Mutua~ Funds are distributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SIPC. In the event of an Account Transfer, if a Participant's account balance has not been fully utilized upon the death of the eligible spouse, the accoun~ balance may continue to be utihzed to pay benefits of eligible dependents who have not reached the age of 19 (or 24 for full-t~me students). If no eligible dependents surwve the spouse, the remaining account balance will be paid to the eligible spouse's estate as soon as practical. After the death of the spouse, upon the attainment of age 19 (or 24 for full-time students) by all eligible dependents, any remaimng account balance will be paid to such dependent(s). Upon the death of all elig~ble dependents, the balance will be paid to the estate of the last dependent to d~e as soon as practical. The age limit for eligible dependents may be waived if the individual is incapable of self-susta~ning employment by reason of mental or physical handicap and the incapacitation occurred prior to the Participant's death. The account balance may continue to be utilized to pay benefits of the individual if he or she qualified as a dependent of the Participant during the Participant's life, and the Plan has received due proof of ~ncapacity within 31 days of when the individual's coverage under the Plan would otherwise terminate. The individual's coverage may be continued as long as the mdiwdual remains incapac~o tated. The Plan may request proof of the continued existence of such incapacity from time to t~me. There will be no elective withholding of federal, state, or local taxes for death benefit lump sum account payments to the Participant's spouse's estate, dependent(s), or dependent's estates. ~f there are no living spouse or dependents at the time of death of the Participant, the account will be paid to the designated beneficiary(les) as an Account D~stribution in the year of payout as elected in B. below. If there are no living beneficiary(les), the account wdl be paid to the Partici- pant's estate in the year of payout as elected in B. below. There will be no elective withholding of federal, state, or local taxes for death benefit lump sum account payments to beneficiary(les) or the Participant's estate. If this box is checked, in heu of an Account Transfer, the following shall apply in the case of the death of the Participant. Account Distribution: 'Fhe Employee's account balance will be paid to the Participant's designated beneficiary(les). Upon notification of a Participant's death, the Participant's account balance will be transferred into the Vantagepomt Money Market Fund*. The account balance may be reallocated by the desig- hated beneficia fy(les). * Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there can be no assurance that the Fund will be able to main- tain a stable net asset value of $1.00 per share. Vantagepomt Mutual Funds are distributed by ICMA-RC Serwces, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/ SIPC. If there are no living beneficiary(les), the account will be paid to the Participant's estate. There will be no electwe withholding of federal, state, or local taxes for death benefit lump sum account payments to beneficiary(les) or the Participant's estate. 16 B. In the event of an Account Distribution due to the Participant's death, the death benefits will be paid in the calendar year following the calendar year of the Participant's death. If this box is checked, in lieu of the above paragraph, death benefits will be paid in the calendar year of the Participant's death. The Employer is responsible for reporting and remitting any apphcable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. Xll. Severance Benefit A. No severance benefit shall be provided under this VantageCare Retirement Health Savings Plan unless otherwise provided in B. below. B. [~1 If this box is checked, the Employer's VantageCare Retirement Health Savings Plan provides for the payment of the Participant's account balance to the Participant upon termination of employ- merit ~n advance of retirement (as defined in Section VII.C.) or prior to becoming ehgible for medi- cai benefits under the Plan. The following termination events qualify the Participant for severance benefits: If the Plan provides severance benefits, the vested value of the Participant's account will be paid as a lump sum to the Participant upon notification from the Employer that the Participant has termi- nated employment and is eligible to receive a severance benefit. All severance benefits will be paid as a lump sum. The Employer will be responsible for reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. XIII. The Plan will operate according to the following provisions: A. Employer Responsibilities 1. The Employer will submit all VantageCare Retirement Health Savings Plan contribution data via electronic submission. Participant status updates and/or changes or personal information updates and/or changes (Participants' termination dates, Participants' benefit eligibihty dates, etc.) will be provided via electronic submission. B. Participant account administration fees will be paid through the redemption of Participant account shares, unless agreed upon otherwise in the Administrative Services Agreement. C. Employer plan fees will be paid by the Employer as outlined in the Administrative Services Agreement. D. Assignment of benefits is not permitted. E. Payments to an alternate payee (payee other than a Participant) are not permitted with the exception of reimbursement of health insurance premiums to the Employer. F. An eligible dependent ~s the Participant's lawful spouse and any other individual who is a person described in IRC Section 152(a). 17 XIV. Go Upon termination of employment prior to a Partmipant becoming eligible for medical benefits from a VantageCare Retirement Health Savings Plan account, Participant accounts that are $5,000 or less will be considered De Mimmis, and will be paid to the Participant. H. The Employer will be responsible for withholding, reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. The Employer hereby acknowledges it understands that failure to properly fill out th~s Employer VantageCare Retirement Health Savings Plan Adoption Agreement may result in the loss of tax exemption of the Trust and/or loss of tax-deferred status for Employer contributions. EMPLOYER Ely:. Title:. Attest: AccepteE: Vantagepoint Transfer Agents, LLC Corporate Treasurer 18 VA N TAG E CARE RETIREMENT HEALTH SAVINGS PLAN Retain Booklet This booklet contains the following documents: · Model Integral Part Trust Document · Private Letter Ruling · Sample Welfare Benefit Plan ICMA RETIREMENT CORPORATION The Public Sector Expert RETAIN BOOKLET USING THE VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN RETAIN BOOKLET This is one of two booklets containing information to establish your VantageCare Retirement Health Savings (RHS) Plan with the ICMA Retirement Corporation. For detailed information about plan adoption, please see your VantageCare Retirement Health Savings Plan Employer Manual. This booklet includes: · Model Integral Part Trust Document · Private Letter Ruling -Sample Welfare Benefit Plan Please read the information and retain it for your files. MODEL INTEGRAL PART TRUST DOCUMENT You will need to execute a trust document; you may execute the model trust document in this retain booklet by inserting your information on pages 4, 5, 7, and 13. If you do not use the ICMA-RC model trust document, your individually designed document must be reviewed and approved by ICMA-RC prior to your joining the RHS program. Th~s will ensure that ICMA-RC can administer all provisions of your plan. PRIVATE LETrER RULING ICMA-RC has obtained a private letter ruling from the IRS approving one employer's RHS Plan trust. Your use of ICMA-RC's model trust document will provide you with comfort that the trust for your Plan is also within the IRS' requirements. {This is similar to the comfort provided when you use ICMA-RC's model 457 plan documents.) Of course, you may want to talk to your legal counsel about whether or not you should obtain a private letter ruling on your own RHS trust document if you choose not to use the ICMA-RC model document. Note that the plan upon which the IRS private letter ruling was based did not include certain features that have subsequently been added to the RHS program. These features include · the irrevocable election to participate in the program, · the irrevocable election to contribute compensation or accrued leave*, · the irrevocable prospective election to contribute leave to be earned in the coming year*, and · voluntary employee after-tax contributions (Article 7.2 of the Trust). *These contribution types are treated as Employer contributions under Article 7.1 and 7.3 of the Trust. However, ICMA-RC has obtained the opinion of counsel that these features should be allowed as long as the requirements outhned in the Trust and Adoption Agreement are met. Any questions regarding these features of the RHS program can be directed to your ICMA-RC Retirement Plan Specialist. SAMPLE WELFARE BENEFIT PLAN You will need to execute a welfare benefit plan if you do not already have one in place. You may execute the sample welfare benefit plan provided herein or you may execute your own welfare benefit plan. It can be a simple document, but it must be in writing in order for your employees to enjoy tax-free treatment of the benefits they receIve from this plan or any other welfare benefit plan you provide. VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN FOR ASSISTANCE Please contact your VantageCare Retirement Health Savings Plan New Business Analyst at 1-800-326-7272. Please note that the information in this booklet and the documents herein take into account only the federal tax rules related to ICMA-RC's VantageCare Retirement Health Savings Plan. Prior to implementing an RHS plan, the employer ~s responsible for determining that there are no state or local laws that would prohibit it from offering the plan to its employees. The employer must also determine that the options it selects in the VantageCare Retirement Health Savings Plan Adoption Agreement fall within state/local requirements. RETAIN BOOKLET DECLARATION OF TRUST OF THE NAME OF EMPLOYER INTEGRAL PART TRUST VANTAGE. CARE RETIREM£NT HEALTH SAVINGS PLAN DECLARATION OF TRUST OF THE NAME OF EMPLOYER INTEGRAL PART TRUST Declaration of Trust made as of the by and between the Name of Emoloye~ (hereinafter referred to as the "Employer") and referred to as the "Trustee"), day of Name of Trustee ,20 , State Tyl~e of Entffy or its designee (hereinafter RECITALS WHEREAS, the Employer is a political subdivision of the State of exempt from federal income tax under the Internal Revenue Code of 1986; and WHEREAS, the Employer provides for the security and welfare of its eligible employees (here- inafter referred to as "Participants"), their Spouses, Dependents and Beneficiaries by the maintenance of one or more post-retirement welfare benefit plans, programs or arrangements which provide for life, sickness, medical, disability, severance and other similar benefits through insurance and self-funded reimbursement plans (collectively the "Plan"); and WHEREAS, it is an essential function and integral part of the exempt activities of the Employer to assist Participants, their Spouses, Dependents and Beneficiaries by making contributions to and accu- mulating assets in the trust, a segregated fund, for post-retirement welfare benefits under the Plan; and WHEREAS, the authority to conduct the general operation and administration of the Plan is vested in the Employer or its designee, who has the authority and shall be subject to the duties with respect to the trust specified in this Declaration of Trust; and WHEREAS, the Employer wishes to establish this trust to hold assets and income of the Plan for the exclusive benefit of Plan Participants, their Spouses, Dependents and Beneficiaries; and NOW, THEREFORE, the parties hereto do hereby establish this trust, to be known as the Declaration of Trust of the Integral Part Trust Name of Emoloyer (hereinafter referred to as the "Trust"), and agree that the following constitute the Declaration of Trust (hereinafter referred to as the "Declaration"): RETAIN BOOKLET ARTICLE I Definitions 1.1 Definitions. For the purposes of this Declaration, the following terms shall have the respective meanings set forth below unless otherwise expressly provided. (a) "Account" means the individual recordkeeping account maintained under the Plan to record the interest of a Participant in the Plan in accordance with Section 7.4. (b) "Account Transfer" means a transfer of the Participant's Account upon his or her death to be used for the payment of benefits for the Participant's Spouse and Dependents. (c) "Administrator" means the Employer or the entity designated by the Employer to carry out admin- istrative services as are necessary to implement the Plan. (d) "Beneficiary" means the person or persons designated by the Participant pursuant to the terms of the Plan, or, if the Plan provides otherwise, the Spouse and Dependents, who will receive any b~enefits payable hereunder in the event of the Participant's death. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (f) "Dependent" means an individual who is a person described in Code Section 152(a). (g) "Investment Fund" means any separate investment option or vehicle selected by the Employer in which all or a portion of the Trust assets may be separately invested as herein provided. The Trustee shall not be required to select any Investment Fund. (h) "Nonforfeitable Interest" means the interest of the Participant or the Participant's Spouse, Depend- ent or Beneficiary (whichever is applicable) in the percentage of Participant's Employer's contribu- tion which has vested pursuant to the vesting schedule specified in the Employer's Plan. A Partici- pant shall, at all times, have a one hundred percent (100%) Nonforfeitable Interest in the Partici- pant's own contributions. (i) "Spouse" means the Participant's lawful spouse as determined under the laws of the state in which the Participant has his primary place of residence. (j) "Trust" means the trust established by this Declaration. (k) '"Trustee" means the person or persons appointed by the Employer to serve in that capacity. VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE II Establishment of Trust 2.1 The Trust is hereby established as of the date set forth above for the exclusive benefit of Partici- pants, their Spouses, Dependents and Beneficiaries. ARTICLE III Construction 3.1 This Trust and its validity, construction and effect shall be governed by the laws of the State of State 3.2 Pronouns and other similar words used herein in the masculine gender shall be read as the feminine gender where appropriate, and the singular form of words shall be read as the plural where appropriate. 3.3 If any provision of this Trust shall be held illegal or invalid for any reason, such determination shall not affect the remaining provisions, and such provisions shall be construed to effectuate the purpose of this Trust. ARTICLE IV Benefits 4.1 Benefits. This Trust may provide benefits to the Participant, the Participant's Spouse and Dependents. Death benefits may be provided to a Beneficiary pursuant to the terms of the Plan. 4.2 Form of Benefits. This Trust may provide benefits by cash payment. This Trust may reimburse the Participant, his Spouse or Dependents for insurance premiums or other payments expended for permissi- ble benefits described under the Plan. Th~s trust may reimburse the Employer, or the Administrator for insurance premiums. ARTICLE V General Duties 5.1 It shall be the duty of the Trustee to hold title to assets held in respect of the Plan in the Trustee's name as directed by the Employer or its designees in writing. The Trustee shall not be under any duty to com- pute the amount of contributions to be paid by the Employer or to take any steps to collect such amounts as may be due to be held in trust under the Plan. The Trustee shall not be responsible for the custody, investment, safekeeping or disposition of any assets comprising the Trust, to the extent such functions are performed by the Employer or the Administrator, or both. 5.2 It shall be the duty of the Employer, subject to the provisions of the Plan, to pay over to the Adminis- trator or other person designated hereunder from time to time the Employer's contributions and Partici- pants' contributions under the Plan and to inform the Trustee in writing as to the identity and value of the assets titled in the Trustee's name hereunder and to keep accurate books and records with respect to the Participants of the Plan. RETAIN BOOKLET ARTICLE VI Investments 6.1 The Employer may appoint one or more investment managers to manage and control all or part of the assets of the Trust and the Employer shall notify the Trustee in writing of any such appointment. 6.2 The Trustee shall not have any discretion or authority with regard to the investment of the Trust and shall act solely as a directed Trustee of the assets of which it holds title. To the extent directed by the Employer (or Participants, their Spouses and Dependents, or Beneficiaries to the extent provided herein) the Trustee is authorized and empowered with the following powers, rights and duties, each of which the Trustee shall exercise m a nondiscretionary manner: (a) To cause stocks, bonds, securities, or other investments to be registered in its name as Trustee or ~n the name of a nominee, or to take and keep the same unregistered; (b) To employ such agents and legal counsel as it deems advisable or proper in connection with its duties and to pay such agents and legal counsel a reasonable fee. The Trustee shall not be liable for the acts of such agents and counsel or for the acts done in good faith and in reliance upon the advice of such agents and legal counsel, provided it has used reasonable care in selecting such agents and legal counsel; (c) To exercise where applicable and appropriate any rights of ownership in any contracts of insurance in which any part of the Trust may be invested and to pay the premiums thereon; and (d) At the direction of the Employer (or Participants, their Spouses, their Dependents, their Benefi- ciaries, or the investment manager, as the case may be) to sell, write options on, convey or transfer, invest and reinvest any part thereof in each and every kind of property, whether real, personal or mixed, tangible or intangible, whether income or non-income producing and wherever situated, including but not limited to, time deposits (including time deposits in the Trustee or its affiliates, or any successor thereto, if the deposits bear a reasonable rate of interest), shares of common and preferred stock, mortgages, bonds, leases, notes, debentures, equipment or collateral trust certificates, rights, warrants, convertible or exchangeable securi- ties and other corporate, individual or government securities or obligations, annuity, retire- ment or other insurance contracts, mutual funds (including funds for which the Trustee or its affiliates serve as investment advisor, custodian or in a similar or related capacity), or in units of any other common, collective or commingled trust fund. 6.3 Notwithstanding anything to the contrary herein, the assets of the Plan shall be held by the Trustee as title holder only. Persons holding custody or possession of assets titled to the Trust shall include the Employer, the Administrator, the investment manager, and any agents and subagents, but not the Trustee. The Trustee shall not be responsible or liable for any loss or expense which may arise from or result from compliance with any direction from the Employer, the Admimstrator, the investment manager, or such agents to take title to any assets nor shall the Trustee be responsible or liable for any loss or expense which may result from the Trustee's refusal or failure to comply with any direction to hold title, except if the same shall ~nvolve or result from the Trustee's negligence or intentional misconduct. The Trustee may refuse to comply with any direction from the Employer, the Administrator, the investment manager, or such agents in the event that the Trustee, in its sole and absolute discretion, deems such direction illegal. 6.4 The Employer hereby indemnifies and holds the Trustee harmless from any and all actions, claims, demands, liabilities, losses, damages or reasonable expenses of whatsoever kind and nature in connection with or arising out of (i) any action taken or omitted in good faith by the Trustee in accordance with the directions of the Employer or its agents and subagents hereunder, or (ii) any disbursements of any part of the Trust made by the Trustee in accordance with the directions of the Employer, or (iii) any action taken by or omitted in good faith by the Trustee with respect to an investment managed by an investment manager ~n accordance with any d~rection of the investment manager or any inaction with respect to any -~NTAGECARE RETIREMENT HEALTH SAVINGS PLAN such investment ir. - the contrary herein, fication ~f the Truste by it under the pro ,l~sence of directions from the investment manager. Notwithstanding anything to Employer shall have no responsibdity to the Trustee under the foregoing indemm- Is negligently, intentionally or recklessly to perform any of the dutms undertaken ns of this Trust. 6.5 Notwithstand~- the Administrator valuing all assets of the same. The actions, demands from or are relate assets. ~ything to the contrary herein, the Employer or, if so designated by the Employer, the investment manager or another agent of the Employer, will be responsible for :quired for all purposes of the Trust and of holding, investing, trading and d~sposing :loyer will indemnify and hold the Trustee harmless against any and all claims, ~dities, losses, damages, or expenses of whatsoever kind and nature, which arise any use of such valuation by the Trustee or holding, trading, or disposition of such 6.6 The Trustee tions, claims, der nature in connec the Admmistratc Section 6.3 ahoy the investment r, and hereby does indemnify and hold harmless the Employer from any and all ac- ids, liabilities, losses, damages and reasonable expenses of whatsoever kind and ' with or arising out of (a) the Trustee's failure to follow the directions of the Employer, ~e investment manager, or agents thereof, except as permitted by the last sentence of b) any d~sbursements made without the direction of the Employer, the Administrator, -sager or agents thereof; and (c) the Trustee's negligence, willful misconduct, or reck- lessness with re'-,:, ecl to the Trustee's duties under this Declaration. ARTICLE VII Contributions 7.1 Employer Contributions. The Employer shall contribute to the Trust such amounts as specified in the Plan or by resolution. 7.2 Participant Contributions. If specified in the Plan, each Participant may make voluntary after-tax contributions. Under no circumstances shall Participant Contributions exceed an insubstantial amount. These contributions shall be collected by the Employer and remitted to the Trust for deposit at such time or times as required under the terms of the Plan. 7.3 Accrued Leave. Contributions up to an amount equal to the value of accrued sick leave, vacation leave, or other type of accrued leave, as permitted under the Plan. The Employer's Plan must prowde a formula for determining the value of the Participant's contribution of accrued leave. The Employer's Plan must contain a forfeiture provision that will prevent Participants from receiving the accrued leave in cash in lieu of a contribution to the Trust. 7.4 Accounts. Employer contributions, Participant contributions, and contributions of accrued leave, all investment income and realized and unrealized gains and losses, and forfeitures allocable thereto will be deposited into an Account in the name of the Participant for the exclusive benefit of the Participant, his Spouse, Dependents and Beneficiaries. The assets in each Participant's Account may be invested in Investment Funds as directed by the Participant (or, after the Participant's death, by the Spouse, Dependents or Beneficiaries) from among the Investment Funds selected by the Employer. 7.5 Receipt of Contributions. The Employer or, if so designated by the Employer, the Administrator or investment manager or another agent of the Employer, shall receive all contributions paid or delivered to ~t hereunder and shall hold, invest, reinvest and administer such contributions pursuant to this Declara- tion, without distinction between principal and income. The Trustee shall not be responsible for the calculation or collection of any contribution under the Plan, but shall hold title to property received in respect of the Plan in the Trustee's name as directed by the Employer or its designee pursuant to this Declaration. RETAIN BOOKLET 7.6 No amount in any Account maintained under this Trust shall be subject to transfer, assignment, or alienation, whether voluntary or involuntary, in favor of any creditor, transferee, or assignee of the Em- ployer, the Trustee, any Partmipant, h~s Spouse, Dependent, or Beneficiaries. 7.7 Upon the satisfaction of all liabilities under the Plan to prowde such benefits, any amount of Employer contributions, plus accrued earnings thereon, remaining in such separate Accounts must, under the terms of the Plan, be returned to the Employer. ARTICLE VIII Other Plans If the Employer hereafter adopts one or more other plans providing life, sickness, accident, medical, disability, severance, or other benefits and designates the Trust hereby created as part of such other plan, the Employer or, if so designated by the Employer, the Administrator or an investment manager or an- other agent of the Employer shall, subject to the terms of thru Declaration, accept and hold hereunder contributions to such other plans. In that event (a) the Employer or, ~f so designated by the Employer, the Administrator or an investment manager or another agent of the Employer, may commingle for invest- ment purposes the contributions received under such other plan or plans with the contributions previously received by the Trust, but the books and records of the Employer or, if so designated by the Employer, the Administrator or an investment manager or another agent of the Employer, shall at all times show the portion of the Trust Fund allocable to each plan; (b) the term "Plan" as used herein shall be deemed to refer separately to each other plan; and (c) the term "Employer" as used herein shall be deemed to refer to the person or group of persons whmh have been designated by the terms of such other plans as having the authority to control and manage the operation and administration of such other plan. ARTICLE IX Disbursements and Expenses 9.1 The Employer or its designee shall make such payments from the Trust at such time to such persons and in such amounts as shall be authorized by the provisions of the Plan provided, however, that no payment shall be made, either during the existence of or upon the discontinuance of the Plan (subject to Section 7.7), which would cause any part of the Trust to be used for or diverted to purposes other than the exclusive benefit of the Participants and their Beneficiaries pursuant to the prows~ons of the Plan. 9.2 All payments of benefits under the Plan shall be made exclusively from the assets of the Accounts of the Participants to whom or to whose Spouse, Dependents, or Beneficiaries such payments are to be made, and no person shall be entitled to look to any other source for such payments. 9.3 The Employer, Trustee and Administrator may be reimbursed for expenses reasonably incurred by them in the administration of the Trust. All such expenses, including, without limitation, reasonable fees of accountants and legal counsel to the extent not otherwise reimbursed, shall constitute a charge against and shall be paid from the Trust upon the direction of the Employer. ARTICLE X Accounting 10.1 The Trustee shall not be required to keep accounts of the investments, receipts, disbursements, and other transactions of the Trust, except as necessary to perform its title-holding functmn hereunder. All accounts, books, and records relating thereto shall be maintained by the Employer or ~ts designee VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN 10.2 As promptly as possible following the close of each year, the Trustee shall file with the Employer a written account setting forth assets titled to the Trust as reported to the Trustee by the Employer or its designee. ARTICLE Xl Miscellaneous Provisions 11.1 Neither the Trustee nor any affiliate thereof shall be required to give any bond or to qualify before, be appointed by, or account to any court of law in the exercise of its powers hereunder. 11.2 No person transferring title or receiving a transfer of title from the Trustee shall be obligated to look to the propriety of the acts of the Trustee in connection therewith. 11.3 The Employer may engage the Trustee as its agent in the performance of any duties required of the Employer under the Plan, but such agency shall not be deemed to increase the responsibility or liability of the Trustee under this Declaration. 11.4 The Employer shall have the right at all reasonable times during the term of this Declaration and for three (3) years after the termination of this Declaration to examine, audit, inspect, review, extract informa- tion from, and copy all books, records, accounts, and other documents of the Trustee relating to this Declaration and the Trustees' performance hereunder. ARTICLE XII Amendment and Termination 12.1 The Employer reserves the right to alter, amend, or (subject to Section 9.1) terminate this Declaration at any time for any reason without the consent of the Trustee or any other person, prowded that no amendment affecting the rights, duties, or responsibilities of the Trustee shall be adopted without the execution of the Trustee to the amendment. Any such amendment shall become effective as of the date provided ~n the amendment, if requiring the Trustee's execution, or on delivery of the amendment to the Trustee, if the Trustee's execution is not required. 12.2 Upon termination of this Declaration and upon the satisfaction of all liabilities under the Plan to provide such benefits, any amount of Employer contributions, plus accrued earnings thereon, remaining in such separate Accounts must, under the terms of the Plan, be returned to the Employer. ARTICLE Xlll Successor Trustees 13.1 The Employer reserves the right to discharge the Trustee for any or no reason, at any time by giving ninety (90) days' advance written notice. 13.2 The Trustee reserves the right to resign at any time by giving ninety (90) days' advance written notice to the Employer. 13.3 In the event of discharge or resignation of the Trustee, the Employer may appoint a successor Trus- tee who shall succeed to all rights, duties, and responsibilitIes of the former Trustee under this Declara- tion, and the terminated Trustee shall be deemed discharged of all duties under this Declaration and responsibihties for the Trust. 10 RETAIN BOOKLET ARTICLE XlV Limited Effect of Plan and Trust Neither the estabhshment of the Plan and the Trust or any modification thereof, the creation of any fund or account, nor the payment of any benefits, shall be construed as giving to any person covered under the Plan or other person any legal or equitable right against the Trustee, the Administrator, the Employer or any officer or employee thereof, except as may otherwise be expressly provided in the Plan or in this Declaration. ARTICLE XV Protective Clause Neither the Administrator, the Employer, nor the Trustee shall be responsible for the validity of any con- tract of insurance or other arrangement maintained in connection with the Plan, or for the failure on the part of the insurer or provider to make payments prowded by such contract, or for the action of any per- son which may delay payment or render a contract void or unenforceable in whole or in part. 11 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN IN WITNESS WHEREOF, the Employer and the Trustee have executed this Declaration by their respective duly authorized officers, as of the date first heremabove mentioned. EMPLOYER: By:. Title: TRUSTEES: By:. Title: By:, Title: Title:. 12 RETAIN BOOKLET INSERT REDACTED PLR 13 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN VA NTAG ECA RE RETIREMENT HEALTH SAVINGS PLAN RETAIN BOOKLET SAMPLE RETIREE MEDICAL AND DENTAL EXPENSE REIMBURSEMENT PLAN 17 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN SAMPLE RETIREE MEDICAL AND DENTAL EXPENSE REIMBURSEMENT PLAN Article Article Article Article Article Article Article Article I Preamble 1.01 Establishment of Plan 1.02 Purpose of Plan II Definitions 2.01 "Benefits" 2.02 "Code" 2.03 "Dependent" 2.04 "Eligible Medical or Dental Expenses" 2.05 "Employer" 2.06 "Entry Date" 2.07 "Participant" 2.*08 "Plan Administrator" 2.09 "Plan Year" 2.10 "Retiree" 2.11 "Spouse" III Eligibility 3.01 General Requirements 3.02 Termination of Coverage of an Eligible Dependent IV Amount of Benefits 4.01 Annual Benefits Provided by the Plan 4.02 Cost of Coverage V Payment of Benefits 5.01 Eligibility for Benefits 5.02 Claims for Benefits VI Plan Administration 6.01 Allocation of Authority 6.02 Provision for Third-Party Plan Service Providers 6.03 Several Fiduciary Liability 6.04 Compensation of Plan Administrator 6.05 Bonding 6.06 Payment of Administrative Expenses 6.07 ~meliness of Payments 6.08 Annual Statements VI Claims Procedure 7.01 Procedure if Benefits are Denied Under the Plan 7.02 Requirement for Written Notice of Claim Demal 7.03 Right to Request Hearing on Benefit Denial 7.04 Disposition of Disputed Claims 7.05 Preservation of Other Remedies VIII Amendment or Termination of Plan 8.01 Permanency 8.02 Employer's Right to Amend 8.03 Employer's Right to Terminate 18 RETAIN BOOKLET Article IX General Provisions 9.01 No Employment Rights Conferred 9.02 9.03 9.04 9.05 9.06 9.07 9.08 9.09 9.10 9.11 9.12 9.13 Payments to Beneficiary Nonalienation of Benefits Mental or Physical Incompetency inability to Locate Payee Requirement of Proper Forms Source of Payments Tax Effects Multiple Functions Gender and Number Headings Applicable Laws Severability 19 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE I Preamble THIS INSTRUMENT made and published by "Employer") on the day of ,20 and Dental Expense Reimbursement Plan, as follows: , creates the (hereinafter called Retiree Medical 1.01 Establishment of Plan The Employer named above hereby establishes a Retiree Medical and Dental Expense Reimbursement Plan as of the day of ,20. 1.02 Purpose of Plan This Plan has been established to reimburse the eligible Retirees of the Employer for medical and dental expenses incurred by them, their Spouses and Dependents, pursuant to the Employer's VantageCare Retirement Health Savings (RHS) Plan. ARTICLE II Definitions The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context: 2.01 "Benefits" means any amounts paid to a Participant in the Plan as reimbursement for Eligible Medical and Dental Expenses incurred by the Participant during a Plan Year by h~m, his Spouse, or h~s Dependents. 2.02 "Code" means the Internal Revenue Code of 1986, as amended. 2.03 "Dependent" means any individual who is a dependent of the Participant within the meaning of Code Sec. 152. 2.04 "Eligible Medical or Dental Expenses" means those expenses designated by the Employer as eligible for reimbursement in the VantageCare Retirement Health Savings Plan Adoption Agreement. 2.05 "Employer" means the unit of state or local government creating this Plan, or any affiliate or succes- sor thereof that likewise adopts this Plan. 2.06 "Entry Date" means the first day the Participant meets the eligibility requirements of Article III as of such Date. 2.07 "Participant" means any Retiree who has met the eligibility requirements set forth in Article III. 2.08 "Plan Administrator" means the Employer or other person appointed by the Employer who has the authority and responsibility to manage and direct the operation and administration of the Plan. 2.09 "Plan Year" means the annual accounting period of the Plan, which begins on the day of ,20 , and ends on the__ day of ,20 , w~th respect to the first Plan Year, and thereafter as long as this Plan remains in effect, the period that begins on ., and ends on 20 1I rI RETAIN BOOKLET 2.10 "Retiree" means any individual who, while in the service of the Employer, was considered to be in a legal employer-employee relationship w~th the Employer for federal withholding tax purposes, and who was part of the classification of employees designated as covered by the Employer's VantageCare Retire- ment Health Sawngs Plan. 2.11 "Spouse" means the Participant's lawful spouse as determined under the laws of the state in which the Participant has his primary place of residence. All other defined terms in this Plan shall have the meanings specified in the various Articles of the Plan in which they appear. ARTICLE III Eligibility 3.01 General Requirements Each Retiree who meets the eligibility requirements outlined in the Employer's VantageCare Retirement Health Savings Plan shall be eligible to participate in this Plan. 3.02. Termination of Coverage of an Eligible Dependent An Eligible Dependent's coverage shall terminate - (a) after the death of the Retiree, upon the attainment of age 19 (or 24 for a full time student); (b) Notwithstanding (a) above, an Eligible Dependent's coverage shall not cease if the individual is incapable of self-sustaining employment by reason of mental or physical handicap and he or she became handicapped while an Eligible Dependent of the Participant. The account balance may continue to be utilized to pay Benefits of the individual if he or she qualified as a Depend- ent of the Participant during the Participant's life, and the Plan has received due proof of incapacity within 31 days of when the individual's coverage under the Plan would otherwise terminate. The individual's coverage may be continued as long as the individual remains incapacitated. The Plan may request proof of the continued existence of such incapacity from time to t~me. ARTICLE IV Amount of Benefits 4.01 Annual Benefits Provided by the Plan Each Participant shall be entitled to reimbursement for his documented, Eligible Medical or Dental Ex- penses incurred during the Plan Year in an annual amount not to exceed the account balance of the Partici- pant ~n the Employer's VantageCare Retirement Health Savings Plan. 4.02 Cost of Coverage The expense of providing the benefits set out in Section 4.01 shall be contributed as outlined in the Em- ployer's VantageCare Retirement Health Savings Plan 21 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE V Payment of Benefits 5.01 Eligibility for Benefits (a) Each Participant in the Plan shall be entitled to a benefit hereunder for all Eligible Medical and Dental Expenses incurred by the Participant on or after the Entry Date of his or her participa- tion, (and after the effective date of the Plan) subject to the limitations contained m Article V, below, regardless whether the mental or physical condition for which the Participant makes application for benefits under this Plan was detected, diagnosed, or treated before the Partici- pant became covered by the Plan. (b) In order to be eligible for benefits, the Participant must meet the benefit eligibdity criteria outlined in the Employer's VantageCare Retirement Health Savings Plan Adoption Agreement. (c) A Participant who becomes totally and permanently disabled (as defined by the Social Security Administration) will become immediately ehgible to receive medical benefit payments from the Plan. Pursuant to Section 9.02 and Employer's VantageCare Retirement Health Savings Plan Adoption Agreement, the surviving Spouse and Eligible Dependents shall become immediately eligible to receive or to continue receiving medical benefit payments from the Plan upon the death of the Participant. 5.02 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 Article VI, below. Upon receipt of a properly documented claim, the Plan Admimstrator shall pay the Participant the benefits provided under this Plan as soon as is administratively feasible. ARTICLE VI Plan Administration 6.01 Allocation of Authority The Employer shall control and manage the operation and Administration of the Plan. The Employer shall have the exclusive right 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 Employer with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Employer shall have the following powers and duties: (a) 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; (b) To determine the amount of benefits that shall be payable to any person in accordance with the provisions of the Plan; to inform the Plan Administrator, 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 demed in whole or in part; and (c) To designate other persons to carry out any duty or power which would otherwise be a fiduci- ~ ary responsibility of the Plan Administrator, under the terms of the Plan. 22 RETAIN BOOKLET (d) To require any person to furnish such reasonable ~nformat~on as ~t may request for the purpose of the proper admimstration of the Plan as a condition to receiving any benefits under the Plan; (e) To make and enforce such rules and regulations and prescribe the use of such forms as he shall deem necessary for the efficient administration of the Plan. 6.02 Provision for Third-Party Plan Service Providers The Plan Administrator, subject to approval of the Employer, may employ the services of such persons as it may deem necessary or desirable in connection operation of the Plan. The Plan Administrator, the Employer (and any person to whom it may delegate any duty or power ~n connection with the administra- tion of the Plan), and all persons connected therewith may rely upon all tables, valuations, certificates, reports and opimons 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. 6.03 Several fiduciary Uability To the extent permitted by law, 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. 6.04 Compensation of Plan Administrator Unless otherwise agreed to by the Board, 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 pa~d by the Employer. 6.05 Bonding Unless otherwise determined by the Employer, or unless required by any Federal or State law, the Plan Administrator shall not be required to give any bond or other security in any jurisdiction in connection w~th the administration of this Plan. 6.06 Payment of Administrative Expenses All reasonable expenses incurred in administering the Plan, including but not limited to administrative fees and expenses owing to any third party administrative service provider, actuary, consultant, account- ant, attorney, specialist, or other person or organization that may be employed by the Plan Administrator in connection with the administration thereof, shall be paid by the Employer, provided, however that each Participant shall bear the monthly cost (if any) charged by a third party administrator for maintenance of h~s Benefit Account unless otherwise paid by the Employer. 6.07 ~imeliness of Payments Payments shall be made as soon as administratively feasible after the required forms and documentation have been received by the Plan Administrator. 6.08 Annual Statements The Plan Administrator shall furnish each Participant with an annual statement of his medical and dental expense reimbursement account within ninety (90) days after the close of each Plan Year. 23 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE VII Claims Procedure 7.01 Procedure if Benefits are Denied Under the Plan Any Participant, Spouse or Eligible Dependent, or his duty authorized representative may file a claim for a plan benefit to which the claimant believes that he is entitled. Such a claim must be in writing on a form provided by the Plan Administrator and delivered to the Plan Administrator, in person or by mad, postage pa~d. Within-thirty (30) days after receipt of such claim, the Plan Administrator shall send to the claimant, by mail, postage prepaid, 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 exten- sion 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 30-day period. The Plan Administrator shall have full discretion to deny or grant a claim in whole or m part. If notme of the denial of a claim is not furnished in accordance with this Section, the claim shall be deemed demed and the claimant shall be permitted to exercise his right to review pursuant to Sections 7.03 and 7.04. 7.02 Requirement for Written Notice of Claim Denial The Plan Administrator shall provide, to every claimant who is denied a claim for benefits, written notice setting 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 of 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. 7.03 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. 7.04 Disposition of Disputed Claims Upon its receipt of notice of a request for review, the Plan Administrator shall make a prompt decision on the review. The decision on review shall be written ~n a manner calculated to be understood by the claim- ant and shall include specific reasons for the decision and specific references to the pertinent plan provi- sions on which the decision is based. The decision on 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 g~ven written notice of the extension prior to the expiration of the ~mtial sixty (60) day period. If notice of the decision on the review is not furnished in accordance with this Section, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to legal remedy pursuant to Section 7.05. 7.05 Preservation of Other Remedies After exhaustion of the claims procedures provided under this Plan, nothing shall prevent any person from pursuing any other legal or equitable remedy otherwise available. 24 RETAIN BOOKLET ARTICLE VIII A~nendment or Termination of Plan 8.01 Permanency While the Employer fully expects that this Plan will continue indefinitely, due to unforeseen, future busi- ness contingencies, permanency of the Plan will be subject to the Employer's right to amend or terminate the Plan, as provided m Sections 8.02 and 8.03, below. 8.02 Employer's Right to Amend The Employer reserves the right to amend the Plan at any time and from time-to-time, and retroactively if deemed necessary or appropriate to meet the requirements of the Code, or any similar provisions of subsequent revenue or other laws, or the rules and regulations in effect under any of such laws or to conform with governmental regulations or other policies, to modify or amend in whole or in part any or all of the provisions of the Plan. 8.03 EmlJloyer's Right to Terminate The Employer reserves the right to discontinue or terminate the Plan at any time without prejudice. ARTICLE IX General Provisions 9.01 No Employment Rights Conferred Neither this Plan nor any action taken with respect to it shall confer upon any person the right to be con- tinued in the employment of the Employer. 9.02 Payments to Beneficiary Any benefits otherwise payable to a Participant following the date of death of such Participant shall be paid as outlined in the Employer's VantageCare Retirement Health Savings Plan Adoption Agreement. 9.03 Nonalienation of Benefits No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assign- ment, 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, ste~l, transfer, 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 in the discretion of the Plan Administrator, and he may hold or apply the same or any part thereof to the benefit of any dependent or beneficiary of such person, in such manner and proportion as he may deem propen 9.04 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, he may cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibihty to follow the application of amounts so paid. Payments made pursuant to this Section shall completely discharge the Plan Admims- trator and the Employer. 25 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN 9.05 Inability to Locate Payee If the Plan Administrator is unable to make payment to any Participant or other person to whom a pay- ment 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 Employer), such payment and all subsequent payments otherwise due to such Partici- pant or other person shall be escheated under the laws of the State of the last known address of the Partmipant or other persons eligible for benefits. 9.06 Requirement of Proper Forms All communications in connection with the Plan made by a Participant shall become effective only when duly executed on forms provided by and filed with the Plan Administrator. 9.07 Source of Payments The Employer shall be the sole source of benefits under the Plan. No Employee or beneficiary shall have any right.to, or interest in, any assets of the Employer 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. 9.08 Tax Effects Neither the Employer nor the Plan Administrator makes any warranty or other representation as to whether any payments received by a Participant hereunder will be treated as includible ~n gross income for federal or state income tax purposes. 9.09 Multiple Functions Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 9.10 Gender and Number Masculine pronouns include the feminine as well as the neuter gender, and the singular shall include the plural, unless indicated otherwise by the context. 9.11 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. 9.12 Applicable Laws The provisions of the Plan shall be construed, administered and enforced according to the laws of the State of 9.13 Severability Should any part of this Plan subsequently be invalidated by a court of competent jurisdiction, the remain- der thereof shall be given effect to the maximum extent possible. 26 RETAIN BOOKLET IN WITNESS WHEREOF, we have executed this Plan Agreement the date and year first written above. (Employer) By: AT'i'EST Secretary 27 ICMA RETIREMENT CORPORATION 777 North Capitol Street, NE Washington, DC 20002 1-800-326-7272 www. icmarc.org BKTO00-O06-200205 VantageCare Retirement Health Savings Program Process for Adoption and Implementation and Preview of Plan Design Options · The process for adoption and implementation of a VantageCare Retirement Health Savings (RHS) Program is designed to be as streamlined as possible. With all the features avadable to employers, ICMA Retirement Corporation (ICMA-RC) knows that you will have questions concerning plan options and how the adoption process works. Your ICMA-RC Retirement Plan Specialist is the best starting point for your questions about the adoption and implementation of RHS. Following the steps below will ensure an orderly adoption process: Speak with an ICMA-RC Retirement Plan Specialist and review the benefits and features of the RHS pro- gram. Determine how they may apply to your cur- rent needs and capabilities. If you have technical questions, you may be referred to an RHS Technical Expert in the Corporate Office. Meet with covered employee groups as appropriate. These may include collective bargaining groups. Arrive at a preliminary decision on the following (more information on the breadth of your choice is shown on the back of this page): a. Covered groups. b. Contributions to be made. c. Eligibility for benefits. d. Medical benefits to be reimbursed. Notify your Retirement Plan Specialist when you are ready to proceed and have the relevant adoption materials provided to you for your consideration. ICMA-RC supplies you the Return and Retain Booklets. These booklets contain all materials neces- sary to adopt the plan, and an amendment to the Administrative Services Agreement containing fee information. Specifically, the Return 8ooklet contains: a. Suggested Adoption Resolution - Adopted by your governing body, if you require th~s action. b. Employer VantageCare Retirement Health Savings Plan Adoption Agreement - Details your selection of options available within the Program (see back of this page). c. VantageCare Retirement Health Savings Plan Implementation Data Form - Gives ICMA-RC the contact information necessary to set up your plan. d. Administrative Services Agreement Addendum - Requires execution to detail the agreement between you and ICMA-RC for the plan's admin- istration. The Retain Booklet contains: a. Model Trust Agreement- Required element for plan; you may adopt this trust document or one of your own design. b. Private Letter Ruling - a copy of the IRS ruling on the initial employer's plan. c. Sample Welfare Benefit Plan - A written plan is required to be in place in order to offer tax- advantaged benefits. (over) ICMA RETIREMENT CORPORATION The Pu~l,¢ Sector Ex!~ert Finalize your plan features and complete all the doc- uments in the Return Booklet. Verify that you have adopted a Trust and have a written welfare benefit plan. Sign the Administrative Services Agreement. Return this package to ICMA-RC. ICMA-RC sends you an Acceptance Letter and sam- ple RHS Plan Announcement Letter detailing the specific features of your plan for your employees. Your employees are introduced to the plan and its features and complete enrollment forms. You enroll the participants electronically and begin to transmit data and contributions to ICMA-RC via EZ Link. Plan Design Options Your introduction to the features in the program ~s included in the VantageCare RHS Employer Question and Answer Brochure. The specific language for adopt- ing the features of the program will be provided to you by your Retirement Plan Specialist in the RHS Return Booklet, sent to you after you express interest in contin- uing the adoption process. The specific items that appear in the Adoption Agreement give you the opportunity to tailor the plan to your needs. The following options are available: · Effective Date of the Plan - You may give the plan an effective date that matches your collective bar- gaining agreement or that coincides with your fund- lng cycle. · Eligible Groups - You may name eligible groups that cover all employees, separately bargained groups, or other designated groups. One plan may cover all of your employees, or you may have separate plans with different features for different groups.* · Mandatory/Elective Participation - Employer deter- mines whether employees in the covered group must participate or may elect participation on a one- time irrevocable basis.* · Contributions - Overall participant contribution limit may be specified. May include any or all of the following: · Mandatory Contributions Direct employer contributions of a percent- age of salary* or fixed dollar amount per participant. Mandatory employee contributions of a per- centage of salary* or fixed dollar amount. Mandatory employee contribution of accrued sick, vacation, and/or other leave on sched- ule determined by employer.* · Employee Elective Contributions Voluntary after-tax contributions up to 25% of total contributions. One-time irrevocable election for ongoing pre-tax contributions of compensation and/or accrued sick, vacation, and/or other leave.' Annual election of sick, vacation, and/or other leave accruing in the following calen- dar year.* Vesting - The employer may adopt a vesting sched- ule for direct employer contributions. Forfeiture - The employer determines how forfeited funds are applied if a vesting schedule is estab- lished. Eligibility - Eligibility may be any combination of retirement, separation from service, and age speci- fied by the employer. Medical Benefits - Employer chooses all or specific medical expenses from those permitted by the IRS for medical expense deductions. Death Benefits - Employer chooses whether the account is transferred to a surviving spouse/eligible dependent for use for eligible medical expenses on a tax-free basis or the account is paid out to a desig- nated beneficiary. In either case, the assets do not revert to the trust in the event that a participant has no spouse/eligible dependent. Severance Benefit - Employer can choose to have the account paid out to the participant on separation from service if the participant is not eligible for ben- efits at that time. Clearly, the choices the VantageCare RHS program pro- vides you with will accommodate a wide range of plan designs. Funding formulas may be complex so long as the employer is able to administer them. Examples of employer contribution formulas are included in the Employer Retirement Health Savings Question and Answer Brochure. Refer to the VantageCare RHS Employer (~uestion and Answer Brochure for information regarding possible application of welfare plan nondiscrimina- tion rules. 777 North CapItol Street, NE, WashIngton, DC 20002-4240 · 1-800-299-9249 · www ~cmarc.org FLY000-094-200206 VantageCare Retirement Health Savings Plan Money Market Fund MW US Govenment Securities Fund* MT Asset Allocation Fund MP Equity Income Fund ......... MM Growth & Income Fund .. MJ Growth Fund ...... MG Aggressive 0pportunmes Fund ...... MA Internauonal Fund ......... MO Core Bond Index Fund 500 Stock Index Fund Broad Market Index Fund M~d/Small Company Index Fund Overseas Equity Index Fund WM WJ WG WD WB Savings OHented (Code SF) 5% International Fund 10% Growth & 10% Equity Income Fund US Govemmem-~' 10% Securmes Fund* -~ J 65% Income Preservauon Fund Long-Term Growth (Code SM) 10% International Fund ZO% Core Bond Index Fund 5% Overseas / Index Fund Aggressive I0% Equ~t7 Income Fund Fund 20% Growth & 2Q% Growth Fund Income Fund Conservative Growth (Code SG) 5% Internauonal Fund 5% AggressIve 0pportunmes Fund 10% Growth 10% Growth & Income Fund 10% Equity Income Fund -- 50% Income Preservauon Fund 10% Core Bond Index Fund Ali-Equity Growth (Code SP) 20% International Fund j ]5% Equity Income Fund 20% Aggressive 0pportumtles Fund -- 20% Growth & - income Fund 25% Growth Fund Traditional Growth (Code SL) 10% International Fund ]0% Aggressive /.30% Income Preservation Fund 15% Growth Fund 15% Growth & income Fund Core Bond Index Fund 10% Equ~ Income Fund Renamed from U S Treasury Secur~nes Fund, as of December 1 2001 Th,s page d~splays each of the Model Portfolio funds avadable to ICMA Retirement Corporation participants Vantagepomt secuntles are d~stnb- uteri by ICMA-RC Services. LLC, a controlled broker-dealer affd~ate of [CMA-RC, member NASD/SIPC For complete detads on funds, including charges and expenses call 1-8OO-669-74OO to obtain the Vantagepo/nr Funds Prospectus Please read ~t carefully before investing. ICMA RETIREMENT CORPORATION The Pubhc Sector Expert 777 North Cap,tel Street, NE Washington, DC 20002-4240 1-800-669-7400 Para as~stenc~a en Espahol Ilame al 1-800-669-8216 www. icmarc.org FLYOOO-O24-2OO206-C328 Actively Managed Funds Money Market Fund US Government Securities Fund* Asset Allocation Fund Equity income Fund Growth & Income Fund Growth Fund Preservation Bt camtat, hqu~ddy, and a posmve total return each month H~gh level of protection against credit risk and long-term cap,Iai appreciation, pnmanty through remves~ment of periodic raceme Long-term ca0~tai appreciation w~Th less risk than a po~lfoho containing all stocks Long-term total return, pr;manly through remvestment of current raceme Long-term total return [rom both camtal appreclauon and current raceme Long-term capital appreciation due to price gain Aggressive Opportunities Fund International Fund H~gh long-term camtal appreciation Long-term cap,iai appreciation and d{vers~h,.~b~}n by investing m [ore~gn compames Money market and a vanew of short-term, hxed income securities U S Treasury and agency socurmes Stocks, bonds, and cash m proportions determined by each subadv~ser's assessment of market condmons Common stocks Bt estabhshed companies t,at pay cl]v,dends Common stocks of companies w~th good potential for cap, tat appreaat~on, emphasizing ~ose that ma,/also pay dw~dends Common stocks of compames w~th above-average potenual for earmngs growth Common stocks Bt small- to medium-sized domestic and fore,go compames Stocks of compames headduar~ered outside the Umted States Low Low to moderate, SubleCt to changes m interest rates ;I i,'il[I] ;1 [ ~:I t&~Z~l g;~ i I II]11' Moderate ;i N1 I[I];118:11YJf) f:l lilil' Moderate Average Above average S~gmhcant S~gmhcant 500 Slock Index Fund Broad Market Index Fund Mid/Small Company Index Fund Overseas Equity Index Fund Index Fund Series Core Bond Index Fund Long-term camtal appreciation, pnmardy through remvestment of periodic mcome Long-term camtal appreaat~on retloctmg the large- capltahzatJon segment BI toe U S stock market Long-term camtal appreciation reflem~ng the broad U S stock market Long-term capital apprac~at~on reflecting the med~um- to smatl-cap~tahzauon segment of the U S s~ock market Long-term capital appreclauon and dwers#lcat~on by investing m fore,go compames Bonds are chosen to rephcate the charactensucs of the Lehman Brothers Government/Corporate Bond Index Stocks are chosen to fully rephcate the Standard & Poor's 500 Index Stocks are chosen to replicate the characteristics of the Wilshlre 5000 Index Stocks are chosen to replicate the characteristics of the Wilshlra 4500 index Stocks are chosen ~o rephcate the characteristics Morgan Stanley Cap,iai international EAFE Free Index ; I~.'i I[;I;I [I;11&~;~] e:'~ i I I i i' Moderate, SUbleCt to changes in interest rates Jll,t It ];l[ff:T IYJl] e:~l I I I i I Moderate Moderate to above average S~gmflcant S~gmhcant Model Portfolio Funds (comprised of Vantagepoint Funds) Savings Oriented Conservative Growth Preservation of prmmpal reasonable current income, and some growth of principal w~th m~mmal nsk Reasonable current ~ncome and a modest emphasis on growth of pnnc~pal Moderate capital growth and reasonable current ~ncome Traditional Growth Long-Term Growth Growth of prmapal H~gh long-term cap~tal growth AII-EquityGrawth 5% VP International Fund, 10% VP Growth &lnceme Fund. 10% VP EQuity Income Fund, 10% VP US Government Securmes Fund'. 65% Vantagepomt Income Preservation Fund 5% VP International Fund, 5% VP Aggressive Opportunmes Fund, 10% VP Growth Fund, 10% VP Growth & Income Fund, I0% VP Eciu~ty Income Fund. 10% VP Core 8end index Fund. 50% Vantagepomt Income Preservauoo Fund 10% VP I nternauonal Fund, 10% VP Aggressive Opportunmes Fund. 15% VP Growth Fund, 15% VP Growth & Income Fund, 10% VP Equity Income Fund, ~0% VP Core Bond Index Fund. 30% Vamagepmm Income Preservation Fund 10% VP International Fund, 5% VP Overseas Equity Index Fund, 'f5% VP Aggresstve Opportunmes Fund, 20% VP Growth Fund, 20% VP Growth & Income Fund, 10% VP Eqmty Income Fund, 20% VP Core Bond Index Fund 20% VP International Fund, 'i5% VP Edu~ty Income Fund, 20% VP Growth & income Fund, 25% VP Growth Fund, 20% VP Aggressive Oppodunmes Fund Low Moderate Moderate Above average to slgmflcant Above average to significant Renamed from U S Treasury Securmes Fund. as of Oecember 1 2gO1 Instructions for Completing the VantageCare Retirement Health Savings Plan Implementation Data Form Please ensure that each section of this form is completed before returning it to ICMA-RC along with the other RHS Plan adoption materials. You may contact Employer Services at 1-800-326- 7272. if you have questions. The following list of designations should help you while completing the Implementation Data Form: 5. Primary Contact/Plan Coordinator This person is responsible for the day-to-day administration and processing of RHS transactions. This is the person we call if general questions arise concerning your RHS Plan. ICMA-RC will also call this person regarding all EZ L~nk transmission questions with the exception of questions regarding contributions. 16. Payroll Contact This person(s) will be responsible for coordinating with Zenith Administrators, Inc. 19. Contribution Contact This person is responsible for sending contributions to ICMA-RC. If there are discrepancies in the actual EFT, check or wire amounts and the corresponding detail transmitted via EZ Link, this is the person we wilt contact to resolve the issue. This person should have access to all payroll/ contribution information to ensure efficient processing of contributions. 20. Trustee The title of this person is designated in the resolution, if required by state or local law. If a differ- ent person obtains the same title, you may use this form to update the name change. If your state or local law requires a resolution, you must have your legislative body pass a new resolu- tion to update the title of the person designated as Trustee. This person will receive all quarterly statements as well as confirmations for each contribution received and confirmations for all reinvested dividends. 21. Billing (Fees) If ICMA-RC charges any employer paid fees to your account, this person will receive the in- voices. 19 USING THE VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN RETURN BOOKLET This ~s one of two booklets conta~mng ~nformation needed to estabhsh your VantageCare Retirement Health Savings (RHS) Plan with the ICMA Retirement Corporation (ICMA-RC). This booklet includes: · Suggested Resolution for Adoption of the VantageCare Retirement Health Savings Plan · Employer VantageCare Retirement Health Savings Plan Adoption Agreement · VantageCare Retirement Health Savings Plan Implementat,on Data Form · Administrative Services Agreement Addendum for the RHS Plan prepared for employers expecting to adopt the Plan Please return the following to ICMA-RC using the envelope provided: OA copy of the approved and executed Suggested Resolution (if required). Your governing body may require the execution of a Resolution to adopt the RHS Plan. If so, you may use th~s model Resolut.on. Please execute the Resolution and return a copy to tCMA-RC along w~th the other forms in this Return Booklet. If a Resolution is not required, please inform your VantageCare Retirement Health Savings Plan New Business Analyst at 1-800-326-7272. The completed RHS Adoption original Agreement. Detailed instructions for completion of the Adoption Agreement follow. You may wish to consult with your ICMA-RC Retirement Plan Specialist and your benefits counsel on the various choices in the Adoption Agreement. If your governing body requires the execution of this Adoption Agreement at the same time as the Sug- gested Resolution, please execute it prior to returning it to ICMA-RC along with the other forms in this Return Booklet. .The original completed RHS Implementation Data Form. This form provides ICMA-RC with the necessary contact information in order to set up your new VantageCare Retirement Health Savings Plan. 4. Two executed originals of the Administrative Services Agreement Addendum. Please execute both copies of the Administrative Services Agreement Addendum and return them to ICMA-RC along w~th the other forms in this Return Booklet. Please note Upon receipt and processing of your Return Booklet, ICMA-RC will send you a written Notice of Plan Acceptance, an executed copy of the Administrative Services Agreement Addendum, employee enrollment kits including an em- ployee RHS announcement letter, and complete instructions for submitting contributions that may also be found in Chapter Three of the VantageCare Retirement Health Sawngs Plan Employer Manual. For assistance Please contact the VantageCare Retirement Health Savings Plan New Business Analyst at 1-800-326-7272. Please note that the information in this booklet and the documents herein take into account only the federal tax rules related to ICMA-RC's VantageCare Retirement Health Savings Plan. Prior to imple- menting an RHS plan, the employer is responsible for determining that there are no state or local laws that would prohibit ~t from offering the plan to its employees. The employer must also deter- mine that the options ~t selects in the VantageCare Retirement Health Savings Plan Adoption Agree- ment fall within state/local requirements. SUGGESTED RESOLUTION FOR ADOPTION OF THE VANTAGECARE RETIREMENT HEALTH SAVINGS (RHS) PROGRAM State:, ~'~-~ ."~ Resolution of the above-named Employer (the "Employer"): WHEREAS, the Employer has employees rendering valuable services; and WHEREAS, the establishment of a retiree health savings plan for such employees serves the interests of the Employer by enabling it to provide reasonable security regarding such employees' health needs during retirement, by providing increased flexibility in its personnel management system, and by assisting in the attraction and retention of competent personnel; and WHEREAS, the Employer has determined that the establishment of the retiree health savings plan (the "Plan") serves the above objectives; NOW, THEREFORE BE IT RESOLVED, that the Employer hereby adopts the Plan in the form of the ICMA Retirement Corporation's VantageCar~ Retirement Health Savings program. BE IT FURTHER RESOLVED that the assets of the Plan shall be held in trust, with the Employer serving as trustee, for the exclusive benefit of Plan participants and their beneficiaries, and the assets of the Plan shall not be diverted to any other purpose prior to the satisfaction of all habilities of the Plan The Em- ployer has executed the Declaration of Trust of the ~ ~ ~ ~= .Y~¥rL~"I [~ (name of Employer) Integral Part Trust in the form of: (Select one) The model trust made, available by the ICMA Retirement Corporation The trust provided by the Employer (executed copy attached hereto). BE IT FURTHER RESOLVED, that the [~'; ~,~c_~_ _[~ ~ ~c..c-,~._ (use title of Employer's official, not name) shall be the coordinator and contact for the Plan and shall receive necessary reports, notices, otc, I, ., Clerk of the (City, County, etc.) of do hereby certify that ~he foregoing resolution, proposed by (Council Member, Trustee, etc.) , was duly passed and adopted in the )Council, Board, etc.) of the (City, County, etc.) of meeting thereof assembled this ~ day of ,20 , by the following vote: AYES: NAYS: ABSENT: at a regular (Seal) Clerk of the (City, County, etc.) Instructions For Completing The Employer VantageCare Retirement Health Savings Plan Adoption Agreement The Employer VantageCare Retirement Health Savings (RHS) Plan Adoption Agreement specifies the details of how your RHS Plan will operate. For example, the adoption agreement details employee eligibil- ity requirements, sources of contributions, the level of contributions, vesting provisions (if any), the types of benefits that will be funded by the RHS Trust, and procedures to be followed in case of the death of the employee. The following instructions outline how the adoption agreement should be completed. Any questions regarding the adoption agreement can be directed to your ICMA-RC Retirement Plan Specialist. You may also wish to consult with your benefits counsel. I. Employer Name - Enter the official name of the employer sponsoring the RHS Plan (e.g. City of Anytown, State). III. Effective Date of the Plan - Enter the date your RHS Plan will become effective. IV. Welfare Plan - Enter the name(s) of the employee welfare benefit plan(s) that will be funded through the RI-CS Plan. If you do not already have a retiree welfare plan in place, a sample plan is provided in the VantageCare Retirement Health Savings Plan Retain Booklet. Your welfare plan document(s) identifies the underlying benefits available to the retiree such as medi- cal, dental and long-term care coverage. It can be a simple document, but it must be in writing m order for your employees to enjoy tax-free treatment of the benefits they receive. V. Eligible Groups and Participant Eligibility Requirements A. Eliaible (~rouDs: This sectio~ is used to designate the employee group(s) that are covered under your RHS Plan. If you intend to ~)rovide different benefits to different groups of employees, you should establish distinct RHS Plans and complete a separate adoption agreement for each group. Please note that if your RHS Plan covers non-collectively bargained employees, AND if it provides for reimbursement of any medical expenses other than insurance premiums, the welfare plan nondis- crimination rules will apply. More information regarding these rules is available in the VantageCare Retirement Health Savings Plan Questions And Answers For Employers and the VantageCare Retire- merit Health Savings Plan Employer Manual. The coverage group specified in your adoption agreement must correspond to a group of the same designation that is defined in the statutes, ordinances, rules, regulations, personnel manuals or other material in effect in your state or locality. Irrevocable Election to Participate: Unless you check this box, all employees in the eligibility group(s) you designate must participate in the RHS program. If you desire, you may allow your employees to make a one-time irrevocable election to participate in the RHS program by checking the Irrevocable Election box. Employees in the designated eligibility group(s) will be allowed to elect to participate in the program on an irrevocable basis. For newly eligible employees, you may allow an election window of no more than 60 days from the date of initial eligibility during which they may make the election to participate. Participation may begin no earlier than the calendar month following the end of the election window. If the employee does not make the elect[on in the year of initial eligibility, the election to participate may be made in a later year. You may provide an annual election window of no more than 60 days during which these employees may make their elections. Participation may not begin until the following calendar year for employees that wait until a later year to make their participation election. In either case, the election may not be revoked. VI. Employees that do not elect to participate in RHS will not be eligible to receive direct employer contd- butions or to make employee contributions (mandatory or elective). If you do not check this box, all employees in the covered group (current employees and future hires) will be required to participate in the RHS program. Note that the RHS plan upon which the VantageCare RHS IRS private letter ruling was based did not include elective employee participation (see shaded port~on of the Adoption Agreement). However, ICMA-RC has obtained the opinion of P3ounsel that this feature should be allowed as long as the re- quirements outlined in the RHS Declaration of Trust and this Adoption Agreement are met. You may wish to discuss this feature w~th your own benefits counsel. Any questions regarding this feature of the RHS program can be directed to your ICMAoRC Retirement Plan Specialist. B. Participant Eligibility: If desired, you may specify a minimum period of service (e.g. 6 months) and/or minimum age (e.g. age 21) requirement. Contribution Sources and Amounts - Th~s section outlines the amount and types of contributions to your IRHS Plan. A. Direct Emolover Contributions and Mandatory Emolovee Contributions You, as the employer, may choose to make direct employer contributions of a specific amount or percentage of earnings (as defined by you in this section), mandatory contributions of,accumulated unused leave, [. v' mandatory contributions of employee compensation, or v~ a combination of the above. Your selection is made in Section VI.A. of the Adoption Agreement. Use Section VI.A.1. to define your direct employer contribution formula. Use Sections VI.A.2. and 3. to define your mandatory accrued leave or compensation contribution requirements. Direct employer contributions Direct employer contributions can be made as either a specific dollar amount or a percentage of earnings. Please note that this definition of earnings is referred to in other sections of the Adoption Agreement. You may need to complete the definition of earnings even if you do not choose to make direct employer contributions. Mandatory contributions of employee compensation and accumulated leave Mandatory contributions can be used as a way to share responsibility for funding your retirement health plan with your employees. Mandatory compensation contributions may take the form of either a reduction in salary (e.g., 1% of compensation is contributed to the Trust) or a decrease in the annual pay plan or merit increase (e.g., 1% of a 3% pay plan adjustment is contributed to the Trust). For mandatory contributions of both compensation and leave, no FICA or income tax are payable at the time of contribution, and, if used for medical expenses, no FICA or income tax are payable at distribu- tion. Mandatory contributions of employee compensation or accrued leave are estabhshed by the employer - employees may not choose whether or not to make these contrib~ion~ ~n~ they may not revise the (;qmtribution amount. The employer can establish an unused leave or compensation contribution formula that best fits the needs of its covered employees. For example, the employer might require all accumulated leave in excess of a certain number of hours to be contributed to the RHS Plan on an annual basis. Note that direct employer contributions made as a percentage of earnings, mandatory contributions of employee compensation that are made as a percentage of earnings, as well as mandatory contribu- tions of accumulated leave, may be subject to nondiscrimination testing. See the d~scussion in the VantageCare Retirement Health Savings Plan Questions And Answers For Employers and the VantageCare Retirement Health Savings Plan Employer Manual, or contact your benefits counsel. B. Employee Elective Contributions In addition, you may also choose to allow your employees v' to elect to make voluntary after-tax contributions, to ~'nake a one-time irrevocable election of the amount of their compensation that will be contrib- uted on an ongoing basis to your RHS Plan as an employer contribution, v' to make a one-time irrevocable election of the amount of their accrued leave that will be contrib- uted (generally at retirement) to your RHS Plan as an employer contribution, v' to make an annual, irrevocable election to have all or a portion of their leave accruing in the next calendar year contributed to your RHS Plan as an employer contribution, or combination of the above., If you desire to allow after-tax contributions or irrevocable employee elections described above, complete Section VI.B. See immediately below for additional information regarding each of these contribution types. Note that the RHS plan upon which the VantageCare RHS IRS private letter ruling was based did not include elective employee contributions (see shaded portion of the Adoption Agreement). However, ICMA-RC has obta,ned the opinion of counsel that these features should be allowed as long as the requirements outlined in the RHS Declaration of Trust and this Adoption Agreement are met. You may wish to discuss these features with your own benefits counsel. Any questions regarding these fea- tures of the RHS program can be directed to your ICMA-RC Retirement Plan Specialist. Note that elective employee contributions (with the exception of voluntary after-tax contributions and contributions of a fixed dollar amount of compensation made pursuant to an irrevocable election) may be subject to nondiscrimination testing. See the discussion in the VantageCare Retirement Health Savings Plan Questions And Answers For Employers and the VantageCare Retirement Health Savings Plan Employer Manual, or contact your benefits counsel. Voluntary After-Tax Contributions If you choose, your employees may elect to make voluntary after-tax contributions to their RHS ac- counts. In order to protect the tax-exempt status of your RHS Trust, .~goreoate employee after-tax contributions are limited to no more than 25% of total contribution~ to your RHS plan. You may specify a lower limit, and/or enforce the limit at the employee level if you wish. After-tax contributions are subject to FICA (if applicable) and income tax. To allow your employees to make voluntary after-tax contributions, complete Section VI.B.1. Your employees may modify their after-tax contribution elect~on at any time by completing the VantageCare RHS Plan Employee After-Tax Contribution Election Form. Irrevocable Election to Contribute Compensation or Accrued Leave Your RHS Plan can provide a way to shelter previously accrued sick, vacation, and other types of leave - the employer and employee will pay no FICA or income tax on the contributed funds, and, if used for medical expenses, no FICA or income tax will be due at distribution. Please note that employees may not choose whether or not to receive their leave or compensation in cash once they elect to contribute it to the RHS plan. Once your employees make an irrevocable elect~on to contribute compensation or accrued leave, the election will apply to all succeeding years in which they participate in the RHS program. The election cannot be revised or revoked. You may allow employees to make an irrevocable election with respect to compensation or accrued leave, or both. In additfon, you may specify the type(s) of leave that may be contributed. To allow your employees to make irrevocable elect~ons to contribute compensation or accrued leave, complete Section VI.B.2.a. or b. There rs no fixed maximum or minimum contribution amount or percentage for irrevocable election contributions of compensation or leave. If you desire to provide for such limits, however, you may do SO. For newly eligible employees, you may allow an election window of no more than 60 days from the date of initial eligibility during which they may make the election to contribute. Contributions may begin no earlier than the calendar month following the end of the election window. If the employee does not make the election in the year of initial eligibility, the elect~on to contribute may be made in a later year. You may provide an annual election window of no more than 60 days during which these employees may make their elections. Contributions may not begin until the following calendar year for employees that wait until a I~er year to make their election. In either case, the election may not be revoked. Annual Irrevocable Election to Contribute Leave Accruing in the Next Calendar Year Your RHS Plan can also provide a way to shelter sick, vacation and other types of leave that is sched- uled to be accrued in the next calendar year. As with irrevocable election contributions of compensa- tion and accrued leave, no FICA or income tax ~s payable on these future accrual contributions and, if used for medical expenses, no FICA or income tax will be due at distribution. To allow your employees to make annual elections to contribute leave accruing in the next calendar year, complete Section VI.B.2.c. Future leave accrual contributions must be elected prior to the start of the next calendar year - em- ployees may not elect to contribute the value of their sick and vacation leave for the calendar year during which the election is made. There is no exception for newly eligible employees -- all elections must be made in the prior calendar year. You may specify the type(s) of leave that may be contributed pursuant to the annual irrevocable elec- tion to contribute future accruals. In addition, you may specify whether you wish contributions of future leave accruals to be made as the leave is earned or at the end of the year. In either case, the leave must be retained for contribution to the RHS plan. In the case where you specify contributions to be made at the end of the year, the leave must be placed in "reserve" as it accrues such that the employee cannot access it. The leave must be contributed to the RHS Plan. There is no fixed maximum or minimum contribution amount or percentage for annual irrevocable election contributions of future leave accruals. If you desire to provide for such limits, however, you may do so. Your employees' election to contribute future leave accruals w~ll apply to all succeeding years until rewsed by the employee on the VantageCare RHS Plan Annual Prospective Leave Election Form. C. Limits on Contributions You may establish limits on each type of RHS Plan contribution by completing the pertinent sec- tions referenced above. In addition, you may establish an overall limitation on RHS plan contribu- tions by completing Section VI.C. You may wish to speak with your benefits counsel. Recordkeeping of Contribution Types Note that the IRS considers direct employer contributions, mandatory accrued leave and mandatory compensation contributions, irrevocably elected employee compensation and accrued leave contribu- tions, and future leave accrual contributions, to be employer contributions. In other words, all contd- butions other than voluntary after-tax contributions are considered to be employer contributions. However, ICMA-RC will recordkeep the direct employer contributions as a distinct source for partici- pant reporting purposes. Voluntary after-tax contributions will also be sourced to a distinct employee after-tax source. All other types of employee contributions -- mandatory accrued leave, mandatory emplc~yee compensation, irrevocably elected employee compensation and accrued leave contribu- tions, and future leave accrual contributions -- will be comb'ined and shown as employee pre-tax contributions on participant stater~ents. See the VantageCare RHS Employer Manual for directions on how to report your contribution detail properly via EZ Link. VII. Vesting - Mandatory unused leave, mandatory employee compensation, irrevocably elected employee compensation and accrued leave, future leave accrual and employee voluntary after-tax contributions are always 100% vested. In addition, the RHS Plan default is 100% vesting for direct employer contri- butions. However, if you desire, you may specify a vesting schedule for your direct employer contributions in this section. Note that a participant's RHS account will automatically become 100% vested upon the death, disabil- ity, retirement (as you define it in Section VII.C.) and attainment of benefit eligibility by the participant. Note also that the "years of service completed" for a participant that separates from service and is then rehired will start over for vesting purposes upon rehire. VIII. Forfeiture Provisions - If you establish a vesting schedule for direct employer contributions in Sec- tion VII, you must also designate a forfeiture provision in this section. There are four choices: [~1 Forfeited account balances will be used to offset your direct employer contributions for the next and succeeding contribution cycles. [~1 Forfeited account balances are reallocated on an equal dollar basis among remaining plan participants. (~ Forfeited account balances are reallocated among remaining plan participants based on account balances. [~ Forfeited account balances revert to the employer. (it is anticipated that few employers will choose this option, in order for RHS funds to continue to be used for medical benefits for retirees.) Regardless of which option you choose, you must inform ICMA-RC at the time you wish to use the forfeited funds. IX. XI. Eligibility Requirements to Receive Medical Benefit Payments from the VantageCare Retirement Health Savings Plan - This section defines your benefit eligibility provisions. You may select: ~1 Retirement, as defined in Section VII.C. ~1 Separation from service, with criteria defined by the employer, if desired [~1 Attainment of a certain age [~1 A combination of retirement and a certain age. If you designate retirement as a portion of your eligibility criteria, you must define "retirement" in Section VlI.C. even if you did not specify a vesting schedule m Section VII.B. It is important to note that the designated eligibility event(s) will determine eligibility for terminated employees in the situation where the employer has not opted to include the severance feature in its plan (see Section Xll). For example, an employee that separates from service prior to reaching an eligibility event will become eligible at a future date, when that eligibility milestone is reached. Note that employees will automatically become eligible for medical benefits if they are disabled. In addition, upon the death of the em, ployee, the surviwng spouse and dependents will automatmally become eligible for benefits, provided the employer has selected Account Transfer for its plan. See Section XI. Permissible Medical Benefit Payments ~ This section is used to designate the medical expenses that will qualify for reimbursement under your RHS Plan. You may offer reimbursement for all qualifying medical expenses as defined in Internal Revenue Code Section 213 (i.e. medical costs that would otherwise be deductible to the employee on his or her individual income tax return}. Alternatively, you may pick and choose the benefits that will be provided. For example, reimbursements may be made available only for health i~surance premiums, COBRA premiums, Medicare supplemental insur- ance premiums, dental insurance premiums, out-of-pocket medical costs, qualified long-term care insurance, etc. The employer may allow reimbursement for only one benefit, or for any combination of qualifying medical costs. Information about what constitutes a qualifying medical expense can be found in IRS Publication 502, Medical and Dental Expenses (available on the IRS Web site at http:// www. irs.gov/). Death Benefit - This section is used to designate the treatment of the participant's account balance at death. The Plan default is an Account Transfer: upon the death of the participant, the surviving spouse and/or surviving eligible dependents are immediately eligible to maintain the account and utilize it to fund eligible medical benefits. However, if you do not desire to allow this, you may select Account Distribution: upon the death of the participant, the remaining account balance will be paid to the participant's designated beneficiary(ies). You must also designate the timing of the Account Distribution. Unless you select otherwise, death benefits will be paid on the first business day of the year following the year of death of the participant. This timing simplifies the tax reporting and withholding consequences of the distribution - no FICA tax withholding or reporting will be required. For this reason, it is recommended that you choose this option. However, if you determine that it ~s not in the best interest of your employees, you may desig- nate that death benefits should be paid in the year of death of the participant. Note that a timing designation must be made even if you choose Account Transfer - in the event that there are no surviving spouse or dependents, an Account Distribution will be made. Upon notification of the death of the participant, ICMA-RC will create a new account in the transferee's or beneficiary's name and move all funds into the Vantagepoint Money Market Fund*. The beneficiary or transferee may move the money into other investments once the new account has been established. * Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there c. an be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. Vantagepoint Mutual Funds are d~stributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SIPC. Xll. Severance Benefit - The RHS Plan is primarily intended to provide retiree health benefits. As such, there is normally no severance benefit provided under the RHS Plan, However, you may w~sh to provide your employees with a means of receiving funds from the RHS Plan upon termination of service under certain circumstances (e.g. in case of a reduction m force). In order to accomplish this, your RHS Plan may provide for a severance benefit payment upon termina- tion of employment prior to the RHS Plan's designated retirement age (as defined in Section VII) or prior to the participant meeting other eligibility criteria you have established. Section XlI.B. defines the events that the employer has designated as qualifying for severance payments. You will be responsible for notifying ICMA-RC via EZ Link when a participant has met the requirements set out in the Adoption Agreement, and is eligible for a severance benefit. Upon notification by the employer, .ICMA-RC will initiate payment of the participant's vested account value as a taxable lump sum payment to the participant. Xlll. Other Provisions - This section defines other provisions of the RHS Plan, including: [~1 RHS Plan administration must be accomplished via ICMA-RC's EZ Link System. RHS Plan fee payment. De Minimis benefit - An employee that separates from service prior to eligibility for health benefits w~th a vested account balance of $5,000 or less is considered to have a "de minimis" account balance. ICMA-RC will automatically pay the participant the vested account balance in a lump sum. If the employee is already eligible for health benefits through the RHS Plan, his/her account wdl not be considered de mimmis regardless of the size of the balance. Likewise, if the employee dies or becomes disabled, no de minim~s payment will be made. Employer responsibilities for tax reporting and remitting. After you have completed the Adoption Agreement, it should be signed (and executed, if required by your state or local law), and returned to ICMA-RC with the other documents in this booklet. Questions regarding completion of the Adoption Agreement can be directed to your ICMA-RC Retirement Plans Specialist. VantageCare Retirement Health Savings Plan Questions and Answers for Employers ICMA RETIREMENT CORPORATION The Pubhc Sector Expert VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN QUESTIONS AND ANSWERS FOR EMPLOYERS INTRODUCTION TO VANTAGECARE RETIREMENT HEALTH SAVINGS 01: What is the VantageCare Retirement Health Savings Plan? ...................................................................... 1 02: What are the key features of RHS? .............................................................................................................. 1 BENEFITS OF RHS 03: What are the benefits of RHS to the employer? .......................................................................................... 1 04: What are the benefits of RHS to the employee? .......................................................................................... 2 INTEGRAL PART TRUST 05: 06: 07: 08: What is the legal basis for RHS? .................................................................................................................. 2 What are the requirements for qualifying as an "integral part" of a governmental employer? ............ 3 What constitutes an eligible employer? ........................................................................................................ 3 How does RHS compare to a VEBA or 401(h) plan~ Can these assets be transferred to an RHS plan? .................................................................................................................................................. 3 ESTABLISHING AN RHS PLAN - PLAN DESIGN, ADOPTION AND IMPLEMENTATION 09: 010: 011: 012: 013: What is the adoption procedure for establishing an RHS Plan? ................................................................ 5 What documents govern the RHS Plan? ...................................................................................................... 5 What plan design features are available under the RHS Program? .......................................................... 6 How much individual choice is permitted? .................................................................................................. 6 How do the employees get started? .............................................................................................................. 7 CONTRIBUTIONS 014: 015: 016: 017: 018: 019: What types of contributions can be made to the RHS Plan? ...................................................................... 7 What are some examples of contributions allowed by employers? .......................................................... 9 Are there limits to the amount of contributions that are made in a given year? .................................... 9 How are the contributions coordinated with Section 457 and 401 plans? ................................................ 9 Are contributions made to the account included in "pensionable" compensation? .............................. 9 When does the employer make contributions? ........................................................................................ 10 PLAN INVESTMENTS 020: Where will RHS assets be invested? .......................................................................................................... 10 MEDICAL BENEFITS AND PLAN DISTRIBUTIONS 021: 022: 023: 024: 025: 026: At what point are employees eligible for and what procedure do they follow to begin receiving medical benefits? .............................................................................................. 10 What medical benefits can be provided to participating employees? .................................................... 11 What circumstances permit an employee to receive assets from the account? .................................... 11 Are there any emergency withdrawal provisions? .................................................................................... 11 What happens when employees leave the employer prior to benefit eligibility? .................................. 11 What happens to the account balance tf the parttcipant dies? ................................................................ 11 PROCEDURES FOR MEDICAL EXPENSE REIMBURSEMENT Q27: Who will pay medical benefit claims? ........................................................................................................ 12 Q28: Who is Zenith Administrators? .................................................................................................................... 12 Q29: What is the procedure for reimbursement? How long does it take? ...................................................... 12 TAXES Q30: Q31: How are payments from RHS accounts treated for tax purposes? .......................................................... 12 What ~s the employer's responsibility with respect to tax reporting and remittance? .......................... 12 ADMINISTRATION Q32: Are there any ongoing employer responsibilities related to the Q33: Q34: Q35: Q36: administration of the RHS Program? ........................................................................................................ 13 What is EZ Link? ............................................................................................................................................ 14 Are there nondiscrimination requirements that apply to the RHS Plan? ................................................ 14 What types of reports will employers and employees receive? .............................................................. 14 What fees does ICMA-RC charge for the RHS Program? .......................................................................... 15 RESOURCES Q37: What information will I receive to assist in ongoing plan administration? ............................................ 15 Q38: Whom should I call with other questions regarding the RHS Program? ................................................ 15 QI: What is the VantageCare Retire- ment Health Savings Plan? VantageCare Retirement Health Savings (RHS) Plan is the ICMA Retirement Corporation's employer-sponsored health benefit savings vehi- cie that allows employees to accumulate assets to pay for medical expenses (e.g., health insurance, co-pays, prescription expenses, etc.) at retirement (or upon meeting other eligibility criteria) on a tax- free basis. The plan breaks new ground for health care savings in the public sector and is offered through a concept pioneered by ICMA-RC that has received IRS approval (see Q5). RHS ~s similar to other ICMA-RC products such as the 401 and 457 plans in that it allows an employ- ee to invest dollars on a pre-tax basis m the Van- tagepoint Mutual Funds* for financial needs dur- lng retirement (or when otherwise eligible). RHS offers a number of benefits, including tax-deferred accumulation of earnings and, if account assets are used to pay for tax qualified medical benefits, the additional benefit of tax-free withdrawals. Vantagepomt Mutual Funds are distributed by ICMA-RC Services, £LC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SlPC. Q2: What are the key features of RHS? The plan allows for flexibility in plan design to meet employer/employee needs and permits significant employee choice (see Q12). Employers make tax-free contributions (includ- ing unused employee sick and vacation leave dollars) to an employee account (see Q14). · Mandatory, pre-tax employee contributions may be required (see Q14). · Employees may make voluntary after-tax con- tributions (see Q14). The plan may permit employee elective pre- tax contributions on a one-time irrevocable election basis (see Q14). · The plan may permit employees to irrevocably elect to contribute accrued leave (see Q14). The plan may allow employees to annually elect to contribute the following year's accru- als of vacation and sick leave (see Q14). All earnings grow tax-deferred, and as long as the account assets are used to pay for quah- fled medical benefits, withdrawals wdl be tax- free (see Q30). Plan assets remaining at the t~me of the employee's death are not forfeited. The account can continue to be used for medical expenses by the employee's spouse or dependents, or passed on to beneficiaries, depending on the employer's plan selections (see (226). BENEFITS OF RHS Q3: What are the benefits of RHS to the employer? The cost of medical care goes up every year, while escalating long-term care and prescription drug expenses are not fully covered by Medicare. This continuing medical inflation, particularly for serv- ices not covered by Medicare and employer-spon- sored retiree health plans, means that retirees are increasingly responsible for growing medical costs. The RHS Program enables employers - and their employees - to save in advance for these COSTS. There are several benefits to employers that choose to offer the RHS Program: No unfunded liability- Existing retiree med- ical programs, offered either through a retire- ment system or by the employer directly, may burden employers with unfunded liabilities in the future, particularly when the Governmental Accounting Standards Board implements reporting requirements for Other Post Employ- ment Benefits. RHS now offers a way to pre- fund some or all of these costs. Low cost t RHS provides the ability to offer a Iow-cost employee benefit that complements your current retirement savings package. Also, employer and most employee contributions are not subject to FICA and unemployment taxes. Easy administration t By using ICMA-RC's EZ Link System, RHS can be offered w~th limited administrative effort by the employer (see Q32 and 33). · Attract and retain valued employees. Security -- Allows the employer to provide additional security to employees saving for their retirement health needs. Slmdar to a defined contribution retirement plan, it also provides employees w~th greater responsibili- ty and control over saving for retirement health needs. Flexibility -- The employer can design its RHS Plan to best fit the needs of employee groups, including collective bargaining units. Unused leave -- Provides the employer with additional flexibility in the payout of accrued vacation or sick leave. In addition, no FICA tax is payable on contributions of unused leave (see Q14). Employers can structure an RHS program to reward the responsible use of a sick and vacation leave program and discour- age its, abuse. Q4: What are the benefits of RHS to the employee? Employees can reap substantial benefits as well. Convenience -- Once an employee is eligible to participate in RHS (See Q12), the employee only has to enroll (see Q13) and make deci- slons regarding investment of RHS funds (see Q20). Contributions are made d~rectly by the employer or through converting employee unused leave (see Q14). Additional employee contribution options may include mandatory and irrevocably elected pre-tax, annual leave, terminal leave, and voluntary after-tax contri- butions (see Q14). · Most contributions are pre-tax (see Q14). - Tax-deferred accumulation of savings- Assets grow in a tax-deferred account. Tax-free w~thdrawals ~ Withdrawals are tax- free when used for qualified medical expenses covered by the employer's RHS Plan (under Section 213 of the Internal Revenue Code). Only de minimis, severance or death benefit w~thdrawals will be taxed (see Q30). Familiar investment options ~ RHS allows investment in the Vantagepoint Mutual Funds* employees are familiar with from their retire- ment plan, including ICMA-RC's Iow-cost index funds (see Q20). Flexibdity -- Participants may use RHS dollars to pay medical expenses for themselves and their spouse and dependents. No account balance forfeiture upon death ~ At the death of the participant, the account balance is either transferred to an account for the spouse and/or dependents, or paid out to a beneficiary, depending on the employer's elechon in the adoption agreement. (see Q26). Vantagepoint Mutual Funds are distributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/S/PC. INTEGRAL PART TRUST Q5: What is the legal basis for RHS? ICMA-RC has pioneered a new concept for offer- lng retirement health savings to the public sector through the use of an integral part trust vehicle. The legal basis for RHS stems from several private letter rulings (PLRs) issued by the Internal Rev- enue Service (IRS) which allow non-profit organi- zations, including state and local government bod- ies, to establish "funds" which are deemed to be an "integral part" of the organization. Because the provision of welfare benefits ~s considered an inte- gral part of the government's activities, the vehicle used to fund the activity is also considered part of the governmental entity, and enjoys the entity's tax-exempt status. ICMA-RC has crafted program documents for you to adopt and use based on a PLR obtained from the IRS for an initial employer. Your use of a simi- lar trust document will provide you with assur- ance that your Program is also within the IRS's requirements. (This is identical to the assurance provided when you use ICMA-RC's model 457 plan documents.) A copy of the PLR on RHS will be prowded to you by ICMA-RC ~n the Retain Brochure provided in the adoption process (see Qg). Since obtaining the original PLR, ICMA-RC's out- side counsel has issued an opinion broadening the types of contributions which may be made to the plan and permitting certain elections by the participant. ICMA-RC is offering these enhanced opportunities as part of the RHS plan design. You may wish to have your benefits counsel rewew th,s opinion prior to adoption. An Executive Sum- mary of the opinion is avadable from your ICMA- 2 RC Retirement Plan Specialist. The opimon of counsel is also available on request Please note that the information in th~s document takes into account only the federal tax rules relat- ed to ICMA-RC's VantageCare Retirement Health Savings Plan. Prior to implementing an RHS plan, the employer ~s responsible for determining that there are no state or local laws that would prohibit it from offering the plan or any of the selected options to its employees. Q6: What are the requirements for qualifying as an "integral part" of a governmental employer? In order for a trust to qualify as an "~ntegral part" of the employer, the employer must exert 'sJb- stantial control" directing the plan and must have "substantial financial involvement". "Substantial control" simply means that the employer controls the integral part entity by hold- ing the power to amend or terminate ~t, and by naming the parties that manage the daily opera- tions of the entity. These parties include trustees appointed by the employer to hold title to trust assets on behalf of the employer. The trustees can be named solely by the employer, named in con- junction with the employee group(s) covered by the Trust, or can be a directed trustee hired by the employer. ICMA-RC's model trust agreement gives the employer the authority to amend or terminate the trust and to name the trustees. Thus, the req- uisite level of control is automatically present. "Substantial financial involvement" means that the employer has the primary responsibility for funding the trust. The IRS considers direct employer contributions, mandatory contributions of accumulated unused vacation and sick leave, mandatory pre-tax contributions, and irrevocably elected pre-tax contributions to be employer con- tributions (see Q14). QT: What constitutes an eligible employer? Any state or local government employer or ~ts agency or instrumentality is legally eligible to use the program. At the current time, however, ICMA- RC is hmiting use of RHS to only those employers who participate in its 457 and/or 401 programs. Other employers wishing to pursue adoption may contact (800) 299-9249 to initiate a discussion on adoption. Q8: How does RHS compare to a VEBA or 401(h) plan? Can these assets be transferred to an RHS plan? The RHS Program is considerably more flexible and less restrictive than either a Voluntary Employees' Beneficiary Association (VEBA) or a Section 401(h) medical account. The chart on the next page lays out the similarities and differences between the three types of retirement medical funding vehicles. Based on advice of ICMA-RC's counsel, assets of the employer that are in a VEBA may be trans- ferred to RHS accounts for the individual employ- ees covered. Section 401(h) assets may also be transferred; however, the employer should obtain a determination letter on the 401 plan to which the 401(h) account is attached to ensure that the quah- fled status of the retirement assets is protected. If there are general assets of the employer that are held for future retiree health care costs, they may be able to be transferred to RHS so long as the ~ndividual employee doesn't have a vested interest ~n the assets (i.e., no option to receive the assets ~n cash rather than transferring them to the RHS program). ICMA-RC will work with employers on a case-by-case bas~s to determine if their existing retiree health assets are transferable and to assure an efficient transition. Employers may also want to consult w~th their own counsel. 3 Program Feature Legal Basis Types of Contributions Allowed · Employer · Mandatory Unused Leave · Mandatory Pre- Tax Employee · Irrevocable Elective Pre-Tax · Voluntary after-tax Employee Limit on Contributions Tax Treatment of Earning Types of Benefits Allowed Tax Treatment of Health Benefits Participation Treatment of assets remaining after employee's death Application of welfare plan non-discrimination rules Assets subject to claims of employer's creditors? IRS ruling required? RHS Private Letter Rulings and Treas. Reg. 301.7701-1(a)(3) Available Available Available Available Available None, except 25% limit on voluntary after-tax Tax-deferred · Health · Death Benefit · De Minimis · Severance Tax-free Irrevocable election Determined by plan provi- sions: balance may remain available to survivors for medical expenses or be paid to beneficiary Apply to self-insured, non-collectively bargained plans (see Q34) No Not required but may be obtained if desired Section 401(h) Account* IRC Section 401(h) Available Unclear+ Available with 414(h) Unclear+ Unclear+ Limited to 25% of total Section 401 Plan contributions (or 33% of retirement contributions) Tax-deferred · Health Tax-free Mandatory for covered employees Must revert to the employer Apply to self-insured, non-collectively bargained plans No Part of qualified Section 401 plan determination letter VEBA* IRC Section 501(c)(9) Available Available Available Unclear+ Unclear+ None for governmental VEBA Tax-deferred · Health · Death Benefit · Other welfare benefits Tax-free Generally mandatory for covered employees Determined by VEBA provisions: balance may be forfeited back to trust or be paid to beneficiary Apply to self-insured, non-collectively bargained plans No Yes * Please note that the theoretical ability of a 401(h) or VEBA to include a particular feature does not suggest that the programs currently offered to local governments are structured with these features. + ICMA-RC is not aware of an ex~sting 401(h) or VEBA program that allows these features. 4 ESTABLISHING AN RHS - PLAN DESIGN, ADOPTION AND IMPLEMENTATION Q9: What is the adoption procedure for establishing an RHS Plan? The employer first talks to an ICMA-RC Retire- ment Plan Specialist and reviews the benefits and features of the RHS program and how they may apply to the employer's current needs and capabilities. A preliminary decision is made on the following: bo Whether benefits will apply to all employ- ees or to a specific group or collective bar- gaining umt (if applicable). What contributions will be made and what the funding formula will be. When employees will become eligible for benefits. d. What medical benefits the program will reimburse. The employer makes a decision to proceed with the adoption and implementation process. The employer notifies the Retirement Plan Specialist that it is ready to proceed and undertake a complete evaluation of relevant adoption materials. The employer meets with covered employee groups as appropriate. These may include col- lective bargaining groups. ICMA-RC supplies the employer with the Return and Retain Booklets. These booklets contain all materials necessary to adopt the plan, including an amendment to the Adminis- trative Services Agreement containing fee information. 5. The necessary documents are prepared: Welfare benefits plan (if one does not already exist - see Q10). The Retain Book- let includes a sample which may be adopt- ed by the employer. VantageCare Retirement Health Savings Plan Adoption Agreement. ICMA-RC pro- vides this document as part of the Return Booklet. All specifics of the program are outlined in the Adoption Agreement. (See QIO and Qll.) RHS Declaration of Trust. ICMA-RC pro- wdes a model trust declaration in the Retain Booklet. (See Q10.) o The employer obtains governing body approval, if required, to establish the RHS Pro- gram. ICMA-RC provides a model resolution m the Return Booklet. 7. The employer amends the Administrative Ser- vices Agreement between itself and ICMA-RC. 8. Employees enroll in the plan. The employer begins to transmit data and con- tributions to ICMA-RC via EZ Link (see Q32 and 33). QIO: What documents govern the RHS Plan? The provisions of an employer's RHS Program are governed by three documents that collectively comprise the VantageCare Retirement Health Say- ings Plan. All three documents are provided by ICMA-RC as part of the adoption process. You may alternatively work with your human resources and benefits counsel to develop your own welfare ben- efit plan and RHS Trust documents. The welfare benefits plan: A written document must be in place in order to offer any tax-advan- taged welfare benefit plan, and you may have one in place already. This document(s) identifies the underlying benefits available to the employee/retiree such as medical, dental and long-term care coverage. VantageCare Retirement Health Savings Plan Adoption Agreement: The Adoption Agreement specifies the details of how the employer's RHS Program works. For example, the adoption agree- ment details employee eligibility requirements, sources of contributions, the level of contribu- tions, vesting provisions (if any), the types of ben- efits that will be funded by the RHS trust, and pro- cedures to be followed in case of the death of the employee. See Qll for more reformation on employer options in the RHS program. RHS Declaration of Trust: The Declaration of Trust establishes the legal entity ("integral part trust") that holds the assets set aside to pay for employees' retirement health benefits. As part of the adoption process, ICMA-RC provides a model trust agreement that has already received approval by the IRS for another employer for the basic plan concepts. 5 (See QS.) You should check with appropriate coun- sel prior to adopting th~s document. Alternatively, this document may be drafted by you ~n conjunction with your human resources or benefits counsel. However, if you develop your own Trust agreement, it must be reviewed by ICMA-RC prior to adoption to ensure compliance with integral part trust rules and conformity with ICMA-RC's administration of the RHS program. Ql1: What plan design features are available under the RHS Program? The RHS Program has been designed to both (1) allow the employer flexibility in establishing its Plan to best meet the needs of its employees and (2) minimize the administrative effort by the employer. In completing the RHS Plan Adoption Agreement, the employer may make choices regarding ~the following features. Employee groups: The employer can choose which groups of employees will be included in the RHS Plan (e.g. all employees, full-time employees, or a specific unit of collectively- bargained employees). A separate plan should be adopted for each group if different features are selected for different groups. Employee plan participation and eligibility crite- ria: The employer may make participation by the covered employees elective based on an irrevo- cable election (See Q12) and can establish a minimum age and/or period of service for par- ticipants. Contributions: The employer can determine the funding level (e.g. direct employer contri- butions and/or elective employee contribu- tions). (See Q14.) Vesting: The employer can establish a vesting schedule for d~rect employer contributions if desired. Forfeitures: If a vesting schedule is estab- lished, the employer can determine how for- feited funds will be used when an employee separates from service prior to becoming fully vested (e.g. used to offset future employer contributions or reallocated among all ehgible employees). Benefit eligibility: The employer determines when participants will become eligible to receive medical benefits (e.g. at retirement or upon attainment of a certain age). (See Q21.) Permissible medical benefits: The employer can pick and choose the medical benefits that wdl be covered by the RHS Plan. (See Q22.) Death benefits: The employer determines how funds will be applied at the death of the partic- ipant. The Program default is Account Transfer (funds remain available for the surviving spouse and dependents to use for medical benefits). Account Distribution is also an option (bal- ance ~s pa~d to the designated beneficiary upon the participant's death). The employ- er may also choose when the benefit will be paid - in the year of death or the year following death. (Benefits paid in the year following the year of death are not subject to FICA taxation. See Q30.) Severance benefits: The employer may opt to include a severance feature in its RHS Plan, mandating that employees terminated as part of a reduction-in-force, for example, must receive a taxable severance payment rather than medical benefits (see Q25). Q12: How much individual choice is permitted? A significant amount of individual choice is avail- able depending on options selected by the employer in the Adoption Agreement. A plan may permit employees in the covered group to irrevocably elect to participate. Until such time as the employee elects to partici- pate, he or she does not participate in the pro- gram and does not receive or make contribu- tions. Once an employee elects to participate, there is no opportunity for the participant to rescind participation. Employers may provide an election "window" of up to 60 days. For newly hired or newly eligible employees, the election to participate may be effect;ye no ear- lier than the calendar month following the end of the electIon window. If an employee does not make the election in the year of initial eli- gibility, the elect~on may be made in a later year. However, participation may not begin until the year following the election year in th~s case. 6 A plan may permit employees to make a one- time irrevocable elect~on to make pre-tax con- tributions from compensation (either fixed dol- lars or percentage of compensation) on an ongoing basis. Once made, the participant may not elect to receive the contribution as cash or part of compensation. (See Q14.) A plan may permit employees to irrevocably elect to contribute accrued vacation and/or sick leave to the plan, for example, making the election in the year prior to separation from service or retirement. (See Q14.) A plan may permit employees to annually make an election to contribute a portion of the following year's accrual of vacation and/or sick leave. (See Q14.) o A plan. may permit voluntary after-tax contri- butions. (See Q14.) Q13: How do the employees get started? The employer announces the RHS Plan to employees, informs them of the Plan provi- sions as selected by the employer ~n the Adop- tion Agreement, notifies them of their eligibdi- ty to participate and distributes ICMA-RC pro- vided enrollment kits contaimng forms and necessary information. The employee completes the form and returns it to the employer. This form includes partici- pant indicative data (e.g. name and address) and a beneficiary designation. Employees that are not electing to participate (see Q12) should not complete the enrollment form. Once the employer receives the completed form, the employer verifies the participant's eligibility to participate, transmits the partic~- pant data to ICMA-RC via EZ Link (see Q 33), and retains the beneficiary data. ICMA-RC sets up the participant's account that day, if the information is received prior to 4:00 p.m. Eastern Time. ICMA-RC sends the participant a welcome let- ter the business day following the establish- ment of the new account. o The participant can make changes to the account, including investment allocation (see Q20), by VantageLine, VantageLmk or by speaking to an ICMA-RC Investor Services associate. If any employees are eligible for benefits upon enrollment, the employer should not~fy ICMA- RC of their benefit eligibility the day following enrollment (see Q21). CONTRIBUTIONS Q14: What types of contributions can be made to the RHS Plan? All contributions must be specified in the Adop- tion Agreement. These contributions may be any or all of the following: · Direct employer contributions+ Direct employer contributions can be either a flat dollar amount or a percentage of earnings for each participant. (Note that percentage-of*earn- ~ngs contributions may be subject to nondiscrimi- nation testing for non-collectively-bargained plans or plans that permit benefit payments for other than insurance premiums. (See Q34.) The RHS Program default is immediate 100% vesting for direct employer contributions, but, if desired, the employer can establish a vesting schedule. · Mandatory unused leave contributions+ The RHS Plan can also provide a way to shelter unused sick, vacation and other types of leave - the employer and employee will pay no FICA or income tax on the contributed funds, and, if used for medical expenses, no FICA or income tax will be due at distribution. Unused leave contributions are mandated by the employer -- employees may not choose whether or not to make these contri- butions. The contribution formula may provide for annual contributions or balloon contributions at the time of retirement. The employer can establish an unused leave contribution formula that best fits the needs of its covered employees. Contributions of unused leave are always 100% vested. · Mandatory pre-tax contributions+ A plan may require indiwduals to contribute a cer- tain portion of their salary. This may occur, for example, when the employer grants a salary increase of which part is paid to the individual and the other portion directed to RHS for all covered employees. Employees may not choose whether or not to make these contributions; they are man- dated by the employer. Mandatory pre-tax contri- butions are always 100% vested. As with manda- tory unused leave contributions, neither the employer nor the employee will pay FICA or income tax on the contributed funds, and, if used for medical expenses, no FICA or income tax wdl be due at distribution. · Prospective election to contribute annual leave+ The employer's plan may allow participants to make an election each year to contribute annual leave (sick, vacation, compensatory, etc.) to their accounts. The election is valid for accruals earned during the following calendar year and may be changed for subsequent years. Neither the employer nor the employee wilt pay FICA or in(~ome tax on prospective annual leave contributions, and, if used for medical expenses, no FICA or income tax will be due at distribution. Although ICMA-RC accepts prospective annual leave contributions and is confident that the IRS would find them acceptable, employers should be aware that the PLR doesn't cover prospective annual leave contributions. ICMA-RC accepts them as a result of an opinion of outside counsel, which is available from ICMA-RC. (See Q 5.) · Irrevocable elective pre-tax contributions+ A plan may also provide for pre-tax contributions to be made by the individual on an elective basis, but once elected, these contributions may not be changed or rescinded. Employers may provide an election "window" of up to 60 days. For newly hired or newly covered employees, the election to contribute may be effective no earlier than the month following the end of the elect~on window. A participant that does not make the election in the year of initial eligibility may make the election in a subsequent year. However, in this case, contribu- tions will not begin until the year following the election year. The plan may provide for an employer-fixed per- centage (e.g. 5%) that all participating employees would be required to make, a range chosen by the employer ( e.g., 3%, 5%, 7% or 10%), or employee choice of the percentage, as long as the election is irrevocable. The employer may specify the accept- able range or the limit in the Adoption Agreement. Neither the employer nor the employee will pay FICA or income tax on electwe pre-tax contribu- tions, and, if used for medical expenses, no FICA or income tax will be due at distribution. The employee may also be permitted to irrevoca- bly elect to contribute accrued vacation and/or sIck leave, for example, at separation from service or retirement; th~s election must be made in the cal- endar year prior to the contribution. Newly hired or newly eligible employees may make the elec- tion to contribute in the month prior to the month of contribution, although it is anticipated that most employees will wait until closer to retire- ment. Although ICMA-RC accepts these contributions and ~s confident that the IRS would find these types acceptable, employers should be aware that the PLR doesn't cover elective pre-tax contributions of compensation or accrued leave. ICMA-RC accepts them as a result of an opinion of outside counsel, which is available from ICMA-RC. (See Q 5.) · Voluntary after-tax contributions* Up to 25% of total RHS plan contributions may be voluntary after-tax participant contributions. (These contributions are the only RHS contribu- tions subject to FICA and income tax.) Earnings on these contributions are tax-deferred, and bene- fit payments are, of course, nontaxable if used for medical expense reimbursements. These contribu- tions should be tested for the 25% limit at the plan level. The contributions may be started and stopped by the participant as permitted by the employer. Although ICMA-RC accepts these contributions and is confident that the IRS would find these types acceptable, employers should be aware that the PLR doesn't cover voluntary after-tax contribu- tions. ICMA-RC accepts them as a result of an opinion of outside counsel. (See Q 5.) These contributions are treated as employer contributions by the/RS and not subject to FICA or income tax. Since they are considered employer contributions by the IRS, these con- tributions satisfy the requirement for ~sub- stantial financial involvement" as required by the integral part trust rules (see Qe). However, ICMA-RC will recordkeep the contributions separately in employer (subject to vesting) and employee pre-tax (mandatory leave, mandato- ry pre-tax and elective pre-tax) sources. 8 Voluntary after-tax contributions will be sourced separately and are subject to FICA and income tax. Q15: What are some examples of con- tributions allowed by employers? Employer #1 has chosen to provide all of the fol- lowing types of contributions for employees: Flat dollar contribution for all employees in the amount of $350 to a reimbursement account covering all medical expenses; 1% of each full-time employee's salary above $35,000 as a direct employer contribution to an account that reimburses only for insurance premium reimbursement m order to ehmmate any potential for nondiscrimination ~ssues (see Q34);, 10% of an employee's accumulated sick leave at the t~me an employee leaves service with the employer (if the employee has at least 10 years of service w~th the City). Employer #2 contributes $1,300 per employee per year plus, at retirement, the dollar equivalent of accrued vacation and sick leave up to $40,000 per retiree. Employer #3 contributes on a mandatory basis: Annual unused sick leave as prescribed in the existing employee contract; One-time bonuses and awards; Annual unused vacation accruals exceeding 320 hours; Annual unused administrative leave, not to exceed 64 hours; All unused sick leave not to exceed 500 hours upon retirement or other separation of service; All unused administrative leave and vacation accrual on retirement or separation. Employer #4 contributes direct employer contribu- tions equal to 3% of compensation per employee, plus additional 1% of compensation for employ- ees contributing annual leave of 16 hours per year. An employee who has accrued 40 or more hours of unused annual leave must contribute on a mandatory bas~s all such leave over 40 hours to a maximum of 16 hours per year. Employer #5 granted a 1% salary increase which must be contributed to RHS as a mandatory pre- tax employee contribution. Participants may irrev- ocably elect to contribute a whole percentage of salary as a pre-tax contribution; the contribution may be from 1 to 5% of salary. The participant may irrevocably elect in the year prior to retire- merit eligibility to contribute accrued vacation and sick leave at separation from service. Other employers use age, years of service and date of hire as part of the formulas that determine contributions. Q16: Are there limits to the amount of contributions that may be made in a given year? There are no percentage or dollar limitations on the amount of contributions to RHS made on a tax-advantaged basis to RHS. The only current I~mitation ~s that no more than 25% of total plan contributions may be voluntary after-tax contribu- tions. The employer may want to consider placing a reasonable fixed dollar limit on elective pre-tax contributions, in order to ensure the RHS program does not provide benefits in excess of reasonable benefits normally provided by such a welfare plan. Q17: How are the contributions coordi- nated with Section 457 and 401 plans? Contributions to RHS are not coordinated with and do not offset contributions that may be made to Section 457 and 401 plans. However, there may be an impact relative to mandatory and elective pre-tax contributions. Since these contributions are not considered 'gross compensation' for Form W-2 purposes, they may lower the base on which the contributions to a 457 or 401 plan are calculat- ed, depending upon the terms of the 457 or 401 plan. Q18: Are contributions made to the account included in "pension- able" compensation? The definition of compensation covered by the employer's pension will need to be examined to determine whether any of the various RHS contri- button types (employer, sick and vacation leave accrual, mandatory pre-tax, elective pre-tax, and voluntary after-tax pre-tax) are considered part of compensation on which pension benefit calcula- tions are made. Q19: When does the employer make contributions? The employer can elect to send contributions to ICMA-RC monthly, weekly, annually, bimonthly, at retirement or by some other prearranged date. In addition, the employer can remit the contributions via check or electronic funds transfer (EFT). against a market downturn. This will avoid poten- tial problems arising from a reduction m the value of a parhc~pant's account due to a drop in the mar- ket. The spouse/dependents or beneficiary(les) may transfer the account balance from the Money Market Account into the investments of their choice at any time. Please read the current prospectus carefully prior to investing any money. Vantagepoint securities are distributed by ICMA-RC Services, LLC, a con- trolled broker dealer affiliate of ICMA-RC, member NASD/SlPC. PLAN INVESTMENTS Q20: Where will RHS assets be invested? The investment funds available to RHS partici- pants are ICMA-RC's Vantagepoint Funds, with the exception of the Vantagepoint Income Preserva- tion Fund. These 18 funds consist of eight actively managed funds, five model portfolio funds, and five index funds. Upon initial enrollment in the RHS Program, a par- ticipant's investment allocation is automatically established as the Vantagepoint Money Market Fund*. The participant may subsequently change the investment allocation for future contributions at any time through ICMA-RC's VantageLine (toll- free automated service line), VantageLink (Internet Web site), or an ICMA-RC Investor Services Repre- sentative. Additionally, existing balances can be transferred among the Vantagepoint Funds at any- time through VantageLine, VantageLmk, or an ICMA-RC Investor Services Representative. When ICMA-RC is notified of a participant's death, the account balance will automatically be trans- ferred into the Vantagepoint Money Market Fund. Moving the account balance into the Vantagepoint Money Market Fund may provide protection to the employee's spouse/dependents or beneficiary(les) An investment in the Vantagepoint Money Market Fund is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Fund will be able to main- tain a stable net asset value of $1.00 per share. Please read the current prospectus carefully prior to investing any money. Vantagepoint securities are distributed by ICMA-RC Services, LLC, a controlled broker dealer affiliate of ICMA-RC, member NASD/SIPC. MEDICAL BENEFITS AND PLAN DISTRIBUTIONS Q21: At what point are employees eligi- ble for and what procedure do they follow to begin receiving medical benefits? The employer determines the benefit eligibility cri- teria for partmipatmg employees via the Adoption Agreement (see Q10). The RHS program has been designed to allow the employer the flexibility to choose the benefit eligibility standard that best meets the needs of its employee group. For exam- ple, the employer might select "retirement" as the appropriate time for benefit eligibility. Alternative- ly, a specific age (e.g. 65) could be chosen, or a combination of retirement and a specific age. The plan may allow for eligibility prior to separation from service or retirement; this should be given careful consideration, however, as it may some- what undermine the purpose of the plan in provid- lng for medical expense reimbursements in ret~re- ment. There are two steps that must be taken when an employee becomes eligible for medical benefits. Benefit payments cannot be processed until both steps are completed. · The employer must notify ICMA-RC via EZ Link (see Q33) when an employee attains eligibility. The employee must complete, obtain employ- er signature, and send the VantageCare RHS Plan Employee Benefit Eligibility Form to Zenith Administrators, Inc, ICMA-RC's third party claims administrator (see Q28). The employee wdl then be able to submit reim- bursement requests directly to Zenith on the Van- 10 tageCare RHS Plan Benefits Reimbursement Request Form, available through the employer, ICMA-RC, or Zenith. Q22: What medical benefits can be pro- vided to participating employees? When adopting the RHS Plan, the employer chooses the medical benefits that will be offered to participating employees. The employer may offer reimbursement for all qualifying medical expenses as defined in Internal Revenue Code Section 213 (i.e. medical costs that would other- wise be deductible to the employee on his or her individual income tax return). Alternatively, the employer may pick and choose the benefits that will be provided. For example, reimbursements may be made available only for health insurance premiums, COBRA premiums, Medicare supple- mental insurance premiums, dental insurance pre- miums, out-of-pocket medical costs, qualified long-term care insurance, etc. The employer may allow reimbursement for only one benefit, or for any combination of qualifying medical costs. Information about what constitutes a qualifying medical expense can be found in IRS Publication 502, Medical and Dental Expenses, available on the IRS Web site at http://www, irs.gov/and in the RHS Employer Manual (see Q37). Generally, the expenses permitted are all expenses "paid for diagnosis, cure, mitigation, treatment, or preven- tion of disease, and for treatments affecting any part or function of the body." Insurance premiums covering these expenses are also permissible. Cosmetic surgery and expenses that may be merely beneficial (such as vacations) are not per- missible. Q23: What circumstances permit a par- ticipant to receive assets from the account? As the sole function of the trust is to provide for medical expenses for the participant, spouse and dependents, there are no other circumstances under which the participant may receive account assets, except in the case of de minimis accounts (see Q25) and depending on employer elect~ons when the plan is established, death (Q26) or sev- erance (Q25). Q24: Are there any emergency with- drawal provisions? Unlike Section 457 plans, there are no provisions for withdrawals in the event of a financial hard- sh~p. However, an RHS participant that ~s eligible for medical expense reimbursement will be able to use RHS assets in the event of a medical emer- gency or hardship. Q25: What happens when a participant leaves the employer prior to benefit eligibility? When an employee separates from service, imme- diate lump-sum payments will potentially be made ~n two circumstances: A de minimis benefit is provided for employ- ees that separate from service prior to attain- ing benefit eligibility (see Q21) with vested account balances of $5,000 or less. If a partici- pant is benefit-eligible or has a balance of more than $5,000, the de minimis provision will not apply. If the employer has elected to include a sever- ance benefit (see Qll) in ~ts plan, a participant who separates under the terms established by the employer in the Adoption Agreement (see Q10) before becoming benefit-eligible or reaching retirement age will recewe a lump sum payment, regardless of account balance. See Q30 for a discussion of the tax treatment of de minimis and severance benefits. Q26: What happens to the account bal- ance if the participant dies? An important feature of the RHS Program is that it provides for a death benefit for survivors of deceased employees. At the time the plan is established, the employer elects the treatment of death benefits which will govern payments to all beneficiaries, choosing either: Account Transfer - the surviving spouse/dependents of the employee will con- tinue to use the account for tax-free medical expense reimbursement; or Account Distribution - a death benefit pay- merit will be made to the employee's designat- ed beneficiaryfles), e~ther in the year of the participant's death or in the year following. If an employer elects Account Transfer and a par- t~cipant dies with no surviving spouse or depend- ents, the account assets w~ll be paid out to a bene- 11 ficiary designated by the participant. See Q30 for a discussion of the tax treatment of death benefits. Q27: Who will pay medical benefit claims? The participant will make the initial payment for medical expenses that are paid directly to the service provider. Either the participant or the employer will generally make the initial payment for insurance premiums. Reimbursement for eligi- ble benefits (whether direct expenses or insurance premiums) will be handled by Zenith Admmistra- tors, Inc., a third-party administrator h~red by ICMA-RC (see Q28). Zenith will reimburse on receipt of completed benefit reimbursement forms submitted by the participant. An exception to this procedure.exists for situations where the part~c~- pant has recurring expenses (e.g. insurance pay- ments). In this case, reimbursement can be made on an automatic payment basis after the appropri- ately completed request ~s filed with Zenith. In situations where the employer pays insurance premiums on behalf of the participants, the employer may request reimbursement directly from Zemth by using the appropriate form. Q28: Who is Zenith Administrators? Zenith Administrators, Inc., is a third-party claims administrator hired by ICMA-RC to perform administrative services for the RHS program as directed by ICMA-RC. Zenith is well-versed in medical benefit claims processing (its 700 employ- ees currently serve 400 client funds), and is famil- iar with the workings of ICMA-RC's RHS Program. All questions regarding claims should be directed to Zenith at 1-800-788-5885. Please request to speak with the ICMA-RC VantageCare RHS claims representative. Zenith's claims representatives are available from 9:30 a.m. to 5:30 p.m. Eastern Time. Q29: What is the procedure for reim- bursement? How long does it take? After a participant becomes benefit-eligible, the employer notifies ICMA-RC and the participant notifies Zenith Administrators (see Q21). The par- ticipant may then submit medical claims to Zenith Administrators for reimbursement on the Vantage- Care RHS Plan Benefits Reimbursement Request Form. Zenith reviews the claim to ascertain that the individual is benefit-eligible and that the expense is one covered by the employer's plan. If these conditions are met, Zenith will process the claim and coordinate payment with ICMA-RC. All claims will be paid, suspended, or denied in writ- lng w~thin 30 days. If claims are demed, there is an appeal process, which ends with a final determi- nation on any denied claim by the employer. The RHS Plan Employer Manual includes a detailed description of the appeal process (see Q37). Q30: How are payments from RHS accounts treated for tax purposes? RHS benefits paid in the form of medical expense reimbursements will never be taxed to the partici- pant, his or her spouse, or dependents (whether paid before or after the death of the participant). No income tax withholding or reporting is required, and the benefits need not be reported at all by the recipient on his or her income tax return. Death, de mmim~s, and severance benefits, on the other hand, are taxable benefits. In these instances, the recipient of the funds (either a bene- ficiary or the participant) will receive a tax report- ing form, and income tax will be payable. In some cases, FICA taxes will also be payable. The chart on the next page outlines the tax rules for RHS payments. Q31: What is the employer's responsi- bility with respect to tax reporting and remittance? The responsibilities of Zenith and the employer relative to FICA taxes and federal and state income taxes are somewhat detailed, and employ- ers should become familiar w~th the requirements on plan adoption, through review of the RHS Plan Employer Manual (see Q37.) For de minimis and severance payments, the dis- tribution will be sent to the employer, along with a transaction summary. The employer will then cal- culate, withhold, and transmit the employer and employee shares of FICA (if applicable) as well as the applicable Federal and state/local income taxes and pay the net amount to the participant. The employer includes the distribution on the employee's year-end W-2 as FICA and income tax wages. 12 Type of RHS Benefit Medical benefits paid to employee Medical benefits pa~d to spouse/dependents Death Benefit- Paid in year of death Death Benefit- Paid in year following year of death De Minimis Account Payout Severance Payout Is the Benefit Income Taxable? No No Yes - to beneficiary or estate receiving the payment Yes - to beneficiary or estate receiving the payment Yes - to participant Yes - to participant Income Taxes Is Federal Income Tax Withheld? No No No No Yes - 27.5% Yes - 27.5% Is State/Local Income Tax Withheld? No No No No Yes, if required by state/local law Yes, if required by state/local law FICA Is OASDI/HI* Withheld if Applicable? No No Yes - if employee was covered by OASDI and/or HI No - OASDI/HI taxes are not required to be paid Yes - if employee was covered by OASDI and/or HI Yes - if employee was covered by OASDI and/or HI * OASDI = Social Security and HI = Medicare In the case of death payments made in the year of death, the payment will be handled in the same fashion as de minimis or severance payments with the exception that there will be no Federal taxes withheld, and the payment amount will be included on the deceased employee's year-end W- 2 as FICA wages (if applicable), but not as income tax wages. ICMA-RC will prepare a Form 1099-R for the total distribution and remit the form to the beneficiary(les) of the deceased. If the death payments are made in the year follow- ing the death of the participant, there will be no withholding or remittance of FICA taxes by the employer. ICMA-RC will prepare a Form 1099-R for the total distribution and remit the form to the beneficiary(les) of the deceased. ADMINISTRATIVE Q32: Are there any ongoing employer responsibilities related to the administration of the RHS Pro- gram? The primary responsibilities of the employer are to provide enrollment materials to employees when they become eligible to enroll in the Pro- gram and to send RHS contributions and contribu- tion detail to ICMA-RC. Ongoing responsibilities include the following: · Establish the RHS Plan by following the adop- tion procedures (see Q9 ). · Provide enrollment data via EZ Link (see Q33) for employees participating in the Plan. · Retain file copies of employee enrollment, change, and benefit eligibility forms. · Submit all VantageCare Retirement Health t3 Savings Plan employee information changes via EZ Link. - Provide benefit eligibility dates, termination dates, and reason for termination via EZ Link. · Maintain employee beneficiary designations. Remit withheld employee FICA, federal and state income taxes to the appropriate taxing authorities and file Forms W-2 for any taxable benefits [death (if paid in the year of death), de minimis and severance] (see Q31). Q33: What is EZ Link? EZ Link is an Internet-based program developed by ICMA-RC that provides employers with greater control over plan administration. EZ Link g~ves employers, electronic access to a wide range of plan specific information, transaction-processing capabilities such as contribution processing, enrollments and indicative data changes and keeps employers up-to-date on the latest in plan changes. RHS Plan administration is done almost entirely through EZ Link - participant enrollment, account changes, benefit eligibility notification, and termination notification are all communicated to ICMA-RC electronically via the Internet. More information on EZ Link is available from the Employer Services Unit of the Investor Services Division at ICMA-RC's Corporate Office. Please call (800) 326-7272. Q34: Are there nondiscrimination requirements that apply to the RHS Plan? As with your other health and welfare benefit plans, RHS plans are generally covered by nondis- crimination requirements found under Internal Revenue Code Section 105(h). There are two circumstances under which a plan will not be subject to these requirements: 1. If your RHS Plan is limited to one or more col- lective bargaining groups. If your RHS Plan limits reimbursement to insurance premiums only (health insurance premiums, Medicare supplemental insurance premiums, Medicare Part B insurance prem~- ums, COBRA insurance premiums, long-term care insurance premiums, etc.) If your RHS Plan falls into one of the two cate- gories above, health and welfare nondtscnm~na- tion requIrements will not apply. What does all th~s mean for your RHS Plan? It means that if your plan covers only a collective bargaining unit or only covers insurance premi- urns, you can establish it without concern for the nondiscrimination requirements. Otherwise, you need to consider the nondiscrimination require- merits when developing your Program. Should your plan be determined to not meet the nondis- criminat~on requirements, the effect will be that the non-~nsurance benefits paid for your highly compensated employees may be taxable to those individuals. You may want to consider talking to your benefits counsel regarding your responsibili- ties for testing this and other welfare benefit plans. Also feel free to contact your ICMA-RC Retirement Plan Specialist. Q35: What types of reports will employ- ers and employees receive? The RHS employer will receive two types of state- ments for an RHS Plan - Quarterly and Annual Summary Plan State- ments provided by ICMA-RC and listing infor- mation on contributions, investment earnings, and distributions for all participating employ- ees. The statements will use the same format as the ICMA-RC 401/457 Summary Plan State- ments you currently receive. Quarterly Disbursement Report that is provid- ed by Zenith Administrators, Inc. summarizing all claims paid out of the employer's RHS Plan. This quarterly Disbursement Report will out- hne on an aggregate basis, as well as on a per- participant basis, the types of claims paid (i.e. ~nsurance, other medical, severance, de min- imis, and death). This report will allow the employer to track participant usage of its RHS Plan. The employer will also receive confirmations of contributions and reinvested earnings. Note: all employer-level reports will be sent to the employer's RHS Trustee. If the employer is not the Trustee, the employer may request a copy be sent to itself as well. 14 Employees will receive Quarterly and Annual Summary Plan Statements, showing the activity in their individual RHS accounts. Employees will also receive confirmations of benefit payments, address changes, investment allocation changes, and fund to fund transfers. Q36: What fees does ICMA-RC charge for the RHS Program? There are potentially two types of fees charged for the RHS Program: an employee-level account fee and an employer-level plan fee. Employee Account Fee: The employee-level account fee is assessed directly against the partic- ipant's account, and will be shown as a fee on the quarterly statement. The annual account fee is calculated as follows: Account Assets Fe~ $1- $7,000 Annual fee of 0.90% of plan assets, assessed quarterly. There is a minimum annual charge of $35 ($8.75 per quarter) PLUS $7,001-$23,000 Annual fee of 0.55% of plan assets, assessed quarterly. Account balances exceeding $23,000 will be charged a maximum annual fee of $150 ($37.50 per quarter). For de minimis and severance payouts, ICMA-RC will assess a flat $25 fee in lieu of the quarterly account fee, which will be collected through the extinguishing of shares in the participant's account just prior to the payout. The quarterly account fee will not be charged to the participant's account for the quarter of the de minimis or sev- erance payout. ICMA-RC reserves the right to introduce an advis- er class of its funds at a higher expense ratio. If ICMA-RC's breakeven levels have been achieved, ICMA-RC agrees to make corresponding reduc- tions of the account fee outlined above. Employer Plan Fee: For smaller municipalities and others that do not already have a sufficiently large plan balance with ICMA-RC, there may be a sepa- rate employer-level plan fee. Employers with ICMA-RC-administered 457 and/or 401 plan assets of at least $5 milhon OR average 457 and/or 401 plan participant balances of at least $25,000 will not be assessed an employer-level plan fee. Employers not meeting one of these criteria wdl be charged an annual fee equal to the greater of (1) $200 OR (2) the number of participants multi- plied by $25. This fee will be assessed and billed on a quarterly basis directly to the employer. For example, an employer not meeting the m~nimum average balance or asset criteria with 100 RHS participants would pay an annual fee of $2,500, payable in four quarterly installments of $625. RESOURCES Q37: What information will I receive to assist in ongoing plan admini- stration? The VantageCare Retirement Health Savings Plan Employer Manual is available on line through EZ Link, the required portal for submission of enroll- ment, contribution, termination and eligibility information to ICMA-RC (see Q33). This document is invaluable in detailing all the administrative procedures involved in maintaining an RHS plan. You may download and print this manual if desired. The Manual includes as exhibits all forms used in plan administration, a copy of Publication 502 (the IRS publication detailing eligible medical expenses), and examples of confirmations for var- ious transactions. Q38: Whom should I call with other questions regarding the RHS Pro- gram ? For adoption questions, your ICMA-RC Retirement Plan Specialist (RPS) is the best starting point for questions about RHS. He or she can point you to an RHS expert at ICMA-RC for technical or com- plex inquiries. If you don't have an RPS or don't know who the individual is, you may call (800) 299-9249. For EZ Link questions, supplies of publications and forms and administrative assistance once you have adopted the plan, you may contact RC's Employer Services Unit (ESU) in the investor Ser- vices Division at (800) 326-7272. Employees will be provided a separate number to call in the pro- gram material they are provided at the time of adoption. 15 ICMA RETIREMENT CORPORATION 777 North CapItol Street, NE Washington, DC 20002-4240 1-800-299-9249 www.lcrnarc,org B RC000-050-200206-C331 AGENDA ITEM NUMBER: AGENDA REQUEST Date: 07-05-02 Request to be placed on: X Consent Agenda __ Special Agenda __ Workshop Agenda When: 07-16-02 Description of agenda item: Approval of Resolution ~1-02 and Employer VantageCare Retirement Health Savings Plan Adoption Agreement (see attached memo of explanation) ORDINANCE/RESOLUTION REQUIRED: Draft of Resolution Attached. YES X NO YES X NO Recommendation: Approval is recommended by the Finance Director Determination of Consistency with Gorhprehensive Plan: City Attorney Review/Recommendation (if applicable): Budget Director Review (required on all items involving expenditure of funds): Funding available Yes Funding alternatives (if applicable): Account Number: Account Descripbon: Account Balance. City Manager Review: Approved for Agenda' (~ ~ Hold Until: Agenda Coordinator Review: Received: Action' No No Approved Disapproved P.O. #