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HomeMy WebLinkAbout4.D.2. Adoption of Amendment to Section 125 Cafeteria Plan Res. No. 7494 Consent Business 4. D. 2. SHAKOI'EE TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrator DATE: 10/07/2014 SUBJECT: Adoption of Amendment to Section 125 Cafeteria Plan, Res. No. 7494 (F) Action Sought The Council is asked to adopt Resolution No. 7494, a resolution amending Resolution 6743 adopting a Section 125 Cafeteria Plan for the City of Shakopee. Background The City, like most employers, has what is called a Section 125 Cafeteria Plan, which governs the delivery of employee benefits and authorizes the use of pre-tax dollars to cover employee's benefit costs. The current Section 125 plan was adopted in 2008. Flexible Spending Accounts (FSA) are one benefit covered by our Section 125 plan. These allow employees to defer money from their paycheck on a pre-tax basis to an account. They can then submit receipts for eligible medical expenses and be reimbursed from that account. In the past, these accounts had a "use it or lose it" feature which prohibited the carry-over of funds from one calendar year to the next. However, the IRS recently changed this regulation and now allows the roll-over of up to $500 from one year to the next. In order to take advantage of this new IRS regulation and allow our employee's to roll-over FSA funds, the City must amend its Section 125 plan. The amendment(see attached)has been drafted for us by Alliance Benefit Group, which is the administrator of our FSA accounts. Budget Impact This change has no budgetary impact on the City as all FSA dollars are employee funded. Relationship to Vision This is a housekeeping item. (F) Requested Action The Council is asked to offer Resolution No. 7494, a resolution amending Resolution No. 6743 adopting a Section 125 Cafeteria Plan for the City of Shakopee, and move its adoption. Attachments: Resolution No 7494 Amendment Allowing FSA Carry-Over RESOLUTION No.7494 A RESOLUTION AMENDING RESOLUTION No. 6743,A RESOLUTION ADOPTING A REVISED SECTION 125 CAFETERIA PLAN FOR THE CITY OF SHAKOPEE WHEREAS,the City of Shakopee adopted a revised Section 125 Cafeteria Plan on March 18, 2008;and WHEREAS,from time to time there is a need to update and amend the City's Section 125 Plan in order to remain current with IRS regulations; NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE, MINNESOTA,that the Section 125 Cafeteria Plan adopted by Resolution No. 6743 in March of 2008 is hereby amended to allow for the carry-over of Flexible Spending Account(FSA)funds under defined circumstances, as described in the attached amendment which is hereby adopted and made part of the City's Section 125 Cafeteria Plan. Adopted in regular session of the City Council of the City of Shakopee, Minnesota, held this 7th day of October, 2014. Mayor of the City of Shakopee ATTEST: City Clerk AMENDMENT TO CITY OF SHAKOPEE SECTION 125 CAFETERIA PLAN BY THIS AMENDMENT, the City of Shakopee Section 125 Cafeteria Plan (herein referred to as the "Plan") is hereby amended as follows: 1. AUTHORITY AND SCOPE. This Amendment is being made pursuant to (a) the Plan sponsor's general authority to amend and modify the Plan, and (2) IRS Notice 2013-71, which authorizes limited carryovers under certain health flexible spending accounts that are part of a Section 125 cafeteria plan. 2. WORDS AND PHRASES. Unless specifically defined herein, the words and phrases used in this Amendment are intended to have their ordinary meaning and are not necessarily intended to have the same meaning as the same defined terms used in the Plan. 3. EFFECTIVE DATE. This Amendment first applies with respect to the plan year beginning on or after January 1, 2014. 4. LIMITED CARRYOVER UNDER HEALTH FSA. The health flexible spending account(s) (the "health FSA(s)") that is part of the Plan is hereby amended to provide a limited carryover of account balances from plan year to plan year in accordance with the following conditions and restrictions: a. A participant of a health FSA may carry over the lesser of (i) $500, or (ii) the balance of his/her account. The balance of a participant's account at any point in time shall be equal to the amount credited to the account for the plan year minus claims paid to date with respect to that plan year. b. In general, the balance of a participant's account available for the carryover shall be determined upon expiration of the health FSA's claim run-out period. For purposes of this Amendment, the "claim run-out period" refers to the period of time following a plan year during which claims for expenses incurred during that plan year may be submitted for reimbursement. Notwithstanding the foregoing, the balance of the participant's account as of midnight on the last day of the plan year, up to the amount specified in paragraph a. above, shall be available to reimburse expenses incurred on and after the first day of the new plan year. The claims administrator will administer claims submitted during the claim run out period (including allocating claims between the participant's carryover balance and the participant's election for the new plan year (if any)) in a manner consistent with applicable law(including regulatory guidance). c. In general, a carryover made in accordance with the provisions of this Amendment shall occur automatically. However, unless otherwise prohibited under applicable law (including regulatory guidance), if a participant entitled to an account carryover in accordance herewith elects to waive the carryover in accordance with procedures adopted by the Plan Administrator and the conditions contained in the applicable regulatory guidance, the carryover shall not occur, provided the election is made no later than the last day of the plan year from which the carryover is to be made. d. Unless otherwise required under applicable law (including regulatory guidance), a carryover of an account balance under a health FSA shall be available only to individuals who are eligible to make elections under the health FSA as of the first day of the plan year to which the carryover will be made (regardless of whether the individual actually elects to participate). e. A carryover shall not count against the maximum reimbursement or benefit a participant may elect to receive under the health FSA. Flex Plan Amendment 1 Health FSA Carryover 5. SUPERSEDING EFFECT. The provisions contained herein shall apply notwithstanding any language in the Plan to the contrary. IN WITNESS WHEREOF, this Amendment has been executed this day of , 20 . By Flex Plan Amendment 2 Health FSA Carryover