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