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RES 13-76
City of Piver Resolution 13- 76 Resolution of the City of lk River to Amend and Restate the City's Flexible Benefits Plan , the City of Elk River previously adopted the City of Elk River Flexible Benefits Plan ("Plan") on June 6, 1988, to permit eligible Employees to elect to receive a portion of their compensation as regular taxable income or as nontaxable payment of the Employee's premiums for Employer-sponsored insurance and for reimbursement of die Employee's Health Care Expenses and Dependent Care Expenses;and WHEREAS, the Plan has continued in force at all times since its effective date; and , the City of Elk River desires to amend and restate the Plan to incorporate all relevant regulatory changes since the last Plan modification,which was on January 1, 2008; and WHEREAS, the City of Elk River desires to amend and restate the Plan to incorporate a provision to allow eligible Employees to Opt-out of Employer-sponsored health insurance. NOW, THEREFORE, BE IT S by the City Council of the City of Elk River,Minnesota, as follows: The City of Ells River Flexible Benefits Plan be amended and restated effective January 1, 2013. Passed and adopted this 16`1' day of December 2013. hn J Ai "ror ATTEST: j Tina Allard, City Clerk NATURE CITY OF ELK RIVER FLEXIBLE BENEFITS PLAN Prepared by., 1-1 T S.\4- 'N& QLJDn,%, 12900 - 63rd Avenue North Maple Grove, MN 55369 Tele, 763-503-6620 i i f TABLE OF CONTENTS ARTICLE I. INTRODUCTION .........................................................................................................2 ARTICLE II. DEFINITIONS.............................................................................................................3 ARTICLE III. ELIGIBILITY AND PARTICIPATION...............................................................................7 ARTICLEIV. CONTRIBUTIONS........................................................................................................9 ARTICLE V. ELECTION OF AVAILABLE BENEFITS..........................................................................10 ARTICLE VI. ADMINISTRATION ....................................................................................................16 ARTICLE VII. PLAN AMENDMENT AND TERMINATION.....................................................................20 ARTICLE VIII. GENERAL PROVISIONS..............................................................................................21 ARTICLE IX. GROUP MEDICAL BENEFITS......................................................................................23 ARTICLE X. GROUP DENTAL BENEFITS........................................................................................25 ARTICLE XI. GROUP TERM LIFE BENEFITS ...................................................................................27 ARTICLE XII. SHORT TERM DISABILITY BENEFITS .........................................................................28 ARTICLE XIII. LONG TERM DISABILITY BENEFITS ...........................................................................29 ARTICLE XIV. MEDICAL EXPENSE REIMBURSEMENT PLAN ...............................................................30 ARTICLE XV. DEPENDENT CARE EXPENSE REIMBURSEMENT PLAN..................................................33 ARTICLE XVI. HSA CONTRIBUTION FEATURE..................................................................................38 ARTICLE XVII. LIMITED SCOPE MEDICAL EXPENSE REIMBURSEMENT PLAN.......................................41 ARTICLE XVIII. CASH PAYMENT........................................................................................................44 ARTICLE XIX. HIPAA PROVISIONS..................................................................................................45 EXHIBIT A. INSURANCE CARRIER/THIRD PARTY PROVIDER INFORMATION.................................49 i f 's f ©2012 Hitesman&Wold,P.A. I City of Elk River Flexible Benefits Plan i i ILLUSTRATION 1: City of Elk River Flexible Benefits Plan EMPLOYER AND VOLUNTARY EMPLOYEE CONTRIBUTIONS CORE BENEFITS Dental Group Terra Coverage for Life and AD&D Participant Insurance for Participant (Basic) OPTIONAL BENEFITS Medical Coverage for Participants and Dependents Dental Coverage for Dependents Group Term Life (Supplemental)for Participants Short Term Disability Coverage for Participants Long-Term Disability Coverage for Participants Medical Expense Reimbursement Plan Dependent Care Expense Reimbursement Plan FISA Contributions Limited Scope Medical Expense Reimbursement Plan Cash ©2012 Hitesman&Wold, P.A. 1 City of Elk River Flexible Benefits Plan i f f+ { ARTICLE I. INTRODUCTION 1.1 Establishment. City of Elk River (hereinafter the "Employer's hereby amends and restates the City of Elk River Flexible Benefits Plan (the "Plan"). Except as otherwise provided herein, this amendment and restatement of the Plan is effective January 1, 2013. 1.2 Purpose. The purpose of the Plan is to provide Participants with a choice between cash and certain "qualified benefits" as defined in Section 125 of the Code. [See Illustration 1 on Page 1 of this Plan.] The Plan is intended to qualify as a "cafeteria plan" under Section 125 of the Code so that Optional Benefits a Participant elects to receive under the Plan will be eligible for exclusion from the Participant's gross income to the fullest extent possible under the Code. 1.3 HIPAA Privacy and Security Rules. Portions of this Plan are "covered entities" for purposes of the Privacy Rules and the Security Rules. 1.4 Gender and Number. Pronoun references in this Plan shall be deemed to be of any gender relevant to the context, and words used in the singular may also include the plural. 1.5 Not ERISA Plan. This Plan is not an employee welfare plan for purposes of ERISA because the Plan is a governmental plan within the meaning of Act. Sec. 3 (32) of ERISA. Any resemblance of the Plan to an ERISA plan shall not bind the Plan to comply with ERISA. ©2012 Hitesman&Wold, P.A. 2 City of Elk River Flexible Benefits Plan ARTICLE II. DEFINITIONS The following words and phrases are used in this Plan and shall have the meanings set forth in this Article unless a different meaning is clearly required by the context or is defined within an Article. 2.1 Benefits means Core Benefits and Optional Benefits. 2.2 Cafeteria Plan Regulations means any final regulations, or proposed regulations on which employers may rely, issued by the Department of Treasury under Section 125 of the Code. 2.3 Cash Payment means the amount received by a Participant described in ARTICLE XVIII. 2.4 Change in Status means the situations that permit an Eligible Employee or Participant to make a change in his or her Election mid-Plan Year and include events that: (a) change an Eligible Employee's or Participant's legal (under applicable state and federal law) marital status; (b) change the number of an Eligible Employee's or Participant's dependents (as defined in Section 5.3); (c) change an Eligible Employee's or Participant's employment status, or the employment status of the Participant's Spouse or dependents (as defined in Section 5.3); (d) cause an Eligible Employee's or Participant's dependent (as defined in Section 5.3) to satisfy or cease to satisfy the eligibility requirements for an Optional Benefit; and (e) change the place of residence of an Eligible Employee or Participant, or his or her Spouse or dependents (as defined in Section 5.3). 2.5 Claims Administrator means the entity described in Section 6.1(c). 2.6 Claims Run-out Period means the period of time following the end of the Plan Year during which claims incurred during such Plan Year (and applicable Grace Period) may be submitted as provided in the Optional Benefit. 2.7 Code means the Internal Revenue Code of 1986, as amended from time to time. 2.0 Compensation means all of an Employee's earnings from the Employer which are subject to withholding for federal income tax purposes. 2.9 Core Benefits means the mandatory benefits required to be taken through this Plan. Eligible Employees are required to purchase single coverage under the Group Dental Benefits and basic coverage under the Group Term Life Benefits. 2.10 Covered Individual means a person, including a Participant, a Dependent of a Participant, a Spouse of a Participant, and any other person, appropriately covered under an Optional Benefit subject to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as amended, and as reflected in the Public Health Services Act ("PHSA'�, as amended. 2.11 Dependent means "Dependent" as defined in each Optional Benefit provision in which such term is used. Dependent is not necessarily the same as a dependent for tax purposes. See the definition of Tax Dependent in Section 2.37. 2.12 Effective Date means the effective date of this amendment and restatement, which is January 1, 2013. ©2012 Hitesman&Wold, P.A. 3 City of Elk River Flexible Benefits Plan i f1 2.13 Election means the choice of Optional Benefits and means of payment made by the Participant, as described in Article V. 2.14 Election Period means the period of time identified by the Plan Administrator prior to the start of a Plan Year during which a Participant may change his or her Election. For a Participant who enters the Plan other than at the start of a Plan Year, Election Period means the period of time identified by the Plan Administrator prior to the date on which the Eligible Employee begins participation during which an Eligible Employee may make an Election or change a deemed Election. 2.15 Eligible Employee means each Employee who has met the eligibility requirements of Section 3.1. 2.16 Employee means any person employed by the Employer and on the Employer's W-2 payroll on or after the Effective Date, except that it shall not include: (a) Any individual treated as being self-employed for purposes of Section 401(c) of the Code; (b) Any individual included within a unit of employees covered by a collective bargaining unit unless such agreement expressly provides for coverage of the employee under this Plan; (c) Any individual who is a nonresident alien and receives no earned income from the Employer from sources within the United States; (d) Any leased employee (including, but not limited to, those individuals defined in Code Section 414(n)) or an individual classified by the Employer as a contract worker, independent contractor, temporary employee or casual employee, whether or not any such persons are on the Employer's W-2 payroll or are determined by the IRS or others to be common-law employees of the Employer; and (e) Any individual who performs services for the Employer but who is paid by a temporary or other employment or staffing agency whether or not such individuals are determined by the IRS or others to be common-law employees of the Employer. 2.17 Employer means the City of Elk River. 2.18 Employer Contribution means amounts, if any, that have not been actually or constructively received by the Participant that are made available to the Participant by the Employer for the purpose of electing Core and Optional Benefits under the Plan. 2.19 ePHI means PHI maintained or transmitted in electronic media including, but not limited to, electronic storage media (i.e., hard drives, digital memory medium) and transmission media used to exchange information in electronic storage media (i.e., internet, extranet, and other networks). PHI transmitted via facsimile and telephone is not considered to be transmissions via electronic media. 2.20 Grace Period means the period of time beginning on the first day following the last day of a Plan Year and continuing through March 151" following the close of the Plan Year. i (a) Claims Incurred during the Grace Period. An eligible expense incurred during the Grace Period shall be deemed to have been incurred during both the preceding Plan Year and the current Plan Year. (b) Processing of Claims. Claims incurred during the Grace Period, and submitted prior to the close of the Claims Run-out Period, shall be first allocated to and reimbursed from the Participant's respective reimbursement-type account for the preceding Plan Year until such reimbursement-type account is exhausted. Thereafter, any such claims shall be ©2012 Hitesman&Wold, P.A. 4 City of Elk River Flexible Benefits Plan i I allocated to and reimbursed from the Participant's reimbursement-type account for the current Plan Year. Claims incurred during the Grace Period will be allocated based upon the date the claim is received. Once a claim is allocated, there shall be no changes, modifications, or adjustments to the allocation of the account. In accordance with this paragraph (a), a claim incurred during the preceding Plan Year and submitted during the Claims Run-out Period will be processed subsequent to a previously submitted claim incurred during the Grace Period, even if the account from the preceding Plan Year is exhausted by reimbursement of the claim incurred during the Grace Period. (c) Elections. No adjustment to a Participant's election for the current Plan Year shall be made or allowed based upon the amount of claims reimbursed from the prior Plan Year's account in accordance with paragraph (b) hereof. (d) Termination of Participation. Notwithstanding anything herein to the contrary, if(1) a Participant is a Participant on the last day of a Plan Year; and (2)the Participant has an account balance under an Optional Benefit as of the close of such Plan Year, then the Participant shall continue participating in that Optional Benefit for the entire Grace Period for the purpose of receiving reimbursements from such account balance. Such participation shall continue until the close of the Grace Period despite the fact that the Participant elects not to participate in the Optional Benefit for the following Plan Year or the Participant's participation in the Optional Benefit would otherwise terminate under Section 3.4(b) or 3.4(c) prior to the close of the Grace Period. 2.21 Highly Compensated Individual means individuals who are highly compensated as defined in Section 125(e)(2) of the Code. 2.22 Highly Compensated Participant means Participants who are highly compensated as defined in Section 125(e)(1) of the Code. 2.23 HIPAA means Health Insurance Portability and Accountability Act of 1996, and regulations thereunder, as amended from time to time. 2.24 HSA means a health savings account within the meaning of Section 223 of the Code. 2.25 Insurer means any insurance company that has issued a policy through which benefits are made available under this Plan. 2.26 IRS means the Internal Revenue Service. 2.27 Optional Benefits means the benefits made available through this Plan as follows: Non-Reimbursement., Reimbursement., • Group Medical Benefits • Medical Expense Reimbursement Plan • Family Group Dental Benefits • Dependent Care Expense • Additional Group Term Life Benefits Reimbursement Plan • Long Term Disability Benefits • Limited Scope Medical Expense • Short Term Disability Benefits Reimbursement Plan • HSA Contribution Feature • Cash Payment 2.28 PHI means health information that: (a) Is created or received by a health plan, health care provider, or health care clearinghouse; ©2012 Hitesman&Wold, P.A. 5 City of Elk River Flexible Benefits Plan i j11 j f C: (b) Relates to the past, present and future physical or mental health or condition of an individual (including "genetic information" as that term is defined in the Genetic Information Nondiscrimination Act of 2008); the provision of health care to an Individual; or the past, present or future payment for the provision of health care to an individual; and (c) Either identifies the individual or reasonably could be used to identify the individual. PHI includes ePHI. 2.29 Participant means an Eligible Employee who participates in the Plan in accordance with Article III and has not ceased to be a Participant under Section 3.4. I 2.30 Plan means the City of Elk River Flexible Benefits Plan, as it may be amended from time to time. 2.31 Plan Administrator means the entity determined under Section 6.1. 2.32 Plan Year means the twelve-month period commencing on the first day of January and ending on the last day of December. 2.33 Privacy Rules means the Standards and Privacy of Individually Identifiable Health Information at 45 C.F.R. Part 160 and Part 164 at subparts A and E. 2.34 Security Rules means the Security Standards and Implementation Specifications at 45 C.F.R. Part 160 and Part 164, subpart C. 2.35 Spouse means an individual who is (a) legally married to a Participant (under applicable state law); and (b) treated as a"spouse"under the applicable section of the Code. 2.36 Summary Health Information means "summary health information" as defined in 45 C.F.R. Section 164.504, which generally defines "summary health information" to include information, which may be PHI, that summarizes claims history, claims expenses, or the type of claims experienced by individuals receiving benefits under the Plan from which certain identifiers have been deleted. 2.37 Tax Dependent means an individual (other than the Participant and the Participant's Spouse) with respect to whom group health plan benefits are excluded from the Participant's income under Section 105(b) of the Code. As of the effective date of this amendment, these individuals include; (a) the Participant's "dependent" as determined under Section 152 of the Code (without regard to subsections (b)(1), (b)(2) and (d)(1)(B) thereof), and (b) the Participant's child (as defined in Section 152(f)(1) of the Code) who has not attained age 27 as of the end of the taxable year. A child may be a Dependent under clause (b) above regardless of the child's marital status, but such child's spouse and children shall not be Dependents unless they satisfy the requirements of clause (a) above in their own right. I i i ©2012 Hitesman&Wold,P.A. 6 City of Elk River E' Flexible Benefits Plan i i ARTICLE III. ELIGIBILITY AND PATICIPATI®N 3.1 Initial Eligibility Requirements. In general, Eligible Employees include all full-time Employees and part-time Employees working at least thirty-two (32) hours or more per week. Seasonal and temporary employees are not eligible. 3.2 Notification to Participants. The Plan Administrator shall provide each Eligible Employee written notice of the Employee's eligibility to participate in the Plan. 3.3 Application for Participation. (a) Generally. In general, unless an Eligible Employee is deemed to have made an Election as provided in Section 5.1, to become a Participant, an Eligible Employee shall execute and deliver to the Plan Administrator within the time period established by the Plan Administrator, a written application signed by the Eligible Employee in which the Eligible Employee: (1) applies to participate in the Plan; (2) designates the required portion of Compensation for the pre-tax and after-tax (if any) contributions; (3) makes a benefit Election; and (4) supplies any other pertinent information that the Plan Administrator may reasonably require. By signing such application or agreement, the Eligible Employee shall be deemed for all purposes to have agreed to participate and to conform to the requirements of the Plan. Such application or agreement may be the same as, or separate from, the application or agreement required to participate in any Optional Benefit under this Plan. Alternatively, or in addition to, the Plan Administrator may require or permit application of same scope by electronic means. (b) Effective Date. Participation in the Plan shall begin on the first day of the month following the date on which the Employee becomes eligible to participate or, if later, as soon as administrative feasible following submission of the written application. Notwithstanding the foregoing, for new hires, if an Eligible Employee executes and delivers such written application to the Plan Administrator within thirty (30) days of employment, then pursuant to Cafeteria Plan Regulations participation in this Plan is retroactive to the first of the month following the date of hire. However, salary reduction contributions to pay for coverage during the period preceding the submission of the application shall be taken prospectively from compensation paid following submission of the application. 3.4 Termination of Participation. A Participant automatically ceases to be a Participant at midnight of the earliest of the following dates: (a) the date of the death of the Participant; (b) the last day of the month containing the date of termination of the Participant's employment with the Employer; (c) the last day of the month containing the date of the Participant's failure to meet the eligibility requirements of Section 3.1, as may be amended from time to time; or ©2012 Hitesman&Wold,P.A. 7 City of Elk River Flexible Benefits Plan i' Pi f`[t '1 (d) the date of termination of the Plan in accordance with Article VII. Note: This provision applies to participation in this Plan. With respect to the Optional Benefits that involve premium payments for other plans sponsored by the Employer, coverage under the underlying plan may extend beyond the date a Participant ceases to be a Participant in this Plan. In the event the Plan does not learn that a Participant has automatically ceased to be a Participant until a date after the date participation ceased, participation will be terminated retroactively and the Plan shall be entitled to recover any benefits paid after the date participation terminated. Termination of participation in this Plan shall not prevent a former Participant from continuation coverage, conversion coverage or benefits under the respective Core and Optional Benefit plans if and to the extent provided by such plans. t 3.5 Conditions of Participation. As a condition of participation and receipt of benefits under this Plan, the Participant agrees to: (a) observe all Plan rules and regulations; (b) consent to inquiries by the Plan Administrator with respect to any provider of services involved in a claim under this Plan; and (c) submit to the Plan Administrator all notifications, reports, bills, and other information required by the Plan or which the Plan Administrator may reasonably require. Failure to do so relieves the Plan, Plan Administrator, and Claims Administrator from any and all obligations under this Plan. 3.6 Participation in Optional Benefit Plans. In order to elect a specific Optional Benefit provided under this Plan, a Participant must elect that Optional Benefit on such forms as the Plan Administrator may require (unless the benefit is provided to all Participants) and, if the cost of the Optional Benefit is not fully paid by the Employer, shall be required to share the cost of the Optional Benefit as provided in Article IV. Further, the Participant must meet any eligibility, participation, etc., requirements applicable to that Optional Benefit in accordance with the terms of the underlying plan through which the Optional Benefit is provided. 3.7 Electronic Forms. Notwithstanding anything in the Plan to the contrary, including any documentation incorporated by reference, any required forms may, at the Plan Administrator's discretion, be required or permitted to be sent and/or made by electronic means, to the extent not prohibited by applicable law. For this purpose, "forms" includes, but is not limited to, participation agreements, elections, notifications/notices, applications, etc. ©2012 Hitesman&Wold, P.A. 8 City of Elk River Flexible Benefits Plan ARTICLE IV. CONTRIBUTIONS 4.1 Salary Reduction Contributions. To the extent the cost of Benefits exceeds the Employer Contribution, a Participant may elect in accordance with the Election procedures described in Article V to receive his or her full Compensation in cash, or to have a portion of such Compensation applied by the Employer toward the Participant's share of the cost of Benefits. If so elected, the Participant's Compensation will be reduced, and an amount equal to the reduction shall be allocated by the Employer to the Benefits designated by the Participant. A Participant's Compensation shall be reduced by pro-rata amounts of the Participant's total salary reduction Election. Salary reduction is done on a pre-tax basis before any withholdings have been made. The frequency of salary reduction contributions shall be two (2) payrolls per month. Notwithstanding the foregoing, if participation in a Benefit extends to the last day of the month in which a Participant's employment terminates, if necessary, additional salary reduction contributions shall be taken from the Participant's final pay check to pay for the coverage provided during the period of time following the date on which the Participant's employment terminates. 4.2 Imputation of Income. To the extent a Participant participates in an Optional Benefit that covers a Dependent who is not the Participant's Spouse or Tax Dependent, the entire cost of coverage for Optional Benefits for which the Participant is responsible shall be paid pre-tax through this Plan and the fair market value of the coverage for that Dependent shall be imputed as income to the Participant as the coverage is provided (pursuant to Cafeteria Plan Regulations). This provision applies regardless of whether the cost of coverage is paid by salary reduction or allocation of available Employer Contributions, if any. 4.3 Salary Deduction Contributions. The Employer may require that amounts for which the Participant is responsible, but which cannot be paid with pre-tax dollars through salary reduction described above, be funded with after-tax dollars pursuant to a salary deduction agreement. Such salary deductions shall be made on a periodic basis and relate to a Participant's Compensation after taxes and withholdings have been made. 4.4 Employer Contribution. The Employer makes a fixed dollar contribution per month per Participant based upon such Participant's coverage level (or lack of coverage) under the Group Medical Benefits. The Employer Contribution must be first allocated to pay the costs of Core Benefits. The amount of the Employer Contribution shall be communicated to the Participants prior to the start of each Plan Year so that they may consider it in making their Elections. The amount of the Employer Contribution may change from year to year as announced by the Employer prior to the Plan Year start. Participants who work less than forty (40) hours per week receive a prorated Employer Contribution based upon hours worked. No Employer Contribution shall be credited to any Employee during a period of leave of absence, whether authorized or unauthorized, unless required by the Family Medical Leave Act("FMLA'�. 4.5 Maximum Under the Plan. Under no circumstances may a Participant's total salary reduction exceed the sum of (a) the cost of insurance or insurance-type Benefits, plus (b) the maximum Election amounts permitted under the reimbursement-type Optional Benefits, plus (c) the maximum Election amount permitted under the .HSA Contribution Feature, minus (d) the Employer Contribution, if any. 4.6 No Trust. Nothing in this Plan is intended to require the establishment of a trust. The portion of benefits paid under this Plan attributable to Employer Contributions, if any, is paid from the Employer's general assets. The portion of benefits paid under this Plan attributable to Participant contributions including, but not limited to, salary reduction amounts is paid from the Employer's general assets. ©2012 Hitesman&Wold,P.A. 9 City of Elk River Flexible Benefits Plan i f ARTICLE V. ELECTION OF AVAILABLE BENEFITS 5.1 Initial Elections. An Election must have been made prior to the date on which an Eligible Employee becomes a Participant. An affirmative Election to participate is generally required. If the initial Election Period ends and an Eligible Employee has not returned an Election form to the Plan Administrator, the Eligible Employee will be deemed to have elected: (1) to pay for Core Benefits with the Employer Contribution; and (2) to not participate in Optional Benefits. 5.2 Subsequent Annual Elections. During the Election Period prior to each subsequent Plan Year, each Participant and Eligible Employee shall be given the opportunity to make a new Election. Such new Election may include the following: I (a) an Eligible Employee who is not participating may elect to begin participating by electing Optional Benefits during the Election Period; (b) a Participant may terminate participation in the Plan; or (c) a Participant may elect different Optional Benefits or different levels of Optional Benefits. If the annual Election Period ends and an Eligible Employee has not returned an Election form to the Plan Administrator, the Eligible Employee will be deemed to have: (1) to pay for Core Benefits with the Employer Contribution; and (2) to not participate in Optional Benefits. 5.3 Elections Irrevocable. For purposes of this Section 5.3, the term "dependent" shall mean an individual who is a "dependent" under the provision of the Code applicable to the Optional Benefit(s) to which the Election being changed or revoked relates. An Election becomes effective and shall be irrevocable for the Plan Year or the remainder of the Plan Year except under the following circumstances: (a) Change in Status. A Participant may change or terminate his or her actual or deemed Election under the Plan upon the occurrence of a Change in Status, but only if such change or termination is made on account of and corresponds with a Change in Status that affects coverage eligibility of a Participant, a Participant's Spouse, or a Participant's dependent (referred to as the general consistency requirement). The Plan Administrator (in its sole discretion) shall determine, based on prevailing IRS guidance, whether a requested change is on account of and corresponds with a Change in Status. Assuming that the general consistency requirement is satisfied, a requested change must also satisfy the following specific consistency requirements in order for a Participant to be able to alter his or her Election based on that change. (1) Loss of Dependent Eligibility. For a Change in Status involving a Participant's divorce, annulment or legal separation from a Spouse, the death of a Spouse or a dependent, or a dependent ceasing to satisfy the eligibility requirements for coverage, a Participant may only elect to cancel accident or health insurance, or insurance-type, coverage for the Spouse involved in the divorce, annulment, or legal separation, the deceased Spouse or dependent, or the dependent that ceased to satisfy the eligibility requirements. Canceling coverage for any other individual under these circumstances fails to correspond with that Change in Status. (2) Gain of Coverage Eligibility Under Another Employer's Plan. For a Change in Status in which a Participant, a Participant's Spouse, or a Participant's ©2012 Hitesman&Wold,P.A. 10 City of Elk River Flexible Benefits Plan I i i dependent gains eligibility for coverage under another employer's cafeteria plan (or another employer's qualified benefit plan) as a result of a change in marital status or a change in employment status, a Participant may elect to cease or decrease coverage only if that coverage becomes actually effective or is increased under the other employer's plan. (3) Dependent Care Expense Reimbursement Plan. With respect to the Dependent Care Expense Reimbursement Plan, a Participant may change or terminate his or her Election only if(i) such a change or termination is made on account of and corresponds with a Change in Status that affects eligibility for coverage under the Plan; or (ii) the Election change is on account of and corresponds with a Change in Status that affects eligibility of dependent care expenses for the tax exclusion available under the Code. (4) Group Term Life Insurance and Disability Income Coverage. For a Change of Status involving a Participant's legal marital status or the employment status of a Participant's Spouse or dependent (disregarding the requirement that the event cause a loss or gain of eligibility), a Participant may elect either to increase or to decrease group term life insurance or disability income coverage offered under the Plan. (5) COBRA Coverage. If the Participant becomes eligible for COBRA (or similar health plan continuation coverage under state law) under a group health plan sponsored by the Employer, the Participant may increase the Election for that Optional Benefit to pay for such coverage provided the Participant is still eligible under the Plan and still receiving Compensation. (b) WIPAA Special Enrollment Rights. If a Participant, a Participant's Spouse, and/or a Participant's dependent enrolls in a group health plan that is an Optional Benefit of this Plan pursuant to the HIPAA special enrollment rights provided by Code § 9801(f), the Participant may make a new election that corresponds with the special enrollment. For purposes of this provision (1) an Election to add previously eligible dependents as a result of the acquisition of a new Spouse or dependent child (a/k/a the Tag-along Rule), shall be considered consistent with the special enrollment right; and (2) a HIPAA special enrollment Election attributable to the birth or adoption of a new dependent child may be effective retroactive (up to thirty (30) days), provided it applies to Compensation not yet currently available. (c) Certain Judgments, Decrees and Orders. If a judgment, decree, or order (an "Order's resulting from a divorce, legal separation, annulment or change in legal custody (including a qualified medical child support order) requires accident or health coverage for a Participant's dependent child (including a foster child who is a dependent of the Participant), a Participant may; (1) change his or her Election to provide coverage for the dependent child (provided that the Order requires the Participant to provide coverage and subject to the provisions of the underlying group health plan); or (2) change his or her Election to revoke coverage for the dependent child if the Order requires that another individual (including the Participant's Spouse or former Spouse) provide coverage under that individual's plan. (d) Medicare and Medicaid. If a Participant, a Participant's Spouse, or a Participant's dependent who is enrolled in a health or accident benefit under this Plan (including the Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) becomes entitled to Medicare or Medicaid (other than coverage consisting solely of benefits under Section 1928 of the Social Security Act providing for pediatric vaccines), the Participant may prospectively reduce or cancel the health or accident coverage of the person becoming entitled to Medicare or Medicaid. Further, if a ©2012 Hitesman&Wold, P.A. 11 City of Elk River Flexible Benefits Plan I+ i r f, L, Participant, a Participant's Spouse, or a Participant's dependent who has been entitled to Medicare or Medicaid loses eligibility for such coverage, then the Participant may prospectively elect to commence or increase the health or accident coverage provided under this Plan (including the Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) of the person losing entitlement to Medicare or Medicaid. (e) Change in Cost. (1) Automatic Increase or Decrease for Insignificant Cost Changes. If the cost of an Optional Benefit (other than Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) increases or decreases during a Plan Year by an insignificant amount, then the pre-tax contributions or after-tax contributions (as applicable) under each affected Participant Election shall be prospectively increased or decreased to reflect such change. The Plan Administrator, on a reasonable and consistent basis, will automatically effectuate this prospective increase or decrease in Participant contributions in accordance with such cost changes. The Plan Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether increases or decreases in costs are "insignificant" based upon all the surrounding facts and circumstances (including, but not limited to, the dollar amount or percentage of the cost change). (2) Significant Cost Increases. If the Plan Administrator determines that the cost of an Optional Benefit (other than Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) significantly increases during a Plan Year, the Participant may, on a prospective basis, either: (i) make a corresponding increase in his or her Election; (ii) enroll in another benefit package option providing similar coverage and make a corresponding Election change; or (iii) revoke his or her Election if no other benefit package option providing similar coverage is available. The Plan Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether a cost increase is significant and what constitutes"similar coverage"based upon all the surrounding facts and circumstances. (3) Significant Cost Decrease. If the Plan Administrator determines that the cost of an Optional Benefit (other than Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) significantly decreases during a Plan Year: (i) an Eligible Employee or Participant may commence participation in such Optional Benefit; and (ii) the Plan Administrator shall automatically effectuate a prospective decrease in a Participant's Election with respect to such Optional Benefit in accordance with the cost decrease. i l k ©2012 Hitesman&Wold,P.A. 12 City of Elk River Flexible Benefits Plan (f) Change in Coverage. (1) Significant Curtailment. If the Plan Administrator determines that coverage under an Optional Benefit (other than Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) is significantly curtailed during a Plan Year, the Participant may prospectively enroll in another benefit package option providing similar coverage and make a corresponding Election change. Coverage under an accident or health plan is deemed "significantly curtailed" only if there is an overall reduction in coverage provided to Participants under the Plan so as to constitute reduced coverage to Participants in general. The Plan Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether a curtailment is "significant", and whether a benefit package option constitutes"similar coverage" based upon all the surrounding facts and circumstances. (2) Loss of Coverage. If the Plan Administrator determines that coverage under an Optional Benefit (other than Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) is lost during a Plan Year, the Participant may, on a prospective basis: (1) enroll in another benefit package option providing similar coverage and make a corresponding Election change; or (ii) revoke his or her Election if no other benefit package option providing similar coverage is available. Coverage under an accident or health plan is deemed "lost" only if there is a complete loss of coverage under the benefit package option (e.g., due to elimination of the benefit package option) or other fundamental loss of coverage. The Plan Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether a "loss" has occurred, and whether a benefit package option constitutes "similar coverage"based upon all the surrounding facts and circumstances. (3) Addition or Improvement of an Optional Benefit. If during a Plan Year, the Plan adds a new Optional Benefit or a new benefit package option under the Optional Benefit (other than the Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan), or if coverage under an existing Optional Benefit (other than the Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) is significantly improved: (i) an affected Participant may prospectively change his/her Election with respect to the newly-added or improved Optional Benefit; and (ii) an Eligible Employee may commence participation in such Optional Benefit. The Plan Administrator(in its sole discretion)will decide, in accordance with prevailing IRS guidance, whether an Optional Benefit has been "significantly improved" based upon all the surrounding facts and circumstances. (4) Change Under Another Employer-Sponsored Plan. A Participant may make a prospective Election change (other than with respect to the Health Care Expense Reimbursement Plan and Limited Scope Health Care Expense Reimbursement Plan) that is on account of and corresponds with a change made under another employer-sponsored plan (including a plan of the Employer or a plan of another employer), provided (i) the other cafeteria plan or qualified benefits plan permits its participants to make an Election change that would be 'permitted under the Cafeteria Plan Regulations; or (ii) this Plan permits Participants to make an Election for a Plan Year period of coverage which is different from the plan year period of coverage under the other cafeteria plan or Optional Benefit. The Plan Administrator shall determine, based on prevailing IRS guidance, whether a requested change is on account of and corresponds with a change made under another employer-sponsored plan. ©2012 Hitesman&Wold, P.A. 13 City of Elk River Flexible Benefits Plan (5) Loss of Governmental or Educational Coverage. A Participant may prospectively change his or her Election to add group health coverage for the Participant or his or her Spouse or dependent, if such individual(s) loses coverage under any group health coverage sponsored by a governmental or educational institution including, but not limited to, the following: a medical care program of an Indian Tribal government (as defined in Code § 7701(a)(40)), the Indian Health Service, or a tribal organization; a state health Benefits risk pool; or a foreign government group health plan, subject to the terms and limitations of the applicable benefit package option(s). (g) Family and Medical Leave Act. A Participant taking a leave governed by the Family and Medical Leave Act of 1993 ("FMLA'� may revoke or change an Election as may be provided for under the FMLA and the Employer's FMLA policy required thereunder, provided the Employer is subject to FMLA. (h) Special Rule for PISA Contribution Feature. A Participant may change his or her Election with respect to the HSA Contribution Feature prospectively on at least a monthly basis. A Participant may also revoke his or her Election with respect to the HSA Contribution Feature prospectively if the Participant becomes ineligible to make or have made HSA contributions under the HSA Contribution Feature. (i) other. The Plan Administrator shall have the discretion to allow a change to or termination of an Election to the extent such change or termination is the result of any other situation informally recognized by the IRS as providing an exception to the general rule that Elections are irrevocable (e.g., corrections of mistakes, changes to meet nondiscrimination requirements, failure to satisfy underwriting). A Participant entitled to make a new Election under this Section must do so within thirty (30) days of the event. An Employee who is eligible to elect benefits but declined to do so during the initial Election period, or during a subsequent Election period, may file a new Election within thirty (30) days of the occurrence of an event described above, but only if the new Election is made on account of and corresponds with the event. Subject to the provisions of the underlying group health plan, Elections made to add medical coverage for a newborn or newly adopted dependent child pursuant to a HIPAA special enrollment right may be retroactive for up to thirty (30) days. All other new Elections shall be effective prospectively immediately following the date the Participant files the new Election with the Plan Administrator. Elections made pursuant to this Section shall be effective for the balance of the Plan Year in which the Election is made unless a subsequent event (described above) allows a further Election change. 5.4 Rehire and Eligibility Loss. Termination of employment shall automatically revoke any Election. Former Participants who are rehired: (a) After thirty (30) days following a termination of employment, shall have two "periods of coverage;"that period prior to the termination of employment and that period following the re-employment of the terminated Employee. Expenses incurred prior to the termination of employment shall be subject to the Election in effect upon termination; while the Employee shall have an opportunity to make a new Election and expenses incurred after re-employment shall be subject to the Election made upon re-employment. (b) Within thirty (30) days following a termination of employment, shall have the Election in effect prior to the termination of employment reinstated upon re-employment. 5.5 Benefit Descriptions. While an Election to receive one or more of the Optional Benefits may be made under this Plan, the benefits themselves may be provided in accordance with Plan documents or contracts which describe the types and amounts of benefits available, the requirements for participation, procedures for submitting claims, and the other terms and ©2012 Hitesman&Wold, P.A. 14 City of Elk River Flexible Benefits Plan conditions of coverage. Such underlying Plan documents or contracts, if any, are incorporated into this Plan by reference. 5.6 Forfeiture. Any amounts, whether obtained through salary reduction, salary deduction, Employer Contributions, or otherwise, under this Plan which cannot be distributed by the Plan Administrator to cover the cost of Optional Benefits for the applicable Plan Year, shall be forfeited by the Participant. Forfeited amounts, in accordance with the Cafeteria Plan Regulations, may be: (a) retained by the Employer; (b) used to defray the reasonable administrative costs of the Plan; (c) used to reduce required salary reduction amounts for the immediately following Plan Year on a reasonable and uniform basis; and/or (d) returned to the Participants on a reasonable and uniform basis. Under no circumstances shall the Plan Administrator establish an outside formal or informal arrangement under which the forfeited amounts are allocated among Participants based (directly or indirectly) on their individual claims experience under the Plan. 5.7 Limitations on Benefits. Benefits shall be limited as determined by the Plan Administrator in accordance with Section 6.16 for the purpose of ensuring compliance with any nondiscrimination requirement applicable to the Plan or an Optional Benefit. ©2012 Hitesman&Wold, P.A. 15 City of Elk River Flexible Benefits Plan i I' ARTICLE VI. ADMINISTRATION 6.1 Plan Administrator. (a) The Plan Administrator shall be responsible for the general supervision of the Plan. The Plan Administrator shall perform any and all acts necessary or appropriate for the proper management and administration of the Plan. (b) The Employer shall be the Plan Administrator unless the Employer's managing body designates a person or persons other than the Employer to be the Plan Administrator. The Employer shall also be the Plan Administrator if the person or persons so designated j cease to be the Plan Administrator. (c) The Plan Administrator may designate an individual or entity to act on its behalf with respect to certain powers, duties, responsibilities, etc. with respect to the operation and administration of this Plan. Where benefits under this Plan are provided through an insurance company, Health Maintenance Organization ("HMO"), or Dental Maintenance Organization ("DMO"), or similar entity, that entity shall be the Claims Administrator with respect to those benefits. In all other situations, the Plan Administrator shall be the Claims Administrator unless the Plan Administrator contracts with a third party to act on its behalf. 6.2 Agent for Service of Legal Process. The agent for service of legal process for the Plan is the Plan Administrator. 6.3 Allocation of Responsibility for Administration. The Plan Administrator shall have the sole responsibility for the administration of this Plan as is specifically described in this Plan. The designated representatives of the Plan Administrator shall have only those specific powers, duties, responsibilities, and obligations as are specifically given to them under this Plan. The Plan Administrator warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan authorizing or providing for such direction, information or action. It is intended under this Plan that the Plan Administrator shall be responsible for the proper exercise of its own powers, duties, responsibilities, and obligations under this Plan and shall not be responsible for any act or failure to act of another Employee of the Employer. Neither the Plan Administrator (including any designee) nor the Employer makes any guarantee to any Participant in any manner for any loss or other event because of the Participant's participation in this Plan. 6.4 Rules and Decisions. Except as otherwise specifically provided in the Plan, the Plan Administrator may adopt such rules and procedures as it deems necessary, desirable, or appropriate to fulfill the purposes of the Plan. All rules and decisions of the Plan Administrator shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Plan Administrator shall be entitled to rely upon information furnished by a Participant, the Employer, or legal counsel. 6.5 Procedures. The Plan Administrator may act at a meeting or in writing. The Plan Administrator may adopt by-laws and regulations as it deems desirable for the conduct of the Plan's affairs and as are consistent with the terms of the Plan. 6.6 Records and Reports. The Plan Administrator shall be responsible for complying with all j reporting, filing and disclosure requirements for the Plan. 6.7 Claim for Benefits. This Section addresses the requirements for claims for reimbursement-type Optional Benefits and the provisions of general applicability. Claims requirements for other Optional Benefits shall be handled in accordance with the governing documents for those Optional Benefits. ©2012 Hitesman&Wold,P.A. 16 City of Elk River Flexible Benefits Plan I A Participant may apply to the Claims Administrator for reimbursement of eligible expenses incurred during such Plan Year (and applicable Grace Period) by completing a claim form and submitting such form(s) via interoffice mail or directly delivering the forms to the Claims Administrator(or its designee) setting forth at least the following: (a) the amount, date and nature of the expense, including the identity of the individual who incurred the expense; (b) the name of the person or entity to which the expense was paid; (c) the Participant's statement that the expense has not been reimbursed and the Participant will not seek reimbursement for the expense; and (d) such other information as the Claims Administrator may require. Such claim form shall be accompanied by bills, invoices, receipts, or other statements from an independent third party, or by an explanation of benefits ("EOB') issued by a health plan, stating the eligible expense has been incurred and the amount of the expense. With respect to an over- the-counter drug or medicine (other than insulin) that constitutes an eligible expense under the Health Care Expense Reimbursement Plan or an over-the-counter drug or medicine for dental or vision care that constitutes an eligible expense under the Limited Scope Health Care Expense Reimbursement Plan, the claim form shall be accompanied by a copy of the prescription or a receipt identifying the purchaser of the drug or medicine (or the patient), the date and amount of the purchase, and an Rx number. The Claims Administrator is entitled to rely on the information provided on the claim form in processing claims under this Plan. Where circumstances beyond the Participant's control prevent submission within the described time frame, notice of a claim with an explanation of the circumstances may be accepted by the Claims Administrator as a timely filing. Claims shall be determined in accordance with this Article. 6.8 Determination of Claims and Review Procedure. (a) Third Party Benefits. The claims determination requirements and appeal procedures regarding benefits available from third parties shall be handled in accordance with the governing documents for those benefits. (b) Other Benefits. For benefits other than those described in (a), within thirty (30) days of receipt of a written claim for benefits, either the claim will have been paid or the Employer, or its designee, will notify the Participant that it has been denied. If the claim is denied, the Participant will be provided with the following information in writing: (i) the specific reasons for the denial; and, (ii) a description of any additional material or information necessary to complete the claim, and an explanation of why such material or information is necessary. 6.9 Authorization of Benefit Payments. The Plan Administrator shall issue directions to the Employer concerning all benefits to be paid from the Employer's assets pursuant to the provisions of the Plan, and shall warrant at the time the directions are provided that all such directions are in accordance with the Plan. 6.10 Benefit Payments. The Participant shall be reimbursed at least either (a) once per month; or (b) when the total reimbursement for eligible expenses first equals or exceeds a reasonable minimum amount that the Plan Administrator may communicate to Employees from time to time. 6.11 Overpayments. If a payment for benefits is made by the Plan in excess of the benefit to which a Covered Individual is entitled under the Plan, the Plan shall have the right to recover such overpayment from the payee. Repayment of an overpayment is a condition of participation in the Plan. ©2012 Hitesman&Wold, P.A. 17 City of Elk River Flexible Benefits Plan k f 1+ Il 6.12 Inability to Locate Payee. If benefits are due under this Plan and the Plan Administrator is unable, after reasonable attempts to do so, to locate the Participant to whom such benefits are payable, such benefits shall be handled in accordance with applicable state law regarding unclaimed property or escheat. For purposes of the foregoing, the Plan Administrator shall be deemed to be unable to locate a Participant if a check issued for benefits payable under the Plan has been sent to the payee's last known address and has not been cashed within three (3) years of its date of issuance. 6.13 Facility of Payment. Whenever, in the Plan Administrator's opinion, a -person entitled to receive any payment of a benefit or installment under the Plan is under a legal disability or is incapacitated in any way so as to be unable to manage their financial affairs, the Plan Administrator may request the Employer to make payments to such person, or the Plan Administrator may request the Employer to apply the payment for the benefit of such person in such manner as the Plan Administrator considers advisable. Any payment of a benefit, or I installment, in accordance with the provisions of this Section, shall be a complete discharge of I any liability for the making of such payment under the provisions of the Plan. i 6.14 Other Powers and Duties of the Administrator. The Plan Administrator shall also have such other duties and powers as may be necessary to discharge its duties under the Plan including, but not limited to, the following: (a) discretion to construe and interpret the Plan in a non-discriminatory manner, to decide all questions of eligibility, except to the extent the eligibility determinations are governed by an insurance contract, and to determine all questions arising in the administration and application of the Plan, except to the extent such eligibility determinations are governed by an insurance contract; (b) to receive from the Employer and from Participants such information as shall be necessary for the proper administration of the Plan; (c) to furnish the Employer, upon request, such annual reports with respect to the administration of the Plan as are reasonable and appropriate; and (d) to appoint individuals to assist in the administration of the Plan and any other agents the Plan Administrator deems advisable, including legal and actuarial counsel. The Plan Administrator shall not have the power to add to, subtract from, or modify any of the terms of the Plan, to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for a benefit under this Plan. 6.15 Indemnification. To the maximum extent allowed by, and in accordance with applicable law, the Employer shall indemnify and hold harmless any Employee that is deemed to be a fiduciary against any and all losses, claims, damages, expense (including court costs and attorneys'fees), and liability arising from the Employee's duties and responsibilities in connection with the Plan, unless the same is determined to be intentional or willful. 6.16 Changes by the Plan Administrator. If the Plan Administrator determines before or during any Plan Year, the Plan or a Benefit may fail to satisfy any nondiscrimination requirement imposed by the Code or other applicable law, the Plan Administrator may take such action as the Plan Administrator deems appropriate, under rules uniformly applicable to similarly situated Participants, to further compliance with such requirements or limitation. Such action may include, without limitation, a modification of Elections by Highly Compensated Participants with or without consent of such Employees and/or a re-characterization within the Plan Year of benefits i provided under the Plan as taxable income with or without consent of such Employees. 6.17 Plan Interpretation. This Plan will be administered in accordance with its terms. The Plan Administrator and/or a third parry to the extent that such individual or entity is acting in its ©2012 Hitesman&Wold, P.A. 18 City of Elk River Flexible Benefits Plan f I fiduciary capacity, shall have the complete and final authority, responsibility, and control, in its sole discretion, to manage, administer and operate this Plan, to make factual findings, to construe the terms of this Plan, and to determine all questions arising in connection with the administration, interpretation, and application of this Plan, including, but not limited to, the eligibility and coverage of individuals and the authorization or denial of payment or reimbursement of benefits. All determinations and decisions will be binding on this Plan, Covered Individuals, claimants, and all interested parties. i i ©2012 Hitesman&Wold, P.A. 19 City of Elk River Flexible Benefits Plan i I ARTICLE VII. PLAIN AMENDMENT AND TERMINATI®N 7.1 Employer Amendments. The Employer reserves the right to amend the Plan, or any portion of the Plan, at any time. The Employer expressly may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with the law. Such amendment shall not affect any right to benefits that accrued prior to such amendment. Such amendment shall be made in writing and in accordance with Section 8.4. 7.2 Employer's Right to Terminate. Although the Employer expects the Plan to be maintained for an indefinite time, the Employer reserves the right to terminate the Plan, or any portion of the Plan, at any time. In the event of the dissolution, merger, consolidation, or reorganization of the Employer, the Plan shall terminate unless the Plan is continued by a successor to the Employer in accordance with the resolution of such successor's managing body. Such termination shall not affect any right to benefits that accrued prior to any termination. Such action shall be taken in writing and in accordance with Section 8.4. ©2012 Hitesman&Wold,P.A. 20 City of Elk River Flexible Benefits Plan ARTICLE VIII. GENERAL PROVISIONS 8.1 Plan Not a Contract of Employment. The Plan is not an employment contract and does not assure the continued employment of any Employee or Participant for any period of time. Nothing contained in the Plan shall interfere with the Employer's right to discharge an Employee or Participant at any time, regardless of the effect such discharge may have upon the individual as a Participant in this Plan. 8.2 No Right to Employer's Assets. No Employee, Participant or beneficiary thereof 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 this Plan, and then only to the extent of the benefits payable under the Plan to such Employee, Participant or beneficiary thereof. In addition,the Claims Administrator shall not be liable in any manner for such payments. 8.3 Non-Alienation of Benefits. Benefits payable under this Plan shall not be subject to anticipation, alienation, sale, transfer, execution, or levy of any kind either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a Spouse or former Spouse, or for any other relative of the Participant, prior to actually being received by the person entitled to the benefit under the terms of the Plan. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable under the Plan shall be void. The Employer, Plan Administrator and/or Claims Administrator shall not in any manner be made liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan. 8.4 Action by Employer. Whenever the Employer, under the terms of this Plan, is permitted or required to do or perform any act or matter or thing, it shall be done and performed by the managing body of the Employer or such representatives of the Employer as the managing body may designate. 8.5 No Guarantee of Tax Consequences. Notwithstanding any provision in this Plan to the contrary, neither this Plan nor the Employer make any commitment or guarantee that any amounts paid to or on behalf of a Participant under this Plan will be excludable from the Participant's gross income for federal or state income tax purposes. It shall be the obligation of each Participant to determine whether each payment is excludable from the Participant's gross income for federal and state income tax purposes, and to notify the Employer if the Participant has reason to believe that any such payment is not so excludable. 8.6 Indemnification of Employer by Participants. To the maximum extent allowed by, and in accordance with, applicable law, if any Participant receives one or more payments or reimbursements under this Plan that are not for eligible expenses, such Participant shall indemnify and reimburse the Employer for any liability it may incur for failure to withhold federal or state income tax or Social Security tax from such payment or reimbursements. However, such indemnification and reimbursement shall not exceed the amount of additional federal and state income tax that the Participant would have owed if the payments or reimbursements had been made to the Participant as regular cash compensation, plus the Participant's share of any Social Security tax that would have been paid on such compensation, less any such additional income and Social Security tax actually paid by the Participant. 8.7 Benefits Provided Through Third Parties. In the case of any Benefit provided through a third parry (e.g., an insurance company pursuant to a contract or policy with that third party), if there is any conflict or inconsistency between the description of benefits contained in this Plan and the contract or policy, the terms of the contract or policy shall control, unless prohibited by applicable law or specifically addressed in this Plan.. The Employer does not guarantee benefits payable under any insurance contract or health maintenance organization policy incorporated by reference into the Plan. Any benefits payable thereunder shall be the exclusive responsibility of the insurer or health maintenance organization that is obligated under the contract or policy. ©2012 Hitesman&Wold, P.A. 21 City of Elk River Flexible Benefits Plan I i I 8.8 Mistakes and Errors. It is recognized that in the administration of the Plan, certain administrative and accounting errors may be made or situations may arise by reason of factual errors in information supplied to the Employer or the Plan Administrator. The Employer and/or the Plan Administrator shall have the power to take such equitable steps as may be necessary to correct the mathematical, accounting or factual errors, as they, in their sole discretion, determine(s)to be appropriate. F 8.9 Limitation on Liability. The Employer does not guarantee benefits payable under any I insurance policy or other similar contract described or referred to herein, and any benefits thereunder shall be the exclusive responsibility of the Insurer or other entity that is required to provide such benefits under such policy or contract. 8.10 Governing Law. This Plan shall be construed and enforced according to the laws of Minnesota except to the extent preempted by federal law. 8.11 Family and Medical Leave Act of 1993. Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with the Family and Medical Leave Act of 1993 ("FMLA'% as amended, and the Employer's FMLA policy required thereunder, provided the Employer is subject to FMLA. 8.12 Uniformed Services Employment and Reemployment Rights Act of 1994. Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with the Uniformed Services Employment and Reemployment Act of 1994 ("USERRA"). The Plan Administrator may, within the parameters of the law, establish uniform policies by which to provide such continuation coverage required by USERRA, which shall be incorporated into this Plan by reference. 8.13 Genetic Information Nondiscrimination Act of 2008. Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with the Genetic Information Nondiscrimination Act of 2008("GINA"). 8.14 Children's Health Insurance Program Reauthorization Act of 2009. Notwithstanding any provision of the Plan to the contrary, the Plan shall be operated and maintained in a manner consistent with the Children's Health Insurance Program Reauthorization Act of 2009 ("CHIPRA'�. ©2012 Hitesman&Wold, P.A. 22 City of Elk River Flexible Benefits Plan ARTICLE IX. GROUP MEDICAL BENEFITS 9.1 Purpose. The purpose of this Article is to provide for the pre-tax payment opportunity for Group Medical Benefits under this Plan as an Optional Benefit. The Employer provides Group Medical Benefits through one or more`plans"within the meaning of Sections 105 and 106 of the Code. 9.2 Separate Written Plan. For purposes of Sections 105 and 106 of the Code, this Article shall constitute a separate written plan providing for the reimbursement or direct payment of Insurance Premium expenses. To the extent necessary, other provisions of the Plan are incorporated by reference. 9.3 Definitions. (a) Dependent means an individual (e.g., Spouse, child, etc.) who qualifies as a "dependent" under the terms and conditions of the applicable plan document governing the Group Medical Benefits. (b) Group Medical Benefits means the medical coverage made available by the Employer through this Article to which the Insurance Premiums relate. It does not include individual insurance contracts. (c) HMO means a health maintenance organization authorized to do business in the state in which it operates with which an agreement has been entered for the purpose of providing benefits under the Plan. (d) Highly Compensated Individual means an individual who is highly compensated as defined in Section 105(h)(5) of the Code. (e) Insurance Contract means (1) any insurance contract secured from an insurance company or HMO authorized to do business in the state in which such contract is issued, which has been obtained for the purpose of providing benefits under this portion of the Plan; or(2) a self-insured plan administered by a third party. (f) Insurance Premiums means the amount that must be paid on a periodic basis in return for coverage under the Insurance Contract. 9.4 Terms, Conditions and Limitations. The Employer shall secure the necessary Insurance Contracts, as identified in Exhibit A, Coverage shall begin, benefits shall be provided, and coverage shall terminate in accordance with the applicable Insurance Contracts. Such Insurance Contracts, are expressly incorporated into and made part of this Plan. 9.5 Payments. The Plan Administrator shall make Insurance Premium payments for the Group Medical Benefits on behalf of the Participant in an amount necessary to provide the benefit applicable to the Participant under this portion of the Plan for the applicable Plan Year. Such payments shall be made from Employer Contributions, if any, provided by the Employer under the Plan and, if necessary, contributions made in accordance with the salary reduction arrangement and other arrangements applicable to the Participant under the terms of the Plan. The appropriate portions shall depend on the coverage elected by the Participant. The Plan Administrator shall also make such payments on behalf of the Participant's Dependents who are enrolled in the Group Medical Benefits. To the extent a Dependent is provided coverage under the Group Medical Benefits and that Dependent is not the Participant's Spouse or Tax Dependent, the tax consequence of such coverage shall be addressed as described in Section 4.2. 9.6 Nondiscrimination. To the extent the Group Medical Benefits are subject to Section 105(h) of the Code or Section 2716 of the Public Health Services Act, they shall not discriminate in favor of ©2012 Hitesman&Wold, P.A. 23 City of Elk River Flexible Benefits Plan p Highly Compensated Individuals with respect to eligibility to participate or benefits. If the Plan Administrator determines that Group Medical Benefits are or may be discriminatory, the Plan Administrator may take action permitted by law to avoid such a result as described in Section 6.16. 9.7 Medical Child Support Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize child support orders regarding coverage under the Group Medical Benefits to the extent required by applicable law. 9.8 Continuation of Coverage. Continued coverage shall be provided under the Group Medical Benefits if it is required under, and in accordance with, the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), as amended, and, as reflected in the Public Health Services Act ("PHSA"), as amended. There shall also be compliance with applicable state laws concerning continuation of coverage to the extent not preempted by federal law. 9.9 HIPAA. The Group Medical Benefits shall comply with the Privacy Rules and Security Rules under HIPAA(if applicable) as further provided in the Insurance Contract. i i I F j ©2012 Hitesman&Wold,P.A. 24 City of Elk River Flexible Benefits Plan I I l ARTICLE X. GROUP DENTAL BENEFITS 10.1 Purpose. The purpose of this Article is to provide for the pre-tax payment opportunity for Group Dental Benefits under this Plan as a Core Benefit or Optional Benefit. The Employer offers Group Dental Benefits through one or more"plans"within the meaning of Sections 105 and 106 of the Code. 10.2 Separate Written Plan. For purposes of Sections 105 and 106 of the Code, this Article shall constitute a separate written plan providing for the reimbursement or direct payment of Insurance Premium expenses. To the extent necessary, other provisions of the Plan are incorporated by reference. 10.3 Definitions. (a) Dependent means an individual (e.g., Spouse, child, etc.) who qualifies as a "dependent" under the terms and conditions of the applicable plan document governing the Group Dental Benefits. (b) DMO means a dental maintenance organization authorized to do business in the state in which an agreement has been entered for the purpose of providing benefits under this portion of the Plan. (c) Group Dental Benefits means the dental coverage made available by the Employer through this Article to which the Insurance Premiums relate. It does not include individual insurance contracts. (d) Highly Compensated Individual means an individual who is highly compensated as defined in Section 105(h)(5) of the Code. (e) Insurance Contract means (1) any insurance contract secured from an insurance company or DMO authorized to do business in the state in which such contract is issued, which has been obtained for the purpose of providing benefits under this portion of the Plan; or (2) a self-insured plan administered by a third party. (f) Insurance Premiums means the amount that must be paid on a periodic basis in return for coverage under the Insurance Contract. 10.4 Terms, Conditions and Limitations. The Employer shall secure the necessary Insurance Contracts, as identified in Exhibit A. Coverage shall begin, benefits shall be provided, and coverage shall terminate in accordance with the applicable Insurance Contracts. Such Insurance Contracts, are expressly incorporated into and made part of this Plan. 10.5 Payments. The Plan Administrator shall make Insurance Premium payments for the Group Dental Benefits on behalf of the Participant in an amount necessary to provide the benefit applicable to the Participant under this portion of the Plan for the applicable Plan Year. Such payments shall be made from Employer Contributions, if any, provided by the Employer under the Plan and, if necessary, contributions made in accordance with the salary reduction arrangement and other arrangements applicable to the Participant under the terms of the Plan. The appropriate portions shall depend on the coverage elected by the Participant. The Plan Administrator shall also make such payments on behalf of the Participant's Dependents who are enrolled in the Group Dental Benefits. To the extent a Dependent is provided coverage under the Group Dental Benefits and that Dependent is not the Participant's Spouse or Tax Dependent, the tax consequence of such coverage shall be addressed as described in Section 4.2. ©2012 Hitesman&Wold, P.A. 25 City of Elk River Flexible Benefits Plan i i 10.6 Nondiscrimination. To the extent the Group Dental Benefits are subject to Section 105(h) of the Code, they shall not discriminate in favor of Highly Compensated Individuals with respect to eligibility to participate or benefits. If the Plan Administrator determines that the Group Dental Benefits are or may be discriminatory, the Plan Administrator may take action permitted by law to avoid such a result as described in Section 6.16. If the Group Dental Benefits fail any applicable nondiscrimination requirements, Highly Compensated Individuals shall have taxable income imputed to the extent required by law. 10.7 Medical Child Support Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize child support orders regarding coverage under the Group Dental Benefits to i the extent required by applicable law. 10.5 Continuation of Coverage. Continued coverage shall be provided under the Group Dental Benefits, if it is required under, and in accordance with, the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'), as amended, and, as reflected in the Public Health Services Act ("PHSA'% as amended. There shall also be compliance with applicable state laws concerning continuation of coverage to the extent not preempted by federal law. 10.9 HIPAA. The Group Dental Benefits shall comply with the Privacy Rules and Security Rules under HIPAA (if applicable) as further provided in the Insurance Contract. i ©2012 Hitesman&Wold, P.A. 26 City of Elk River Flexible Benefits Plan ARTICLE XI. GROUP TERM LIFE BENEFITS 11.1 Purpose. The purpose of this Article is to provide an opportunity to purchase Group Term Life Benefits under this Plan as a Core Benefit or Optional Benefit. The Employer provides Group Term Life Benefits through one or more"plans"within the meaning of Sections 79, 105, and 106 of the Code. Note; This Article does not permit pre-tax payment of Insurance Premiums for coverage other than Participant coverage (e.g., no spousal or dependent coverage). 11.2 Separate Written Plan. For purposes of Sections 79, 105 and 106 of the Code, this Article shall constitute a separate written plan providing for the reimbursement or direct payment of Insurance Premium expenses. To the extent" necessary, other provisions of the Plan are incorporated by reference. 11.3 Definitions. (a) Group Term Life Benefits means the group term life insurance and accidental death and dismemberment coverage made available by the Employer through this Article to which the Insurance Premiums relate. It does not include individual insurance contracts. The Group Term Life Benefits that are Core Benefits include accidental death and dismemberment coverage. The Group Term Life Benefits that are Optional Benefits do not include accidental death and dismemberment coverage. (b) Insurance Contract means any insurance contract secured from an insurance company authorized to do business in the state in which such contract is issued, which has been obtained for the purpose of providing benefits under this portion of the Plan. (c) Insurance Premiums means the amount that must be paid on a periodic basis in return for group coverage under the Insurance Contract(s). 11.4 Terms, Conditions and Limitations. The Employer shall secure the necessary Insurance Contracts from third party providers, as identified in Exhibit A. Coverage shall begin, benefits shall be provided, and coverage shall terminate in accordance with the applicable Insurance Contracts. Such Insurance Contracts are expressly incorporated into and made part of this Plan. 11.5 Payments. The Plan Administrator shall make Insurance Premium payments for the Group Term Life Benefits on behalf of the Participant in an amount necessary to provide the benefit applicable to the Participant under this portion of the Plan for the applicable Plan Year. Such payments shall be made from Employer Contributions, if any, provided by the Employer under the Plan and, if necessary, contributions made in accordance with the salary deduction arrangement and other arrangements applicable to the Participant under the terms of the Plan. The appropriate portions shall depend on the coverage elected by the Participant. 11.6 Tax Consequences. It is intended that the Insurance Premiums paid by the Employer for Group Term Life Benefits that are Core Benefits shall be excluded from the Participant's gross income. It is intended that the Insurance Premiums paid by the Employer for Group Term Life Benefits that are Optional Benefits, including through the Participant's allocation of the Employer Contribution, shall be included in the Participant's gross income. 11.7 Continuation/Conversion of Coverage. The Group Term Life Benefits shall comply with applicable state law regarding continuation of coverage and conversion of coverage to the extent such state laws are not preempted by federal law. In addition, any continuation and conversion rights provided under the terms of the Insurance Contract(s) through which benefits are provided shall be available to the extent they are not prohibited or preempted by federal law. ©2012 Hitesman&Wold, P,A. 27 City of Elk River Flexible Benefits Plan i I ARTICLE XII. SHORT TERM DISABILITY BENEFITS 12.1 Purpose. The purpose of this Article is to provide for the payment opportunity for Short Term Disability Benefits under this Plan as an Optional Benefit. The Employer provides Short Term Disability Benefits through one or more "plans" within the meaning of Sections 105 and 106 of the Code. 12.2 Separate Written Plan. For purposes of Sections 105 and 106 of the Code, this Article shall constitute a separate written plan providing for the reimbursement or direct payment of Insurance Premium expenses. To the extent necessary, other provisions of the Plan are incorporated by reference. 12.3 Definitions. (a) Insurance Contract means (1) any insurance contract secured from an insurance company authorized to do business in the state in which such contract is issued, which has been obtained for the purpose of providing benefits under this Plan; or (2) a self- insured plan administered by a third party. (b) Insurance Premiums means the amount that must be paid on a periodic basis in return for group coverage under the Insurance Contract. (c) Short Term Disability Benefits means the short term disability coverage made available by the Employer to which the Insurance Premiums relate. It does not include individual short term disability insurance contracts. 12.4 Terms, Conditions and Limitations. The Employer shall secure the necessary Insurance Contracts from third party providers, as identified in Exhibit A. Coverage shall begin, benefits shall be provided, and coverage shall terminate in accordance with the applicable Insurance Contracts. Such Insurance Contracts, are expressly incorporated into and made part of this Plan. 12.5 Payments. The Plan Administrator shall make Insurance Premium payments for the Short Term Disability Benefits on behalf of the Participant in an amount necessary to provide the benefit applicable to the Participant under this portion of the Plan for the applicable Plan Year. Such payments shall be made from Employer Contributions and, if necessary, contributions made in accordance with the salary deduction arrangements applicable to the Participant under the terms of the Plan. The appropriate portions shall depend on the coverage elected by the Participant. 12.6 Tax Consequences. It is intended that the Insurance Premiums paid by the Employer for a Participant's Short Term Disability Benefits shall be included in the Participant's gross income. Any benefits received as a result of the Insurance Contract under this portion of the Plan attributable to such after-tax Insurance Premiums shall be excluded from the recipient's gross income to the fullest extent permitted by law. ©2012 Hitesman&Wold, P.A. 28 City of Elk River Flexible Benefits Plan ARTICLE XIII. LONG TERM DISABILITY BENEFITS 13.1 Purpose. The purpose of this Article is to provide for the payment opportunity for Long Term Disability Benefits under this Plan as an Optional Benefit. The Employer provides Long Term Disability Benefits through one or more "plans" within the meaning of Sections 105 and 106 of the Code. 13.2 Separate Written Plan. For purposes of Sections 105 and 106 of the Code, this Article shall constitute a separate written plan providing for the reimbursement or direct payment of Insurance Premium expenses. To the extent necessary, other provisions of the Plan are incorporated by reference. 13.3 Definitions. (a) Insurance Contract means (1) any insurance contract secured from an insurance company authorized to do business in the state in which such contract is issued, which has been obtained for the purpose of providing benefits under this Plan; or (2) a self- insured plan administered by a third party. (b) Insurance Premiums means the amount that must be paid on a periodic basis in return for group coverage under the Insurance Contract. (c) Long Term Disability Benefits means the long term disability coverage made available by the Employer to which the Insurance Premiums relate. It does not include individual long term disability insurance contracts. 13.4 Terms, Conditions and Limitations. The Employer shall secure the necessary Insurance Contracts from third party providers, as identified in Exhibit A. Coverage shall begin, benefits shall be provided, and coverage shall terminate in accordance with the applicable Insurance Contracts. Such Insurance Contracts,expressly incorporated into and made part of this Plan. 13.5 Payments. The Plan Administrator shall make Insurance Premium payments for the Long Term Disability Benefits on behalf of the Participant in an amount necessary to provide the benefit applicable to the Participant under this portion of the Plan for the applicable Plan Year. Such payments shall be made from Employer Contributions and, if necessary, contributions made in accordance with the salary deduction arrangements applicable to the Participant under the terms of the Plan. The appropriate portions shall depend on the coverage elected by the Participant. 13.6 Tax Consequences. It is intended that the Insurance Premiums paid by the Employer for a Participant's Long Term Disability Benefits shall be included in the Participant's gross income. Any benefits received as a result of the coverage under this portion of the Plan attributable to such after-tax Insurance Premiums shall be excluded from the recipient's gross income to the fullest extent permitted by law. ©2012 Hitesman&Wold,P.A. 29 City of Elk River Flexible Benefits Plan I. r i l I' ARTICLE XIV. MEDICAL EXPENSE REIMBURSEMENT PLAN 14.1 Purpose. The purpose of this Article is to provide Participants with the opportunity to be reimbursed for certain eligible Medical Expenses as an Optional Benefit under the Plan. This Article is intended to qualify as a self-insured medical reimbursement plan under Section 105 of the Code so that payments received under this portion of the Plan are excludable from the gross income of the Participant under Section 105(b) of the Code. 14.2 Separate Written Plan. For purposes of Section 105 of the Code, this Article shall constitute a separate written plan providing for the reimbursement of certain Medical Expenses.To the extent necessary, other provisions of the Plan are incorporated by reference. 14.3 Definitions. (a) Claims Run-out Period means the period beginning on the first day following the close of the Grace Period and ending on thirty(30) days from the close of the Grace Period. (b) Dependent means an individual who is a Tax Dependent. (c) Highly Compensated Individual means an individual who is highly compensated as defined in Section 105(h)(5)of the Code. (d) Medical Expense means an expense incurred during the applicable Plan Year by a Participant, Spouse, or Dependent for medical care as defined in Section 213(d) of the Code, excluding premiums for health coverage and long-term care coverage. Medical care generally refers to the diagnosis, cure, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body. Also included are reasonable transportation expenses for and essential to medical care. "Medical Expense" includes over-the-counter drugs and medicines, only to the extent allowed by Section 106(0 of the Code. (e) Medical Expense Reimbursement Account ("ME Account") means the record keeping account established by the Plan Administrator for each Plan Year for each Participant from whom an Election to create such an account is received. 14.4 Medical Expense Account. The ME Account will be credited with the amount elected by the Participant at the beginning of the Plan Year. The election may consist of a salary reduction election and/or an election to allocate the Employer Contribution. A Participant's ME Account will be decreased from time to time in the amount of payments made to the Participant for eligible Medical Expenses incurred during the Plan Year and Grace Period. 14.5 Claims Determination. Claim submission, determination, and appeals shall be handled in accordance with Article VI. 14.6 Incurred Expenses. To be reimbursable, an eligible Medical Expense must have been incurred after participation in this portion of the Plan began and during the Plan Year for which reimbursement is claimed or the Grace Period related to such Plan Year. An expense is "Incurred" when the Participant is provided with the care which gives rise to the eligible Medical Expense, not when the service is billed or paid. Reimbursement shall not be made for future projected expenses. Notwithstanding the foregoing, pursuant to and in accordance with the Cafeteria Plan Regulations, the Plan may reimburse Medical Expenses for orthodontia care in advance. 14.7 Reimbursement of Expense. The Participant shall be reimbursed as specified in Section 6.7 i from the Participant's ME Account for eligible Medical Expenses incurred during the applicable Plan Year and Grace Period for which the Participant submits the documentation required under ©2012 Hitesman&Wold,P.A. 30 City of Elk River Flexible Benefits Plan I F Article VI. An amount up to the sum of the Participant's Election and reduced as of any particular time for prior reimbursements for the same Plan Year and Grace Period, shall be available for reimbursement at all times during the Plan Year. Claims for reimbursement with respect to a Plan Year and Grace Period must be submitted prior to the close of the Claims Run-out Period for such Plan Year and Grace Period. In no case shall a payment be made which exceeds the annual balance remaining in the Participant's ME Account at the time reimbursement is processed. If a claim for reimbursement exceeds the balance in the Participant's ME Account, the excess part of the claim will be denied. Under no circumstances (a) will any balance remaining in a Participant's ME Account at the end of the Grace Period be carried over to the next Plan Year; or (b) will an otherwise eligible Medical Expense be carried over to the next Plan Year. 14.8 Maximum Reimbursement. The maximum reimbursement a Participant may receive for a Plan Year under this portion of the Plan shall be the lesser of: (1) $3,000; or (2) the maximum amount of salary reduction contribution that may be made to the Medical Expense Reimbursement Plan under applicable law. The maximum reimbursement amount applies to the Participant, Spouse, and Dependent on an aggregate basis, not an individual basis. 14.9 Reimbursement Upon Termination of Participation. If an individual ceases to be a Participant in this portion of the Plan, coverage shall cease (which means that reimbursements shall cease) unless benefits under the Plan are continued as provided in Section 14.14, if applicable. If coverage ceases, reimbursements for eligible Medical Expenses incurred before participation terminated may be reimbursed if submitted within thirty (30) days of the date on which participation terminated. 14.10 Participant's Death. In the event a Participant dies having incurred an eligible Medical Expense (a) which would have been reimbursable out of the Participant's ME Account had the Participant not died; and (b) for which a person or the Participant's estate has paid for or assumed liability, reimbursement may be made to that person or the estate for that payment or assumption. The remainder of the Participant's ME Account shall be forfeited in accordance with Section 5.6. 14.11 Nondiscrimination. This portion of the Plan shall not discriminate in favor of Highly Compensated Individuals as to eligibility to participate or benefits. If the Plan Administrator determines that this portion of the Plan is or may be discriminatory, the Plan Administrator may take action permitted by law to avoid such result as provided in Section 6.16. If the Plan fails any applicable nondiscrimination requirements, Highly Compensated Individuals shall have taxable income imputed to the extent required by law. 14.12 ME Account Forfeiture. (a) ME Account Claims Grace Period. The Claims Grace Period shall apply to this Optional Benefit. (1) Length. The Claims Grace Period for the Medical Expense Reimbursement Plan shall expire on March 151h of the following year. (2) Processing of Claims. Claims incurred during the Claims Grace Period, and submitted prior to the close of the Claims Run-Out Period, shall be first allocated to and reimbursed from the Participant's ME Account for the preceding Plan Year until such ME Account is exhausted. Thereafter, any such claims shall be allocated to and reimbursed from the Participant's ME Account for the current Plan Year. Claims incurred during the Claims Grace Period will be allocated based upon the date the claim is received. Once a claim is allocated, there shall be no changes, modifications, or adjustments to the allocation of the account. ©2012 Hitesman&Wold, P.A. 31 City of Elk River Flexible Benefits Plan I' f I' € In accordance with this part (1), a claim incurred during the preceding Plan Year and submitted during the Claims Run-Out Period will be processed subsequent to a previously submitted claim incurred during the Claims Grace Period, even if the account from the preceding Plan Year is exhausted by reimbursement of the claim incurred during the Claims Grace Period. (3) Elections. No adjustment to a Participant's election for the current Plan Year shall be made or allowed based upon the amount of claims reimbursed from the prior Plan Year's account in accordance with part(1) hereof. (b) ME Account Claims Run-Out Period. Amounts attributed to a Participant's ME Account for any Plan Year shall be used only to reimburse the Participant for eligible Medical Expenses incurred during such Plan Year. Any balance remaining in a Participant's ME Account for a Plan Year shall be forfeited following the end of Claims Run-Out Period and shall be forfeited in accordance with Section 5.6. The Plan Administrator may extend this period in the event the Participant cannot obtain proper documentation until after the expiration of the period. Such forfeited amount shall not be distributed in cash, carried over to the next Plan Year or used by the Participant for any other purpose. 14.13 Medical Child Support Orders. Notwithstanding any provision of the Medical Expense Reimbursement Plan to the contrary, this Plan shall recognize child support orders regarding coverage under the Medical Expense Reimbursement Plan to the extent required by applicable law. 14.14 Continuation of Coverage. Continued coverage shall be provided under the Medical Expense Reimbursement Plan as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'S, as amended. The Plan Administrator may, within the parameters of the law, establish uniform policies by which to provide such continuation coverage required by COBRA, which shall be incorporated herein by reference. 14.15 HIPAA. The Medical Expense Reimbursement Plan shall comply with the Privacy Rules and Security Rules under HIPAA (if applicable) as further provided in Article XX. In addition, the Medical Expense Reimbursement Plan shall comply with the portability requirements under HIPAA, if applicable. 14.16 Further Limitations on Benefits. (a) This Article does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are payable under any worker's compensation law or other employer, union, association or governmental sponsored group insurance plan. (b) This Article does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are received by the Participant, the Participant's Spouse or the Participant's Dependent under any health and accident insurance policy or program, whether or not premiums are paid by the Employer or the Participant, the Participant's Spouse or the Participant's Dependent child. (c) Amounts reimbursed under a dependent care assistance program described in Section 129 of the Code shall not be reimbursed under this Plan. (d) A Participant in the Plan may not participate under this Article and contribute to an HSA. ©2012 Hitesman&Wold,P.A. 32 City of Elk River Flexible Benefits Plan ARTICLE XV. DEPENDENT CARE EXPENSE REIMBURSEMENT PLAN 15.1 Purpose. The purpose of this Article is to provide Participants with the opportunity to be reimbursed for eligible Dependent Care Expenses as an Optional Benefit under the Plan. This Article is intended to qualify as a "dependent care assistance program" under Section 129 of the Code so that payments received under this portion of the Plan are excludable from the gross income of the Participant under Section 129(a) of the Code. This Dependent Care Expense Reimbursement Plan is not subject to ERISA. 15.2 Separate Written Plan. For purposes of Section 129 of the Code, this Article shall constitute a separate written plan providing reimbursement of certain Dependent Care Expenses. To the extent necessary, other provisions of the Plan are incorporated by reference. 15.3 Definitions. (a) Claims Run-out Period means the period beginning on the first day following the close of the Plan Year and ending on thirty(30) days from the close of the Plan Year. (b) Dependent Care Account ("DC Account") means the record keeping account established by the Plan Administrator for each Plan Year for each Participant from whom an Election to create such an account is received. (c) Dependent Care Center shall have the meaning given such term in Sections 21(b)(2)(C) and 21(b)(2)(D) of the Code: a facility that (1) complies with all applicable laws and regulations of the state and town, city or village in which it is located; (2) provides care for more than six individuals (other than individuals who reside at the facility); and (3) receives a fee, payment or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit). (d) Dependent Care Expenses means amounts paid by the Participant for services that would be considered employment-related expenses under Section 21(b)(2) of the Code, any applicable proposed or final regulations issued thereunder, or any guidance issued by the IRS interpreting or applying any of the foregoing. Employment-related expenses for purposes of this Plan include expenses incurred to enable a Participant to be Gainfully Employed during any period for which there are one or more Qualifying Individuals with respect to the Participant for (1) household services; and (2) care of a Qualifying Individual. However, employment-related expenses which are incurred for services outside the Participant's household shall be considered Dependent Care Expenses only if incurred for the care of a Qualifying Individual described in Section 15.3(i)(1) below or a Qualifying Individual not described in Section 15.3(i)(1) below who regularly spends at least eight (8) hours each day in the Participant's household. Dependent Care Expenses do not include expenses which are incurred for services provided by a Dependent Care Center if such center does not comply with all applicable laws and regulations of the applicable state or other unit of local government which regulates the center. In addition, Dependent Care Expenses shall not include any amounts paid to an individual who: (1) is a child of such Participant (within the meaning of Section 152(f)(1) of the Code)who is under the age of nineteen (19) at the close of such taxable year; (2) with respect to whom, for such taxable year, a deduction is allowable under Section 151(c) of the Code (relating to personal exemptions for dependents) to such Participant or the Spouse of such Participant; (3) is the Spouse of the Participant at any time during the taxable year; or ©2012 Hitesman&Wold, P.A. 33 City of Elk River Flexible Benefits Plan I' t' (4) is the parent of the Participant's child who is a Qualifying Individual (e) Earned Income shall have the meaning given such term in Section 32(c)(2) of the Code (which refers to wages, salaries, tips and other Employee Compensation as well as net earnings from self-employment), but shall not include any amounts reimbursed by the Employer under this portion of the Plan. Further, if a Participant's Spouse is a Student or incapable of caring for himself or herself, the provisions of Section 21(d)(2) of the Code shall apply in determining the Earned Income of that Spouse. Generally, this Section provides that a Spouse of a Participant shall be deemed to have Earned Income of not less than $250 per month if there is one Qualifying Individual with respect to the k Participant or $500 per month if there are two or more Qualifying Individuals with respect to the Participant. i (f) Gainfully Employed means the earning of income for services performed or the period of active search for gainful employment. Nominal reimbursement for volunteer work is not considered gainful employment. (g) Highly Compensated Employees means Employees who are"highly compensated"as defined in Section 414(q) of the Code. (h) Non-Highly Compensated Participants means Employees who are not Highly Compensated Employees. (i) Qualifying Individual means a person for whom expenses can be submitted for reimbursement. A Qualifying Individual is an individual who is a"qualifying individual"as defined in Section 21 of the Code. Under Section 21 of the Code: (1) A Qualifying Individual is: i. the Participant's"qualifying child" under Section 152 of the Code who is under age thirteen (13); ii. the Participant's "qualifying child" under Section 152 of the Code (determined without regard to Sections 152(b)(1) and (b)(2) of the Code) who is mentally or physically unable to care for himself or herself; iii. the Participant's "qualifying relative" under Section 152 of the Code (determined without regard to Sections 152(b)(1), (b)(2), and (d)(1)(13) of the Code) who: (1) is mentally or physically unable to care for himself or herself; and (2) has the same principal place of abode as the Participant for at least one-half of the year; or iv. the Participant's Spouse who: (1) is mentally or physically unable to care for himself or herself; and (2) has the same principal place of abode as the Participant for at least one-half of the year. (2) With the exception of two parents that file income taxes jointly, only one person l is entitled to treat the child as a Qualifying Individual. Where multiple people are involved, there are two special rules to determine which person is entitled to treat the child as a Qualifying Individual. t ©2012 Hitesman&Wold, P,A, 34 City of Elk River (; Flexible Benefits Plan i. Divorced or Separated Parents, or Parents Living Apart. If a child's parents are divorced, legally separated, separated pursuant to a written agreement, or live apart at all times during the last six (6) months of the calendar year, a special rule applies if: (1) the child is under age 13 or is mentally or physically unable to care for himself or herself; (ii) the child receives more than 50% of his or her support from the parents (in aggregate); and (iii) the child resides with the parents (in aggregate) for more than 50% of the year. In such situations, the child is the Qualifying Individual of the custodial parent even if the custodial parent has released the right to claim the child as a dependent. The custodial parent is the parent identified in Section 152(e) of the Code (i.e., generally the parent with whom the child resides for the greater number of nights during the calendar year or, if the child resides with both parents for an equal number of nights, the parent with the higher adjusted gross income for the year). ii. Two or More Persons Claiming a Child as a Qualifying Individual. If the special rule described above regarding divorce, etc. does not apply, the special tie-breaker rules of Section 152(c)(4) of the Code may apply. If an individual is a qualifying child (as defined in Section 152 of the Code) with respect to more than one person, then: a. If both persons are the individual's parents and they file a joint federal income tax return, the child is the Qualifying Individual of both parents. b. If both persons are the individual's parents and they file separate federal income tax returns, then the child is the Qualifying Individual of the parent with whom the child resided for the longest period of time during the calendar year (or, if child resides with both parents for the same amount of time during the year, the parent with the highest adjusted gross income for the year). However, if that parent (i.e., the custodial parent or the parent with the highest adjusted gross income) does not claim the child as a qualifying child (as defined in Section 152 of the Code) for any purpose (i.e., a dependent care expense reimbursement program, the earned income credit, the dependency deduction, the child tax credit, and the dependent care credit), then the child is the Qualifying Individual of the other parent (i.e., the non-custodial parent or the parent with the lowest adjusted gross income). This is the one person that is entitled to treat the child as a Qualifying Individual. C. If one person is the individual's parent and the other is not, the child is the Qualifying Individual of the parent. However, if the parent does not claim the child as a qualifying child (as defined in Section 152 of the Code) for any purpose (i.e., a dependent care expense reimbursement program, the earned income credit, the dependency deduction, the child tax credit, and the dependent care credit), then the child is the Qualifying Individual of the other person (i.e., the non-parent). This is the one person that is entitled to treat the child as a Qualifying Individual. d. If neither person is the individual's parent, the child is the Qualifying Individual of the person with the highest adjusted ©2012 Hitesman&Wold,P.A. 35 City of Elk River Flexible Benefits Plan i F i i gross income for the year in question. However, if that person does not claim the child as a qualifying child (as defined in Section 152 of the Code) for any purpose (i.e., a dependent care expense reimbursement program, the earned income credit, the dependency deduction, the child tax credit, and the dependent care credit), then the child is the Qualifying Individual of the other person (i.e., the person with the lowest adjusted gross income). This is the one person that is entitled to treat the child as a Qualifying Individual. (j) Student shall have the meaning provided in Section 21(e)(7) of the Code which means an individual who during each of five (5) calendar months during the taxable year is a full time student at an educational organization which normally maintains a regular facility and curriculum and normally has a regularly enrolled body of students in attendance at the place where its educational activities are regularly carried on as provided in Sections 21(e)(8) and 170(b)(1)(A)(ii) of the Code. 15.4 Dependent Care Account. The DC Account will be credited as of each date Compensation is paid to the Participant with a pro-rated portion of the Participant's Election for the Plan Year, A Participant's DC Account will be decreased from time to time in the amount of payments made to the Participant for eligible Dependent Care Expenses incurred during the Plan Year. 15.5 Claims Determination. Claim submission, determination, and appeals shall be handled in accordance with Article VI. 15.6 Incurred Expenses. To be reimbursable, an eligible Dependent Care Expense must have been incurred after participation in this portion of the Plan began and during the Plan Year for which reimbursement is claimed related to such Plan Year. An expense is "incurred" when the Participant is provided with the care which gives rise to the eligible Dependent Care Expense, not when the service is billed or paid. Reimbursement shall not be made for future or projected expenses. 15.7 Reimbursement of Expense. The Participant shall be reimbursed as specified in Section 6.7 from the Participant's DC Account for eligible Dependent Care Expenses incurred during the applicable Plan Year for which the Participant submits the documentation required under Article VI. In no case shall a payment be made which exceeds the balance in the Participant's DC Account at the time reimbursement is processed. Claims for reimbursement must be submitted prior to the close of the Claims Run-out Period for such Plan Year. If a claim for reimbursement exceeds the available balance in the Participant's DC Account, the excess part of the claim will be carried over and paid as the Participant's DC Account becomes adequate. Under no circumstances (a) will any balance remaining in a Participant's DC Account at the end of the Plan Year be carried over to the next Plan Year; or (b) will an otherwise eligible Dependent Care Expense be carried over to the next Plan Year. 15.8 Maximum Reimbursement. The maximum reimbursement which a Participant may receive in a tax year under this portion of the Plan shall be the lesser of: (a) the Participant's Earned Income for the tax year; (b) the actual or deemed Earned Income of the Participant's Spouse for the tax year; or (c) $5,000 (or in the case of a Participant who is married and filing a separate income tax return from his or her Spouse, $2,500). ©2012 Hitesman&Wold,P.A. 36 City of Elk River Flexible Benefits Plan This maximum includes the Employer Contribution, if any, DC Account forfeitures and the Participant's salary reduction. If a Participant is married and the Spouse of the Participant also participates in a dependent care program under Section 129 of the Code, the combined reimbursements may not exceed the limits described above for the tax year. It shall be the Participant's responsibility to monitor the combined reimbursements. 15.9 Reimbursement Upon Termination of Participation. If an individual ceases to be a Participant in this portion of the Plan during a Plan Year, no further contributions will be credited to the DC Account. However, expenses incurred while a Participant may be reimbursed if submitted within thirty(30) days from the close of the Plan Year. 15.10 Participant's Death. In the event a Participant dies having incurred an eligible Dependent Care Expense (a) which would have been reimbursable out of the Participant's DC Account had the Participant not died, and (b) for which a person or the Participant's estate has paid for or assumed liability, reimbursement may be made to that person or the estate for that payment or assumption. The remainder of the Participant's DC Account shall be forfeited in accordance with Section 5.6. 15.11 Nondiscrimination. This portion of the Plan shall not discriminate in favor of Highly Compensated Employees or their Dependents with respect to eligibility, contributions or benefits. The average eligible Dependent Care Expenses paid to Non-Highly Compensated Employees shall be at least fifty-five percent (55%) of the average eligible Dependent Care Expenses paid to Highly Compensated Employees. If benefits are provided through salary reduction agreements, Employees with annual compensation less than $25,000 may be excluded. If the Plan Administrator determines that the Plan is or will be discriminatory, the Plan Administrator may take any action permitted by law to avoid such result in accordance with Section 6.16. If this portion of the Plan fails any applicable nondiscrimination requirements, Highly Compensated Employees shall have taxable income imputed to the extent required by law. 15.12 DC Account Forfeiture. Amounts attributed to a Participant's DC Account for any Plan Year shall be used only to reimburse the Participant for eligible Dependent Care Expenses incurred during such Plan Year. Any balance remaining in a Participant's DC Account for a Plan Year shall be forfeited following the Claims Run-out Period and shall be forfeited in accordance with Section 5.6. The Plan Administrator may extend this period in the event the Participant cannot obtain proper documentation until after the expiration of the period. Such forfeited amount shall not be distributed in cash, carried over to the next Plan Year or used by the Participant for any other purpose. 15.13 Dependent Care Limitations. Reimbursement or payment of eligible Dependent Care Expenses shall be made to the Participant only in the event and to the extent that such reimbursement or payment is: (a) not otherwise provided under any insurance policy, whether the premium on such policy is paid by the Employer or an individual; and (b) not provided for or reimbursable under any other plan or policy. 15.14 Reporting and Disclosure. Each Participant must be furnished with a written statement showing the amounts paid under this portion of the Plan by an Employer on behalf of the Participant for a calendar year. The statement must be furnished before January 31st of the following year. If the actual amount paid is not known by this deadline, the Employer may report a reasonable estimate of the amounts paid under this portion of the Plan. ©2012 Hitesman&Wold, P.A. 37 City of Elk River Flexible Benefits Plan E f ARTICLE XVI. HSA CONTRIBUTION FEATURE 16.1 Purpose. The purpose of this Article is to provide for the pre-tax funding of an HSA under this Plan as an Optional Benefit. 16.2 Separate Written Plan. For purposes of Section 223 of the Code, this Article shall constitute a separate written plan. To the extent necessary, other provisions of the Plan are incorporated by reference. 16.3 Definitions. (a) HSA means a health savings account under Section 223 of the Code established and owned by a Participant to which contributions are made under this portion of the Plan. The trustee or custodian of the HSA shall be selected by the Participant from among several Employer-approved trustees and custodians. The Employer does not sponsor a Participant's HSA, and a Participant's HSA is not an employer-sponsored group health plan. (b) HSA Contribution Feature means the portion of the Plan described in this Article, which consists of the ability to contribute to a Participant's HSA through salary reduction and allocation of Employer Contributions, if any. (c) High Deductible Health Plan means a "qualifying high deductible health plan" under Section 223(c)(2) of the Code, including those not sponsored by the Employer. (d) Permitted Insurance or Permitted Coverage means; (1) insurance in which substantially all of the coverage relates to liabilities incurred under workers' compensation laws, tort liabilities, liabilities related to ownership or use of property, or similar liabilities as specified by the IRS; (2) insurance for specified disease or illness (e.g., cancer insurance); (3) insurance that pays a fixed amount per day (or other period) of hospitalization (e.g., hospital indemnity insurance); (4) coverage for accidents, disability, dental care, vision care, preventive care, or long-term care; (5) some medical reimbursement accounts and health reimbursement arrangements ("HRAs'� (e.g., limited scope medical reimbursement accounts and HRAs, suspended HRAs, post-deductible medical reimbursement accounts and HRAs, and retirement HRAs); and (6) some wellness programs and employee assistance programs (e.g., those that do not provide significant benefits in the nature of non-preventive medical care or treatment). 16.4 Eligibility. To be eligible for HSA contributions, the Employee must; (a) be eligible to participate in this Plan under Section 3.1; (b) be covered by the High Deductible Health Plan; ©2012 Hitesman&Wold,P.A. 38 City of Elk River Flexible Benefits Plan (c) not be claimed as another person's dependent for purposes of such person's federal income tax return; (d) not be actually covered by Medicare; and (e) not have any health coverage other than Permitted Insurance, Permitted Coverage, or coverage under a high deductible health plan (as defined under Section 223(c)(2) of the Code), whether or not such coverage is sponsored by the Employer. Participation in this HSA Contribution Feature component shall cease upon the earlier of the date upon which the Participant no longer satisfies the foregoing eligibility requirements or the date determined under Section 3.4 of this Plan. 16.5 Contributions. (a) Employer Contributions. Employer Contributions, if any, will be contributed to the Participant's HSA at the times established by the Employer. (b) Employee Contributions. Amounts withheld from a Participant's Compensation pursuant to an agreement authorizing salary reduction with respect to this Optional Benefit shall be contributed to the Participant's HSA as soon as administratively feasible. 16.6 Limits on Contributions. Contributions made by a Participant and/or on a Participant's behalf (i.e., Employer Contributions) into the HSA under this Plan are limited in accordance with the following rules. (a) General Limit. During a taxable year, total contributions to all health savings account owned by a Participant cannot exceed the indexed amount established under Section 223 of the Code. (b) Catch Up Contributions. An additional "catch-up" amount (determined on a monthly basis) can be contributed for eligible individuals who attain age 55 before the close of the taxable year. (c) Pro-rated Limit if Not Eligible on December 1St. If a Participant is eligible for HSA contributions during a taxable year but ceases to be eligible prior to December 1St of that taxable year, the contribution limit for that taxable year shall be determined by multiplying 1/12 of the applicable limit by the number of months the first day of which the Participant was eligible for HSA contributions. This pro-rated limit shall apply to all contributions made during the applicable taxable year, including those contributions made prior to the date on which the Participant ceased to be eligible for HSA contributions. (d) Special Rule if Eligible on December 1St. If a Participant becomes eligible for HSA contributions during the taxable year and is eligible on December 1s' of such year, the Participant shall be deemed to have been eligible for each month in such taxable year and may make or receive HSA contributions up to the full annual limit. This special rule applies to all contributions made during the applicable taxable year, including contributions made prior to or after December V. i Example: An Eligible Employee becomes eligible for HSA contributions on July 1St and remains eligible through December 1St. The Eligible Employee may begin making contributions to his or her HSA through this Plan on July 1St at a rate pursuant to which the full annual contribution will have been made by the end of the taxable year. ©2012 Hitesman&Wold,P.A. 39 City of Elk River Flexible Benefits Plan i f I l i If a Participant to whom this special rule applies ceases to be eligible for HSA contributions within the twelve (12) month period beginning with the last month of such taxable year other than by reason of death or disability (as described in Section 72(m)(7) of the Code), then any contribution made in excess of the annual limit under the general rule described above will be included in the Participant's gross income and will be subject to an excise tax as provided in Section 223(b)(8)(B) of the Code. (e) Special Rule for Married Participants. If the Participant is married and both the Participant and Participant's Spouse have coverage under a high deductible health plan (as defined in Section 223 of the Code), the applicable limit is divided equally between them (unless they agree to a different allocation). (f) Rollover Contributions. Rollover contributions may also be made to the HSA from another health savings account or from an Archer MSA. Rollover contributions are not subject to the contribution limit described above. (g) 'Treatment of Excess Contributions. To the extent total contributions to a Participant's health savings accounts made during the taxable year exceed the applicable limit on such contributions, then the contributions in excess of the limit shall be included in the Participant's gross income and shall be subject to an excise tax as provided in Section 4973(g) of the Code, unless returned in accordance with Section 223(f)(3) of the Code. 16.7 Investment of HSA Funds. A Participant may invest his or her HSA funds as allowed by the HSA trustee/custodian. The Employer shall have no control or responsibility for how a Participant's NSA funds are invested. 16.8 Tax Consequences. It is intended that the HSA contributions made under this Plan shall be excluded from the Participant's gross income under Section 223 of the Code. 16.9 Distribution of HSA Funds. The Employer shall have no responsibility or control over distributions made from a Participant's HSA. The Employer shall have no responsibility to substantiate expenses for which such distributions are made. Sections 6.7 and 6.8 of this Plan shall not apply to distributions from a Participant's HSA. A Participant need not be a Participant in this Plan, be covered by a High Deductible Health Plan of this Employer, nor be covered by any other high deductible health plan in order to receive a distribution from the Participant's HSA. 16.10 Reporting. The Employer shall be responsible for reporting contributions made to a Participant's HSA through this Plan on the Participant's Form W-2. Participants shall be responsible for reporting contributions to their HSAs and distributions from their HSAs on appropriate forms. Participants shall also be responsible for determining whether an HSA distribution is taxable. 16.11 Continuation of Coverage. This HSA Contribution Feature and the underlying HSAs are not group health plans for purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985, ("COBRA'S, as amended, and reflected in the Public Health Services Act ("PHSA'% as amended, the Family and Medical Leave Act ("FMLA"), and the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"). COBRA, FMLA, and USERRA do not apply to this HSA Contribution Feature and the underlying HSAs. ©2012 Hitesman&Wold, P.A. 40 City of Elk River Flexible Benefits Plan ARTICLE XVII. LIMITED SCOPE MEDICAL EXPENSE REIMBURSEMENT PLAN 17.1 Purpose. The purpose of this Article is to provide Participants with the opportunity to be reimbursed for certain eligible Limited Scope Medical Expenses as an Optional Benefit under the Plan. This Article is intended to qualify as a medical reimbursement plan under Section 105 of the Code so that payments received under this portion of the Plan are excludable from the gross income of the Participant under Section 105(b) of the Code. This Article is also intended to be "permitted coverage" for purposes of determining eligibility for health savings account contributions under Section 223 of the Code. 17.2 Separate Written Plan. For purposes of Section 105 of the Code, this Article shall constitute a separate written plan providing for the reimbursement of Limited Scope Medical Expenses. This is a separate and distinct"plan"from the Medical Expense Reimbursement Plan described under Article XV. To the extent necessary, other provisions of the Plan are incorporated by reference. 17.3 Definitions. (a) Claims Run-Out Period means the period beginning on the first day following the close of the Grace Period and ending on thirty(30) days from the close of the Grace Period. (b) Dependent means an individual who is a Tax Dependent. (c) Highly Compensated Individual means an individual who is highly compensated as defined in Section 105(h)(5) of the Code. (d) Limited Scope Medical Expense Account ("Limited Scope ME Account") means the record keeping account established by the Plan Administrator for each Plan Year for each Participant from whom an Election to create such an account is received. (e) Limited Scope Medical Expense means an expense incurred during the applicable Plan Year by a Participant or by the Spouse or Dependent of a Participant for dental and vision within the meaning of "medical care" as defined in Section 213(d) of the Code. However, a Participant may not be reimbursed for dental and vision care of the type covered under the"qualifying high deductible plan" under Section 223(c)(2) of the Code, and a Participant may not be reimbursed for the cost of other dental or vision coverage such as premiums paid under plans maintained by an employer of the Participant's Spouse or individual policies maintained by the Participant or his or her Spouse or Dependent. "Limited Scope Medical Expense" shall include drugs and medicine only to the extent allowed by Section 106(f) of the Code. 17.4 Limited Scope Medical Expense Account. The Limited Scope ME Account will be credited with the amount elected by the Participant and the Employer Contribution, if any, at the beginning of the Plan Year. A Participant's Limited Scope ME Account will be decreased from time to time in the amount of payments made to the Participant for eligible Limited Scope Medical Expenses incurred during the Plan Year and Grace Period, if applicable. 17.5 Claims Determination. Claim submission, determination, and appeals shall be handled in accordance with Article VI. I I 17.6 Incurred Expenses. To be reimbursable, an eligible Limited Scope Medical Expense must have been incurred after participation in this portion of the Plan began and during the Plan Year for which reimbursement is claimed or the Grace Period related to such Plan Year, if applicable. An expense is "incurred" when the Participant is provided with the care which gives rise to the eligible Limited Scope Medical Expense, not when the service is billed or paid. Reimbursement shall not be made for future projected expenses. Notwithstanding the foregoing, pursuant to and ©2012 Hitesman&Wold, P.A. 41 City of Elk River Flexible Benefits Plan in accordance with the Cafeteria Plan Regulations, the Plan may reimburse expenses for orthodontia care in advance. 17.7 Reimbursement of Expense. The Participant shall be reimbursed as specified in Section 6.7 from the Participant's Limited Scope ME Account for eligible Limited Scope Medical Expenses incurred during the applicable Plan Year, and the Grace Period, if applicable, for which the Participant submits the documentation required under Article VI. An amount up to the sum of the Participant's Election and the Employer Contribution, if any, and reduced as of any particular time for prior reimbursements for the same Plan Year, shall be available for reimbursement at all times during the Plan Year, and the Grace Period, if applicable. Claims for reimbursement within a Plan Year, and the Grace Period, if applicable, must be submitted prior to the close of the j Claims Run-Out Period for such Plan Year. In no case shall a payment be made which exceeds the annual balance remaining in the Participant's Limited Scope ME Account at the time reimbursement is processed. If a claim for reimbursement exceeds the balance in the Participant's Limited Scope ME Account, the excess part of the claim will be denied. Under no circumstances (a) will any balance remaining in a Participant's Limited Scope ME Account at the end of the Plan Year, and the Grace Period, if applicable, be carried over to the next Plan Year; or (b) will an otherwise eligible Limited Scope Medical Expense be carried over to the next Plan Year. 17.5 Maximum Reimbursement. The maximum reimbursement a Participant may receive for a Plan Year under this portion of the Plan shall be the lesser of: (1) $3,000; or (2) the maximum amount of salary reduction contribution that may be made to the Medical Expense Reimbursement Plan under applicable law. The maximum reimbursement amount applies to the Participant, Spouse, and Dependent on an aggregate basis, not an individual basis. 17.9 Reimbursement Upon Termination of Participation. If an individual ceases to be a Participant in this portion of the Plan, coverage shall cease (which means that reimbursements shall cease) unless benefits under the Plan are continued as provided in Section 17.14. If coverage ceases, reimbursements for eligible Limited Scope Medical Expenses incurred before participation terminated may be reimbursed If submitted within thirty (30) days of the date on which participation was terminated. 17.10 Participant's Death. In the event a Participant dies having incurred an eligible Limited Scope Medical Expense (a) which would have been reimbursable out of the Participant's Limited Scope ME Account had the Participant not died; and (b) for which a person or the Participant's estate has paid for or assumed liability for the expense, reimbursement may be made to that person or the estate for that payment or assumption. The remainder of the Participant's Limited Scope ME Account shall be forfeited in accordance with Section 5.6. 17.11 Nondiscrimination. This portion of the Plan shall not discriminate in favor of Highly Compensated Individuals as to eligibility to participate or benefits. If the Plan Administrator determines that this portion of the Plan is or may be discriminatory, the Plan Administrator may take action permitted by law to avoid such result. If the Plan fails any applicable nondiscrimination requirements, Highly Compensated Individuals shall have taxable income imputed to the extent required by law. j 17.12 Limited Scope ME Account Forfeiture. (a) Limited Scope ME Claims Grace Period. The Claims Grace Period for the Medical Expense Reimbursement Plan shall expire on March 15th of the following year. (b) Limited Scope ME Account Claims Run-Out Period. Amounts attributed to a Participant's Limited Scope ME Account for any Plan Year shall be used only to reimburse the Participant for eligible Limited Scope Medical Expenses incurred during such Plan ©2012 Hitesman&Wold, P.A. 42 City of Elk River Flexible Benefits Plan i Year. Any balance remaining in a Participant's Limited Scope ME Account for a Plan Year shall be forfeited following the end of Claims Run-Out Period and shall be forfeited in accordance with Section 5.6. The Plan Administrator may extend this period in the event the Participant cannot obtain proper documentation until after the expiration of the period. Such forfeited amount shall not be distributed in cash, carried over to the next Plan Year or used by the Participant for any other purpose. 17.13 Medical Child Support Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize child support orders regarding coverage under this Limited Scope Medical Expense Reimbursement Plan to the extent required by applicable law. 17.14 Continuation of Coverage. Continued coverage shall be provided under this Limited Scope Medical Expense Reimbursement Plan as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'S, as amended, and, as reflected in the Public Health Services Act(°PHSA'�, as amended. 17.15 HIPAA. The Limited Scope Medical Expense Reimbursement Plan shall comply with the Privacy Rules and Security Rules under HIPAA (if applicable) as further provided in Article XIX. In addition, the Limited Scope Medical Expense Reimbursement Plan shall comply with the portability requirements under HIPAA, if applicable. 17.16 Further Limitations on Benefits. (a) This Article does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are payable under any worker's compensation law or other employer, union, association or governmental sponsored group insurance plan. (b) This Article does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are received by the Participant, the Participant's Spouse or the Participant's Dependent under any health and accident insurance policy or program, whether or not premiums are paid by the Employer or the Participant, the Participant's Spouse or the Participant's Dependent child. (c) Amounts reimbursed under a dependent care assistance program described in Section 129 of the Code shall not be reimbursed under this Plan. i ©2012 Hitesman&Wold, P.A. 43 City of Elk River Flexible Benefits Plan ARTICLE XVIII. CASH PAYMENT 18.1 Purpose. The purpose of this Article is to describe the Cash Payment available under this Plan as an Optional Benefit. The Employer Contribution that is not allocated for the purposes of benefits under this Plan may be available to the Participant in cash as provided herein. 18.2 Terms, Conditions and Limitations. A Participant is required to allocate the Employer Contribution to pay for Core Benefits and may allocate the Employer Contribution for Optional Benefits. To the extent a Participant waives Group Medical Benefits and does not allocate all of the Employer Contribution to Benefits available under this Plan, a Participant shall receive a Cash Payment of the unused Employer Contribution. 15.3 Payment. Cash Payments shall be made at least monthly and within the month that the Employer Contribution would otherwise have been used for benefits. Cash Payments shall be made only to Participants. If a Participant ceases to meet the eligibility requirements, then Cash Payments shall cease. 15.4 Tax Consequences. Any cash payment received through the Plan is taxable income to the Participant. ©2012 Hitesman&Wold, P.A. 44 City of Elk River Flexible Benefits Plan ARTICLE XIX. HIPAA PROVISIONS The Privacy Rules and Security Rules under HIPAA apply to the Medical Expense Reimbursement Plan and the Limited Scope Medical Expense Reimbursement Plan unless such Optional Benefits are self- insured and have less than fifty (50) Participants and the Employer is the Claims Administrator for such Optional Benefits for the purposes of this Article XIX, such Optional Benefits are referred to as the"Plan." 19.1 Use and Disclosure of PHI. The Plan will use PHI to the extent allowed by, and in accordance with the uses and disclosures permitted by, HIPAA. Specifically, the plan will use and disclose PHI for purposes related to health care treatment, payment for health care and health care operations. The Plan will also use and disclose PHI as required by law and as permitted by authorization of the subject of PHI. If the Plan discloses PHI to the Employer in accordance with this Article XIX, the Employer may use and further disclosure PHI for the same purposes and in the same situations as the Plan may use and disclose PHI, provided that such use or disclosure is for Plan administration functions performed by the Employer for the Plan or is required by law or permitted by authorization. All uses and disclosures of PHI, whether by the Plan or by Employer, shall be limited to the minimum PHI necessary to accomplish the intended purpose of the use or disclosure in accordance with HIPAA. Notwithstanding the foregoing, neither the Plan nor the Employer shall use PHI that is genetic information in a manner that is prohibited by the Genetic Information Nondiscrimination Act of 2008. (a) Payment includes activities undertaken by the Plan to obtain premiums or determine or fulfill its responsibility for coverage and provision of Plan benefits that relate to an individual to whom health care is provided. These activities include, but are not limited to, the following: (1) determination of eligibility, coverage and cost sharing amounts (for example, cost of a benefit, Plan maximums and co-payments as determined for an individual's claim); (2) coordination of benefits; (3) adjudication of health benefits claims (including appeals and other payment disputes); (4) subrogation of health benefit claims; (5) establishing employee contributions; (6) risk adjusting amounts due based on enrollee health status and demographic characteristics; (7) billing, collection activities, and related health care data processing; (8) claims management and related health care data processing, including auditing payments, investigating and resolving payment disputes and responding to participant inquiries about payments; (9) obtaining payment under a contract for reinsurance (including stop-loss and excess of loss insurance); (10) medical necessity reviews or reviews of appropriateness of care or justification of charges; ©2012 Hitesman&Wold,P.A. 45 City of Elk River Flexible Benefits Plan f E (11) utilization review, including pre-certification, preauthorization, concurrent review and retrospective review; l (12) disclosure to consumer reporting agencies related to the collection of premiums or reimbursement (the following PHI may be disclosed for payment purposes: name and address, date of birth, Social Security number, payment history, account number and name and address of provider and/or health plan); and (13) reimbursement to the Plan. (b) Health care operations include, but are not limited to,the following activities: (1) quality assessment; i r (2) population-based activities relating to improving health or reducing health care I costs, protocol development, case management and care coordination, disease management, contacting health care providers and patients with information about treatment alternatives and related functions; (3) rating provider and Plan performance, including accreditation, certification, licensing or credentialing activities; (4) underwriting, premium rating and other activities relating to the creation, renewal or replacement of a contract of health insurance or health benefits, and ceding, securing or placing a contract for reinsurance of risk relating to health care claims (including stop-loss insurance and excess of loss insurance); (5) conducting or arranging for medical review, legal services and auditing function, including fraud and abuse detection and compliance programs; (6) business planning and development, such as conducting cost-management and planning-related analyses related to managing and operating the Plan, including formulary development and administration, development or improvement of payment methods or coverage policies; (7) business management and general administration activities of the Plan, including, but not limited to: (i) management activities relating to the implementation of and compliance with HIPAA's administrative simplification requirements; and (ii) customer service, including data analyses for policyholders. (8) resolution of internal grievances; and (9) due diligence in connection with the sale or transfer of assets to a potential successor in interest, if the potential successor in interest is a covered entity ! under HIPAA or following completion of the sale or transfer, will become a covered entity. 19.2 Employer's Obligations under the Privacy Rules. Under the Privacy Rules, the Plan may not disclose PHI to the Employer unless the Employer certifies that the Plan document has been I amended to provide that the Plan will make such disclosures only upon receipt of a certification from the Employer that the Plan has been amended to include certain conditions to the Employer's receipt of PHI and that Employer agrees to those conditions. By adopting this Plan document, the Employer certifies that the Plan has been amended as required by the Privacy ©2012 Hitesman&Wold,P.A. 46 City of Elk River Flexible Benefits Plan Rules and that it agrees to the following conditions, thereby allowing the Plan to disclose PHI to the Employer. The Employer agrees to: (a) not use or further disclose PHI other than as permitted or required by the Plan document or as required by law; (b) ensure that any agents, including a subcontractor, to whom the Plan provides PHI received from the Plan agree to the same restrictions and conditions that apply to the Employer with respect to such PHI; (c) not use or disclose PHI for employment related actions and decisions unless authorized by an individual; (d) not use or disclose PHI in connection with any other benefit or employee benefit plan of the Employer unless authorized by an individual; (e) report to the Plan any PHI use or disclosure of which it becomes aware that is inconsistent with the uses or disclosures permitted hereunder and/or may constitute a "breach"as that term is defined in HIPAA; (f) make PHI available for access by the individual who is the subject of the PHI in accordance with HIPAA; (g) make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA; (h) make available the information required to provide an accounting of disclosures in accordance with HIPAA; (i) make internal practices, books and records relating to the use and disclosure of PHI received from the Plan available to the HHS Secretary for the purposes of determining the Plan's compliance with HIPAA; and (j) if feasible, return or destroy all PHI received for the Plan that the Employer still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible). 19.3 Employer's Obligations under Security Rules. If the Employer creates, receives, maintains, or transmits ePHI (other than enrollment and disenrollment information and Summary Health Information, which are not subject to these restrictions), the Employer will: (a) implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of ePHI; (b) ensure that any agents, including subcontractors, who create, receive, maintain, or transmit ePHI on behalf of the Plan implement reasonable and appropriate security measures to protect the ePHI; (c) report to the Plan any Security Incident of which it becomes aware; and I (d) implement reasonable and appropriate security measures to ensure that only those persons identified below have access to ePHI and that such access is limited to the purposes identified below. ©2012 Hitesman&Wold,P.A. 47 City of Elk River Flexible Benefits Plan i i 19.4 Adequate separation between the Plan and the Employer must be maintained. In accordance with HIPAA, only the following employees or classes of employees may be given access to PHI: (a) the person employed in the position that is given primary responsibility for performing the Employer's duties as the Plan Administrator of the Optional Benefits; and (b) staff designated by the person described in (a) above. 19.5 Limitation of PHI Access and Disclosure. The person(s) described above may only have access to and use and disclose PHI for Plan administration functions that the Employer performs for the Plan. I 19.6 Noncompliance Issues. If the person(s) described above does not comply with this Plan I document, the Employer shall provide a mechanism for resolving issues of noncompliance I including, but not limited to, disciplinary sanctions. f i 19.7 Amendments and Guidance. To the extent HIPAA is amended and/or enforcement agency guidance is issued after the Effective Date of this Plan, the Plan shall be administered in accordance with the law, including such amendments and/or changes. Dated: December 16 2013 CITY OF ELK RIVER Its: Mayor By: Its: City Clerk F I ©2012 Hitesman&Wold,P.A. 48 City of Elk River Flexible Benefits Plan EXHIBIT A. INSURANCE CARRIER/THIRD PARTY PROVIDER INFORMATION (as of January 1,2013) Group Medical Benefits Carrier Name: Medica Address: 401 Carlson Parkway Minnetonka, MN 55305 Phone Number: 952-945-8000 Policy or Group Number: 553904 Policy Year. January— December Group Dental Benefits Carrier Name: Principal Financial Group Address: 711 High Street Des Moines, IA 50392-0001 Phone Number: 800-843-1371 Policy or Group Number: 1015564 Policy Year: January— December Group Term Life Carrier Name: The Standard Insurance Company Address: PO Box 5676 Portland, OR 97228-5676 Phone Number: 800-628-8600 Policy or Group Number: 142052 Policy Year: January— December Long Term Disability Benefits Carrier Name: National Insurance Services of Wisconsin Address: 250 South Executive Drive, Suite 300 Brookfield, WI 63005-4273 Phone Number: 800-627-3660 Policy or Group Number: 018374 Policy Year: January— December Short Term Disability Benefits Carrier Name: Unicare Life &Health Insurance Company Address: PO Box 7654 Chicago, IL 60680-4654 Phone Number: 800-618-6435 Policy or Group Number: 146133WO01 Policy Year: January— December i i 4 ©2012 Hitesman&Wold, P.A. 49 City of Elk River Flexible Benefits Plan