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2003-08 RESOLUTION NO. 2003- 08 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE, CALIFORNIA, IMPLEMENTING THE PREMIUM CONVERSION PLAN FOR THE EMPLOYEES OF THE CITY OF GRAND TERRACE, COMMENCING MAY 1,2003 AND RENEWING ANNUALLY ON NOVEMBER 1 WHEREAS, on this date, the City Council of the City of Grand Terrace did meet to discuss the implementation of The City of Grand Terrace Premium Conversion Plan to be effective May 1, 2003; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GRAND TERRACE_ does hereby resolve, declare determine, and order as follows: SECTION 1. The form of Cafeteria Plan, as authorized under Section 125 of the Internal Revenue Code of 1986, presented to this meeting is hereby adopted and approved and that the proper officers of the Employer are hereby authorized and directed to execute and deliver to the Plan Administrator one or more copies of the Plan; - SECTION 2. The initial Plan Year shall be forthe period beginning May 1,2003 and ending October 31, 2003. All subsequent Plan Years shall be for a 12 month period beginning November 1. SECTION 3. The Employer shall contribute to the Plan amounts sufficient to meet - its obligation under the Cafeteria Plan, in accordance with the terms of the Plan Document and shall notify the Plan Administrator to which periods said contributions shall be applied; SECTION 4. The proper officers of the Employer shall act as soon as possible to notify employees of the adoption of the Cafeteria Plan by delivering to each Employee a copy of the Summary Plan Description presented to this meeting, which form is hereby approved; SECTION 5. Attached hereto as Exhibits A and B respectively are true copies of The City of Grand Terrace Premium Conversion Plan Document, and Summary Plan Description approved and adopted in this Resolution. . PASSED, APPROVED AND ADOPTED this 24th day of April, 2003. ayor of the City of Grand Terrace ATTEST: ' City Clerk of the City ofZrand Terrace I, BRENDA STANFILL, City Clerk of the City of Grand Terrace, do hereby certify that Resolution No. 2003- 08 was introduced and adopted at a regular meeting of the City Council of the City of Grand Terrace held on the 24th day of April, 2003, by the following vote: AYES: Councilmember Hilkey, Mayor Pro Tem Ferre and Mayor Garcia NOES: Done ABSENT: Councilmembers Larkin and Cortes ABSTAIN: None Brenda Stanfill, City Cljdfk Approved as to form: City Attorney � IBIT A It PREMIUM CONVERSION PLAN FOR City-of Grand Terrace Prepared by: `- Benefits Resource May 1,2003 Advice of Legal Counsel should be obtained before amending or altering this plan document format. r TABLE OF CONTENTS ARTICLE 1 -AMEND AND RESTATE 1.1 Creation and Title 1.2 Effective Date 1.3 Purpose ARTICLE II-DEFINITIONS ARTICLE III-PARTICIPATION 3.1 . Eligibility 3.2 Commencement to Participation 3.3 Term of Participation 3.4 Participation by Rehired Employees 3.5 COBRA Continuation Coverage 3.6 Family Medical Leave Act ARTICLE IV-CONTRIBUTIONS 4.1 Source of Contributions 4.2 Change in Participant's Benefits Enrollment 4.3 Increases or Decreases in Premium 4.4 Maximum Contribution 4.5 Nondiscrimination r� ARTICLE V-PARTICIPANTS'ACCOUNTS AND PAYMENT OF BENEFITS 5.1 Participants'Benefit Accounts 5.2 Premium Account . 5.3 Payment of Benefits ARTICLE VI-PLAN ADMINISTRATION 6.1 Plan Administrator 6.2 Plan Administrator's Duties 6.3 Information to be Provided to Plan Administrator 6.4 Decision of Plan Administrator Final 6.5 Review Procedures 6.6 Extensions of Time 6.7 Rules to Apply Uniformly 6.8 Indemnity ARTICLE VII-GENERAL PROVISIONS 7.1 Amendment and Termination 7.2 Nonassignability 7.3 Not an Employment Contract 7.4 Participant Litigation 7.5 Addresses,Notice and Waiver of Notice 7.6 Required Information 7.7 Severability 7.8 Applicable Law tom,. 1 City of Grand Terrace .ti PREMIUM CONVERSION PLAN ARTICLE 1 AMEND AND RESTATE 1.1 Amend and Restate. The Employer hereby Amends and Restates a cafeteria plan under the berths and conditions set forth in this document The Plan is to be known as City of Grand Terrace Premium Conversion Plan. 1.2 Effective Date. The provisions of the Plan shall be effective as of May 1,2003 1.3 Purpose. The purpose of the Plan is to allow employees to select among cash compensation and certain nontaxable benefits,namely coverage under one or more benefits programs maintained by the Employer. The Employer intends that the Plan qualify as a cafeteria plan under Section 125 of the Code, and that the benefits provided under the Plan be eligible for exclusion from Federal and State income tax. ARTICLE II DEFINITIONS As used in this Plan document,the following terms shall have the following meanings:. 2.1 "Affiliated Employer"means any employer which adopts the Plan with the approval of City of Grand Terrace. 2.2 "Benefits"mean cash and the various qualified benefits under Section 125(f)of the Code sponsored by the Employer and made available by the Employer through the Plan,including,but not limited-to, health insurance,group term life insurance,disability insurance,AD&D and vision. 2.3 "Benefit Accounts"mean the accounts established by the Plan Administrator under the Plan for each Participant's Benefits for purposes of administering the Plan. 2.4 "Benefits Enrollment Form"means the form or forms,including a Salary Reduction Agreement, evidencing an Eligible Employee's selections from among the various Benefits and the amount to be . contributed towards various Benefits for a Plan Year or portion of a Plan Year. 2.5 "Code"means the Internal Revenue Code of 1986,as amended from time to time. 2.6 "ComBensation"means all of the earned income,salary,wages and other earnings paid by the Employer to a Participant during a Plan Year,including the amounts contributed by the Employer pursuant to a salary reduction agreement which are not includable in gross income under Sections 125,402(a)(8),403(b) or 457(b)of the Code. 2.7 "Dependent"means an individual who is a dependent within the meaning of Section 152(a)of the Code of a Participant or a former Participant in the Plan. 2.8 "Effective Date" shall be May 1,2003. 2.9 "Eligible Employee"means an Employee who has met the Eligibility requirements of the Plait set r out in Section 3.1. I 2 2.10 "Employee"means an individual employed by the Employer who regularly works at least 30 hours per week,except for: (1)employees covered by a collective bargaining agreement,(2)employees who are nonresident aliens who receive no earned income from the Employer which constitutes income from other sources.within the United States,and(3)employees who are self-employed individuals in Section 401 (c) of the Internal Revenue code. 2.11.. "Employer"means City of Grand Terrace or any of its affiliates,successors or assigns which adopt the Plan. 2.12 "Entry Date"means for each Eligible Employee,the first of the month following 90 days of consecutive full time employment. 2.13 "Participant" means any Employee who has met the eligibility requirements of Section 3.1 of the Plan and has elected to participate in the Plan by providing the Plan Administrator with an executed Benefits Enrollment Form. 2.14. "Plan"means City of Grand Terrace Premium Conversion Plan,as described herein. 2.15 "Plan Administrator"means the Employer or such other person or committee as may be appointed by the Employer to administer the Plan. 2.16 "Plan Year"means the 12-consecutive month period beginning November 1 and ending on October,31,except the first year which begins May 1 and ends October 31. 2.17 "Salary Reduction Agreement"means the agreement by an Employee authorizing the Employer to. reduce the Employee's Compensation while a Participant during the Plan Year for purposes of making contributions toward Benefits under the Plan. - 2.18 "Spouse"means an individual who is legally married to a Participant but shall not include an individual separated from a Participant under a decree of legal separation. 2.19 "Status Change"means a change as in one of the following.examples: a. Change in Employee's legal marital status,including marriage,divorce,death of spouse,legal separation,and annulment;however, the change can only be made for the coverage consistent with the dependent causing the qualified change. b. Change in the number of dependents including birth,adoption,placement for adoption and death of a dependent; c. . Change in employment status for.- 1- Employee 2. Spouse 3. Dependent that is claimed as such on your Federal Income Tax; d. A Change in employment status will be considered as follows: 1. Termination or commencement of employment. 2. A strike or lockout. 3. A commencement or return from unpaid leave of absence. 4. Change in worksite that would affect the benefits offered by the employer. 5. A change in the employment status that would"affect either the Employee's benefit eligibility,or,the eligibility of a dependent. (If there is no change in eligibility as a result of a change,the allocated reduction cannot be modified). 6. A dependent satisfies (or ceases to satisfy) dependent eligibility requirements as a result of a Dependent becoming ineligible for benefits due to the attainment of an ineligible age,marriage,or loss/achieving of student status; 3 7. Residence change where the change affects the eligibility of coverage for Employee and/or eligible dependent; 8. Commencement or termination of adoption proceedings for a dependent .9. Any change consistent with a qualifying event is eligible. The general uniform rule applies so that changes can only be made that are consistent with the qualified status change taking place. 10. Change in coverage in employer sponsored plans. 11. Addition or deletion of coverage option by employer. 12. Change in coverage affecting the Employee at their Dependent's place of employment Gender and Number. Except when otherwise indicated by the context,any masculine terminology shall also include the feminine and the definition of any term in the singular shall also include the :plural. ARTICLE III PARTICIPATION 3.1 Eligibility. Each employee shall be eligible to participate on the first of the month following 90 days of consecutive full time employment Each Eligible Employee shall be eligible to become a Participant as of his or her Entry Date, 3.2 Commencement of Participation. An Eligible Employee shall become a Participant in the Plan after providing the Plan Administrator with an executed Benefits Enrollment Form setting forth the Benefits to be made available to the Eligible Employee for the immediately following Plan Year or. remaining portion of the Plan Year. As part of the Benefits,Enrollment Form,the Participant shall also execute a Salary Reduction Agreement,which authorizes the Employer to withhold from the Participant's Compensation an amount the Participant elects to have contributed to the Plan. The Participant must,before the end of the first Plan Year of participation and,before the end of each subsequent Plan Year,provide the Plan Administrator with a newly executed Benefits Enrollment Form.. Each new Benefits Enrollment Form shall specify the type and amount of Benefits to be made available to the Participant for the immediately following Plan Year or remaining portion of the Plan Year..For the initial Plan Year only,if a Participant fails to execute a valid Benefits Enrollment Form before the Plan's original Effective Date,the Participant shall be deemed to have elected to continue to receive the same benefits that the Participant received under all plans sponsored by the Employer which became available under the Plan as of the Effective Date. In addition,the Participant shall be deemed to have executed a valid Benefits Enrollment Form for purposes of determining the source and amount of contributions to the Plan pursuant to Article IV of the Plan. Should a Participant fail . to execute a valid Benefit Enrollment Form for any Plan Year before the start of the Plan Year,the Benefits Enrollment Form for the immediately preceding Plan Year shall be deemed to be effective for the subsequent Plan Year. 3.3 Term of Participation. Each Participant shall be a Participant.in the Plan for the entire Plan Year or the portion of the Plan Year remaining after the Participant's Entry Date,if later than the first day of the Plan Year. A Participant shall cease to be a Participant in the Plan on the earliest of a. the date the Participant dies, resigns or terminates employment with the Employer, subject to the provisions of Section 3.4. b. the date the Participant fails to make required contributions under the Plan. C. the end of the plan year the Participant ceases to be an Employee;or d. the date the Plan terminates. 4 3.4 Participation by Rehired Employees. A Participant whose employment terminates and who is subsequently re-employed more than 60 days from the initial termination date may not re-enter the. f Plan as a Participant prior to the first day of the first Plan Year following the date of re-employment 3.5 COBRA Continuation Coveraee. Under COBRA,This section 3.5 shall not apply to any group health plan of the Employer for any calendar year if all employers maintaining such plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year. Notwithstanding any other provisions in this Article III, any Participant, Spouse or Dependent eligible for continuation of coverage under the Plan under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA')shall be allowed to continue to participate in the Plan,so long as such Participant,Spouse or Eligible Dependent complies with the provisions set out in COBRA. The Employer shall adopt rules relating to continuation coverage,as provided under Section 4980B of the Code or applicable state law, as may be required from time to time, and shall advise affected individuals of the terms and conditions of such continuation coverage. 3.6 Family Medical Leave Act. Under the FMLA, the provisions of this-section 3.6 shall not be available to Employees for such Plan Years in which the Employer has 50 or fewer Employees. Plan Years in which the Employer has more than 50 Employees, the Employer must make FULA leave available to Employees for up to 12 weeks in connection with the birth or.adoption of a child, or to care for a close relative,or because of a serious health condition of the Employee.. Payment Options for coverage while on unpaid Family Medical Leave Act leave for group plans: a. Pre-pay before commencement of leave through pre-tag or after-tax Salary Reduction Agreement from any taxable compensation,including cashing out of unused sick or vacation days,provided all other plan requirements are met b. Pay-as-you-go. Employees may pay their share of premium payments on the same schedule as payments would be made if the employee were not on leave, or under another schedule permitted under Department of Labor regulations. The Employer shall not be required to continue the health coverage of an Employee who fails to make required premium payments while on FMLA leave. However,if the Employer chooses to continue the health coverage of an Employee who fails to make required premium payment while on FMLA leave,the Employer is entitle_d to recoup those payments after the Employee returns from FMLA leave. C. Catch-up-option. Under this payment option the Employer shall.advance the Employee's share of group health premiums while the Employee is on FMLA leave and thereafter shall be entitled to recover such advanced amounts when the Employee Retums from FMLA leave. ARTICLE IV CONTRIBUTIONS 4.1 Source of Contributions. The Employer shall contribute amounts deemed necessary to meet its obligations under the Plan. Contributions to the Plan for the Plan Year shall be limited to the amounts determined by the Benefits Enrollment Form entered into.by Participants.for the Plan Year. Contributions to the Plan shall be made to, and all Plan assets shall be held in such accounts or funds as the Employer deems appropriate. 5 I 4.2 Change in Participant's Benefits Enrollment. No Participant shall.be allowed to alter or discontinue the Participant's elected Benefits under the Plan Year unless there is a change in the Participant.'s family status. A Change in Family Status means a change as in one of the following examples: a marriage, b. divorce; c. death of a spouse or.dependent; d. birth or adoption of a child; e. termination or commencement of a spouse's employment; f. the employee's or spouse's taking of an unpaid leave of absence; g. the employee's or spouse's change from part-time to full-time or full-time to part-tune employment status; h. a significant change in the health coverage of the employee or spouse attributable to the spouse's employment;or i. other similar events determined by the Employer in its sole discretion to be changes in family status,but that do not affect ERISA regulations. Upon the occurrence of any of the aforementioned events,or such other event as may qualify as a change in,family status in the option of the Plan Administrator,the Participant may file a new Benefits Enrollment Form,within 90 days of such change in family status,which.will serve to revoke the Participant's previous Benefits Enrollment Form. The new Benefits Enrollment Form shall be effective prospectively and apply only to those Benefits accruing to the Participant,the Participant's Spouse or the Participant's Dependents after the effective date of the new Benefits Enrollment Form. The Participant's Benefits Enrollment Form for a given Plan Year shall terminate and Benefits under the Plan shall cease upon the date a Participant is no longer eligible to participate under the terms of the Plan: 4.3 Increases or Decreases in Premiums. Should a third party benefit provider, such as an Insurance Company,increase or decrease premiums for any health benefits being offered under this Plan during the Plan Year,.any Participant participating in such benefit shall have his contributions increased or decreased automatically in an amount sufficient to payfor such increase or decrease. However,in the case of an increase in premium if there is a similar benefit offered under the Plan at the time of said increase;the Participant may select such similar benefit rather than pay the increase. No new Benefits Elections or termination of existing Benefits Elections may be elected as a result of an increase or decrease in premium by a third party benefit provider. 4.4 Maximum Contribution. The Maximum Contribution any individual can make under this Plan is an amount.equal to the sum of the costs for each of the highest cost premium-type Benefit Options offered under the Plan in each Benefit Category. The term`Benefit Option"refers to any category of Benefits offered under this Cafeteria Plan in which the Participant has the opportunity to choose one benefit from several different Options in that category. The term "Benefit Category" refers to any category of Benefits offered under this Plan and may include (but is not limited to)-Health Insurance, Group Term Life Insurance or Disability Insurance. 4.5 Nondiscrimination.. The Plan is intended to not discriminate in favor of highly compensated individuals as to eligibility to participate, contributions and benefits in accordance with applicable provisions of the Code. The Plan Administrator may take such actions as excluding certain highly compensated individuals from participation in the Plan or limiting the contributions made with respect to certain highly compensated participants if, in the Plan Administrator's judgment, such actions serve to assure that the Plan does not violate applicable nondiscrimination rules. i� 6 ARTICLE V PARTICIPANTS'ACCOUNTS AND PAYMENT OF BENEFITS 5.1 Participants'Benefit Accounts. The Plan Administrator shall establish separate Benefits Accounts based on the Benefits selections made by each Participant Contributions shall be credited to the proper Benefits Accounts of each Participant. Each Benefits Account shall be designated as a "Premium Account". 5.2 Premium Account. A "Premium Account"is an account established with the intent of paying for premium-type Benefits pursuant to an insurance policy issued by an insurance company to provide medical, dental, vision, psychological or psychiatric, prescription drugs, group-term life insurance, . disability insurance or other qualified benefits under Section 125. For purposes of City of Grand Terrace Premium Conversion Plan,the following premiums are eligible: Medical,Dental,Vision. 5.3 Payment of Benefits. The Plan Administrator shall pay the Benefits authorized under the Plan other an th insurance benefits administered by a third-party benefit provider. Payment'shall be made by the Employer, (or the designated Plan Administrator), in a timely manner upon receipt of a Premium Notice from the Benefit Provider providing such benefit. ARTICLE VI PLAN ADMINISTRATION 6.1 Plan Administrator. The Plan Administrator shall be responsible for the administration of the Plan. 6.2 Plan Administrator's Duties. In addition to any rights, duties or powers specified throughout the Plan,the Plan Administrator shall have the following rights,duties and powers: a. to interpret the Plan,to determine the amount,manner and time for payment of any benefits under the Plan and to construe or remedy any ambiguities, inconsistencies or omissions under the Plan; b. to adopt and apply any rules or procedures to insure the orderly and efficient administration of the Plan; C. to determine the rights of any Participant, Spouse, Dependent or beneficiary.to benefits under the Plan. d. to develop appellate and review procedures for any Participant, Spouse, Dependent or designated beneficiary denied benefits under the Plan; e. to provide the Employer with such tax or other information it may require in connection with the Plan; f. to employ any agents,attorneys,accountants or other parties (who may also be employed by the Employer) and to allocate or delegate to them such powers or duties as is necessary to assist in the proper and efficient administration of the Plan,provided that such allocation or delegation and the acceptance thereof is in writing; g. to report to the Employer, or any party designated by the Employer, after the end of each Plan year regarding the administration of the Plan,and to report any significant problems as to the administration of the Plan and to make recommendations for modifications as to procedures and benefits,or any other change which might insure the efficient administration of the Plan. However; nothing in this paragraph is meant to confer upon the Plan Administrator any powers to amend the Plan.or change any administrative procedure or adopt any other procedure involving the Plan without the express written approval of the Employer regarding any amendment or change in administrative procedure, or Benefit Provider. Notwithstanding the preceding sentence,the Plan Administrator is empowered to take any actions he sees fit to assure that the Plan complies with the nondiscrimination y r requirements of Section 125 of the Code. 6.3". . Information to be Provided to Plan Administrator. The Employer, or any of its agents, shall provide to the Plan Administrator any employment records of any employee eligible to participate under the Plan. Such records shall include, but will not be limited to, any information regarding period of employment, leaves of absence, salary history, termination of employment, or any other information the Plan Administrator may need for the proper administration of the Plan. Any Participant or Dependent or any other person entitled to benefits under the Plan shall furnish to the Plan Administrator his correct post office address,his date of birth,the names,correct addresses and dates of birth of any designated beneficiaries, with proper proof thereof, or any other data the Plan Administrator might reasonable request to insure the proper-and efficient administration of the Plan. 6.4. Decision of Plan Administrator Final. Subject to applicable State or Federal law, and the provisions of Section 6.5,below, any interpretation of any provision of this Plan made in good faith by the Plan Administrator as to any Participant's rights or benefits under this Plan is final and shall be binding upon the parties. Any misstatement or other mistake of fact shall be corrected as soon as reasonably.possible upon notification to the Plan Administrator and any adjustment or correction attributable to such misstatement or fact shall be made by the Plan Administrator as he considers equitable and practicable. 6.5 Review-Procedures. In cases where the Plan Administrator denies a benefit under this Plan for any Participant,Spouse or Dependent or any other person eligible to receive benefits under the Plan,the Plan Administrator shall famish in writing to said party the reasons for the denial of benefits. The written denial shall refer to any Plan or section of the Code upon which the Plan Administrator relied in making such denial. The denial may include a request for any additional data or material needed to properly complete the claim and explain why such data or material is necessary,and explain the Plan's claim review procedures. If requested in writing, and within 30 days of the claim denial, the Plan Administrator shall afford any claimant whose request for claim was denied a full and fair•review of the Plan Administrator's decision, and within 30 days of the request for review of the denied claim, �. the Plan Administrator shall notify the claimant in writing of his final decision on the reviewed claim With respect to the denial of any claim for benefits from an insurance company or other third-party benefit provider, paid for as a premium-type Benefit under the Plan, the review procedures of the insurance company or other thud-party benefit provider shall apply. 6.6 Extensions of Time. In any case where the Plan Administrator determines special circumstances apply, the Plan Administrator may extend the amount of time any Participant,Spouse,Dependent or designated beneficiary may need to appeal a claim,upon proper application to the Plan Administrator. 6.7 Rules to Apply Uniformly. The Plan Administrator shall perform his duties in a reasonable manner and on a nondiscriminatory basis and shall apply uniform rules to all Participants similarly situated under the Plan. 6.8 Indemnity. The Employer does hereby agree to indemnify and hold harmless,to the extent allowed by law and over and above any liability coverage contracts or directors and officers insurance, any officer or director of the Employer, designated by the Employer or the Plan Administrator who has been employed, hired or contracted to assist in the fulfillment of the administration of this Plan. In addition, the Employer agrees to pay any costs of defense or other legal fees incurred by any of the above parties over and above those paid by any liability or insurance contract. ARTICLE VII 8 GENERAL PROVISIONS 7.1 Amendment and Termination. The Employer may amend or terminate this Plan at any time by legal action of the authorized agents of the Employer, subject to the limitation that no amendment shall change the terms and conditions of the payment of any benefit a Participant,Spouse,Dependent or designated beneficiary was or might have been entitled to under the Plan at the.time of the amendment or termination. The Employer may also make amendments apply retroactively to the extent necessary so that the Plan remains incompliance with Section 125 of the Code or any other provision of the Code applicable to the Plan. 7.2 NonassignahjUty. Any benefits to any Participants under this Plan shall be nonassignable and for the exclusive benefit of Participants, Spouses,Dependents and designated beneficiaries. No benefit shall be voluntarily or involuntarily assigned,sold or transferred. 7.3 Not an Employment Contract. By creating this Plan and providing benefits under the Plan, the Employer in no way guarantees employment for any employee or Participant under this Plan.. Participation in this Plan shall in no way assure continued employment with the Employer. 7.4 Participant Litigation. In any action or proceeding against the Plan,or the administration-thereof, employees or former employees of the Employer or any other person having claiming to have an interest under the Plan shall not be necessary parties to such action or proceeding. The Employer,the Plan Administrator, or their registered representative shall be the sole source of service of process against the Plan. Any final judgment which is not appealed or appealable shall be binding on the Employer and any interested party to the Plan. 7.5 Addresses. Notice and Waiver of Notice. Each Participant shall furnish the Employer with his correct post office address. Any communication,statement or notice addressed to a Participant at his last post office address as filed with the Employer will be binding on such person. The Employer or ` Plan Administrator shall be under no legal obligation to search for or investigate the whereabouts of any person benefiting under this Plan. Any notice required under the Plan may be waived by such person entitled to such notice. 7.6 Required Information. Each Participant,Spouse or Dependent shall furnish to the Employer such documents, evidence or information as the Employer considers necessary or desirable to ensure the efficient operation and administration of the Plan and for the protection of the Employer. . 7.7 Severability. In any case where any provision of this Plan is held to be illegal or invalid, such illegality or invalidity shall apply only to that part of the Plan and shall not apply to any remaining provisions of the Plan,and the Plan shall be construed as if such illegal or invalid provision had never existed under the Plan. 7.8 Applicable Law. The Plan shall be construed under the laws of the State of California, to the extent not preempted by any Federal law. Executed this day of ,20 EMPLOYER City of Grand Terrace (Officer) 9 EXHIBIT City of Grand Terrace `i Premium Only Plan SUMMARY PLAN DESCRIPTION Your employer has established a Premium Only Plan within the meaning of Section .125 of the Internal Revenue Code of 1986, designed to offer a choice among benefits to employees.. The Premium Only Plan has been established with the intent that participants will not have to include as taxable income the amount of compensation they have foregone to pay for their.contributions to eligible benefits offered by your employer. This Summary Plan Description (SPD) describes the benefits, terms, and conditions of the Plan as it applies to employees of your employer-on or after their effective date(s) for participation. This SPD is a summary of the Premium Only Plan and is not meant to interpret, extend or change the Premium Only Plan in any way. We suggest you read the SPD carefully so that you may understand the Premium Only Plan's operation and its benefit to you. However, the provisions of the applicable Plans can be determined more precisely by consulting the -plan documents " themselves, which are available from your benefits administrator. In the event of any inconsistencies between this SPD and the actual provisions of the Plan(s), the.terns of the applicable Plan Document will govern, Plan Name: City of Grand Terrace Premium Only Plan Plan Effective Date: May 1,2003 Plan Year: Shall be the 12 consecutive month period beginning November. 1 and ending October 31, except the first year which begins May 1 and ends October 31. Plan Administrator/Sponsor: Larry Ronnow City of Grand Terrace 22795.Barton Rd. Grand Terrace,California 92313 909-824-6621 Employer's Identification Number(EN): 95-3316135 Plan Identification Number: 501 Agent for Service of Legal Process: City of Grand Terrace 22795 Barton Rd. Grand Terrace;California 92313 909-824-6621 Summary of Benefits: Medical, Dental,Vision. Who can participate in the Premium Only Plan? An employee of the employer regularly performing services at least 30 hours per week shall become eligible to participate following 90 days of consecutive employment. What happens when I elect to contribute to the Pre-Tax .Premium portion of the Premium Only Plan? As a participant in the Premium Only Plan, you can make your insurance premium contributions on a pre-tax basis, instead of after-tax. To do this, your regular insurance contribution is deducted from your gross income for reach payroll period, and your employer pays your insurance premiums. Your new gross income is your income less the pre-tax contributions to the insurance plans. Are there any other ways that my election can be modified in the middle of a plan year? The Premium Only" Plan is required to meet certain nondiscrimination provisions as outlined by the Internal Revenue Code. Your employer reserves the right to modify the amount of any benefit elections of the shareholders, officers, owners, and other highly compensated employees by the amount necessary to allow the Plan to satisfy these nondiscrimination requirements. What happens if I terminate'employment? If you terminate employment, y p yment, you will no longer be eligible to participate in the Premium Only Plan. Typically, your pretax contributions will continue through your last regular payroll period. Please contact your benefits administrator for more information regarding pre-tax contributions if your employment terminates. Termination of participation in the Premium Only Plan will not affect any rights you may have to continue participation in. certain health plans. Your benefits administrator will give you information on how to continue coverage under the health plans, if this is appropriate. Can I change my decision to participate? The decision to participate will be binding for the full Plan Year. You may change this election only under the following circumstances: a. You may change your participation election prior to the beginning of each new Plan Year. The election you make will be binding for the new Plan Year. b. You may change your election to participate during the Plan Year if you experience a`change in family status". The election change should be consistent with and as a result of the change in family status. Changes in family status include: 1. Change in Employee's.legal marital status, including marriage, divorce, death of spouse, legal separation, and annulment; however, the change can only be made for the coverage consistent with the dependent causing the qualified change. 2. Change in the number of dependents including birth, adoption, placement for adoption and death of a dependent, 3. Change in employment status for: Employee Spouse Dependent that is claimed as such on your Federal Income Tax; A Change in employment status will be considered as follows: , a. Termination or commencement of employment. b. A strike or lockout. C. A commencement or return from unpaid leave of,absence. . d. Change in worksite that would affect the benefits offered by the employer. e. A change in the employment status that would affect either the Employee's benefit eligibility, or,the eligibility of a dependent. (If there is no change in eligibility as a result of a change,the allocated reduction cannot be modified). 4. A dependent satisfies(or ceases to satisfy).dependent eligibility requirements as a,result of a Dependent becoming ineligible for. benefits due to the attainment of an ineligible age, marriage, or loss/achieving of student status; S. Residence change where the change affects the eligibility of coverage for Employee and/or eligible dependent; 6. Commencement or termination of adoption proceedings for a ,.' dependent. .7. Any change consistent with a qualifying event are eligible. The general uniform rule applies.so that,changes can only be made that are consistent with the qualified status change taking place. 8. Change in coverage in employer sponsored plans. 9. Addition or deletion of coverage option by employer. 10. Change in coverage affecting the Employee at their Dependent's place of employment. If you experience a change in family status and would like to change your election, please contact your benefits administrator as soon as possible. Are there other ways that my partidpation in the Premium Only Plan can be terminated? If you no longer meet the eligibility provisions of.the Premium Only Plan or your employer terminates the plan, your participation will be terminated. Are the benefit contributions to the Premium Only Plan reported as income on my Form W-2? The amounts that are contributed to the Premium Only Plan are not considered taxable wages by the IRS in most States. As a result"wages, tips and other compensation"reported for federal income,'state income (except New Jersey and Pennsylvania), and FICA on your . W-2 will be your gross income less any benefit contributions to the Premium Only Plan. How do Premium Only Plan contributions affect my Social Security benefit? Participation in the Premium Only Plan reduces your gross taxable income and may affect your Social Security benefit by reducing the total taxable income used to calculate your Social Security.benefit. In most instances,the current tax savings under the Premium Only Plan will outweigh'the slight impact on future Social Security benefits. Can my employer terminate or amend the Premium Only Plan? The Premium Only Plan can be amended or terminated, in whole or in part at any time, by your employer or its Board of Directors.(if applicable) in the same manner as.the plan was adopted. Consent of any participant, employee or any other person referenced in the Plan is not required to terminate the Plan. How can.I appeal a claim decision made under the Premium Only Plan? If you, as'a Participant in the Premium Only Plan, or your beneficiary believe you are entitled to a benefit under the Premium Only Plan that is different from the amount that has been paid, you may file an appeal with the Plan Administrator. This appeal must be made in writing to the Plan Administrator and must contain the following information: • The reason(s)for making the appeal; The facts supporting the appeal; • The amount claimed; and • The name and address of the person filing the appeal (claimant). -� The Plan Administrator will generally make a decision within 90 days after receiving the appeal and must mail a copy of the decision to the claimant promptly. The decision must give specific reasons and references to the Premium Only Plan provisions, which support the Plan Administrator's decision. If an appeal is denied, in whole or in part, the claimant may seek a review of the Plan Administrator's decision. The request for review must be. submitted in writing to the Plan Administrator within 60 days of the date the written denial was received. The Claimant will be given an opportunity to review any Premium Only Plan documents involved and may submit written comments. The review will be conducted by either the employer's Board of .Directors or an officer of your employer. Unless special circumstances arise, a written decision will be given to the claimant within 60 days of the date the request for a review was received. Are there special rules that apply if this plan is being offered as part of a collectively bargained (union) agreement? If this Plan is maintained in accordance with a collectively bargained agreement, you or your beneficiaries have the right to examine or obtain a copy of the agreement upon written request to the Plan Administrator. Pre-Tax Premiums What happens to my Pre-Tax Premium election if I drop my insurance during the middle of the Plan Year? The decision to elect to pay your insurance premiums pre-tax through the Premium Only Plan is binding for the full Plan Year, unless you are eligible for a change allowed by the IRS. If _ you drop your insurance coverage in the middle of the Premium Only Plan Year without an allowable reason (i.e., change in family status), you may be required to continue to have the premium amounts deducted from your gross income under the Premium Only Plan. Can my employer modify my Pre-Tax Premium election under the Premium Only Plan? If the amount of your required premium contributions(s) increases or decreases as a result of a rate adjustment required by an independent third party (such as an insurance company), your employer will automatically increase or decrease the amount of your Pre-Tax Premium election(s). Can I change my Pre-Tax Premium election under the.Premium Only.Plan? You may change your pre-tax premium election only under the following circumstances: In coordination with each new plan year If you experience a change in family status (as previously described) If your coverage under the eligible insurance benefits is significantly modified or ceases, or there is a.significant increase in premium costs, you may revoke your. election and elect coverage under another insurance benefit with similar coverage,.if one is available under the Premium Only Plan. Statement of Rights As a participant in the Premium Conversion Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974, ERISA provides that all Plan participants shall be entitled to examine, without charge, at the Plan Administrator's office and at other specified locations (such as work sites and union halls), all plan documents, including insurance contracts, collective bargaining agreements and copies of all documents filed by the Plan with the U.S. Department of. Labor (such as detailed annual, reports and Plan descriptions); obtain copies. of all Plan documents and other Plan information upon written request to the Plan Administrator. The Administrator may make a reasonable charge for the copies. You are also entitled to receive a summary of the Plan's financial report, if applicable. The Plan Administrator is required by law to furnish each participant with a copy of the summary annual report,with certain exceptions. In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the Premium Only Plan. The people who operate your Plan, called"fiduciaries"of the Plan have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA. If your claim for a welfare benefit is denied in whole or in part you must receive a written explanation of the reason for denial. You have the right to have the Plan Administrator review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file a suit in \�' federal court. In such a case, the court may require the plan administrator to provide the t materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may. file suit in a state or federal court. If it should happen that plan fiduciaries misuse the plan's money, or if you are discriminated against for asserting your rights, you may file suit in a federal court. The court will decide who should pay court_costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you.to pay these costs and fees, for example, if it.finds your claim frivolous. If you have any questions about your plan, you should contact the plan administrator. If you have any questions about this.statement or about your rights under ERISA, you should contact the nearest Area Office of the U.S. Labor-Management Services Administration, U.S. Department of Labor, listed in your telephone directory or the Division.of Technical Assistance Inquiries, Pension and Welfare Benefit Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington,.D.C. 20210.