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09. Resolution 4501 - AFLAC Flexible Benefits PlanREPORT TO: Honorable Mayor and City Council FROM: Chris A. Kukulski, City Manager SUBJECT: Resolution 4501 - Adoption of a Flexible Spending Plan with AFLAC MEETING DATE: August 2, 1999 BACK GROUND: Earlier this year the city was approached by AFLAC which is a supplemental medical insurer. The decision to purchase AFLAC's products is totally voluntary and 100% of the premium is paid by the employee. AFLAC is a well respected supplemental insurer whose products are offered pre -taxed. In order to provide our employees with this benefit the city needs to adopt the attached resolution which develops a "Flexible Benefits Plan" under Section 125 of the Internal Revenue Code. This allows the employee's premiums to be paid pre -taxed, thus creating an additional benefit to the employee. If approved, I will be coming back to the City Council within the next year requesting that a Flexible Spending Plan be set up with AFLAC. The flexible spending plan allows the employee to estimate medical, child care, senior care and several other expenses identified by the federal government as eligible for pre -taxed status. I recently set up these same programs through AFLAC in Michigan. I feel strongly that benefits of this type which are of little cost to the employer (some additional time during payroll) and help the employee create a positive environment for the staff and help improve morale. RECOMMENDATION: The City Council adopt the attached Resolution 4501 adopting a flexible benefits plan. FISCAL EFFECTS: AFLAC premiums will be paid 100% by the employees. Minimal administrative cost will be incurred because of additional time related to payroll. ALTERNATIVES: As suggested by the Council. Respectfully submitted, C-"AxX�� Chris A. Kukulski Village Manager Report compiled July 30,1999 Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7700 - FAX (406) 758-7758 RESOLUTION NO. 4501 A RESOLUTION BY THE CITY OF KALISPELL ADOPTING A FLEXIBLE BENEFITS PLAN. WHEREAS, the Employer wishes to adopt a cafeteria plan within the context of Section 125 of the Internal Revenue Code for the benefit of the employer's eligible employees. NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, MONTANA, AS FOLLOWS: SECTION I. That the Employer hereby adopts the Flexible Benefits Plan (consisting of the flexible benefits plan document, the Adoption Agreement, and component benefit plans and Policies) for the Employer named herein below effective as of the date specified in the Adoption Agreement. SECTION II. That any officer of the employer may, without a further resolution, execute the Adoption Agreement and any related documents or amendments which may be necessary or appropriate to adopt the plan or maintain its compliance with applicable federal, state and local law. SECTION III. This Resolution shall become effective immediately following its passage by the City Council and approval by the Mayor. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR THIS DAY OF AUGUST, 1999. Wm. E. Boharski Mayor Attest: Theresa White City Clerk H:\attsect\wp\res\4501 AFLAC.wpd 1 ONCE THE PLAN IS IN OPERATION New Employees should be enrolled into the Cafeteria Plan as they become eligible and satisfy any applicable waiting period by distributing a Summary Plan Description (SPD) and Salary Redirection Agreement to them at least thirty (30) days prior to their eligibility and notifying your AFLAC representative as to their eligibility. (Note: if your employees are eligible to participate as of the date they commence employment, you need to distribute the SPD and Salary Redirection Agreement to them on their first day of work, and permit them to enroll in the plan during the next thirty (30) days). Rehired Employees who previously participated in the Cafeteria Plan and were permitted to terminate their participation upon their termination of employment will be unable to re -enroll in the Cafeteria Plan until the next anniversary date. A Change in Family Status will enable a current participant to change or terminate a Salary Redirection Agreement. It will also enable an employee who is otherwise eligible to be a participant, but who failed to complete a Salary Redirection Agreement during the enrollment period, to become a participant and file a Salary Redirection Agreement. However, the election under the new Salary Redirection Agreement must be made on account of and be consistent with the Change in Family Status. For this purpose, a Change in Family Status is defined as: the employee's marriage or divorce; the birth or adoption of an employee's child; the death of an employee's spouse or child; the commencement or termination of employment by the employee or employee's spouse; a change of employment status from full-time to part-time (or vice versa), by the employee or employee's spouse, or if either take an unpaid leave of absence from work; a significant change in health benefits coverage attributable to the employment of the employee's spouse. Significant Increase In Premiums or Significant Curtailment in Coverage under a health plan by an independent, third -party provider (e.g., an insurance company) will permit affected participants to revoke a prior election, and in lieu thereof, receive on a prospective basis, coverage under another health plan with similar coverage. The Plan Administrator needs to inform affected participants as to such significant changes, after which affected participants will have thirty (30) days to elect alternative coverage. Payroll Instructions will be more thoroughly reviewed with you or your payroll specialist by the AFLAC representative. In general, however, any qualified pre-tax benefit (e.g., accident or health insurance, group term life insurance, medical or dependent care reimbursement) may be funded by employee salary redirection on a dollar for dollar basis. After-tax qualified benefits (e.g., cash or benefits treated like cash that do not defer the receipt of compensation) must be funded with employee contributions after taxes are withheld. Therefore, the amount redirected from an employee's salary for after-tax benefits will exceed the premium by the amount of applicable federal, state, or local income and employment taxes. 5500's and Summary Annual Report - All employers are required to file a Form 5500 (with schedules) within seven months after the end of the plan year. Employers with more than 100 participants are also required to distribute a Summary Annual Report to plan participants within nine months after the close of the plan year if you are subject to ERISA. Upon request, FLEX ONE will assist you with the 5500 filing to satisfy Code Section 6039D only. A separate Form 5500 may need to be filed to satisfy any ERISA imposed obligations. PROC297B.5 Nondiscrimination Testing is at the very core of the legal requirements imposed by Section. 125 of the Internal Revenue Code. Each cafeteria plan sponsor must ensure that its plan satisfies all applicable nondiscrimination requirements imposed by the Internal Revenue Code. Failure to satisfy these requirements will cause adverse tax consequences to highly compensated employees and could possibly disqualify the plan. At a minimum, each plan sponsor should undertake nondiscrimination testing near the beginning and end of each plan year, and whenever there is a substantial change in the participation and/or elections under the plan. Summary Plan Description - All plan administrators are required to give each eligible employee a copy of the summary plan description within 120 days of the effective date of the initial plan year and within 90 days of the effective date of coverage for all subsequent plan years. If an employer makes a change in the plan, the employer must provide the employees with summary of the changes Summary of Material Modifications (SMM) within seven months after the ending date of the plan year. Regulations require that the Summary Plan Description (SPD) display both the Employer Tax Identification (EIN) number and a Plan Identification Number (PIN). You should assign a PIN beginning with the number 501 (Item 4). If this is the first ERISA plan number assigned, the PIN number will be 501. Otherwise, the PIN will be the next available number (e.g. 502, 503, etc.). More elaborate instructions and filing requirements for all of these documents will be included in the Employer's Administration Manual. However, you and/or your plan administrator bear sole responsibility for administering the plan and fulfilling all reporting and disclosure obligations. Certain Insurance Premiums which cover the employee (or employee and tax dependents/family) may be included in the FLEX ONE Plan Documents if adopted as part of your benefits plan. These include: Group Term Life Insurance covering the employee (Eligible under IRS Code Section 79) that is equal to or less than $50,000; Individual and group Medical, Dental, Hospital Indemnity, Cancer Insurance, Vision, Hearing and other qualified premiums. Use caution when including disability income policies within the FLEX ONE Plan since this could make the benefits taxable at the time of claim. Continuation of Coverages - Health benefits offered through a cafeteria plan may be subject to the continuation coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). This law provides that for all employers of 20 or more employees (including employees of affiliated companies, part-time employees, and certain self-employed and leased employees) on a typical business day, covered participants must be allowed the opportunity to continue employer sponsored health benefits should their coverage under the employer's program cease for any reason except termination for gross misconduct. All health coverages elected under the cafeteria plan (including unreimbursed Medical Expense Reimbursement Coverage) are eligible for continuation. Coverages not eligible for continuation include: Group Term Life, Disability, Accidental Death and Dismemberment and Group Travel Accident Insurance. The right to continuation of coverage begins upon the occurrence of certain events. Such events include a loss or change in the employee's or employee's dependents coverage due to: a. death of the covered employee; b. termination of the covered employee (for reasons other than gross misconduct); C. reduction in the employee's hours of employment; d. divorce or legal separation of the employee; e. the employee becoming entitled to Medicare; or f. a dependent's loss of dependent status under a medical plan. PROC297B.5 to co o r LO 0 0 n co o 0 M The law requires that the covered individual be extended the opportunity to maintain, continuation coverage for 3 years unless the loss of coverage was attributable to the covered employee's termination of employment or reduction in hours. In that case, the required continuation coverage period is 18 months. For an employee or family member who is disabled within sixty (60) days of the employee's termination or reduction in hours, the continuation coverage period is 29 months. The health plan administrator is required to provide notification of the right to continuation of benefits to all eligible employees and their dependents. Employees have 60 days from the date the notification of the right to continue is given to formally continue their coverage. The continuation will be at the employee's expense as no employer contribution is required. Employees have 45 days from the date on which they give notice of their intent to continue coverage to pay the required premiums. The cost of the benefits must be at the regular premium rate, but may include up to a 2% handling fee. If you have questions regarding COBRA or its effects on the coverage for your employees, please contact your Legal Advisor or other Tax professional for information. PROC297B.5 co co co 0 U) O O T O O 0 co TABLE OF CONTENTS FLEXIBLE BENEFITS PLAN ARTICLE I - DEFINITIONS 1.01 "Affiliated Employer" 1 1.02 "After-tax Premium(s)" 1 1.03 "Anniversary Date" 1 1.04 "Benefit Plan(s) or Policy(ies)" 1 1.05 "Board of Directors" 1 1.06 "Change in Family Status" 1 1.07 "Code" 1 1.08 "Compensation" 1 1.09 "Dependent" 1 1.10 "Dependent Care Expense Reimbursement" 1 1.11 "Earned Income" 1 1.12 "Effective Date" 1 1.13 "Eligible Employment Related Expenses" 1 1.14 "Eligible Medical Expenses" 2 1.15 "Employee" 2 1.16 "Employer" 2 1.17 "ERISA" 2 1.18 "Highly Compensated Individual" 2 1.19 "Key Employee" 2 1.20 "Medical Care Expense Reimbursement" 2 1.21 "Nonelective Contributions" 2 1.22 "Participant' 2 1.23 "Plan" 2 1.24 "Plan Administrator" or committee 3 1.25 "Plan Year" 3 1.26 "Pre-tax Premium(s)" 3 1.27 "Qualified Benefit' 3 1.28 "Qualifying Employment -Related Expenses" 3 1.29 "Qualifying Individual" 3 1.30 "Qualifying Services" 3 1.31 "Reimbursement Account(s) or Account(s)" 3 1.32 "Salary Redirection Agreement' 4 1.33 "Spouse" 4 1.34 "Student' 4 1.35 "Trustee" 4 ARTICLE II - ELIGIBILITY AND PARTICIPATION 4 2.01 Eligibility to Participate 4 2.02 Entry Date 4 2.03 Termination of Participation 4 2.04 Eligibility to Participate in Reimbursement Benefits 4 2.05 Qualifying Leave Under Family Leave Act 5 ARTICLE III - PREMIUM ELECTIONS 3.01 Election of Premiums 3.02 Initial Election Period 3.03 Annual Election Period 3.04 Change of Premium Election 3.05 Termination of Election PROC297B.5 ARTICLE IV - PREMIUM PAYMENTS AND CREDITS AND DEBITS TO ACCOUNTS 7 4.01 Source of Premium Payments 7 4.02 Allocations Irrevocable During Plan Year 7 4.03 Reduction of Certain Elections to Prevent Discrimination 7 4.04 Modification of Amounts Withheld due to Premium Increases 7 4.05 Medical Care Expense Reimbursement 7 4.06 Dependent Care Expense Reimbursement 8 ARTICLE V - BENEFITS 0 5.01 Qualified Benefits 8 5.02 Cash Benefit 9 5.03 Repayment of Excess Reimbursements 9 5.04 Termination of Reimbursement Benefits 10 5.05 COBRA Coverage 10 5.06 Coordination of Benefits Under Health FSA 10 ARTICLE VI - PLAN ADMINISTRATION 10 6.01 Allocation of Authority 10 6.02 Provision for Third -Party Plan Service Providers 11 6.03 Fiduciary Liability 11 6.04 Compensation of Plan Administrator 11 6.05 Bonding 11 6.06 Payment of Administrative Expenses 11 6.07 Funding Policy 11 6.08 Disbursement Reports 11 6.09 Reporting and Disclosure Obligations 11 6.10 Indemnification 11 6.11 Substantiation of Expenses 12 6.12 Reimbursement 12 6.13 Annual Statements 12 ARTICLE VII - FUNDING AGENT 12 7.01 Funding of the Plan 12 7.02 The Employer as Funding Agent 12 7.03 Trust as Funding Agent 12 ARTICLE Vill - CLAIMS PROCEDURES 12 8.01 Application to Plan Benefits 12 8.02 Procedure if Benefits are Denied Under the Plan 13 8.03 Requirement for Written Notice of Claim Denial 13 8.04 Right to Request Hearing on Benefit Denial 13 8.05 Disposition of Disputed Claims 13 ARTICLE IX - AMENDMENT OR TERMINATION OF PLAN 13 9.01 Permanency 13 9.02 Employer's Right to Amend 13 9.03 Employer's Right to Terminate 14 9.04 Determination of Effective Date of Amendment or Termination 14 PROC297B.5 co C LO O (0 O CD O O co ARTICLE X - GENERAL PROVISIONS 14 10.01 Not an Employment Contract 14 10.02 Applicable Laws 14 10.03 Post-Mortem Payments 14 10.04 Nonalienation of Benefits 14 10.05 Mental or Physical Incompetency 14 10.06 Inability to Locate Payee 14 10.07 Requirement for Proper Forms 14 10.08 Source of Payments 14 10.09 Multiple Functions 15 10.10 Tax Effects 15 10.11 Gender and Number 15 10.12 Headings 15 10.13 Incorporation by Reference 15 10.14 Severability 15 10.15 Effect of Mistake 15 10.16 Provisions Relating to Insurers 15 ARTICLE XI - CONTINUATION COVERAGE UNDER COBRA 15 11.01 Continuation Coverage After Termination of Normal Participation 16 11.02 Who is a "Qualified Beneficiary" 16 11.03 Who is not a "Qualified Beneficiary" 16 11.04 What is a "Qualifying Event" 16 11.05 What Benefit is Available Under Continuation Coverage 16 11.06 Notice Requirements 17 11.07 Election Period 17 11.08 Duration of Continuation Coverage 17 11.09 Automatic Termination of Continuation Coverage 17 PROC297B.5 PREAMBLE The Employer hereby establishes a Flexible Benefits Plan ("Plan") for its Employees for purposes of providing eligible Employees with the opportunity to choose from among the fringe benefits available under the Plan. The Plan is intended to qualify as a cafeteria plan under the provisions of Code Section 125. The Dependent Care Expense Reimbursement Plan ("DCR") is intended to qualify as a Code Section 129 dependent care assistance plan, and the Medical Care Expense Reimbursement Plan ("Health FSA") is intended to qualify as a Code Section 105 medical expense reimbursement plan. Although printed within this document, the DCR and Health FSA Plans are separate written plans for purposes of administration and all reporting and nondiscrimination requirements imposed by Sections 105 and 129 of the Code and all applicable provisions of ERISA. The DCR and Medical Care Expense Reimbursement Plans are available only if designated on the Adoption Agreement. PROC297B.5 FLEXIBLE BENEFITS PLAN ARTICLE I DEFINITIONS 1.01 "Affiliated Employer" means any Employer within the context of Code Section 414(b), (c),or (m) of the Code which will be treated as single employer for purposes of Code Section 125. 1.02 "After-tax Premium(s)" means amounts withheld from an Employee's Compensation pursuant to a Salary Redirection Agreement to purchase coverages available under the Adoption Agreement on an after-tax basis. 1.03 "Anniversary Date" means the first day of any Plan Year. 1.04 "Benefit Plan(s) or Policy(ies)" means those Qualified Benefits available to a Participant under the Adoption Agreement. 1.05 "Board of Directors" means the Board of Directors of the Employer. The Board of Directors, upon adoption of this Plan appoints the Committee to act on the Employer's behalf in all matters regarding the Plan. 1.06 "Change in Family Status" means, and is limited to, a Participant's marriage or divorce; the death of a Participant's spouse or child; the birth or adoption of a Participant's child; the termination of employment (or commencement of employment) of the Participant's spouse; a change in employment status from full-time to part-time (or vice versa) by the Participant or the Participant's spouse; an unpaid leave of absence by either the Participant or the Participant's spouse; a significant change in the health coverage of the Participant or the Participant's spouse's attributable to the spouse's employment; or such other events as may be described by the Internal Revenue Service from time to time as a Change in Family Status. 1.07 "Code" means the Internal Revenue Code of 1986, as amended. 1.08 "Compensation" means the cash wages or salary paid to an Employee by the Employer. 1.09 "Dependent" means any individual who is a tax dependent of the Participant within the purview of Code Sec.152(a), or who is determined to be an alternative receipt of a Plan Participant under an order determined to be a qualified medical child support order (QMCSO) by the Plan Administrator, provided however, that in the case of a divorced Employee Dependent shall be defined as in Code Section 21(e)(5) (e.g., dependent of the parent with the custody) for purposes of the Dependent Care Expense Reimbursement Plan. 1.10 "Dependent Care Expense Reimbursement" shall have the meaning assigned to it by Section 5.01(c) of the Plan. 1.11 "Earned Income" means all income derived from wages, salaries, tips, self-employment, and other Employee Compensation (such as disability or wage continuation benefits), but does not include (a) any amounts received pursuant to any dependent care assistance program under Section 129 of the Code, (b) any amount received as a pension or annuity, or (c) workers compensation. co 1.12 "Effective Date" means the effective date of the Plan specified in the Adoption Agreement. 1.13 "Eligible Employment Related Expenses" means those Qualifying Employment -Related Expenses (as defined below) paid or incurred incident to maintaining employment after the date of the Employee's participation in the Dependent Care Expense Reimbursement Plan and during the Plan Year, other than amounts paid to: LO (a) an individual with respect to whom a Dependent deduction is allowable under Code Sec. 0 0 151(a) to the Participant or his Spouse; 1 co PROC297B.5 O CD O O N (b) the Participant's Spouse; or (c) a child of the Participant who is under 19 years of age. 1.14 "Eligible Medical Expenses" means those expenses incurred by the Employee, or the Employee's Spouse or Dependents, after the date of the Employee's participation in the Medical Care Expense Reimbursement Plan and during the Plan Year otherwise allowable as deductions under Code Sec. 213 (without regard to the limitations contained in Sec. 213(a)), but shall not include i)expenses for qualified long term care services (as defined in Code 770213(c); or ii) an expense incurred for the payment of premiums under a health insurance plan. For purposes of this Plan, an expense is "incurred" when the Participant or beneficiary is furnished the medical care or services giving rise to the claimed expense. 1.15 "Employee" means any individual who is considered to be in a legal employer -employee relationship with the Employer for federal withholding tax purposes. Such term includes "former employees" for the limited purpose of allowing continued eligibility for benefits hereunder for the remainder of the Plan Year in which an employee ceases to be employed by the Employer. The term "Employee" shall not include any leased employee (as that term is defined in Code Section 414(n) or any self employed individual who receives from the Employer "net earnings from self employment" within the meaning of Code Section 401(c)(2) unless such individual is also an Employee. 1.16 "Employer" means the organization(s) named in the Adoption Agreement, provided, however, that when the Plan provides that the Employer has a certain power (e.g., the appointment of a Plan Administrator, entering into a contract with a third party insurer, or amendment or termination of the plan) the term "Employer" shall mean only that entity named on the first line of the Adoption Agreement, and not any Affiliated Employer. Affiliated Employers who sign the Adoption Agreement shall be bound by the Plan as adopted and subsequently amended unless they clearly withdraw from participation herein. 1.17 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.18 "Highly Compensated Individual" means an individual defined under Code Section 125(e), 129(d)(2), or 105(h)(5), as amended, as a "highly compensated individual" or a "highly compensated employee." 1.19 "Key Employee" means an individual who is a "key employee" as defined in Code Section 125(b)(2), as amended. 1.20 "Medical Care Expense Reimbursement" shall have the meaning assigned to it by Section 5.01(b) of the Plan. 1.21 "Nonelective Contribution(s)" means any amount which the Employer in its sole discretion may contribute on behalf of each Participant to provide benefits for such Participant and his or her Dependents, if applicable under the Plan. The amount of Nonelective Contribution for each Participant may be adjusted upward or downward in the contributing Employer's sole discretion. The amount shall be calculated for each Plan Year in a uniform and nondiscriminatory manner based upon the Participant's dependent status, commencement or termination date of the Participant's employment during the Plan Year, and such other factors as the Employer shall prescribe. Except as otherwise provided in the Adoption Agreement in no event will any Nonelective Contribution be disbursed to a Participant if the cost of the benefit(s) elected is less than the Nonelective Contribution allocable thereto. Any excess shall be returned to the Employer. 1.22 "Participant" means an Employee who becomes a Participant pursuant to Article II. 1.23 "Plan" means the Adoption Agreement, the Flexible Benefits Plan and (if applicable) the related Trust created by this document. 2 PROC297B.5 1.24 "Plan Administrator" or committee means the person(s) appointed by the Employer with authority and responsibility to manage and direct the operation and administration of the Plan. If no such person is named, the Plan Administrator shall be the Employer. 1.25 "Plan Year" means the twelve month period specified in the Adoption Agreement provided, however, that a period of less than twelve months may be a Plan Year for the initial Plan Year, the final Plan Year, and a transition period to a different Plan Year. 1.26 "Pre-tax Premium(s)" means any amount withheld from the Employee's Compensation pursuant to a Salary Redirection Agreement which is intended to be paid on a pre-tax basis. This amount shall not exceed the premiums attributable to the most costly Benefit Plan of Policy options afforded hereunder, and for purposes of Code Section 125, shall be treated as an Employer contribution (this amount may, however, be treated as an Employee contribution for purposes of state insurance laws). 1.27 "Qualified Benefit" means any benefit excluded from the Employee's taxable income under Chapter 1 of the Code (other than Sections 106(b),117, 124, 127, or 132), and any other benefit permitted by the Income Tax Regulations (i.e., any group -term life insurance coverage that is includable in gross income by virtue of exceeding the dollar limitation on nontaxable coverage under Code Sec. 79). Long-term care insurance is not a "Qualified Benefit". 1.28 "Qualifying Employment -Related Expenses" means those expenses that would be considered to be employment -related expenses under Section 21(b)(2) of the Code (relating to expenses for household and dependent care services necessary for gainful employment) if paid for by the Employee to provide Qualifying Services. Such expenses must not be paid or payable to a child of the Employee who is under age 19 at the end of the year in which the expenses are incurred or an individual for whom the Employee or Employee's spouse is entitled to a personal tax exemption as a dependent. 1.29 "Qualifying Individual" means: (a) a Dependent of the Participant who is under the age of thirteen (13); (b) a Dependent of a Participant who is mentally or physically incapable of caring for himself or herself; or (c) the Spouse of a Participant who is mentally or physically incapable of caring for himself or herself. 1.30 "Qualifying Services" means services relating to the care of a Qualifying Individual that enable the Participant or his Spouse to remain gainfully employed which are performed: (a) in the Participant's home; or (b) outside the Participant's home for (1) the care of a Dependent of the Participant who is e= under age 13, or (2) the care of any other Qualifying Individual who resides at least eight (8) hours per day in the Participant's household. If the expenses are incurred for services provided by a dependent care center (i.e., a facility that provides care for more than 6 individuals not — residing at the facility), the center must comply with all applicable state and local laws and CO regulations. o _ 1.31 "Reimbursement Account(s) or Account(s)" shall be the funding mechanism by which amounts are withheld from an Employee's Compensation and retained for future Medical Care Expense -= Reimbursement or Dependent Care Expense Reimbursement. These amounts may either be retained by the Employer, sent to a third party plan administrator, and/or kept in trust for Employees. No money shall actually be allocated to any individual Participant Account(s); any such Account(s) shall o be of a memorandum nature, maintained by the Administrator for accounting purposes, and shall not be o r 3 CO PROC297B.5 O .� C3 C O O = M N representative of any identifiable trust assets. No interest will be credited to or paid on amounts credited to the Participant Account(s). 1.32 "Salary Redirection Agreement" means the actual or deemed agreement pursuant to which an eligible Employee or Participant enrolls in the specific component Benefit Plans or Policies with Pre-tax Premiums or After-tax Premiums in accordance with Article III. 1.33 "Spouse" means an individual who is legally married to a Participant, but for purposes of the Dependent Care Expense Reimbursement Plan provisions, shall not include an individual legally separated from the Participant under a divorce or separate maintenance decree, nor shall it include an individual who, although married to the Participant, files a separate federal income tax return, maintains a separate, principal residence from the Participant during the last six months of the taxable year, and does not furnish more than one-half of the cost of maintaining the principal place of abode of the Qualifying Individual. 1.34 "Student" means an individual who, during each of five (5) or more calendar months during the Plan Year, is a full time student at any college or university, the primary function of which is the conduct of formal instruction, and which routinely maintains a regular faculty and curriculum and normally has an enrolled student body in attendance at the location where its educational activities are regularly presented. 1.35 "Trustee" (if applicable) means the person(s) or institution (and their successors) named on the signature page attached hereto, who have assented to being so named by their signature to this Agreement, otherwise empowered to hold and disburse the funds that are created hereunder. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.01 Eligibility to Participate. Each Employee who meets the criteria set forth in the Adoption Agreement shall be eligible to participate in the Plan as of any applicable Entry Date. Eligibility for the benefits elected in the Adoption Agreement shall be subject to the additional requirements, if any, specified in the applicable Benefit Plan or Policy. The provisions of this Article are not intended to override any eligibility requirement(s) or waiting period(s) specified in the applicable Benefit Plans or Policies. 2.02 Entry Date. Each eligible Employee shall become a Participant in the Plan on the Entry Date specified in the Adoption Agreement provided that he has satisfied the requirements of the Adoption Agreement. 2.03 Termination of Participation. Participation shall terminate on the earliest of: i) the date an Employee ceases to be an Employee (except as otherwise provided in Section 3.05 for COBRA coverage ); ii) when an Employee ceases to meet the eligibility requirements of Section 2.01 of this Plan, iii) the date this Plan is amended to exclude the Employee or is terminated: iv) the effective date of the Employee's election not to participate pursuant to Sections 3.03 or 3.04. Subject to any specific limitations for any particular benefit which the Participant has elected, (a) participation shall be continued during a leave of absence for which the Participant continues to receive a salary from his or her employer and (b) participation shall be suspended during an unpaid leave of absence. 2.04 Eligibility to Participate in Reimbursement Benefits. An Employee, who is otherwise an Eligible Participant pursuant to Sections 2.01 and 2.02 shall be eligible to receive Medical and/or Dependent Care Expense Reimbursements (if selected by the Employer in the Adoption Agreement) if; (i) the additional Eligibility criteria (if any) set forth in the Adoption Agreement for the Reimbursement benefits have been satisfied; and (ii) a Salary Redirection Agreement is properly executed and submitted on which the aforementioned benefit(s) have been selected. 4 PROC2976.5 o LO o o CD O O co 2.05 Qualifying Leave Under Family Leave Act. Notwithstanding any provision to the contrary in this Plan, if a Participant goes on a qualifying unpaid leave under the Family and medical Leave Act of 1993 (FMLA), to the extent required by the FMLA, the Employer will continue to maintain the Participant's medical coverage (as defined in Code 5000) on the same terms and conditions as though he were still an active Employee (i.e., the Employer will continue to pay its share of the premium to the extent the Employee opts to continue his coverage). If the Employee opts to continue his coverage, the Employee may pay his share of the premium with after-tax dollars while on leave (or pre- tax dollars to the extent he receives compensation during the leave), or the Employee may be given the option to pre -pay all or a portion of his share of the premium for the expected duration of the leave on a pre-tax salary reduction basis out of his pre -leave Compensation by making a special election to that effect prior to the date such Compensation would normally be made available to him (provided, however, that pre-tax dollars may not be utilized to fund coverage during the next plan year), or via other arrangements agreed upon between the Employee and the Administrator (e.g., the Administrator may fund coverage during the leave and withhold amounts upon the Employee's return). Upon return from such leave, the Employee will be permitted to reenter the Plan on the same basis the Employee was participating in the Plan prior to his leave, or as otherwise required by the FMLA. ARTICLE III PREMIUM ELECTIONS 3.01 Election of Premiums. A Participant may elect any combination of Pre-tax Premiums or After-tax Premiums to fund any Benefit Plan or Policy available under the Adoption Agreement, provided however, that only Qualified Benefits (other than group term life insurance coverage in excess of $50,000) may be funded with Pre-tax Premiums. Participants may also be permitted to elect additional cash compensation by opting out of certain coverages to the extent described in the Adoption Agreement under "opt -out Option". 3.02 Initial Election Period. (a) Currently Eligible Employees. An Employee who is eligible to become a Participant in this Flexible Benefits Plan as of the Effective Date must complete, sign and file a Salary Redirection Agreement with the Plan Administrator during the election period (as specified by the Plan Administrator) immediately preceding the Effective Date in order to become a Participant on the Effective Date. The elections made by the Participant on this initial Salary Redirection Agreement shall be effective, subject to Section 3.04, for the Plan Year beginning on the Effective Date. (b) New Employees and Employees Who Have Not Yet Satisfied The Flexible Benefit Plan's Waiting Period. An Employee who becomes eligible to become a Participant in this Flexible Benefits Plan after the Effective Date must complete, sign and file a Salary Redirection Agreement with the Plan Administrator during the sixty (60) day period prior to the day the Employee first becomes eligible to participate in this Plan. If an Employee is eligible to participate in this Flexible Benefits Plan on the date he is first hired, a Salary Redirection Agreement must be completed, signed, and filed with the Plan Administrator within thirty (30) days from the date of hire. The elections made by the Participant on this initial Salary Redirection Agreement shall be prospectively effective as of the first pay period coinciding with or immediately following the date that the Salary Redirection Agreement is filed (or if later, the date of the employee's eligibility under the Flexible Benefits Plan) and, subject to Section 3.04, ending on the last day of the Plan Year in which such participation began. Coverage under the component Benefits Plan or Policies will be effective in accordance with the eligibility requirements contained in such Benefits Plans or Policies. (c) An eligible Employee who fails to complete, sign and file a Salary Redirection Agreement with the Plan Administrator in accordance with paragraph (a) or (b) above during an initial election period may become a participant on a later date in accordance with Section 3.03 or 3.04. 3.03 Annual Election Period. Each Employee who is a Participant in this Plan or who is eligible to become a Participant in this Plan shall be notified, prior to each Anniversary Date of this Plan, of his right to become a Participant in this Plan, to continue participation in this Plan, or to modify or to cease participation in this Plan, and shall be given a reasonable period of time in which to exercise such right: such period of time shall be known as the annual election period. An Election shall be made 5 PROC297B.5 by submitting a Salary Redirection Agreement to the Plan Administrator during the election period, and shall be effective for the entire Plan Year beginning on the Anniversary Date. A Participant or Employee who fails to complete, sign and file a Salary Redirection Agreement as required by this Section 3.03 shall be deemed to have elected to continue the same coverages under the Benefit Plans or Policies funded by the same coverages under the Benefit Plans or Policies funded by the same election (e.g., either Pre-tax Premiums or After-tax premiums adjusted to reflect any increase or decrease in premium/cost) then in effect for such Participant or Employee. Notwithstanding the foregoing, annual elections for participation in the Medical Care and Dependent Care Expense Reimbursement Plans must be made by submitting a Salary Redirection Agreement prior to the beginning of each Plan Year -- no deemed elections shall occur under such Plans. 3.04 Change of Premium Election. (a) A Participant may change or terminate his or her Pre-tax Premiums elected on the Salary Redirection Agreement within thirty (30) days of the occurrence of a change in Family Status, but only if such change or termination is made on account of, and is consistent with, the change in Family Status. Provided, however, that no Participant shall be allowed to reduce his election for Health or Dependent Care reimbursement to a point where the annualized contribution for such benefit is less than the amount already reimbursed. Any change in an election affecting annual Plan Contributions to the Health FSA pursuant to this Section also will change the maximum FSA Benefits for the period of coverage remaining in the Plan Year. Such Maximum Health FSA Benefits for the period of coverage following an election change shall be the lesser of: a) the maximum annual amount specified in the Adoption Agreement for Health FSA benefits less any Health FSA reimbursements prior to the change in Family Status; and b) the sum calculated by adding the balance remaining in the Participant's Health FSA as of the end of the portion of the Plan Year immediately preceding the change in election, to the total Plan Contributions scheduled to be made by the Participant during the remainder of such Plan Year. An Employee who is eligible to become a Participant but declined to become a Participant during the initial election period pursuant to Section 3.02(a) or (b) may become a Participant and file a Salary Redirection Agreement with respect to Pre-tax Premiums within thirty (30) days of the occurrence of change in Family Status, but only if the election under the new Salary Redirection Agreement is made on account of and is consistent with, the change in Family Status. Elections made pursuant to this Section 3.04 shall be effective for the balance of the Plan Year in which the election is made beginning on the first day of the pay period next following the day the new Salary Redirection Agreement is filed with the Plan Administrator, other than as provided in Section 3.04(b), below. (b) A Participant may revoke a prior election with respect to Pre-tax Premiums and in lieu thereof, receive on a prospective basis, coverage under another health plan with similar coverage if any independent, third -party provider of medical benefits previously elected by the Participant either significantly increases the premiums for such coverage, or significantly curtails the coverages available under such plans, during the Plan Year coverage period. A Participant otherwise entitled to make an alternate election under this Section must do so within 30 days of receipt of a written notice from the Plan Administrator of the significant change in cost or composition of the benefit originally elected. Such revocation and new election shall be effective on the first day of the payroll period coincident with or immediately following the date the Participant files his new Salary Redirection Agreement with the Plan Administrator. 3.05 Termination of Election. Except as otherwise provided in Section 2.03, Termination of employment shall automatically revoke any Salary Redirection Agreement. Except as provided below for COBRA continues, if revocation occurs under this Section 3.05, no new election with respect to Pre-tax Premiums may be made by such Participant during the remainder of the Plan Year. Except as otherwise provided in the applicable Benefit Plans or Policies, individuals who elect to continue group health coverage pursuant to Section 5.05 and Article XI, and who are subsequently rehired during the same Plan Year will be reinstated upon reemployment with the same election(s) such individual had before termination. PROC297B.5 ; co N co O o o o O O CM ARTICLE IV PREMIUM PAYMENTS AND CREDITS AND DEBITS TO ACCOUNTS 4.01 Source of Premium Payments. The Employer shall withhold from a Participant's Compensation on a Pre-tax or After-tax basis (as elected on the Salary Redirection Agreement) an amount equal to the contributions required from the Participant (less any applicable Nonelective Contribution) for coverage of the Participant, or the Participant's spouse or dependents, under the Benefit Plans or Policies elected by the Participant and maintained by the Employer as noted in the Adoption Agreement under this Plan. The component Benefit Plans or Policies, and required Employee contributions thereunder shall be set forth on an annual schedule. Amounts withheld from a Participant's Compensation as Pre-tax Premiums or After-tax Premiums shall be applied to fund benefits as soon as administratively feasible. The maximum amount of Pre-tax Premiums plus any Nonelective Contribution made available by the Employer for the benefit of each Plan Participant shall not exceed the aggregate cost of the benefits elected. 4.62 Allocations Irrevocable During Plan Year. Except as provided in Sections 3.04, 3.05, 4.03, and 4.04, neither (i) the insurance coverages nor amounts withheld therefor elected under Section 5.01(a), nor (ii) the amount to be credited to a Participant Account during the Plan Year pursuant to Sections 4.05 and 4.06, nor (iii) the allocation of such amounts to the appropriate Account(s) of the Participant, can be changed during the Plan Year. 4.03 Reduction of Certain Elections to Prevent Discrimination. If the Plan Administrator determines, before or during any Plan Year, that the Plan may fail to satisfy for such Plan Year any requirement imposed by the Code or any limitation on Pre-tax Premiums allocable to Key Employees or to Highly Compensated Individuals, the Plan Administrator shall take such action(s) as he deems appropriate, under rules uniformly applicable to similarly situated Participants, to assure compliance with such requirement or limitation. Such action may include, without limitation, a modification or revocation of a Highly Compensated Individual's or Key Employee's Salary Redirection Agreement without the consent of such Employee. 4.04 Modification of Amounts Withheld due to Premium Changes. Except as otherwise provided in Section 3.04(b), if the cost of a health plan provided by an independent, third party provider increases or decreases during a Plan Year, then any Participant who has elected to participate in such health plan shall be required to make a corresponding change in his or her premium payments, and the Plan Administrator shall increase or decrease, as the case may be, the Pre-tax Premiums or After-tax Premiums (as applicable) under each affected Participant's Salary Redirection Agreement. . 4.05 Medical Care Expense Reimbursement. (a) Debiting and Crediting of Accounts. Each Participant's Medical Care Expense Reimbursement Account ("Account") will be credited with amounts withheld from the Participant's Compensation for Medical Care Expense Reimbursement pursuant to the Salary Redirection Agreement. The Account will be debited for reimbursement amounts disbursed to the Participant in accordance with Article V of this document. The entire amount elected by the Participant on the Salary Redirection Agreement as an annual amount for the Plan Year for Medical Care Expense Reimbursement less any reimbursements already disbursed shall be available to the Participant at any time during the Plan Year without regard to the balance in the Account (provided that the periodic premiums have been paid). Thus, the maximum amount of Medical Care Expense Reimbursement at any particular time during the Plan Year will not relate to the amount which a Participant has had withheld up to that time. In no event will the amount of medical expense reimbursement benefits in any Plan Year exceed the annual amount specified for the Plan Year in the Salary Redirection Agreement for Medical Care Expense Reimbursement. Any amount allocated to the Account shall be forfeited by the Participant and restored to the Employer if it has not been applied to provide Medical Care Expense Reimbursement by the ninetieth (90th) day following the end of the Plan Year for which the election was effective. Amounts so forfeited shall be used to offset administrative expenses. (b) Source of Payments. All Medical Care Expense Reimbursement benefits derived hereunder shall be paid exclusively from the amounts in each Employee's Medical Care Expense 7 PROC297B.5 Reimbursement Account funded by amounts withheld from the Employee's wages pursuant to the Salary Redirection Agreement for Medical Care Expense Reimbursement and any Nonelective Contributions allocated thereto. In the event that an Employee's reimbursement request for Medical Care Expense Reimbursement benefits exceeds the amount currently available in the Employee's Medical Care Expense Reimbursement Account, the Employer shall pay the excess amount up to the amount elected by the Participant on the Salary Redirection Agreement for Medical Care Expense Reimbursement less any reimbursements already disbursed. Future premium payments by the Employee shall then go to the Employer as reimbursement for the money so advanced on behalf of the Employee. (c) Employer Risk. If an Employee terminates employment before the Employer has been reimbursed for the money it has advanced on behalf of the Employee, the entire unreimbursed portion shall be deemed to be an "administrative expense" to be refunded to the Employer by any unused Account balance(s) (if any) as provided in Section 4.05(a). 4.06 Dependent Care Expense Reimbursement. (a) Crediting and Debiting of Accounts. Each Participant's Dependent Care Expense Reimbursement Account ("Account") will be credited with amounts withheld from the Participant's Compensation for Dependent Care Expense Reimbursement pursuant to the Salary Redirection Agreement. The Account will be debited for reimbursement amounts disbursed to the Participant in accordance with Article V of this document. In the event that the amount in the Account is less than the amount of reimbursable benefit requests at any time during the Plan Year, the excess part of the reimbursement will be carried over into following months (within the same Plan Year), to be paid out as the Account balance becomes adequate. In no event will the amount of Dependent Care Expense Reimbursement benefits exceed the amount withheld pursuant to the Salary Redirection Agreement for any Plan Year. Any amount allocated to the Account shall be forfeited by the Participant and restored to the Employer if it has not been applied to provide Dependent Care Expense Reimbursement for the Plan Year by the ninetieth (90th) day following the end of the Plan Year for which the election was effective. Amounts so forfeited shall be used to offset administrative costs. (b) Source of Payments. All Dependent Care Expense Reimbursement benefits derived hereunder shall be paid exclusively from the amounts in each Employee's Dependent Care Expense Reimbursement Account funded by amounts withheld from the Employee's wages pursuant to the Salary Redirection Agreement for Dependent Care Expense Reimbursement, and any Nonelective Contributions allocable thereto. ARTICLE V BENEFITS 5.01 Qualified Benefits. The maximum benefit a Participant may elect under this Plan shall not exceed the Sum of i) the Aggregate Premium for all Insurance Premium Payments under 5.01(a);ii) the Maximum Medical Care Expense Reimbursement under 5.01(b); and iii) the Maximum Dependent Care Reimbursement under 5.01(c). The Qualified Benefits available for election are one or more of the following: (a) Insurance Premium Payment. The Employer shall withhold from a Participant's Compensation an amount equal to the contributions required from the Participant (less any applicable Nonelective contribution) for coverage of the Participant, or the dependent coverage of the Participant's spouse or Dependents, under the Benefit Plans or Policies elected by the Participant and maintained by the Employer as noted in the Adoption Agreement. The benefits are subject to the terms and conditions of the applicable Benefit Plans or Policies specifically referred to in the Adoption Agreement and incorporated herein into this Plan. (b) Medical Care Expense Reimbursement. If pursuant to the Adoption Agreement, the Employer has elected to maintain a Medical Care Expense Reimbursement Plan, payment shall be made to the Participant in cash as reimbursement for Eligible Medical Expenses incurred by the Participant or his Dependents while he is an Employee, during the Plan Year for which the Participant's election is effective. These expenses must also be expenses which -- 0 PROC297B.5 (1) are not covered, paid or reimbursed from any other source; and (2) meet the criteria of tax -deductibility as a medical or dental expense under Section 213 of the Code, as amended and the regulations thereunder, and (3) meet any limitations imposed by applicable regulations promulgated under Code Section 125; and (4) will not be taken as a deduction from income on the Participant's federal income tax return in any tax year; and (5) do not exceed the lesser of (a) the maximum annual amount allocable to Medical Care Expense Reimbursement specified in the Adoption Agreement, or (b) the annual amount that the Employee has elected to have withheld for Medical Care Expense Reimbursement; less previous Medical Care Expense Reimbursements made during the Plan Year; and (6) are verified in writing to the satisfaction of the Administrator that a covered expense has occurred and the reimbursement for which meet the substantiation requirements of Section 6.11. (c) Dependent Care Expense Reimbursement. If pursuant to the Adoption Agreement, the Employer has elected to maintain a Dependent Care Expense Reimbursement Plan, payment shall be made to the Participant in cash as reimbursement for Eligible Employment Related Expenses incurred by him or her while an Employee, during the Plan Year for which the Participant's election is effective, provided that the substantiation requirements of Section 6.11 have been complied with. No payment otherwise due a Participant hereunder shall exceed the smallest of: (1) the Participant's Earned Income for the applicable month; or (2) the Earned Income of the Participant's Spouse for such month (Note: a Spouse of a Participant who is not employed during a month in which the Participant incurs Eligible Employment Related Expenses and who is either incapacitated or a Student shall be deemed to have Earned Income in the amount of $200 per month per Qualifying Individual for whom the Participant incurs Eligible Employment Related Expense(s), up to a maximum amount of $400 per month); or (3) the annual amount the Participant has elected to have withheld from his Compensation for Dependent Care Expense Reimbursement less any prior Dependent Care Expense Reimbursements during the Plan Year; or (4) Five Thousand Dollars` ($5,000), or, if the Participant is married and files a separate tax return, Two Thousand Five Hundred Dollars ($2,500) (or any future aggregate limitations promulgated under Code Section 129) less any prior reimbursements during the Plan Year. 5.02 Cash Benefit. Employees who elect not to receive coverage under certain Employer sponsored plans may be entitled to additional cash compensation as described in the Adoption Agreement under "Opt -out Option". To the extent that a Participant does not elect under a Salary Redirection Agreement to have the maximum amount of his Compensation contributed as a Pre-tax Premium or After-tax Premium hereunder, such amount not elected shall be paid to the Participant in the form of normal Compensation payments; provided however, that Nonelective Contributions may not 1* be received in the form of cash compensation. o 5.03 Repayment of Excess Reimbursements. If, as of the end of any Plan Year, it is determined that a Participant has received payments under this Plan that exceed the amount of Eligible Reimbursement Expenses that have been substantiated by such Participant during the Plan Year, the Plan Administrator shall give the Participant prompt written notice of any such excess amount, and the Participant shall repay the amount of such excess to the Employer within sixty (60) days of receipt of such notification. C) 9 T O PROC297B.5 O O cM N 5.04 Termination of Reimbursement Benefits. Coverage under the Medical Care Expense Reimbursement and/or Dependent Care Expense Reimbursement Plan(s) shall cease as of the date on which a Participant is no longer employed by the Company or when a premium payment has not been made for any reason. Provided, however, that Participants shall have the right to submit Claims for reimbursement for Eligible Employment -Related Expenses arising during the Plan Year at any time until ninety (90) days after the end of the Plan Year for which the election had been in effect, and to receive reimbursement hereunder. Participants in the Medical Reimbursement Plan shall have the right to submit claims for reimbursement for Eligible Medical Expense arising during the Plan Year and before the date of separation from service at any time until ninety (90) days after the end of the Plan Year for which the election had been in effect, and to receive reimbursement hereunder. Unless a COBRA election is made, Participants shall not be entitled to receive reimbursement for Medical Care expenses incurred after coverage ceases under this Section, and any unused reimbursement benefits at the expiration of the 90-day period following the close of the Plan Year shall be treated in accordance with Sections 4.05 or 4.06. 5.05 COBRA Coverage. Each Benefit Plan or Policy made available under Article V that is considered to be a "group health plan" under Code Sec. 4980B, because employees and their families are provided with health care benefits within the meaning of Code Sec. 212(d)(1), including the Medical Care Expense Reimbursement Benefit, shall contain the necessary provisions required by Code Sec. 4980B and ERISA Sec. 601, to assure that such benefits may be continued on or after the occurrence of the qualifying events defined in Code Sec. 4980B(f)(3). 5.06 Coordination of Benefits Under Health FSA. The Health FSA is intended to pay benefits solely for otherwise unreimbursed medical expenses. Accordingly, it shall not be considered a group health plan for coordination of benefits purposes, and its benefits shall not be taken into account when determining benefits payable under any other plan. ARTICLE VI PLAN ADMINISTRATION 6.01 Allocation of Authority. Except as to those functions reserved within the Plan to the Employer, the Plan Administrator appointed pursuant to the Adoption Agreement shall control and manage the operation and administration of the Plan. The Plan Administrator shall have the exclusive right to interpret the Plan and to decide all matters arising thereunder, including the right to construe and interpret possible ambiguities, inconsistencies, or omissions in the Plan and the Summary Plan Description issued in connection with the Plan. All determinations of the Plan Administrator with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Plan Administrator shall have the following powers and duties: (a) To require any person to furnish such reasonable information as he may request for the purpose of the proper administration of the Plan as a condition to receiving any benefits under the Plan; (b) To make and enforce such rules and regulations and prescribe the use of such forms as he shall deem necessary for the efficient administration of the Plan; (c) To decide on questions concerning the Plan and the eligibility of any Employee to participate in the Plan and to make or revoke elections under the Plan, in accordance with the provisions of the Plan; (d) To determine the amount of benefits which shall be payable to any person in accordance with the provisions of the Plan; to inform the Employer, insurer or Trustee (if any), as appropriate, of the amount of such benefits; and to provide a full and fair review to any Participant whose claim for benefits has been denied in whole or in part; (e) To designate other persons to carry out any duty or power which may or may not otherwise be a fiduciary responsibility of the Plan Administrator, under the terms of the Plan; IV PROC297B.5 (f) To keep records of all acts and determinations, and to keep all such records, books of account, data and other documents as may be necessary for the proper administration of the Plan; (g) To prepare and distribute to all Employees information concerning the Plan and their rights under the Plan; (h) To do all things necessary to operate and administer the Plan in accordance with its provisions; 6.02 Provision for Third -Party Plan Service Providers. The Plan Administrator, subject to approval of the Employer, may employ the services of such persons as it may deem necessary or desirable in connection with the operation of the Plan and to rely upon all tables, valuations, certificates, reports and opinions furnished thereby. Unless otherwise provided in the service agreement, obligations under this Plan shall remain the obligation of the Employer. 6.03 Fiduciary Liability. To the extent permitted by law, neither the Plan Administrator nor any other person shall incur any liability for any acts or for failure to act except for their own willful misconduct or willful breach of this Plan. 6.04 Compensation of Plan Administrator. Unless otherwise determined by the Employer and permitted by law, any Plan Administrator who is also an employee of the Employer shall serve without compensation for services rendered in such capacity, but all reasonable expenses incurred in the performance of their duties shall be paid by the Employer. 6.05 Bonding. Unless otherwise determined by the Employer, or unless required by any Federal or State law, the Plan Administrator shall not be required to give any bond or other security in any jurisdiction in connection with the administration of this Plan. 6.06 Payment of Administrative Expenses. Unless otherwise indicated in the Adoption Agreement, all reasonable expenses incurred in administering the Plan shall be paid by the Employer, provided, however that each Participant shall bear the monthly cost (if any) charged for the maintenance of any Reimbursement Account unless otherwise paid by the Employer. 6.07 Funding Policy. The Employer shall have the right to enter into a contract with one or more insurance companies for the purposes of providing any benefits under the Plan and to replace any of such insurance companies or contracts. Any dividends, retroactive rate adjustments or other refunds of any type which may become payable under any such insurance contract shall not be assets of the Plan but shall be the property of, and shall be retained by the Employer to provide future Benefit Plan or Policy benefits. 6.08 Disbursement Reports. The Plan Administrator shall issue directions to the Employer concerning all benefits which are to be paid from the Employer's general assets pursuant to the provisions of the Plan. 6.09 Reporting and Disclosure Obligations. Unless specified otherwise, it shall be the Employer and Plan Administrator's sole responsibility to comply with all filing, reporting, and disclosure requirements, imposed by the Department of Labor and/or Internal Revenue Service, specifically including, but not limited to creating, filing and distributing Summary Annual Reports, Form 5500's, and Summary Plan Descriptions. Furthermore, the Employer and Plan Administrator shall be required to 0 amend the Plan as is necessary to ensure compliance with applicable tax and other laws and LO regulations. co 0 6.10 Indemnification. The Plan Administrator shall be indemnified by the Employer against claims, and the expenses of defending against such claims, resulting from any action or conduct relating to the administration of the Plan except claims arising from gross negligence, willful neglect, or willful �. misconduct. —' 11 0 o T CD PROC2978.5 O �. 0 O O N 6.11 Substantiation of Expenses. Each Participant must submit a written Request for Reimbursement form to the Plan Administrator to receive reimbursements from his Medical or Dependent Care Expense Reimbursement Account(s), on a form provided by the Plan Administrator accompanied by a written statement/bill from an independent third party stating that the expense has been incurred, and the amount thereof. The forms shall contain such evidence as the Plan Administrator shall deem necessary as to substantiate the nature, the amount, and timeliness of any expenses that may be reimbursed. 6.12 Reimbursement. Reimbursements shall be made as soon as administratively feasible after the required forms have been received by the Plan Administrator. Reimbursements of less than $15 may be carried forward and aggregated with future reimbursements until the reimbursable amount is greater than $15, provided, however, that the entire amount of reimbursable reimbursements outstanding at the end of the Plan Year shall be reimbursed without regard to the $15 threshold limit. Such forms and documentation must be submitted by the fourth (4th) Friday of the month in order to receive a reimbursement in the following month. Year-end expense reimbursements must be submitted to the Plan Administrator within 90 days of the close of the Plan Year for which the Salary Redirection Agreement is effective, and during which such expense was incurred, in order to be eligible for reimbursement. Likewise, if a Participant terminates participation in the Plan with a credit balance in any Reimbursement Account, such Participant shall be entitled to submit to the Plan Administrator any Requests for Reimbursement for reimbursable expenses incurred prior to such cessation of Participation at any time within 90 days after the close of the Plan Year for which the Salary Redirection Agreement is effective. 6.13 Annual Statements. The Plan Administrator shall furnish each Participant with an annual statement, showing the amounts paid or expenses incurred by the Employer in providing Medical and/or Dependent Care Expense Reimbursement during the previous calendar year and the respective Reimbursement Account balance(s) on or before January 31 following the close of the applicable Plan Year. ARTICLE VII FUNDING AGENT 7.01 Funding of the Plan. The Plan shall be funded with amounts withheld from Compensation pursuant to Salary Redirection Agreements and by Nonelective Contributions by the Employer. 7.02 The Employer as Funding Agent. If the Employer is designated the Funding Agent in the Adoption Agreement, the Employer will immediately apply all such amounts, without regard to their source, to pay for the welfare benefits provided in the Adoption Agreement and shall comply with all applicable regulations promulgated by the Department of Labor ("D.O.L.") taking into consideration any enforcement procedures adopted by the D.O.L. 7.03 Trust as Funding Agent. If a Trust is designated Funding Agent in the Adoption Agreement, an appropriate Trust Agreement shall be attached at the end of this Plan. ARTICLE Vill CLAIMS PROCEDURES 8.01 Application to Plan Benefits. The provisions of this Article do not apply to: i) individual policies or ii) group policies not subject to ERISA. If applicable, these provisions apply to claims for benefits only to the extent that no claims procedure is specified for such benefit in the applicable Benefit Plan or Policy. If a claims procedure is otherwise available under the applicable Benefit Plan or Policy, this Article shall not apply to benefits under the component Benefit Plan or Policy, but shall only apply to issues germane ToT the pre-tax benefits available under this Plan (i.e., such as a determination of: a Change in Family Status; significant change in premiums charged; or eligibility and participation matters under this Flexible Benefits Plan document). This Article shall be the claims procedure applicable to the Medical Care Expense Reimbursement and the Dependent Care Expense Reimbursement Plan(s). 12 PROC297B.5 8.02 Procedure if Benefits are Denied Under the Plan. Any Employee, beneficiary, or his duly authorized representative may file a claim for a benefit to which the claimant believes that he is entitled, but that has been previously denied by the Plan Administrator. Such a claim must be in writing and delivered to the Plan Administrator in person or by mail, postage paid. Within ninety (90) days after receipt of such claim, the Plan Administrator shall send to the claimant, by mail, postage prepaid, notice of the granting or denying, in whole or in part, of such claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension exceed ninety (90) days from the end of the initial period. If such extension is necessary, the claimant will be given a written notice to this effect prior to the expiration of the initial 90-day period. The Plan Administrator shall have full discretion to deny or grant a claim in whole or in part. If notice of the denial of a claim is not furnished in accordance with this Section 8.02, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to review pursuant to Sections 8.04 and 8.05. 8.03 Requirement for Written Notice of Claim Denial. The Plan Administrator shall provide a written notice to every claimant who is denied a claim for benefits under this Article. Such written notice shall set forth in a manner calculated to be understood by the claimant, the following information: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent Plan provisions on which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material is necessary, and (d) An explanation of the Plan's claim review procedure. 8.04 Right to Request Hearing on Benefit Denial. Within sixty (60) days after the receipt by the claimant of written notification of the denial (in whole or in part) of his claim, the claimant or his duly authorized representative may make a written application to the Plan Administrator, in person or by certified mail, postage prepaid, to be afforded a review of such denial; may review pertinent documents; and may submit issues and comments in writing. 8.05 Disposition of Disputed Claims. Upon receipt of a request for review, the Plan Administrator shall make a promptdecision on the review matter. The decision on such review shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent plan or insurance policy provisions on which the decision was based. The decision upon review shall be made not later than sixty (60) days after the Plan Administrator's receipt of a request for a review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered not later than one hundred twenty (120) days after receipt of a request for review. If an extension is necessary, the claimant shall be given written notice of the extension prior to the expiration of the initial sixty (60) day period. If notice of the decision on the review is not furnished in accordance with this Section 8.05, the claim shall be deemed denied and the Claimant shall be permitted to exercise his right to a legal remedy. ARTICLE IX AMENDMENT OR TERMINATION OF PLAN 9.01 Permanency. While the Employer fully expects that this Plan will continue indefinitely, due to unforeseen, future business contingencies, permanency of the Plan will be subject to the Employer's right to amend or terminate the Plan, as provided in Sections 9.02 and 9.03, below. Nothing in this Plan is intended to be or shall be construed to entitle any Participant, retired or otherwise, to CD vested or nonterminable benefits. co 9.02 Employer's Right to Amend. The Employer reserves the right to amend the Plan at any time and from time -to -time, and retroactively, if deemed necessary or appropriate to meet the requirements of Code Section 125, or any similar provisions of subsequent revenue or other laws, to modify or amend in whole or in part any or all of the provisions of the Plan. All amendments shall be =— made in writing and shall be approved by the Board of Directors (or a duly authorized officer of the Employer) in accordance with its normal procedures for transacting business. Such amendments may oapply retroactively or prospectively. Each Benefit Plan or Policy shall be amended in accordance with i= 13 CD PROC297B.5 O O _•• C the terms specified therein, or, if no amendment procedure is prescribed, in accordance with this section. Any amendment made by the Employer shall be deemed to be approved and adopted by any Affiliated Employer. 9.03 Employer's Right to Terminate. The Employer reserves the right to discontinue or terminate the Plan without prejudice at any time and for any reason without prior notice. Such decision to terminate the Plan shall be made in writing and shall be approved by the Board of Directors (or a duly authorized officer of the Employer) in accordance with its normal procedures for transacting business. Affiliated Employers may withdraw from participation in the plan, but may not terminate it. 9.04 Determination of Effective Date of Amendment or Termination. Any such amendment, discontinuance or termination shall be effective as of such date as the Employer shall determine. Subject to, Sections 4.05(a) and 4.06(a) (if applicable), no amendment, discontinuance or termination shall allow the return to any Employer of any Reimbursement Account balance nor its use for any purpose other than for the exclusive benefit of the Participants and their beneficiaries. ARTICLE X GENERAL PROVISIONS 10.01 Not an Employment Contract. Neither this Plan nor any action taken with respect to it shall confer upon any person the right to continue employment with any Employer. 10.02 Applicable Laws. The provisions of the Plan shall be construed, administered and enforced according to applicable Federal law and the laws of the State of the principal place of business of the Employer to the extent not preempted. 10.03 Post-Mortem Payments. Any benefit payable under the Plan after the death of a Participant shall be paid to his surviving spouse (if any), otherwise, to his estate. If there is doubt as to the right of any beneficiary to receive any amount, the Plan Administrator may retain such amount until the rights thereto are determined, without liability for any interest thereon. 10.04 Nonalienation of Benefits. Except as expressly provided by the Administrator, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. No benefit under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person. 10.05 Mental or Physical Incompetency. Every person receiving or claiming benefits under the Plan shall be presumed to be mentally and physically competent and of age until the Plan Administrator receives a written notice, in a form and manner acceptable to it, that such person is mentally or physically incompetent or a minor, and that a guardian, conservator or other person legally vested with the care of his estate has been appointed. 10.06 Inability to Locate Payee. If the Plan Administrator is unable to make payment to any Participant or other person to whom a payment is due under the Plan because he cannot ascertain the identity or whereabouts of such Participants or other person after reasonable efforts have been made to identify or locate such person such _payment and all subsequent payments otherwise due to such Participant or other person shall be forfeited one year after the date any such payment first became due. 10.07 Requirement for Proper Forms. All communications in connection with the Plan made by a Participant shall become effective only when duly executed on any forms as may be required and furnished by, and filed with, the Plan Administrator. 10.08 Source of Payments. The Employer, the Trust fund (if selected as Funding Agent), and any insurance company contracts purchased or held by the Employer or funded pursuant to this Plan shall be the sole sources of benefits under the Plan. No Employee or beneficiary shall have any right to, or interest in, any assets of the Employer upon termination of employment or otherwise, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or beneficiary. 14 PROC297B.5 co a EMEE LO O T CD O O O N 10.09 Multiple Functions. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 10.10 Tax Effects. Neither the Employer, its agents, the Plan Administrator, nor the Trustee makes any warranty or other representation as to whether any Pre-tax Premiums made to or on behalf of any Participant hereunder will be treated as excludable from gross income for local, state, or federal income tax purposes. If for any reason it is determined that any amount paid for the benefit of a Participant or Beneficiary are includable in an Employee's gross income for local, federal, or state income tax purposes, then under no circumstances shall the recipient have any recourse against the Plan Administrator or the Employer with respect to any increased taxes or other losses or damages suffered by the Employees as a result thereof. The Plan is designed and is intended to be operated as a "cafeteria plan" under Section 125 of the Code. 10.11 Gender and Number. Masculine pronouns include the feminine as well as the neuter genders, and the singular shall include the plural, unless indicated otherwise by the context. 10.12 Headings. The Article and Section headings contained herein are for convenience of reference only, and shall not be construed as defining or limiting the matter contained thereunder. 10.13 Incorporation by Reference. Except for the Medical and Dependent Care Expense Reimbursement Plan(s), the actual terms and conditions of the separate component Benefit Plans or Policies offered under this Plan are contained in separate, written documents governing each respective benefit, and shall govern in the event of a conflict between the individual plan document, and this Plan as to substantive content. To that end, each such separate document, as amended or subsequently replaced, is hereby incorporated by reference as if fully recited herein. The provisions of the Medical and Dependent Care Expense Reimbursement Plan(s) are reproduced herein, but shall constitute separate plans for purposes of all applicable Code and ERISA provisions. 10.14 Severability. Should any part of this Plan subsequently be invalidated by a court of competent jurisdiction, the remainder thereof shall be given effect to the maximum extent possible. 10.15 Effect of Mistake. In the event of a mistake as to the eligibility or participation of an Employee, or the allocations made to the account of any Participant, or the amount of distributions made or to be made to a Participant or other person, the Plan Administrator shall, to the extent it deems possible, cause to be allocated or cause to be withheld or accelerated, or otherwise make adjustment of, such amounts as will in its judgment accord to such Participant or other person the credits to the account or distributions to which he is properly entitled under the Plan. Such action by the Administrator may include withholding of any amounts due the Plan or the Employer from Compensation paid by the Employer. 10.16 Provisions Relating to Insurers. No insurer shall be required or permitted to issue an insurance policy or contract that is inconsistent with the purposes of this Plan, nor be bound to take any action not in accordance with the terms of any policy or contract with this Plan. The insurer shall not be deemed to be a party to this Plan, nor shall it be bound to interpret the construction or validity of the Plan. The insurer shall be protected from its good faith reliance on the written representations and instructions of the Trustee and the Plan Administrator, and shall not be responsible for the initial or continued qualified status of the Plan. ARTICLE XI CONTINUATION COVERAGE UNDER COBRA The following provisions shall be applicable to the Medical Care Expense Reimbursement Plan, and any other group health plan (as defined by Code 4980B and 5000(b)(1) and the regulations promulgated thereunder) subject to COBRA that does not otherwise contain COBRA provisions. The intent of this Article is to extend continuation rights required by COBRA. To the extent greater rights are provided for hereunder, this Article shall be void. 15 PROC2976.5 11.01 Continuation Coverage after Termination of Normal Participation. During any Plan Year during which the Employer is subject to Code Section 4980B, each person who is a Qualified Beneficiary shall have the right to elect to continue coverage under the Medical Care Expense Reimbursement Plan (or other group health plan subject to COBRA) upon the occurrence of a Qualifying Event that would otherwise result in such person losing coverage hereunder. Such extended coverage under the plan is known as "Continuation Coverage." 11.02 Who is a "Qualified Beneficiary". A "Qualified Beneficiary" is any person who is, as of the day before a Qualifying Event, (a) an Employee of the Employer (including persons who are considered to be "employees" within Code Sec. 401(c), directors and independent contractors) covered under a health plan offered under the Plan as of such day (such persons are called "Covered Employees"), (b) the Spouse of the Covered Employee, or (c) a Dependent of the Covered Employee. A Covered Employee can be a Qualified Beneficiary only if the Qualifying Event consists of termination of employment (for any reason other than gross misconduct) or reduction of hours of the Covered Employee's employment. A child born to or placed for adoption with a Covered Employee during Continuation Coverage will also be a Qualified Beneficiary. A retiree or other former Employee actively participating in the Plan by reason of a previous period of employment will be treated as a "Qualified Beneficiary". 11.03 Who is not a "Qualified Beneficiary". A person is not a Qualified Beneficiary if, as of such day, either the individual is covered under the Medical Care Expense Reimbursement Plan (or other group health plan subject to COBRA) by virtue of the election of Continuation Coverage by another person and is not already a Qualified Beneficiary by reason of a prior Qualifying Event, or is entitled to Medicare coverage under Title XVIII of the Social Security Act. Furthermore, an individual who fails to elect Continuation Coverage within the election period provided in Section 11.07, below, shall not be considered to be a Qualified Beneficiary. Event": 11.04 What is a "Qualifying Event". Any of the following shall be considered as a "Qualifying (a) death of a Covered Employee; (b) termination (other than by reason of gross misconduct) of the Covered Employee's employment or reduction of hours of employment; (c) divorce or legal separation of a Covered Employee from the employee's spouse; (d) a Covered Employee's becoming entitled to receive Medicare benefits under Title XVIII of the Social Security Act; or (e) a dependent child of a Covered Employee ceasing to be a Dependent. In the case of any person treated as a Covered "Employee" but who is not a common-law employee, termination of "employment" means termination of the relationship that originally gave rise to eligibility to participate in the Medical Care Expense Reimbursement Plan (or other group health plan subject to COBRA.) 11.05 What Benefit is Available under Continuation Coverage. Each person who is eligible to elect to continue coverage under Article XI shall have the right to continue the level of coverage in effect for the Covered Employee on the day before the Qualifying Event (or a lesser level of coverage). If a Qualified Beneficiary of another group health plan maintained by the Employer is prevented from receiving a previous level of Benefits due to a change in plan Benefits or plan termination , such individual will be entitled to elect any available level of coverage under the Medical Care Expense Reimbursement Plan. A premium for Continuation Coverage shall be charged to Employees and Qualified Beneficiaries in such amounts and shall be payable at such times as are established by the Plan Administrator and permitted by applicable law. 16 PROC297B.5 co co O LO -- o rl- CD O O O co 11.06 Notice Requirements. . (a) When an Employee becomes covered under this Medical Care Expense Reimbursement Plan (or any other group health plan subject to COBRA), the Plan Administrator must inform the Participant (and spouse, if any) in writing of the rights to continued coverage, as described in Article XI. (b) The Employer shall give the Plan Administrator (if different from the Employer) written notice of a Qualifying Event within thirty (30) days of the occurrence thereof. (c) Within fourteen (14) days of receipt of the Employer's notice, the Plan Administrator shall furnish each Qualifying Beneficiary with written notification of the termination of regular coverage under the Medical Care Expense Reimbursement Plan (or any other group health plan subject to COBRA), as well as a recital of the rights of any such Beneficiary to elect Continuation Coverage, as required by Code Sec. 4980B and ERISA Sec. 601, in accordance with the terms of this Plan. (d) In the case of a Qualifying Event described in Section 11.04(c) or (e), a Covered Employee or a Qualified Beneficiary who is a Spouse or Dependent of such Employee must notify the Plan Administrator within sixty (60) days of the occurrence thereof. The Plan Administrator shall give written notification of Conversion Coverage rights to any other affected Qualified Beneficiaries within fourteen (14) days of receipt of the notice described in this Section 11.06(d). Notwithstanding any of the foregoing, notification to a Qualified Beneficiary who is a spouse of a Covered Employee is treated as notification to all other Qualified Beneficiaries residing with that person at the time notification is made. 11.07 Election Period. Any Qualified Beneficiary entitled to Continuation Coverage shall have 60 days from the date of the notice required by Section 11.06, in the case of occurrence of a Qualifying Event, in which to return a signed election to the Plan Administrator indicating the choice to continue benefits under this Plan. 11.08 Duration of Continuation Coverage. Except as otherwise provided in this Plan, Continuation Coverage shall extend for a period of 18 months after the date that regular coverage ceased due to occurrence of the initial Qualifying Event described in Section 11.04(b), unless during such 18-month period a subsequent, Qualifying Event occurs, in which case, another election to extend coverage for 18 months shall be available to the Beneficiary. Except as otherwise provided in this Section, in the case of a Qualifying Event not described in Section 11.04(b), Continuation Coverage shall extend for a period of 36 months after the date that regular coverage ceased due to the occurrence of the Qualifying Event. In the case of a Qualified Beneficiary who is determined, under title II or XVI of the Social Security Act to have been disabled within 60 days of a Qualifying Event described in Section 11.04 (b), Continuation Coverage with respect to such event shall extend for a period of 29 months after the date that regular coverage ceased due to the occurrence of the Qualifying Event if the Qualified Beneficiary has provided notice of such determination within sixty (60) days after the date of such determination and before the end of the initial 18 month Continuation Coverage period. In the event a Covered Employee becomes entitled to Medicare coverage, the period of Continuation Coverage for a Qualified Beneficiary, other than the Covered Employee for such Qualifying Event or any subsequent Qualifying Event, shall not terminate for a period of 36 months from the date the Covered Employee becomes entitled to Medicare benefits. In no event, however, shall Continuation Coverage extend more than 36 months beyond the date of the original Qualifying Event. 11.09 Automatic Termination of Continuation Coverage. Continuation Coverage shall automatically cease if (a) the Employer no longer offers the particular group health coverage to any of its employees (b) the required premium for Continuation Coverage for a particular coverage is not paid within 30 days of the date due or within 45 days after the initial election of Continuation Coverage made pursuant to Section 11.07 (whichever is later), (c) an electing Qualified Beneficiary becomes covered under another group health plan other than a group health plan which may limit a Qualified Beneficiary's coverage because it involves a pre-existing condition, or (d) an electing Qualified Beneficiary becomes eligible to receive benefits under Medicare. 17 PROC297B.5 IN WITNESS WHEREOF, the Employer has executed this Flexible Benefits Plan, Medical Care Expense Reimbursement Plan, and/or Dependent Care Expense Reimbursement Plan (as noted in the Adoption Agreement), the date and year first written below, to be effective as set forth in the Adoption Agreement. WITNESS Corporate Officer Employer: By: Title: Date: 18 PROC297B.5 RESOLUTION ADOPTING A FLEXIBLE BENEFITS PLAN The undersigned hereby certifies that the following described Resolution was officially and legally adopted at the duly authorized official meeting of the body with legal authority (hereafter "Authority") to pass said Resolution. Said meeting was held on the date set forth below. WHEREAS, the Authority wishes to adopt a cafeteria plan within the context of Section 125 of the Internal Revenue Code for the benefit of the employer's eligible employees. NOW, THEREFORE, BE IT RESOLVED, that the Authority hereby adopts the Flexible Benefits Plan (consisting of the flexible benefits plan document, the Adoption Agreement, and component benefit plans and Policies) for the Employer named herein below effective as of the date specified in the Adoption Agreement. RESOLVED FURTHER, that any officer of the employer may, without a further resolution, execute the Adoption Agreement and any related documents or amendments which may be necessary or appropriate to adopt the plan or maintain its compliance with applicable federal, state and local law. Name: Body With Legal Authority Of Employer To Pass Resolution: (Examples - Board of Directors, Board of Commissioner, etc.) Date of Official Meeting of Authority at which Resolution was Legally Passed: Signature of Person with Authority to certify that Resolution was legally passed Corporate Officer Print Name and Title of Person above [OFFICIAL SEAL] Date: =_ "Note: Legal requirements for a valid Board of Directors Resolution vary from state to state. This document is merely a suggested form. Each Employer should consult with its own legal counsel to ensure compliance with applicable law. o CD � T - O CO N O O O O AMEND97B.3 N 06-17-99 MARTI HANSLEY CITY OF KALISPELL 312 1 ST AVE EAST KALISPELL, MT 59901 Dear MARTI HANSLEY: Welcome to AFLAC's FLEX ONE Cafeteria Program. Enclosed in this packet are the necessary forms to establish a cafeteria plan with the assistance of FLEX ONE 1) Flexible Benefits Plan Document - containing the Adoption Agreement and Table of Contents. Each separate document should be executed and one copy sent to AFLAC FLEX ONE for our records. 2) Corporate Resolution - to be executed and kept by Employer. 3) Summary Plan Description - One copy should be distributed to each eligible employee (regardless of whether they actually choose to participate) by the employer. 4) Salary Redirection Agreement 5) Once the Plan is in Operation - Pertinent Information. You should carefully review the Flexible Benefits Plan Document and Summary Plan Description to verify that all of the information concerning benefits offered; eligibility, plan administration and funding have been correctly produced. co Due to the complexity of cafeteria plans, we recommend that you consult with your accountant, attorney C or other tax advisor concerning the plan provisions, administration and operation before executing the plan documents. You should note that these documents are only documents typical of a plan intended to qualify as a Section 125 cafeteria plan with the terms and conditions thereof, and that they may need to be modified to conform to your individual circumstances. _ AFLAC has developed these documents with legal counsel and it is AFLAC's intent and belief LO o that the documents in form satisfy the requirements of Code Section 125. However, AFLAC is not in o the business of offering legal counsel or tax advice, and thus AFLAC cannot and does not make any f representations about the legal or tax effect of these documents upon any particular employer. CD O Therefore, it is each employer's responsibility to determine, with the assistance of the employer's own 0 o MFLEX ONE" • Flexible Benefit Management • A Service of American Family Life Assurance Company of Columbus (AF1�297AA 5\1 Worldwide Headquarters: 1932 Wynnton Road • Columbus, Georgia 31999 • (706) 323-3431 legal counsel, the suitability of these particular documents and the legal and tax effect of these plan documents upon the employer and its employees. Since AFLAC has no control over your subsequent modification and/or administration of the Plan, and the Internal Revenue Service will not render an opinion as to a plan's qualified status under IRS Code Section 125, AFLAC makes no representation (express or implied) as to your Plan's qualification under IRS Code Section 125 and related provisions as it is adopted and subsequently amended. Furthermore, you as sponsoring employer bear sole responsibility for amending your plan (as necessary) to comply with future tax law changes, for meeting all reporting and disclosure requirements imposed by federal law, and for the daily administration of your plan. If your Company is related to any other company through stock ownership or otherwise (e.g., partnership, relatives owning other company, etc.), you may need to consider the employees of the affiliated company for purposes of nondiscrimination testing even if the affiliated company does not adopt this plan, or adopts an entirely separate plan. In addition, if the requirements of IRS Code Section 414(b), (c), (m) or (o) are satisfied, the employees of the affiliated company may be able to participate in this plan. You should consult with your tax advisor concerning the potential impact of IRS Code Section 414(b), (c), (m) and (o). Please note that your cafeteria plan will not be effective until your plan is adopted, and the Plan Documents must be signed PRIOR TO THE EFFECTIVE DATE. Once you have executed the Flexible Benefits Plan Document and Corporate Resolution, if applicable, you need to send an executed copy of the Adoption Agreement to FLEX ONE so your adoption of the cafeteria plan can be verified. Note that while the Plan and related documents are copyrighted, AFLAC gives you limited permission to copy the documents as necessary for distribution to your employees for use solely in the operation of your own cafeteria plan. FLEX ONE will send you an Employer's Administration Manual which details your responsibilities as Plan Administrator of your cafeteria plan. AFLAC will make its best efforts to provide employers information from time to time about developments concerning Section 125 plans. However, for reasons stated above, it is the employer's responsibility to maintain the qualified status of the Section 125 plan, in form and in operation. Should you have any questions concerning the FLEX ONE cafeteria Program, you may contact us at 1-800-323-5391 between the hours of 8:30 a.m. and 7 p.m. Eastern time, Monday through Friday. Sincerely, 24el-)-71� Cheryl M. Moss Second Vice President Director of Administration/Compliance PROC297A.4 ADOPTION AGREEMENT FOR: CITY OF KALISPELL FLEXIBLE BENEFITS PLAN ESTABLISHMENT OF THE PLAN The Employer named below established as set forth herein, a Flexible Benefits Plan (the "Plan") as of the Effective Date consisting of this Adoption Agreement, the Plan Document and the Benefit Plans and Policies specifically referred to herein including the Dependent Care Expense Reimbursement Plan and/or an Medical Care Expense Reimbursement Plan. The purpose of the Flexible Benefits Plan is to provide eligible Employees a choice between cash and the specified welfare benefits described in this Adoption Agreement. Pre-tax Premium elections under the Plan are intended to qualify for the exclusion from income provided in Section 125 of the Internal Revenue Code of 1986. EMPLOYER INFORMATION 1) Name and Address of Employer/ CITY OF KALISPELL Plan Administrator: MARTI HANSLEY 312 1 ST AVE EAST KALISPELL, MT 59901 2) Employer Telephone Number: (406) 758-7757 3) Employer's Federal Tax Identification Number: 4) 125 Start Date: 5) Effective Date of this Plan 6) Last Day of the Plan Year: Subsequent Plan Years: 7) Name and Address of the Plan Service Provider: 81-6001281 07/10/99 07/10/99 06/30/00 07/01-06130 SAME 8) Name and Address of registered GLEN NEIER agent for service of legal CITY ATTORNEY process: 01 /06/99 version 1 Copyright January 1, 1990 AMEND97B.3 9) Affiliated Employers which will participate in the Plan: 10) Employer's type of business: CORPORATION AMEND978.3 0 a) 00 0 LO O T CD r� O T ELIGIBILITY All Employees employed by the Employer shall be eligible to participate under the Plan except the following: (Describe) An eligible Employee may become a Participant in the Plan: ( ) Immediately, upon his first day of employment (but not prior to the Effective Date of the Plan ( ) On the day following commencement of employment ( X) On the first day of the month following 90 days of employment ( ) OTHER provided the Employee completes a Salary Redirection Agreement. However, eligibility for coverage under any given Benefit Plan or Policy shall be determined by the terms of that Benefit Plan or Policy, and reductions of the Employee's Compensation to pay Pre-tax or After-tax Premiums shall commence when the Employee becomes covered under the applicable Benefit Plan or Policy. An eligible Employee may become a Participant in the Dependent Care and/or Medical Expense Reimbursement Plan(s): ( ) Immediately, upon his first day of employment (but not prior to the Effective Date of the Plan). ( ) On the day following commencement of employment. ( ) On the first day of the month following days of employment, ( ) OTHER provided the Employee completes a Salary Redirection Agreement selecting such benefits. BENEFITS PROVIDED UNDER THE PLAN The Employer elects to offer to eligible Employees the following Benefit Plans and Policies subject to the terms and conditions of the Plan. These component Benefit Plans and Policies are specifically incorporated herein by reference. The maximum Pre-tax Premiums a Participant can contribute via the Salary Redirection Agreement is the aggregate cost of the applicable Benefit Plans or Policies selected minus any Nonelective Contribution made by the Employer. It is intended that such Pre-tax Premium accounts shall, for tax purposes, constitute an Employer contribution, but may constitute Employee contributions for state insurance law purposes. X) Group Medical Insurance. X) Vision Care Insurance. X) Disability Income -Short Term (A&S). X) Cancer Insurance. Accidental Death and Dismemberment. X) Group Dental Coverage. X) Group Term Life Insurance. X) Disability Income -Long Term (LTD). X) Intensive Care Insurance. X) Accident Insurance X) Hospital Indemnity Insurance (HIP) 3 PROCADOP.2 Medical Care Expense Reimbursement described in Section 5.01(b) of the Plan, not to exceed 0 per Plan Year pursuant to the CITY OF KALISPELL Medical Care Expense Reimbursement Plan. Dependent Care Expense Reimbursement described in Section 5.01(c) of the Plan not to exceed $5,000 per Plan Year or $2,500 for married filing separate returns pursuant to the CITY OF KALISPELL Dependent Care Expense Reimbursement Plan. Opt -out Option: Additional taxable compensation for certain participants who opt -out of certain coverages (as described in enrollment materials). THE FUNDING AGENT The Employer selects the following Funding Agent for the Plan (check one): ❑ The Employer, which will comply with the requirements of Section 7.02 of the Plan. ❑ The Flexible Benefits Trust created concurrently with the execution of the Plan, which shall receive contributions under the Plan in accordance with Section 7.03 of the Plan. ADMINISTRATIVE EXPENSES Administrative Expenses incurred in operating the Plan shall be paid by (check one): ❑ The Employer, except as otherwise noted in the Plan. ❑ The Participants, except as otherwise noted in the Plan. EMPLOYER'S ACKNOWLEDGEMENT As evidenced by the formal execution of this Adoption Agreement, the undersigned Employer adopted and established this Plan on the Effective Date as the Flexible Benefits Plan of the undersigned Employer. In doing so,the undersigned Employer acknowledges that this Adoption Agreement and this Plan are important legal instruments with significant legal and tax implications. The Employer also acknowledges that it has read this Adoption Agreement and the Plan in their entirety, has consulted independent legal and tax counsel other than representatives of American Family Life Assurance Company of Columbus (AFLAC), to the extent considered necessary, and accepts full responsibility for participation of Employees hereunder and the operation of the Plan. The Employer acknowledges that as sponsor, and the Plan Administrator it shall have sole responsibility to comply with all filing, reporting, and disclosure requirements imposed by the Department of Labor, Internal Revenue Service, or any other government agency, specifically including, but not limited to creating, filing, and distributing Summary Annual Reports, Form 5500's, and Summary Plan Descriptions. Furthermore, the Employer further acknowledges that it shall bear sole responsibility for amending the Plan as necessary to ensure compliance with applicable tax, labor, and other laws and regulations. It is also understood and agreed that American Family Life Assurance Company of Columbus (AFLAC), and its Subsidiaries, agents, and representatives, are not providing legal or tax advice to the undersigned Employer in connection with this Plan and that no representations are made by it with respect to the operation of the Flexible Benefits Plan pursuant to the documents provided by American Family Life Assurance Company of Columbus (AFLAC) to the Employer. rd PROCADOP.2 This Plan shall be construed and enforced according to the Internal Revenue Code of 1986, as amended from time to time, the applicable regulations thereto and the laws of the state of the principal place of business of the Employer. IN WITNESS WHEREOF, the Employer has caused this Plan and Adoption Agreement to be executed on the day of to ratify the adoption of the Plan adopted and effective as of the Effective Date. WITNESS: Corporate Secretary co o LO CD 0 T N O T Employer: By: Title: Date: PROCADOP.2