League of Minnesota Cities Model Adoption Agreement – Flexible Benefit Plan This is the Adoption Agreement referred to in the Flexible Benefit Basic Plan Document (“Basic Plan Document”). The Adoption Agreement plus the Basic Plan Document constitute the “Plan.” ************************** Important: This document is intended for use by League of Minnesota Cities’ member organizations who administer their Flexible Benefit Plan (a.k.a. “Cafeteria Plan”) internally. Once completed and signed, this document becomes part of the official Plan documentation. Please complete this Adoption Agreement carefully. The Basic Plan Document incorporates many of the components that may be included in a Flexible Benefit Plan. Each city organization opts into the various benefits through completion of the Adoption Agreement. The Adoption Agreement plus the Basic Plan Document constitute “the Plan”. Provisions of the Adoption Agreement and the Basic Plan Document should not be construed as legal or tax advice. Each employer is responsible for obtaining such counsel on their own. The League offers additional resources for cities wanting to implement a Flexible Benefit Plan. See HR & Benefits on our web site for more information. The red text marks places where the city must customize the model agreement. The icon before its appearance has additional red text and will explain the choices you need to make. Icons also identify additional provisions, optional language, or comments for your consideration. Make other changes, as needed, to customize the model for your city. The icon, and language you do not wish to include, should be deleted from this model before use. Flexible Benefit Plan Adoption Agreement Page | 1 © 2010 Hitesman & Associates, P.A. _____________________________ (Insert Employers Name) Flexible Benefit Plan Adoption Agreement This is the Adoption Agreement referred to in the Flexible Benefit Plan Basic Plan Document (“Basic Plan Document”). The Adoption Agreement plus the Basic Plan Document constitute the “Plan.” “Affiliated Employer” addresses situations where more than one public sector entity (e.g., city, county, school district, etc.) provides benefits to employees on a joint basis. See the annotation to Section 2.18 below. The Employer hereby makes the following selections: Employer and Affiliated Employer Information Employer Name: Address: City, State, Zip: Phone/Fax Number: Employer and Affiliated Employer Information Employer Name: Address: City, State, Zip: Phone/Fax Number: Section Number References: The section numbers below correlate to the section numbers found in the Basic Plan Document. Article II: Definitions 2.2 Available Benefit(s) means (check all that apple): Very Important Note: The Basic Plan Document describes all of the Available Benefits that can be provided through the Plan. However, it is through the Adoption Agreement that the specific portions of the Basic Plan Document are activated. An Available Benefit must both (1) be checked below, and (2) have the corresponding Article of the Adoption Agreement (if any) completed, in order for the provision regarding that Available Benefit in the Basic Plan Document to be activated and part of the Plan. Premium Contributions: Expense Reimbursement: Other: ☐Group Medical Benefits ☐ Dependent Care Expense ☐ HAS Contribution Reimbursement Plan Feature ☐Group Dental Benefits ☐Medical Expense ☐Cash Payment Reimbursement Plan ☐Group Vision Benefits ☐ Limited Scope Medical ☐Individual Premium Expense Reimbursement Plan Feature ☐ Group Term Life Benefits and/or AD&D Benefits ☐Long Term Disability Benefits ☐Short Term Disability Benefits Flexible Benefit Plan Adoption Agreement Page | 2 © 2010 Hitesman & Associates, P.A. The Claims Administrator is the entity that adjudicates claims, pays claims, forwards premiums to carriers, etc. Sometimes it is a third party under contract with the Employer. Sometimes these functions are performed by Employer staff. If performed by Employer staff, check the Plan Administrator box. If some functions are performed by Employer staff and other functions by a third party under contract, check both boxes and indicate which entity is responsible for which functions. See Section 6.1(b) for the identification of the Plan Administrator. 2.6 Claims Administrator means: ☐Plan Administrator ☐Other (please provide additional information below): Name: Address: City, State, Zip: Phone/Fax Number: The Effective Date is the date this Plan document, as reflected in this Adoption Agreement, is effective. If the Plan is already in existence, indicate that this document is a restatement and indicate the date on which the Plan was originally adopted. “Restatement” refers to a situation where the employer has had a program in place and is now amending, updating, or otherwise changing that program by adopting this document. 2.13 Effective Date Means: (Month, day, year) Is this a restatement: If yes, original effective ☐Yes ☐No Date: Affiliated employers are other governmental entities related to the primary employer for which the primary employer may provide benefits (e.g., a Housing Redevelopment Authority, etc.). Unless the affiliated employer has its own cafeteria plan, it should be identified as an Employer in this Plan and should sign the Adoption Agreement. 2.19 Employer means: Affiliated Employers participating in this Plan are: 2.20 See 4.4 below regarding Employer Contribution The Entry Date is the date on which the Eligible Employee actually starts participation in the Plan after becoming eligible. The Entry Date cannot be later than the first day of the first Plan Year beginning after the date on which the Employee became eligible. If the Employee is required to complete a period of service as a condition of eligibility, that requirement is described in Section 3.1. Due to the ACA, waiting periods imposed by group medical plans are limited. If the entry date for group medical benefits is earlier than the entry date for other benefits provided through this plan, choose other and specify both entry dates. 2.21 Entry Date means: ☐The date on which the Employee becomes eligible to participate in the Plan. ☐The first day of the month coinciding with or following the date on which the Employee becomes eligible to participate in the Plan ☐Other: Flexible Benefit Plan Adoption Agreement Page | 3 © 2010 Hitesman & Associates, P.A. 2.31 Plan Name: The Plan Year is not required to be the same as the contract or policy year of the Available Benefits made available through the Flexible Benefit Plan. Special considerations arise when the Plan Year is not the calendar year (especially with respect to the Dependent Care Expense Reimbursement Plan – the $5,000 is a calendar year limit). And, special considerations arise when the contract or policy year of the Group Medial Benefits is not the same as the Plan Year of the Flexible Benefit Plan (e.g. election changes when premiums and/or benefit changes occur mid-Plan year). Except for a “short” Plan Year, the Plan Year must be a 12-month period. A short Plan Year may be used when the Plan is first adopted or when the Plan Year is changed. 2.33 A Plan Year commences on the first day of: (insert month) And ends on the last day of: (insert month) A “short” Plan Year begins on: (insert month/day/year) And ends on: (insert month/day/year) Excluding employees may impact compliance with cafeteria plan nondiscrimination requirements. Any length of service requirement must not exceed three years and must be the same for all eligible employees. Under the ACA, waiting periods for group medical plans cannot exceed 90 days. To the extent the length of service requirements applicable under this Plan vary for different Available Benefits, describe the differences. Article III: Eligibility and Participation 3.1 General eligibility requirements are as follows (check and complete only those that apply): ☐ Minimum number of hours (describe, including whether Employee must actually work, or be scheduled to work, the hours and the period over which the required hours must be worked (e.g., per week, per month, etc.)): ☐ Length of Service (describe): ☐ Employment Classification (e.g., union, part-time, full-time) (describe): ☐ Other (describe, including any Available Benefits(s) with different eligibility and participation requirements): Elected Officials. Provided the elected official is a common law employee of the employer receiving W2 compensation, the Plan can provide for his/her participation. 3.1 Eligibility requirements for elected officials: ☐ Elected officials are subject to the general eligibility requirements identified above ☐ Elected officials are eligible to participate without satisfying the general eligibility requirements identified above. ☐ Elected officials are not eligible to participate. Flexible Benefit Plan Adoption Agreement Page | 4 © 2010 Hitesman & Associates, P.A. The special rule may be used if there is no length of service requirement and Employees are able to participate immediately upon becoming eligible. The special rule allows new hires to begin participation in all Available Benefits retroactively to the date of hire if they elect to participate within thirty (30) days of being hired. 3.3(b) Special rule for new hires described in the Basic Plan Document: ☐Applies. ☐Does not apply. The second option is used if payroll occurs bi-weekly and the Employer does not wish to take contributions from the third payroll that occurs in two months of the year. Article IV: Contributions 4.1 Salary reduction contributions shall occur: ☐Every payroll period. ☐Only two payroll periods per month (bi-weekly). ☐Monthly. Imputation of income is an issue if coverage under an Available Benefit is provided to a person that cannot be provided that coverage on a tax favored basis. In light of the expansion of the definition of Tax Dependent, it is uncommon (although not impossible) for a plan sponsored by a public sector entity to provide coverage to non-Tax Dependents. The first option allows pre-tax salary reduction with respect to all premiums, with a corresponding imputation of income. The second option requires post-tax salary deduction with respect to the value of the non-Tax Dependent’s coverage. See 4.2 in the Basic Plan Document for additional information. 4.2 Imputation of income (please choose one): ☐Pre-tax contributions with imputation of income of “fair market value” (see 4.2(a) in the Basic Plan Document). ☐After-tax payments of the “fair market value” (see 4.2(b) in the Basic Plan Document). Only select the second box if the Employer provides a flat dollar contribution allowing employees to allocate those dollars among Available Benefits or to take the contribution as cash in lieu of coverage. There is no requirement that the Employer Contribution be uniform for all Participants; it can vary among different classifications (e.g. Single Coverage versus Family Coverage or by Union Group). However, the Employer Contribution is considered a “benefit” for purposes of non-discrimination testing. Differences between nonbargained classifications of Participants should be carefully reviewed. Restrictions may include a requirement that the Employer Contribution be used only for certain specific Available Benefits; like Group Medical Benefits first. Restrictions are also often applied to the Medical Expense Reimbursement Plan to (1) limit the exposure of the employer (e.g., uniform coverage rule applies regardless of when contributions actually made, see Sections 11.8 and 19.8 below); and (2) to ensure the plan is excepted from the HIPAA Portability requirements and the ACA. Flexible Benefit Plan Adoption Agreement Page | 5 © 2010 Hitesman & Associates, P.A. 4.4 Employer Contribution Amount of the Employer Contribution towards Available Benefits for the Plan Year is as follows: ☐ None ☐ Amount of the Employer Contribution is: Frequency of the Employer Contribution: ☐ Per pay period. ☐ Per month. ☐ Per year on the first day of the Plan Year. Restrictions, if any, on the Employer Contribution (Describe): Continuation of Employer Contribution during an unpaid leave (except as required by applicable law): ☐ Employer Contributions do not continue. ☐ Employer Contributions continue. For Participants joining the Plan mid-Plan Year, the Employer Contribution is: ☐ Pro-rated. ☐ Unchanged (i.e., the entire Employer Contribution for the Plan Year is available.) FMLA Leave. FMLA requires maintenance of the status quo for group health benefits. To the extent any portion of the Employer Contribution has been allocated to pay for the cost of Available Benefits that are group health benefits (e.g., Group Medical Benefits, Group Dental Benefits, Group Vision Benefits, Medical Expense Reimbursement Plan, Limited Scope Expense Reimbursement Plan), the Employer Contribution must continue to be made during the leave. If the second option is selected, and there is no length of service requirement, participation in the premium payment portions of the Plan will begin upon date of hire even if the special rule under 3.3(b) does not apply. Affirmative initial elections are always required for expense reimbursement and other Available Benefits (e.g., Medical Expense Reimbursement Plan). Article V: Elections 5.1 Initial Election of Premium Contributions (e.g. toward Group Medical Benefits, Group Dental Benefits, etc.): ☐ As provided in the Basic Plan Document (i.e., affirmative election required to pay premiums pre-tax). ☐ An Eligible Employee is deemed to have elected to participate and to pay the Participant’s share of the cost of such Available Benefits through pre-tax salary reduction unless (1) the Eligible Employee specifically elects not to participate with respect to such Available Benefit(s) and notifies the Plan Administrator in writing on or before the close of the Election Period, or (2) such deemed Election is otherwise prohibited by law. Can be narrowed from what is provided in the Basic Plan Document, but cannot be expanded. 5.3(b) Ongoing Annual Election of Premium Contributions (e.g., Group Medical Benefits, Group Dental Benefits, etc.): ☐ As provided in the Basic Plan Document (i.e., automatic election to pay premiums pre-tax). ☐ Affirmative election required to pay cost of benefits on a pre-tax basis through the Plan each year. Can be narrowed from what is provided in the Basic Plan Document, but cannot be expanded. Flexible Benefit Plan Adoption Agreement Page | 6 © 2010 Hitesman & Associates, P.A. 5.4 Irrevocable election rules are modified as follows: If more than one Employer participates in the Plan, choose the “Other” option and identify which Employer is responsible for overall administration of the Plan. Article VI: Plan Administration Distinct from Claims Administrator. If a third party vendor is used to provide Plan related services, including claims adjudication, that third party vendor will be the Claims Administrator but typically NOT the Plan Administrator. The Plan Administrator is the entity that has the overall responsibility for the Plan, including selecting the Claims Administrator. See Section 2.5 for the identification of the Claims Administrator. 6.1(b) Plan Administrator means: ☐ As provided in the Basic Plan Document (i.e., the Employer). ☐ Other (Describe): 6.7(a) For paper claims, reimbursement of eligible expenses shall be made at least: ☐ Weekly ☐ Monthly ☐ Other (Describe): “Electronic payment” refers to the use of an electronic payment card, such as a debit card, to pay for eligible expenses. Special requirements apply to electronic payments. In addition, careful communication by the employer to the Participants is crucial. 6.7(b) Electronic payment for Medical Expense Reimbursement Plan is: ☐ N/A – no Medical Expense Reimbursement Plan is included. ☐ Available. ☐ Not Available. The Basic Plan Document describes specific procedures that must be followed with respect to determining claims and allowing Participants to appeal claim denials. There is no legal requirement to include such protections for the Participants. However, to ensure compliance with the Cafeteria Plan Regulations, the procedures contained in the Plan must be followed. Use the “Other” option to add alternative procedures for determining claims and/or allowing (or not allowing) appeals. 6.8 Claims determination and appeal procedures: ☐ As provided in the Basic Plan Document. ☐ Other (Describe): Specifics on Available Benefits. The remainder of this Adoption Agreement, with the exception of the signature page, relates solely to each individual Available Benefit that is offered under the Plan as reflected in Section 2.28 (i.e. where (1) there is an Employer contribution towards benefits, and/or (2) the Employee may pay for certain benefits on a pre-tax basis. Flexible Benefit Plan Adoption Agreement Page | 7 © 2010 Hitesman & Associates, P.A. Article IX: Group Medical Benefits ☐ Available ☐ Not Available Group Medical Benefits are provided in accordance with the applicable Insurance Contracts, HMO agreements, other medical benefit agreements, and/or self-insured plan documents identified in Exhibit A attached to this Adoption Agreement. Article X: Dependent Care Expense Reimbursement Plan ☐ Available ☐ Not Available The Claims Run-Out Period refers to the period of time, after the Plan Year ends, during which Participants may submit eligible expenses incurred during the Plan Year for reimbursement. 10.3(a) Claims Run-Out Period means: ☐ The 60-day period following the end of Plan Year. ☐ The 90-day period following the end of Plan Year. ☐ Other (Describe): 10.8 Maximum Reimbursement: See the Basic Plan Document for the statutory limits. To implement further limits on the maximum available to employees, describe those limits in Section 10.12(b) below. Shorter Time Frame. The second option requires reimbursement more quickly than applying the normal end of the year Claims Run-Out Period. It is measured from the date the person ceases participation. If the second option is selected, enter the number of days during which a former Participant may submit claims. Full Participation. Unlike the Medical Expense Reimbursement Plan, there is no prohibition to letting a person continue to submit expenses incurred after the person terminated participation, provided the expenses still meet the definition of Dependent Care Expenses. The third option allows reimbursement through the earlier of (1) the end of the Plan Year in which the person terminates participation, or (2) the point at which the account balance equals zero. 10.9 Reimbursement of Dependent Care Expenses following termination of participation: ☐ Expenses incurred while a Participant may be reimbursed if submitted within the Claims Run-out Period identified in Section 10.3(a). ☐ Expenses incurred while a Participant may be reimbursed if submitted within «Number_Days» days following termination of participation. ☐ Expenses incurred during the Plan Year (whether while a Participant or after participation ceases) may be reimbursed if submitted within the Claims Run-Out Period identified in Section 10.3(a). ☐ No reimbursement of expenses shall occur following termination of participation. 10.12(b) Other dependent care limitations are as follows: ☐ N/A ☐ Other (Describe): Article XI: Medical Expense Reimbursement Plan ☐ Available ☐ Not Available Flexible Benefit Plan Adoption Agreement Page | 8 © 2010 Hitesman & Associates, P.A. Note: For a Limited Scope Medical Expense Reimbursement Plan intended to work with a Health Savings Account (“HSA”), see Article XIX. The Claims Run-Out Period refers to the period of time, after the Plan Year ends, during which Participants may submit eligible expense incurred during the Plan Year for reimbursement. If the Claims Grace Period (Section 11.12(a)) applies, the Claims Run-Out Period cannot be shorter than 2 ½ months. 11.3(a) Claims Run-Out Period means: ☐ The 60-day period following the end of Plan Year. ☐ The 90-day period following the end of Plan Year. ☐ Other (Describe): Use the “Other” option to restrict the definition in the Basic Plan Document. “Dependent” cannot be defined more broadly than as provided in the Basic Plan Document. The Basic Plan Document definition of “Dependent” includes individuals who satisfy the requirements of paragraph (a) or (b) below: 11.3(b) Dependent means: (a) An individual who: (1) is your child (son, daughter, stepson, stepdaughter, adopted child, eligible foster child, or child placed for adoption); and (2) will not attain age 27 during the relevant calendar year. (b) An individual who: (1) is your child (son, daughter, stepson, stepdaughter, adopted child, eligible foster child, or child placed for adoption), brother, sister, stepbrother, or stepsister, or a descendant of any such person; (2) has the same principal place of abode as you for at least one-half of the relevant year; (3) will not attain age 19 (or age 24 if a full time student) during the relevant year or is permanently and totally disabled; (4) did not provide over half of his/her own support during the relevant year; (5) is a citizen, national, or resident of the United States, or a resident of Canada or Mexico; (6) is younger than you; and (7) does not file a joint tax return with his or her spouse. (c) An individual who: (1) is your child (or a descendant of a child), brother, sister, stepbrother, or stepsister, parent (or a parent’s ancestor), stepparent, brother or sister’s son or daughter, parent’s brother or sister, sonin-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law or, if not such a relative, an individual who has the same principal place of abode as you and is a member of your household; (2) has received more than one-half of his/her support from you during the relevant year; (3) is not your qualifying child or the qualifying child of anyone else (i.e., does not satisfy the requirements of paragraph (a) above with respect to any person); and (4) is a citizen, national, or resident of the United States, or a resident of Canada or Mexico. ☐As provided in the Basic Plan Document ☐Other (Describe): The Basic Plan Document contains the broadest definition allowed by the Code. Use the “Other” option to restrict the definition contained in the Basic Plan Document (e.g., by excluding over-the-counter drugs, transportation expenses, etc.). Flexible Benefit Plan Adoption Agreement Page | 9 © 2010 Hitesman & Associates, P.A. 11.3(d) Medical Expense means: ☐ As provided in the Basic Plan Document. ☐ Other (Describe): The first option represents an exception to the general rule applicable under the Medical Expense Reimbursement Plan that expenses may be reimbursed only after the care has been provided. Orthodontia is a specifically excepted expense category specifically addressed by the IRS in regulations. These principles should not be extended to other expense categories. 11.6 With respect to orthodontia expenses: ☐ Expenses for orthodontia care shall be deemed incurred and may be reimbursed when the Participant makes an advance payment for the orthodontia care. ☐ Expenses for orthodontia care are incurred and may be reimbursed only as the care is provided. Statutory Maximum. There is a statutory maximum on the amount of salary reduction contributions that may be made to this plan. It is indexed for inflation. If the first option is selected, the amount inserted should be less than or equal the statutory maximum unless the employee may allocate non-cashable employer contributions to the plan. If the second option is selected, the maximum will increase automatically as the statutory maximum increases for inflation. 11.8 Maximum Elections The maximum election a Participant may make for a Plan Year is: The amount of the maximum salary reduction contributions that may be made under Section 125(i) of the Code. For a “short” Plan Year, the maximum election is: ☐ Not applicable. ☐ Pro-rated. ☐ Unchanged. For Participants joining the Plan mid-Plan Year, the maximum election is: ☐ Pro-rated. ☐ Unchanged (i.e., the entire Employer Contribution for the Plan Year is available). Uniform Coverage. Because the full amount of a Participant’s election (including salary reduction and allocation of Employer Contributions) under the Medical Expense Reimbursement Plan is available starting on the first day of the Plan Year (even though contributions are made over the course of the entire Plan Year), the amount of the maximum relates to the amount of risk the Employer assumes with respect to funding benefits under this plan. If the second option is selected, enter the number of days within which a former Participant may submit claims. Unlike the Dependent Care Expense Reimbursement Plan, expenses incurred during the Plan Year after the Participant ceases participation cannot be reimbursed (unless the Participant is eligible for and elects COBRA. Flexible Benefit Plan Adoption Agreement Page | 10 © 2010 Hitesman & Associates, P.A. 11.9 Reimbursement of Medical Expenses following termination of participation: ☐ Expenses incurred while a Participant may be reimbursed if submitted within the claims runout period identified in Section 13.12. ☐ Expenses incurred while a Participant may be reimbursed if submitted within «Number_Days» days following termination of participation. ☐ No reimbursement of expenses shall occur following termination of participation (unless required under COBRA). As described in Section 2.6 of the Basic Plan Document, the Claims Grace Period extends the period of time during which expenses may be incurred with respect to a particular Plan Year. It is different from the Claims Run-Out Period described in Section 11.3(a). The Claims Grace Period cannot be included if the plan includes the carryover feature. 11.12(a) Claims Grace Period: ☐ A Claims Grace Period is available under the Medical Expense Reimbursement Plan. ☐ A Claims Grace Period is not available under the Medical Expense Reimbursement Plan. 11.12(b) Carryover: ☐ Carryover is available under the Medical Expense Reimbursement Plan. ☐ Carryover is not available under the Medical Expense Reimbursement Plan. See the Basic Plan Document for a description of this feature. 11.14 Qualified Reservist Distributions: ☐ Qualified Reservist Distributions are available under the Medical Expense Reimbursement Plan. ☐ Qualified Reservist Distributions are not available under the Medical Expense Reimbursement Plan. In most cases, there will not be “other” limitations. If there are “other” limitations, they must be described here. To the extent any such limitations apply differently to different classifications of Participants, they should be carefully reviewed for non-discrimination testing purposes. 11.17(e) Other Medical Expense Reimbursement Plan limitations are as follows: ☐ None ☐ Other (Describe): Article XII: Group Dental Benefits ☐ Available ☐ Not Available Group Dental Benefits are provided in accordance with the applicable Insurance Contracts, DMO agreements, other dental benefit agreements, and/or self-insured plan documents identified in Exhibit A attached to this Adoption Agreement. Article XIII: Group Vision Benefits ☐ Available ☐ Not Available Flexible Benefit Plan Adoption Agreement Page | 11 © 2010 Hitesman & Associates, P.A. Group Vision Benefits are provided in accordance with the applicable Insurance Contracts, other vision benefit agreements, and/or self-insured plan documents identified in Exhibit A attached to this Adoption Agreement. Article XIV: Group Term Life Benefits and/or AD&D Benefits ☐ Available ☐ Not Available Group Term Life and AD&D Benefits are provided in accordance with the applicable Insurance Contracts, other benefit agreements, and/or self-insured plan documents identified in Exhibit A attached to this Adoption Agreement. Article XV: Long Term Disability Benefits ☐ Available ☐ Not Available 15.6 Insurance Premiums paid through the Plan are: ☐ Included in the Participant’s gross income (after-tax). ☐ Excluded from the Participant’s gross income (pre-tax). Article XVI: Short Term Disability Benefits ☐ Available ☐ Not Available 16.6 Insurance Premiums paid through the Plan are: ☐ Included in the Participant’s gross income (after-tax). ☐ Excluded from the Participant’s gross income (pre-tax). Article XVII: Individual Premium Plan ☐ Available ☐ Not Available The Claims Run-Out Period refers to the period of time, after the Plan Year ends, during which Participants may submit eligible expenses (i.e., premium costs) incurred during the Plan Year for payment. 17.3(a) Claims Run-Out Period means: ☐ The 60-day period following the end of Plan Year. ☐ The 90-day period following the end of Plan Year. ☐ Other (Describe): Use the “Other” option to restrict or expand the definition in the Basic Plan Document. The Basic Plan Document defines “Dependent” as a “Tax Dependent,” which is the definition described above in Section 11.3(b). Expanding the definition creates a tax issue. See Section 17.10 of the Basic Plan Document. 17.3(b) Dependent means: ☐ As provided in the Basic Plan Document. ☐ Other (Describe): Flexible Benefit Plan Adoption Agreement Page | 12 © 2010 Hitesman & Associates, P.A. Caution: The definition of Insurance Contract should be limited to coverages other than major medical coverage (e.g., dental, vision, accident, indemnity, diseases-specific, etc.). Including major medical insurance policies in this plan will likely cause the plan to violate the ACA. Insurance Contract means: 17.3(g) ☐ As provided in the Basic Plan Document (i.e., all accident and health coverages except major medical coverage). ☐ All accident and health coverages (except as provided in the Basic Plan Document) other than coverages offered by the Employer on a group basis. ☐ Other (Describe): If the second option is selected, enter the number of days during which a former Participant may submit claims. 17.7 Reimbursement of Individual Premium Expenses following termination of participation: ☐ Expenses incurred while a Participant may be reimbursed if submitted within claims run-out period identified in Section 17.3(a). ☐ Expenses incurred while a Participant may be reimbursed if submitted within «Number_Days» days following termination of participation. ☐ Expenses incurred during the Plan Year (whether while a Participant or after participation ceases) may be reimbursed if submitted within the claims run-out period identified in Section 17.3(a). ☐ No reimbursement of expenses shall occur following termination of participation. Employer Contributions to HSAs. When made outside of the Flexible Benefit Plan, certain rules regarding nondiscrimination apply (i.e., comparability rules). In general, those rules impact an employer’s ability to restrict HSA contributions. When made inside the Flexible Benefit Plan, the comparability rules do not apply. Employers have more flexibility. For example, an employer could provide a matching contribution to the HSA for each dollar contributed by the employee. This would be reflected in the description of the Employer Contributions. Article XVIII: HAS Contribution Feature ☐ Available ☐ Not Available An employer is not required to choose the HSA vendor. Contributions could be forwarded to any HSA vendor. For administrative ease (e.g., sending a single check to the HSA vendor), the employer often chooses the HSA vendor. If selected by the Employer, the HSA vendor shall be identified in Exhibit A attached to this Adoption Agreement. 18.3(b) HSA means: ☐ An HSA provided through a trustee/custodian selected by the Employer. ☐ An HSA provided through any trustee/custodian selected by the Participant. Flexible Benefit Plan Adoption Agreement Page | 13 © 2010 Hitesman & Associates, P.A. An employer can permit pre-tax funding of an HSA even if the employer does not sponsor a compatible Group Medical Benefit (i.e., a high deductible health plan designed to work with an HSA). 18.3(d) High Deductible Health Plan means: ☐ As provided in the Basic Plan Document (i.e., the Employer-sponsored High Deductible Health Plan). ☐ Any health plan constituting a high deductible health plan under Section 223 of the Code (i.e. a qualified health plan to be offered with a HSA). Certification of HSA Eligibility. This is not required. However, where the employer provides contributions (e.g., Employer Contributions) or facilitates contributions (e.g., as an Available Benefit through the Flexible Benefit Plan) to an HSA, it makes good sense for the employer to monitor HSA eligibility. 18.5 Certification of HSA Eligibility: ☐ A Certification of HSA Eligibility is required to participate in the HSA Contribution Feature. ☐ A Certification of HSA Eligibility is not required to participate in the HSA Contribution Feature. Article XIX: Limited Scope Medical Expense Reimbursement Plan ☐ Available ☐ Not Available The Claims Run-Out Period refers to the period of time after the Plan Year during which Participants may submit eligible expense incurred during the Plan Year for reimbursement. If the Claims Grace Period (Section 19.12(a)) applies, the Claims Run-Out Period cannot be shorter than 2 ½ months. 19.3(a) Claims Run-Out Period means: ☐ The 60-day period following the end of Plan Year. ☐ The 90-day period following the end of Plan Year. ☐ Other (Describe): Flexible Benefit Plan Adoption Agreement Page | 14 © 2010 Hitesman & Associates, P.A. Note: Use the “Other” option to restrict the definition in the Basic Plan Document. “Dependent” cannot be defined more broadly than as provided in the Basic Plan Document. The Basic Plan Document definition of “Dependent” includes individuals who satisfy the requirements of paragraph (a) or (b) below: 19.3(b) Dependent means: (a) An individual who: (1) is your child (son, daughter, stepson, stepdaughter, adopted child, eligible foster child, or child placed for adoption); and (2) will not attain age 27 during the relevant calendar year. (b) An individual who: (1) is your child (son, daughter, stepson, stepdaughter, adopted child, eligible foster child, or child placed for adoption), brother, sister, stepbrother, or stepsister, or a descendant of any such person; (2) has the same principal place of abode as you for at least one-half of the relevant year; (3) will not attain age 19 (or age 24 if a full time student) during the relevant year or is permanently and totally disabled; (4) did not provide over half of his/her own support during the relevant year; (5) is a citizen, national, or resident of the United States, or a resident of Canada or Mexico; (6) is younger than you; and (7) does not file a joint tax return with his or her spouse. (c) An individual who: (1) is your child (or a descendant of a child), brother, sister, stepbrother, or stepsister, parent (or a parent’s ancestor), stepparent, brother or sister’s son or daughter, parent’s brother or sister, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-inlaw, or sister-in-law or, if not such a relative, an individual who has the same principal place of abode as you and is a member of your household; (2) has received more than one-half of his/her support from you during the relevant year; (3) is not your qualifying child or the qualifying child of anyone else (i.e., does not satisfy the requirements of paragraph (a) above with respect to any person); and (4) is a citizen, national, or resident of the United States, or a resident of Canada or Mexico. ☐ As provided in the Basic Plan Document ☐ Other (Describe): The definition of “Limited Scope Medical Expense” contained in the Basic Plan Document is the broadest definition allowed to ensure Participants remain eligible to make and/or receive HSA contributions. Use the “Other” option to restrict the definition contained in the Basic Plan Document. 19.3(e) Limited Scope Medical Expense means: ☐ As provided in the Basic Plan Document. ☐ As provided in the Basic Plan Document plus Post-Deductible Expenses. ☐ Other (Describe): Flexible Benefit Plan Adoption Agreement Page | 15 © 2010 Hitesman & Associates, P.A. The first option represents an exception to the general rule applicable under the Medical Expense Reimbursement Plan that expenses may be reimbursed only after the care has been provided. Orthodontia is a specifically excepted expense category specifically addressed by the IRS in regulations. These principles should not be extended to other expense categories. 19.6 With respect to orthodontia expenses: ☐ Expenses for orthodontia care shall be deemed incurred and may be reimbursed when the Participant makes an advance payment for the orthodontia care. ☐ Expenses for orthodontia care are incurred and may be reimbursed only as the care is provided. Statutory Maximum. There is a statutory maximum on the amount of salary reduction contributions that may be made to this plan. It is indexed for inflation. If the first option is selected, the amount inserted should be less than or equal the statutory maximum unless the employee may allocate non-cashable employer contributions to the plan. If the second option is selected, the maximum will increase automatically as the statutory maximum increases for inflation. 19.8 Maximum Elections The maximum election a Participant may receive for a $ Plan Year is: The amount of the maximum salary reduction contributions that may be made under Section 125(i) of the Code. For a “short” Plan Year, the maximum election is: ☐ Pro-rated. ☐ Unchanged. For Participants joining the Plan mid-Plan Year, the maximum election is: ☐ Pro-rated. ☐ Unchanged (i.e., the entire Employer Contribution for the Plan Year is available.) Uniform Coverage: Because the full amount of a Participant’s election (including salary reduction and allocation of Employer contributions) under the Limited Scope Medical Expense Reimbursement Plan is available starting on the first day of the Plan Year (even though contributions are made over the course of the entire Plan Year), the amount of the maximum relates to the amount of risk the Employer assumes with respect to funding benefits under this plan. If the second option is selected, enter the number of days during which a former Participant may submit claims. Unlike the Dependent Care Expense Reimbursement Plan, expenses incurred during the Plan Year after the Participant ceases participation cannot be reimbursed (unless the Participant is eligible for and elects COBRA. 19.9 Reimbursement of Limited Scope Medical Expenses following termination of participation: ☐ Expenses incurred while a Participant may be reimbursed if submitted with the claims runout period identified in Section 19.12. ☐ Expenses incurred while a Participant may be reimbursed if submitted within «Number_Days» days following termination of participation. ☐ No reimbursement of expenses shall occur following termination of participation. Flexible Benefit Plan Adoption Agreement Page | 16 © 2010 Hitesman & Associates, P.A. As described in Section 2.6 of the Basic Plan Document, the Claims Grace Period extends the period of time during which expenses may be incurred with respect to a particular Plan Year. It is different from the Claims Run-Out Period described in Section 19.3(a). The Claims Grace Period cannot be included if the plan includes the carryover feature. 19.12 (a) Claims Grace Period: ☐ A Claims Grace Period is available under the Limited Scope Medical Expense Reimbursement Plan. ☐ A Claims Grace Period is not available under the Limited Scope Medical Expense Reimbursement Plan. 19.12 (b) Carryover: ☐ Carryover is available under the Limited Scope Medical Expense Reimbursement Plan. ☐ Carryover is not available under the Limited Scope Medical Expense Reimbursement Plan. See the Basic Plan Document for a description of this feature. 19.14 Qualified Reservist Distributions: ☐ Qualified Reservist Distributions are available under the Limited Scope Medical Expense Reimbursement Plan. ☐ Qualified Reservist Distributions are not available under the Limited Scope Medical Expense Reimbursement Plan. In most cases, there will not be “other” limitations. If there are “other” limitations, they must be described here. To the extent any such limitations apply differently to different classifications of Participants, they should be carefully reviewed for non-discrimination testing purposes. 19.17 (d) Other Limited Scope Medical Expense Reimbursement Plan limitations are as follows: ☐ N/A ☐ Other (Describe): In general, there is no requirement that Cash Payment be an Available Benefit. It can be an Available Benefit when there are Employer Contributions to allocate, including where an amount is made available upon waiver of an Available Benefit (e.g., waiver of Group Medical Benefits). Article XX: Cash Payment ☐ Available ☐ Not Available Use the “Other” option to restrict the amount of Employer Contributions that may be received through the Cash Payment benefit (e.g., only X% or $X of unused Employer Contributions may be received as a cash payment, all unused Employer Contributions may be received as a cash payment up to a set maximum, etc.). To the extent the terms (e.g., availability, amount, etc.) differ amount classifications of Participants, they should be carefully reviewed for non-discrimination testing purposes. 20.0 Restrictions on the Cash Payment available : ☐ N/A – no restrictions. ☐ Other (Describe): Flexible Benefit Plan Adoption Agreement Page | 17 © 2010 Hitesman & Associates, P.A. Acknowledgements 1. 2. This Plan has been duly adopted or authorized to be adopted by the Employer’s managing body Portions of this Plan are intended to be a “covered entity” for purposes of the Health Insurance Portability and Accountability Act (HIPAA). EMPLOYER: By: Its: Date: If Affiliated Employers: EMPLOYER: ☐ Date: N/A By: Its: EMPLOYER: ☐ Date: N/A Flexible Benefit Plan Adoption Agreement By: Its: Page | 18 © 2010 Hitesman & Associates, P.A. EXHIBIT A If more than one insurer/provider for a particular benefit, provide the additional insurer/provider information in the blank space provided below. Insurer/Provider Information Group Medical Benefits Group Term Life Benefits and/or AD&D Benefits ☐ Not Applicable Name of Insurer/Provider: _________________ Address: _______________________________ City, State, Zip: _________________________ Phone #: _______________________________ Group #: _______________________________ ☐ Not Applicable Name of Insurer/Provider: __________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ Group Dental Benefits Long Term Disability Benefits ☐ Not Applicable Name of Insurer/Provider: __________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ ☐ Not Applicable Name of Insurer/Provider: __________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ Group Vision Benefits Short Term Disability Benefits ☐ Not Applicable Name of Insurer/Provider: __________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ ☐ Not Applicable Name of Insurer/Provider: __________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ HSA Contribution Feature ☐ Not Applicable Name of HSA Vendor (if vendor selected by Employer): ______________________________ Address: ________________________________ City, State, Zip: __________________________ Phone #: ________________________________ Group #: ________________________________ Flexible Benefit Plan Adoption Agreement Page | 19 © 2010 Hitesman & Associates, P.A. Additional Information: Flexible Benefit Plan Adoption Agreement Page | 20 © 2010 Hitesman & Associates, P.A.