2003 AGN OCT 07 I08 - Laserfiche WebLink

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Item #8 CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF OCTOBER 7, 2003 TO: HONORABLE MAYOR AND CITY COUNCIL APPROVED: AL HOLLIMAN, ASSITANT CITY MANAGER fir__ FROM: ANTHONY ARROYO, ADMINISTRATIVE ANALYST II i SUBJECT: ADOPTION OF INTERNAL REVENUE CODE SECTION 125 PLAN (FLEXIBLE BENEFITS ACCOUNT) DATE: SEPTEMBER 29, 2003 Effective January 1, 2004, the City of Colton will be implementing a cafeteria plan within the context of Section 125 of the Internal Revenue Code. The cafeteria plan allows all city employees to purchase medical, dental, and/or vision insurance. In addition, employees will be allowed to purchase supplemental insurance benefits and set aside funds in a Flexible Spending Account. American Family Life Assurance Company (AFLAC) will assist the city in administering the Section 125 plan (the Flexible Spending Account) and offer the supplemental insurance. The purchase of such benefits is entirely voluntary on the employee's part. Some of the insurance benefits include supplemental cancer coverage and intensive care unit insurance. The cafeteria plan consists of offering $915 per month to each employee to purchase medical, dental, and/or vision insurance. The $915 was derived using the highest medical allowance of $775 offered to all bargaining groups (with the exception of Executive group), $107 for the highest dental insurance plan, and $30 for vision insurance. This amounts to $912 but the city rounded the amount to $915. The cafeteria plan was discussed with the Fire, Police, and the Communication Workers of America during their respective negotiation sessions. The city held meet and confer sessions to discuss the cafeteria plan with the Mid -management, Executive, and General Unit bargaining groups. Lastly, city management met with the International Brotherhood of Electric Workers during the unit modification negotiations. Because the cafeteria plan can be implemented by City Council without these meet and confer sessions, it was determined by city management to meet with the bargaining groups in order to inform the members of the positive changes to become effective January 1, 2004. A cafeteria plan also allows an agency to implement a Flexible Spending Account. The Flexible Spending Account allows employees to set aside pre-tax dollars in an account managed by the city and administered by AFLAC to pay dependent care expenses and medical bills not covered by the individual employee's insurance. Employees will be allowed to set aside up to $5,000 per year for any out of pocket expenses related to health care. In addition, employees will be allowed to set aside another $5,000 for childcare expenses. Once reimbursement is needed for medical or childcare expenses, the employee submits a receipt to AFLAC and a check is drawn to the employee.