RES-10240 Amending Retirement Health Savings Plan for Top Management EmployeesRESOLUTION NO. 10240
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF ORANGE AMENDING RESOLUTION NO.
9660 RELATING TO A RETIREMENT HEALTH
SAVINGS PLAN (RHS) FOR TOP MANAGEMENT
EMPLOYEES.
WHEREAS, the City of Orange has employees rendering valuable services; and
WHEREAS, the amendment of its existing retiree health savings plan far such
employees serves the interests of the City of Orange and its Top Management employees;
NOW THEREFORE BE IT RESOLVED, that the City of Orange hereby amends the
RHS Plan in the form of the ICMA Retirement Corporation's Vantage Care Retirement Health
Savings program attached as Exhibit A.
ADOPTED this 27t" day of November, 2007.
i
i
aro n . avec e, Mayor, City f ange
ATTE'i':
Mary E. City Cler ' o Orange
I, MARY E. MURPHY, City k of the City of Orange, California, do hereby certify
that the foregoing Resolution was duly and regularly adopted by the City Council of the City of
Orange at a regular meeting thereof held on the 27th day of November, 2007, by the following
vote:
AYES: COUNCILMEMBERS: Smith, Cavecche, Dumitru, Bilodeau
NOES: COLJNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: Murphy
ABSTAIN: COLTNCILMEMBERS: None
Mary .hy, City Clerk ' of Orange
icM-RC
a iGiihd RehK„mr smr,;ey
EMPLOYER VANTAGECARE
RETIREMENT HEALTH SAVINGS ( RHS PLAN
ADOPTION AGREEMENT
EMPLOYER VANTAGECARE RETIREMENT HEALTH SAVINGS (RHS) PLAN
ADOPTION AGREEMENT
Amendment to Existing Plan Number: 8 O 1 j
Employer Recirement Health Savings Plan Name:
I. Employcr Name: CJ1' ?Cll.tC. Stace: _P„
II. The Employer hereby attests that it is a unit of a state or local government or an agency or instrumentality of one or more
units of a state or local government.
III. Effective Date of the Amendment: 1 1 r
IV. The Employer intends to utilize the Trust to fund only welfare benefits pursuant to the following welfare benefit plan(s)
established by the Employer:
V. Eligible Groups,Participation and Pacticipant Eligibility Requirements
A. Eligible Groups
The following group or groups of Employees are eligible co parcicipace in che VantageCare Retiremenc Hea(th Savings
Plan (check all applicable boxes):
All Employees
All Full-Time Employees
Non-Union Employees
Public Safery Employees—Police
Public Safery Employees—Firefighters
General Employees
Collectively-Bargained Employees(Specify unit(s))
Other(specifygroup(s)) 1c 0
The Employee group(s)specified musc correspond o a group(s)of the same designation chat is defined in he statuces,
ordinances,rules, regula[ions,personnel manuals or other documents or provisions in effect in che state or locality of the
Employer.
B. Participation
Mantlatory Participation:All Employees in[he coveced group(s) are required to participate in che Plan and shall receive
contributions pursuant[o Section VI.
C. Participant Eligibility Requirements
1. Minimum service: The minimum period of service required for par icipation is I 1 r (wri e N/A if an Employee is
eligible to participate or to elect to parcicipate immediately upon employment).
2. Minimum age:The minimum age required for eligibility to parcicipate is_(write N/A if no minimum age is
required).
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VI.Contribution Sources and Amounts
A. Definition of Earnings
The definicion of Earnings will apply co all RHS Contribution Fea ures that reference"Earnings',including Direct Employer
Con ributions(Sec ion VI.B.1.)and Manda ory Employee Compensation Contributions(Section VI.B.2.)
Definition oEearnings:IW /
B. Direct Employer Contributions and Mandatory Contributions
1. Direct Employer Contributions
The Employer shall contribute on behalf of each Participant
of Earnings
each Plan Year
A discretionary amount to be determined each Plan Year
Other(describe):
2. Mandatory Employee Compensation Contribucions
The Employer will make manda ory contributions of Employee compensation as follows:
Reduction in Salary- of Earnings or$ will be contributed for the Plan Year.
Decreased Merit or Pay Plan Adjustment-All or a portion of the Employees' annual merit
or pay plan adjustment will be contributed as follows:
An Employee shall not have the right to discontinue or vary the rate of Mandatory Contributions of Employee
Compensation.
3. Mandacory Employee Leave Con ributions
The Employer will make mandatory contributions of accrued leave as follows (provide formula for determining Mandatory
Employee Leave contributions):
Accrued Sick Leave
Accrued Vacation Leave
Other (specify rype of leave)Accrued Leave
rs i ll^j-i 1 V l",5 t."'' l:li.ri Yl fel ifil CJ1
C-, E:_.( F i 1` t5 1 .N`(
An Employee shall not have the right o discontinue or vary the rate of mandatory leave conCributions.
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C. Limits on Tota(Contributions(check one box)
The total contribution by the Employer on behalf of each Participant(including Direct Employer and Mandatory
Employee Contributions) for each Plan Year shall not exceed the following limit(s) below.
There is no Plan-defined limit on the percentage or dollar amount of earnings that may be contributed.
of earnings*
Definition of earnings: Same as Section VI.A.. Other
for the Plan year.
See Section V.B.for a discussion of nondiscrimina ion rules that may apply to non-collectively bargained self-insured Plans.
VII.Vesting for Direct Employer Contributions
A. Vesting Schedule(check one box)
The account is 100%vested at all times.
The following vesting schedule shall apply to Direct Employer Contributions as outlined in Section VI.A.1.:
Years of Service Vesting
Completed Percentage
B. The account will become 100%vested upon the death,disability,retitement*,or attainment of benefit eligibility(as
outlined in Section IX) by a Participant.
Definition of retiremenc(check one box):
Recirement as defined in the primary retirement plan of the Employer
Separation from service
Other
C. My period of service by a Participant prior to a rehire of the Participant by the Employer shall not count toward the
vesting schedule out(ined in A above.
VIII.Forfeiture Provisions
Upon separation from che service of che Employer prior to attainment of benefit eligibility(as outlined in Section IX),or upon
reversion to the Trust of a Parcicipan's accounc assets remaining upon he participanc's death (as oudined in Section XI),a
Participant's non-vested Eunds shall(check one box):
Remain in the Trust to be reallocated among all remaining Employees participacing in the Plan as Direct Employer
Contributions foc the next and succeeding contribution cycle(s).
dRemain in the Trust to be reallocated on an equal dollar basis among all Plan Participants.
0
Remain in the Trus[to be reallocated among all Plan Participants based upon Participant account balances.
Revert to the Employer.
IX.Eligibility Requirements to Receive Medical Benefit Payments from the VantageCare Retirement Health Savings Plan
A. A Participant is eligib(e to receive benefits:
At retirement only(also complete Section B.)
Defini ion of retiremenc:
Same as Section VII.B.
Other
At se aration from service with the following restrictions
o restrictions
Other
At age only
At retirement and age also complete section B)
Definition of retirement:
Same as Section VII.B.
Other
At retiremenc or age
Definicion of retiremenr.
Same as Section VII.B.
Ocher
Other,specified as follows (also complete Section B if applicable):
B. Termination prior to general benefit eligibility: In the case where the general benefit eligibility as outlined in
Section IX.A includes a retirement component,a Participant who separates from the service of the Employer prior to
retirement will be eligible to receive benefits:
Immediately upon separation from service.
At age
C. A Participant that becomes totally and permanently disabled
as defined by the Social Security Administra ion
as de6ned by the Employer's primary recirement plan
other
will become immediately eligible to receive medical benefi payments from his/her VantageCare Recirement Health Savings Plan
account.
D. Upon the death of the Participan,benefits shall become payable as outlined in Section XI.
X. Permissible Medical Benefit Payments
Benefits eligible for reimbursement consist of:
dAll Medical Expenses eligible under IRC Section 213*other han direct long-term care expenses,and including non-
prescription medicacions allowed under IRS guidance.
The Eollowing Medical Expenses(selecc only the expenses you wish to cover under the VantageCare Retirement Health Savings
Plan):
Medical Insurance Premiums
Medical Out-of-Pockec Expenses*
Medicare Part B Insurance Premiums
Medicare Part D Insurance Premiums
Medicare Supplemental Insurance Premiums
Prescription Drug Insurance Premiums
COBRA Insurance Premiums
Dental Insurance Premiums
Dental Out-of-Pocket Expenses*
Vision Insurance Premiums
Vision Out-of-Pocke Expenses*
Qualified Long-Term Care Insurance Premiums
Non-Prescription medications allowed under IRS guidance`
Other qualifying medical expenses (describe)*
See Section V.A.for a discussion of nondiscrimination rules which may apply to non-collectivcly bargained,ulf-insured Plans.
XI. Benefits After the Death of the Participant
In the event of a Participant's death, the following shall apply:
A. Surviving Spouse and/or Surviving Dependents
The surviving spouse and/or surviving eligible dependents(as defined in Section XII.F.)of the deceased Participant are immediately
eligible to maintain the account and utilize it co fund eligible medical benefits specified in Section X above.
Upon noti6cation of a Parcicipant's death, the Participant's account balance will be transferred into the Vantagepoint Money
Market Fund* (or anocher fund selected by the Employer). The accounc balance may be realloca ed by the surviving spouse or
dependents.
Pltatc read tbe current Yantagrpoint Mutual Funds prorprctur carefu!!y prior to investing.An invatment in thil fund is neither intu ed nor
guaranteed and there can be no atturance that the Fund wil!be able to maintain a rtablt net arret valut of$1.00 per fhare. Yantagepoint Mutual
Fundf a e diJtributed by tCMA-RC Srrvice.r,LLC, a who![y-owned broker-dealer affiliate of ICMA Retirement Corporation.Member NASD/
SIPC.
If a Participant's account balance has not been fully utilized upon the death of the eligible spouse,the accoun balance may
concinue to be u ilized co pay benefics of eligible dependents. Upon the death of all eligible dependents,che account will revert to
he Plan to be applied as specified in Sec ion VIII.
B. No Surviving Spouse or Surviving Dependents
If there are no living spouse or dependents at the time of death of the Parcicipanc, the account will revert to che Plan to be
applied as specified in Section VIII.
XIII.The Plan will operate according to the following provisions:
A. Employer Responsibilities
1. The Employer will submit all VantageCare Retirement Health Savings Plan contribution data via electronic submission.
2. The Employer will submit all VantageCare Retirement Health Savings Plan Participant staCus updates or personal
information updates via electronic submission. This includes buc is not limiced to terminacion notification and benefi
eligibility notification.
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B. Participant account administration and asset-based Fees will be paid chrough the redemption of Participant account shares,
unless agreed upon otherwise in he Administrative Services Agreement.
C. Assignment of benefits is not permitted.Benefita will be paid only to the Participant, his/her Survivora,the Employer
or an insurance provider(as allowed by the claims administratqr). Payments,to an third-party payce(e.g.,medical service
provider)are not permitted with the exception of reimbursement to the Employer or insurance provider(as allowed by che
claims administrator).
D. An eligible dependont is che Parcicipanis lawEul spouse and any ocher individual who is a person described in IRC Seccion
152(a),as clarified by In ernal Revenue Service Notice 2004-79.
E. The Employer will be responsible for withholding,reporting and remitting any applicable taxes for payments which are
deemed to be discriminatory under IRC Section 105(h),as outlined in the VancageCare Retirement Health Savings Plan
Employer Manual.
XN Employer Acknowledgements
A. The Employer hereby acknowledges it understands tha failure to properly fill out this Employer VantageCare Reciremenc
Health Savings Plan Adoption Agreement may result in che loss of tax exempcion of he Trust and/or loss of tax-deferred
stacus for Employer concribu ions.
B. Check this box if you are including supporCing documents that include plan provisions.
Date•
itle ar 1 avecche M
Attest:_ Date:
Ticle: Mar E. M h Cit Clerk
Accepced:VANTAGEPOINT TRANSFER AGENTS,LLC
Corporace Secretary
6
City of Orange
Top Management Employees
Retirement Health Savings (RHS) Plan
ELECTION RESULTS
November 9, 2007
Total Ballots Cast - 61
1 - Do you agree that the City should amend its RHS Plan for Top
Management which would require everyone to participate in the Plan?
YES - 59 NO - 2
2 - Upon retirement, would you like to have a percentage of your Sick
Leave payout directed to the RHS Program?
YES - 57 NO - 4
If YES,
20% - 2 50% - 13 100% - 42
internal Revenue Service Department of the Tr asury
Washington, DC 20224
Index Number: 115 . 02-00
Contact Person:
D
Telephone Number.
In fleference to:
CC:DOM:FI&P:2 PLR-116685-99
Date:
December 28, 1999
City
Trust
State
Dear
This is in response ko a letter dated October 12, 1999, and
prior correspondence, req esting a private letter ruling that
Trust is an integral part ef City.
FACTS
City is a political Subdivision of S.ate . City currently
maintains one or more post-retirement welfare benefit plans
collectively, the "Plan" } that provide its eligible employees
Participants" } and thei beneficiaries i "Beneficiaries" ) wit?
life, sickness, medical, disability, severance and other similar
benefits through insuranc ar.d self-funded .reimptirsement plan.s .
City intends to esta}lish Trust to hold assets and income of
the Plan for the exclusiv+ benefit of Participants and their
Beneficiaries.
T'1SC ' S ]2CZaration defineS "Bene•`iciaries" c =Tciude G
Participant ' s spouse, any ch ld of the Participanc or :e
pa'_'tiClpant S SD JliSe W.r:C ],'S 3 mir±or or a S UGlE.'IIt Wlthin •.`_'?e
meaning of sect on '_51 ic) `4) of 'the Ineernal Rever.;e Ccce, nr_v
ether minor ch ic residir_g with the Participant, Gr.c any Gt_'lE'i'
individual who is a persor described in section 1 2 +ai oT tne
Code. Death benefits may :be Drovided to any Bene•`iciar,
designated by a Partic pant under the terms of a cleath ner.ef'_
F,`Y CJT 3iA O an 1'_?L'I'aP.C CQP_t=aCC. FO'_"?T:'__^.0 L"d Cr '_"n C i ^- _ -- ^-
PLR-116685-99 2
may provide benefits by ca h payment, and may reimburse a
Participant, City, or Trus' s Administrator for insurance
premiums or other payments. expended for permissible benefits
under the Plan.
Under Trust ' s Declara ion, City will be the Administrator of
Trust . City may appoint o e or more investment managers to
manage and control all or art of the assets of Trust . Under
Trust 's Declaration, the Tx-ustee will hold assets only as
titleholder. Persons havi g custody or possession of assets may
include City, the Administ ator of Trust, the investment manager,
and their agents and subag nts, but not the Trustee . The Trustee
will have no discretion or! authority with regard to the
investments of Trust and w ll act solely as a directed Trustee
with respect to the assets to which it holds title.
The Trustee will not be responsible or liable f or any loss
or expense that may arise pr result from complying with any
direction from the City, the Administrator, the investment
manager, or such agents to; take title to any ass.ets, or from the
Trustee' s refusal or failu e to comply with any direction to hold
title, unless it involves r results from the Trustee' s
negligence or intentional misconduct. The Trustee may refuse to
comply with any direction f it deems such direction illegal .
City indemnifies and olds the Trustee harmless from any
actions, claims, demands, iabilities, losses, damages or
reasonable expenses of any, kir_d in connection wi h or arising out
of (i) any action taken or' omitted in good faith in accordance
with its directions, (ii) ny disbursements made in accordance
with directions, or (iii) ny action taken by or omitted by the
Trustee with respect to an' investment managed by an investment
manager in accordance with any direction of the investment
manager oz any inaction regarding any investment in the abse ce
of directions from the inuestment manager. City, however, has ao
responsibility to the Trustee under the indemnification if the
Trustee fails negligently, intentionally, or reckless to perform
its duties .
City will contribute o Trust such amounts as specified in
the Plan or by resolution. ` No other person or persons will be
permitted to make any can.tributions .
The Plan must rovice' a fcrnula for de`zrminir.g the VG af
a Part.ciDant ' s accrued va ation leave, sicic leave, or both, in
excess of a threshold numb r ot hours of such leave . City :ay
contribute amounts so dete mined to Trust . The Plan wi= cor a?_^.
a forfeiture provision that will prevent Participancs ar_d the r
Beneficiaries from receivi*g cash in lieu cf a contributicr_ to
Trust in their behalf. Co tributions, invesLment income,
rea?ize and unrealized ca ns ar.d losses, ar_d forfe_t r s :_-'_
deposiLed 1F1tO 3P_ aCCOL'P_t }.^. T?'.1St l:l tine .c^l Ci t.''.E a'_"=_C=^c':
PLR-116685-99 3
for the exclusive benefit of the Participant and his or her
Beneficiaries . A Participant may direct the investment of
amounts in her or his accbunt among investments selected by City.
No amount in any account will be subject to transfer, assignment,
or alienation, whether vo untary or involuntary, in favor of any
creditor, transferee, or ssignee of City, the Trustee,
Participant or Beneficiar.
City or the Administ ator, investment manager, or other
agent designated by City will receive contributions and will
hold, invest, and adminis er contributions without distinction
between principal and inc me. The Trustee will not be
responsible for the calcu ation or collection of contributions,
but will hold title to pr perty received as directed by City or
its designee . The Truste will not be required to keep accounts
of the investments, recei ts, disbursements, and other
transaction of Trust exce t as necessary to per=orm its title-
holding function. City o its designee will maintain ail books
and records .
City reserves the ri ht to alter, amend, or terminate Trust
at any time for any reaso without the consent of any person. No
amendment affecting the T ustee is effective without the
Trustee' s consent, and no `termination can result in any part of
Trust 's assets being used 'for or diverted to purposes other than
the exclusive benefit of articipants and Beneficiaries .
If City adopts ot'r.er 'olar.s roviding Zife, sic:ness,
accident, medical, disabi?;ity, severance, or other benefits ar_d
designates Trust as part ctf such plan, City or its agent wi11
hold contributions to such plan in Trust . The contributions may
be commingled for investment purposes, but the books and record
of Trust must show the po tion of Trust allocable to each plan.
Upon the satistactior, of all liabilities under the P 37: .o
provide benefits, any amounts remaining in any account must be
returned to City.
LAW & ANALYSIS
Income of an integral par of a state or politica'_
subdivision oi a state is not taxable absent s ecific s atutc•i
authorizatior_. See Rev. R"ul. 8?-2, 1987-1 C.B 18; se ti'en
511 (a) (2) (B) of the Code, CM 1a407, C.B. XIV-3 , 103 (1935? ,
superseded by Rev. RuI. 7`-?31, 1971-1 C.B. 28 . Whether an
enterprise is an integral part depends on facts and circumsta ce
such as tne state ' s degree! of control over the enterprise ana its
financial commitment to t enterprise. Yf an enterprisG is an
integral part oT a stace o political subd.vision of a state, it
will not be treated as a separate entity for federal tax
pu-pcses, thcug it may ^ave be n forme as a separat r.;_,-
PLR-116685-99 4
under state law. Secti n 301 . 7701-T (a) t3) of the Procedural and
Administrative Regulatiqns.
City has made a su stantial financial commitment to Trust by
providing all of its fu ding. City retains complete control over
Trust because it may am nd or terminate Trust at any time . City
retains control over th daily operation of Trust by its power to
appoint or remove agent who manage daily operation. The Trustee
is merely a title holder with no power to manage Trust .
CONCLUSION
Provided that Cityjis the only person that makes
contributions to Trust, and Trust accepts or holds only amounts
of money contributed by City, Trust will be an integral part of
City, and any income ear ed on amounts in Trust will not be
subject to federal incom tax.
This ruling is direrted only to the, taxpayer that requeste3
it . Section 6110 (k) (3) bf the Code provides that it may not be
used or cited as precede t.
Except as specifica ly provided otherwise, no opinion is
expressed on the federal` income tax consequences of the
transactior. described ab ve .
In accordance with he terms of a power of attorney on file
in this office, a ccpy o tr ' letter is being sent to your
authorized representativ.
Sincerely,
Assistant Chief Counsel
Financial Instztutions & Products)
By: William Coppersmith
William E. Coppersmith
Chief, Branch 2