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HomeMy WebLinkAbout2003-39 Personal Choice PlanRESOLUTION NO. 2003- '~:::)~1 A RESOLUTION OF THE CITY OF ASHLAND ADOPTING A FULL SECTION 125 PLAN FOR ITS EMPLOYEES BY REPEALING RESOLUTION NO, 2002-34. THE ACT OF INVALIDATING RESOLUTION NO. 2002-34 DOES NOT INVALIDATE THE PROGRAM. Recitals: The governing body of the City of Ashland (City) finds and determines that it is in the interest of the City and the City's employees that the City offer an Internal Revenue Code Section 125 Plan to its employees; and The Personal Choice Account, set forth in Exhibit "B" (hereafter "the Plan") provides sufficient flexibility to permit employees of the City to select benefits that most suit their needs by providing a choice between cash wages and the option to set aside wages before taxes have been deducted to cover health insurance premiums, eligible medical and dependent care expenses; and Co The Plan as set forth will allow the employees and the City to establish a partnership to educate employees and their families about appropriate health care utilization and to share responsibility for health care. THE CITY COUNCIL OF THE CITY OF ASHLAND, OREGON, RESOLVES: SECTION 1. That the governing body of the City hereby adopts the Personal Choice Account as a full Section 125 Plan attached hereto as Exhibit "B" and fully incorporated by reference. SECTION 2. This resolution takes effect upon signing by the Mayor. This resolution was read by title only in accordance with Ashland Municipal Code §2.04.090 duly PASSED and ADOPTED this /'.~ day of December, 2003. SIGNED and APPROVED this day of ~GO.,~w-~ ~ ~_.,C', 2003. Alan W. DeBoer, Mayor ATTACHMENT A PERSONAL CHOICE ACCOUNT COST ANALYSIS WORKSHEET This is a worksheet to assist City County Insurance Participating Employers to determine the cost effectiveness of fees associated with the Personal Choice Account versus the FICA and Medicare tax savings for the employer. The average monthly fees includes 1/12th of the annual plus any monthly fees, the Monthly Deductions amount is the total minimum amount that must be set aside for employer to recoup the administrative fees through FICA and Medicare tax savings. Premium Only Cost Analysis requires the employer to insert their annual fee and average number of eligible employees, the other calculations are then automatically updated for your review. Full Section 125 Analysis requires the employer to put in their annual fee, average eligible employees per month, and expected number of employees participating in Health Care or Dependent Care Spending accounts. Once these are up updated, the other calculation fields are automatically updated for your review. Premium Only Section 125 Cost Analysis Average Fees Annual Fee Per Month [ $250.00 [ $20.83 Average Monthly Deductions Necessary to Cover Fees $272.33 Avg. Employees Per Month Average Breakeven Point Per Employee 100 $2.72 Full Section 125 Plan Cost Analysis Average Eligible Employees Per Month Number of Employees Participating in: Premium Contribution Only: Health Care or Dependent Care: 100 Not Applicable 50 Average Fees Annual Fee Per Month L $540.00 [ $270.00 Average Monthly Deductions Necessary to Cover Fees $3,529.41 Average Breakeven Point Per Employee Average Breakeven for Full Participation Employees $35.29 $70.59 ATTACHMENT B OASSOCIATED ADMINISTRATORS, INC. The Personal Choice Account is a flexible spending account program that allows you to use pre-tax dollars to pay for 'dependent care expenses, medical and dental services, and employee insurance premiums you would normally have to buy witKafter-tax dollars. Here's how it works. A set amount of money is withdrawn from your paycheck before taxes are deducted. This money is set aside to fund your Personal Choice Account. Because your taxable income is reduced, yOu pay fewer taxes. The Tax Reform Act of 1986 kept the provision in the tax code that allows flexible spending like the Personal Choice Account. Sound too good to be true? The only catch is that your account is subject to the "use it or lose it" rule, which means that you must use all the designated dollars in your Personal Choice Account by the end of the year, or you forfeit the balance. That's it! You can reduce your taxable income, pay less money in taxes, and use the savings any way you choose. OASSOCIATED . ADMINISTRATORS, INC. fou instruct your employer to set aside a ;pecific amount from each paycheck nto one or more of three kinds of :lexible spending accounts: · Dependent care Spending account · Health care spending account · Employee insurance premium contribution account Fhe amount you designate for your Personal Choice Account should be ~out the same amount you would aormally pay for such services out of ~ur take-home pay. Automatic payroll deductions are made &om your paycheck each month before income taxes are deducted from your gross salary. Once money is set aside into your Personal Choice Account, it's not subject to federal or state income taxes. Since your taxable income is lowe~; you'll pay fewer taxes. The difference 'is extra income for ~,ou to spend any way you like. Here is a .brief description of each kind of account: The Dependent Care Spending Account can be used for care for children under age 13 or adult care expenses for a disabled spouse or other dtsablM dependent ff such care is necessary in order to allow you to work. In addition, this dependent must spend at least eight hours per day in your household. A per, on claiming the Federal Child Care Tax Credit or excluding from ~ ..come re!m_bur~0menti' for dependent c~. turin,provide the nam~ addre.~, information may be provided on tax Form 2441 (Credit for Child and Dependent Care Expenses). This form is available from the IRS and should be filed with your income tax return. Eligible Dependent Care Expenses Expenses that are eligible for reimburse- ment under the Dependent Care Spending Account include, but are not limited to, the following: · Care provided by individuals who care for your children under age 13 in or outside your home · Preschool and care provided by care centers · Care (not residential care) for adults · Home care which is non-medical for a dependent parent who lives with you · Special care for mentally or physically handicapped dependents Excluded'Dependent Care Expenses The following expenses are not eligible for reimbursement and are not limited to: · Payments to your spouse or any dependent that can be claimed by you or your spouse as an exemption · Care provided by your child who is under age 19 · Expenses incurred prior to your enrollment or after your tenuination date · Cost of food, clothing, education or transportation between your home and the dependent care facility (food and education will be eligible if these amounts are incident to and cannot be separated from the cost) · Cost of overnight camp · Care during nOn-working hours · Nursing homes · Educational Expenses The Federal Tax Credit versus the Dependent Care Spending Account Income tax credits for dependent care are available. Your individual circum- stances will determine whether the tax credits or spending account is more advantageous to you. The IRS limits the amount of dependent care expense that can be financed through the spending account to $5,000 annually ($2,500 if married and filing separately). Some people receive a greater savings from the dependent care spending account and others from the federal tax credit. If you are unsure, ask for a copy of the dependent care spending account addendum. This addendum includes worksheets to help you make your determination. The Health Care Spending Account can be used for medical, dental or vision expenses normally allowed by the IRS as deductions. A listing of the eligible expenses are located on the back of this brochure. The Employee Insurance Premium Contribution Account can include payments you make for insurance through your Company for you and your dependents. This account does not require you to submit for reimburse- ment, but simply authorizes your employer to take the deduction on a pre-tax basis. Once that's completed, payroll will do the rest for you. Basically, you should estimate how much you would normally pay for the designated expenses out of after, tax income and designafe that amount for your Personal Choice Account. Be conservative, though. The IRS ' has a "use it orlose it" rule! The "use it or lose it" rule means that if there's anything left in your account(s) at the end of the plan year, it is retained by your employeg Under IRS regulations, they can use these dollars to offset administrative costs that have been incurred. You can carry balances from your account(s) forward from month to month, but you have to use all YOur designated dollars by the end of the plan year. Remember, the services must take place during the plan year. If your participation ends mid-plan year; only expenses incurred while you were making contributions to your account would be eligible. That's why it pays to be conservative about variable or unknown expenses when you decide how much to put into your'Personal Choice Account. Also keep in mind that funds allocated to one account carmot be moved to another account. For instance, you can't use funds from a dependent care account to pay for health ' care expenses. In addition, amendments to your Personal Choice Account are allowed only for family status changes (i.e., death, birth, divorce, adoption, marriage, or termination of spouse's employment) after the effective date of the Plan. You may also contribute less to SoO__~! Securtty, possibly reductng' pot~tial,b~neflts. When your employer deducts the money from your paycheck, it is placed in a special account. We use that account to reimburse you directly for your expenses. You then submit proof that the services were incurred within the plan year or when you were making contributions to your account, along with a reim- bursement request form. Examples of proof that the expenses were incurred would be: · An itemized bill · Explanation of benefits (EOB) · An itemized receipt for payment Canceled checks or statements showing payment on account or balance due are not acceptable. Reimbursement requests are processed daily. Typically, checks are issued within 48 hours after your reimburse- ment request is received. If the reimbursement request exceeds your dependent care spending account balance or the health care spending account pool is at zero, the remainder will be paid as funds .become available. All receipts must include dates of service. The services, must take place during the plan year (regardless of when you are billed or pay for the expenses) and while you are contributing to your account for you to receive reimbursement. Here's How the Personal Choice Account Can Work for You Whether you're a single parent, one half of a working couple, or a one-income, two parent family, the Personal Choice Account means more money in your pocket. This example will help you see how: Like many couples, Jim and his wife Susan both hold down full-time jobs. They have one child. Before signing up for the Personal Choice Account, they paid $200 a month for dependent care and $50 a month for dental and orthodontic expenses out of their take-home pay. Jim's employer offered him the Personal Choice Account and Jim decided to use it to pay for those expenses. Jim's monthly gross sala~ is $2,000. Before he signed up for his Personal Choice Account, his monthly spendable income was $1,360.67. Now it's $1,437.42 -- $75.75 more per month! See the estimate below to find out how Jim did it. Without the Personal Choice Account Gross Monthly Salary $2,000.00 Less: Federal Income Tax 128.75 State Income Tax 107.58 Social Security Tax 153.00 Net Income 1,6 t0.67 Less: Dependent Care 200.00 Health Related Expenses 50.00 Spendable Income ~ 1,360.67 With the Personal Choice Account Gross Monthly Salary $2,000.00 Less: Dependent Care 200.00 Health Related Expenses 50.00 New Gross Salary 1,750.00 Federal Income Tax 91.25 State Income Tax 88.45 Social Security Tax 133.88 Spendable Income ~;1,.~36.42 That's an annual increase of $909.00 or 5.3%1 'Ihx savings are general estimates only. · 8~ ~ tax sx:lvi$or for advice specffic m ~ situatiom ELII31BLE HEALTH CARE EXPEN-mE-~ Health Care Expenses that are eligible for reimbursement under the health care spending account include: · Acupuncture · Ambulance · Artificial limbs · Birth control pills · Braille books and magazines · Car controls for a disabled person · Care for mentally disabled child · Chiropractors' fees · Christian Science practitioners' fees · Coinsurance/copayments · Contact lenses and contact lens cleaning solutions · Crutches · Deductibles for medical, dental or vision plans · Dental fees · Dentures · Diagnostic fees · Disabled person's cost for special home · Drug addiction treatment · Eyeglasses · Eye examinations * Fertility drugs · Hearing aids and batteries · 'Home improvements for medical reasons · Hospital bills · Hypnosis for treatment of an illness · Insulin · Laboratory Fees · Laser eye surgery · Learning disability · Life fee to retirement home for medical care · Maternity care · Naturopathic fees (not for supplements) · Obstetrical services · Operations (non-cosmetic purposes) · Optometrist · Orthodontics (non-cosmetic purposes) · Orthopedic shoes · Oxygen · Physicians' fees · Prescription drugs (must have Rx number) · Psychiatric care · Psychologists' fees · Routine physicals · Seeing-eye dog and its upkeep · Skilled nurses' fees (including board and Social Security taxes you pay) · Smoking cessation · Spa/Pool equipment prescribed by physician and allowed by IRS · Special schools (for mentally impaired or physically disabled) · Telephone designed for hearing impaired person · Television audio display equipment for the hearing impaired · Therapeutic care for drug and alcohol addiction · Therapy received as medical treatment · Transportation expenses for medical purposes · Tuition at special school for disabled · Tuition fee portion that goes for medical care · Vaccines · Well-baby and well-child care · Wheelchairs · Wigs required for medical purpose: · X-rays EXP-LLIDED HEALTH CARE EXPENSE5 The following expenses are not eligible for reimbursement under the health care spending account, and are not limited to: · Insurance premiums · Cosmetic procedures unless they are related to an injury, disease or birth defect · Athletic club memberships (unless prescribed by your physician as treatment for an illness or injury) · Marriage counseling · Weight loss classes · Personal use items such as Band-Aids, vitamins, aspirin, supplements and minerals Note: Associated Administrators, Inc. is not liable to the participant or any other entity for taxes, intere.~ penalties or other consequences tha may be assessed by any taxing authority for disallowed expenses. I:)Ul~TOIvlER I~ E:F~VIClE: POI~Ti' AN 0 AREA: TOLL FF~=~': 1-B00':~4-4340