HomeMy WebLinkAbout4H - Flexible Benefits Plan
CONSENT AGENDA #: 4 (H)
PREPARED BY: RALPH TESCHNER FINANCE DIRECTOR
SUBJECT: CONSIDER APPROVAL OF RESOLUTION 96-20 ADOPTING A
FLEXIBLE BENEFITS PLAN
DATE: FEBRUARY 20, 1996
INTRODUCTION:
The purpose of this agenda item is for the City Council to consider
establishing a Flexible Benefits Plan or what is also commonly known as a
Cafeteria Plan for city employees.
DISCUSSION:
Under a section of the IRS code known as SECTION 125 - Flexible
Spending Account, employers may allow their employees to pay for their
share of benefits and other eligible out-of-pocket costs on a tax free basis.
Basically the way it works is that employees use pretax dollars to pay for
such items as day care, unreimbursed medical expenses and the employee
share of insurance premiums for health and dental plans that are payroll
deductions. Full time and regular part time employees would be eligible.
ISSUES:
The program is a win/win situation for both the employee as well as the
employer (City). The advantage to the employees are that they increase
their net take home pay because the above referenced dollars are not
subject to federal, state or social security taxes. Likewise, there is a cost
savings to the City because we do not have to pay the matching employer
portion of FICA and medicare taxes.
The program is a completely voluntary program which provides
benefit/tax flexibility to employees at their choice and is widely utilized in
both the private and public sectors. Also there is no administration cost to
the City. AFLAC (American Family Life Assurance Company of
Columbus) is the third party administrator that has been selected to
coordinate the program. They are one of the largest companies within the
field of managing flexible spending plans and they have chosen to provide
this service at no cost to public sector employers. The benefit to AFLAC is
the opportunity to sell their insurance products to the employees.
ALTERNATIVES:
There are the following two options available to the Council.
1. Approve Resolution 96-20 Adopting A Flexible Benefits
Plan.
2. Elect not to establish a flexible benefits plan at this time.
16200 Eagle Creek Ave. S.E.. Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQCAL OPPORTUNITY EMPLOYER
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RECOMMENDATION: In order to implement the program a resolution must be approved by the
City Council to comply with IRS regulations. Staff would recommend the
adoption of the attached Resolution 96-20 Adopting A Flexible Benefits
Plan as indicated in Alternative #1. The program would be initiated on
March 1, 1996. Subsequent program years will be September 30th to
September 30th to correspond with our health/dental insurance program
year.
REVIEWED BY:
ACTION REQUIRED:
A9603.WRT
RESOLUTION 96-20
RESOLUTION ADOPTING A FLEXIBLE BENEFITS PLAN
MOTION BY:
WHEREAS,
SECONDED BY:
the City of Prior Lake wishes to a adopt a flexible benefits plan within the
context of Section 125 of the Internal Revenue Code for the benefit of the
City of Prior Lake's eligible employees.
NOW, THEREFORE, BE IT RESOLVED by the Mayor and City Council that the City of
Prior Lake hereby adopts the flexible benefits plan (consisting of the flexible benefits plan
document, the Adoption Agreement, and component benefit plans and Policies) for the City of
Prior Lake effective as of the date specified in the Adoption Agreement.
BE IT FURTHER RESOLVED that the City Manager of the City of Prior Lake is hereby
authorized to execute the Adoption Agreement and any related documents or amendment~ which
may be necessary or appropriate to adopt the plan or maintain its compliance with applicable
federal, state and local law.
Passed and adopted this 2.Q day of February, 1996.
YES
NO
Andren
Greenfield
Kedrowski
Mader
Schenck
Andren
Greenfield
Kedrowski
Mader
Schenck
Frank Boyles
City Manager
City of Prior Lake
{Seal}
A9603.WRT
16200 Eagle Creek Ave. S.E.. Prior Lake. Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER