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Council Agenda - City of BurbankTuesday, October 21, 2003Agenda Item - 4 |
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PURPOSE
Staff recommends that the City set-up a zero balance account with Bank of America to facilitate payment and processing of employee�s �125 contributions by Sheakley Uniservice, Inc., the City�s 125 Plan Third Party Administrator.
BACKGROUND
The City offers a 125 Employee Benefit Plan which allows employees the opportunity to use pre-tax dollars to pay for benefits instead of paying for benefits through after-tax payroll deductions. The City contracts with Sheakley Uniservice Inc., to administer the 125 Plan. Every pay period, the City transmits employee contribution data to Sheakley Uniservice, who then receives the contributions and deposits the funds into a trust established by the third party administrator. Sheakley uses these funds to reimburse employees for claims submitted to them for unreimbursed medical expenses and/or dependent care expenses.
ANALYSIS
Sheakley has changed their funding procedures to eliminate the trust for the 2004 Plan Year. It will be the responsibility of each client to fund their own bank account for reimbursement to their employees.
The Financial Services department is requesting to open a zero balance account with Bank of America that will be used to pay participant claims that are submitted to Sheakley for reimbursement of unreimbursed medical and/or dependent care expenses. This will replace the City�s current procedure of issuing a check to Sheakley�s trust. The purpose of maintaining a zero balance account is to retain control of the funds going into the account. Sheakley will only be able to issue reimbursement checks to the employees from this account. This will ensure that Sheakley will not have access to the City�s payroll account.
Upon City Council approval, staff will set-up a zero balance account with Bank of America to be titled City of Burbank � Benefit Claims Payment. Sheakley will generate a report that will list those participants who have turned in reimbursement claims for the pay period and provide this report to the City. Financial Services staff will issue a check to the Treasurer�s office who will then deposit the amount specified on the reports into the zero balance account with Bank of America. Sheakley will then cut checks in the name of the City, to those employees listed for reimbursement. The Financial Services Director will have signature authority of these checks. Staff from the Financial Services Department will be responsible for monitoring reports submitted by Sheakley related to claims payments.
FISCAL IMPACT
The City Treasurer estimates that the monthly services fee with Bank of America will be approximately $25.00 per month depending on the activity of the account and how many checks are issued from the account.
The City pays an administrative fee to Sheakley for administration of the 125 Plan. The current monthly fee is $4.00 per participant. For the 2003 Plan Year there are approximately 150 participants. Once the account is set-up with the bank, the monthly fee will be reduced to $3.75 per participant. The reduction in administrative fees will more than off-set the costs involved in the monthly fees for the bank account.
RECOMMENDATION
Staff recommends that the City Council adopt the resolution entitled �A RESOLUTION OF THE COUNCIL OF THR CITY OF BURBANK AUTHORIZING THE CITY TO SET UP A ZERO BALANCE ACCOUNT WITH BANK OF AMERICA TO FACILITATE PAYMENT AND PRCESSING OF EMPLOYEES� SECTION 125 CONTRIBUTIONS BY SHEAKLEY UNISERVICE, INC.�.
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