PURPOSE

The purpose of this staff report is to recommend that City Council approve the City�s �125 Employee Benefit Plan Adoption Agreement, bringing it into compliance with the current Internal Revenue Code (IRC).

BACKGROUND

On December 16, 1996, the City established a �125 Employee Benefit Plan for its officers and employees.  The establishment of this employee benefit plan, pursuant to regulations in �125 of the IRC, provides officers and employees the opportunity to use pre-tax dollars to pay for benefits instead of paying for benefits through after-tax payroll deductions. Such benefits include unreimbursed medical expenses, dependent care expenses, and medical/dental premiums. All employees who are eligible for the City�s medical and dental insurance plans are eligible to receive payments or reimbursements of Eligible Health Insurance Expenses that are excludable from the Employees� gross income under Code Sections 105 and/or 106. All employees who complete 12 months of service and are eligible for California Public Employees� Retirement System (CalPERS) are eligible to participate in the Medical Reimbursement Benefit. All employees who are eligible for CalPERS membership and the City�s medical and dental insurance plans are eligible to participate in the Dependent Care Benefit.

ANALYSIS

On December 16, 2002, the City entered into a contract with a new third party administrator for the

� 125 Plan, Sheakley Uniservice, Inc. As part of the service agreement, Sheakley revised and updated the City�s Plan Document for the �125 Plan which is referred to in the Adoption Agreement. There were no major revisions or substantial changes from the previous provider. Sheakley reviewed the document for compliance with the current Internal Revenue Code.

FISCAL IMPACT

Execution of the Adoption Agreement for the City�s Flexible Benefits Plan will have no financial impact on the City. 

RECOMMENDATION

Staff recommends that the City Council adopt the resolution entitled �A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING AND AUTHORIZING EXECUTION OF THE CITY OF BURBANK FLEXIBLE BENEFITS PLAN ADOPTION AGREEMENT BETWEEN THE CITY OF BURBANK AND SHEAKLEY UNISERVICE, INC. �

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