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BACKGROUND INFORMATION <br />FLEX BENEFIT PLAN <br />PER IRS CODE 125 <br />In response to increasing health insurance costs, the recent increase <br />of employee dependent costs, and the proposed employee cost for <br />employee coverage, City staff has explored the use of a 125 <br />Cafeteria Plan. We have spoken to Institutional Securities <br />Corporation Representative Deb Reed with whom the City has <br />dealt with in the past in order to learn the mechanics of how this <br />idea would help the City. <br />A Premium Only Plan (Medical, Vision, Dental, and Supplemental <br />Insurance premiums) would be administered at no cost to the City <br />in exchange for the opportunity to market supplemental insurance <br />products to City employees. These products would be purchased at <br />the employee's expense through payroll deduction. Examples are: <br />Accident, Disability, Intensive Care, Cancer, and Heart <br />Attack/Stroke Insurance. <br />If a Flexible Spending Account is added to the above premium <br />only plan, a one-time $450 set up charge and a$3 monthly charge <br />per actual participant would be incurred. <br />Use of IRS Section 125 would permit employee insurance <br />premiums to be paid with pre-tax dollars and also remove those <br />premiums from taxable social security wages. This is a win-win <br />situation for employees and the City. Estimated annual savings for <br />the City would be $45,000. Employees would benefit by a similar <br />amount plus federal income tax savings. <br />The staff would recommend the premium only plan as the initial <br />phase, with exploring the concept of adding flexible spending <br />accounts as a second phase. <br />The City currently offers a 457 supplemental retirement plan. <br />There is no representative with the existing company who can <br />assist our employees with investment decisions. The staff would <br />like to add another 457 plan and a Roth IRA plan. Employees <br />