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Regular City Council Meeting <br />July 12„ 2004 <br />Page 2 <br />in response to increasing health insurance premium cost, whether it is <br />dependent costs or for the employees, they have been exploring the use of a 125 <br />Cafeteria Plan. Mr. Anderson said they have talked with Deb Reed, with <br />Institutional Securities Corporation, about how the mechanics would work. <br />Mr. Anderson advised that he chose Ms. Reed because she has worked with the <br />city in the past when she worked with National-Wide Retirement on our 457 <br />Plan. <br />Mr. Anderson told the City Council that a premium only plan, which deals <br />with premiums on Medical, Vision, Dental, and Supplemental Insurance, would <br />be administered for the city at no cost, in exchange for the opportunity to <br />market supplemental insurance products to the city employees. Mr. Anderson <br />pointed out that he had listed examples such as Accident, Disability, Intensive <br />Care, Cancer, and Heart Attack/Stroke Insurance. <br />Mr. Anderson said that basically what that Section 125 would allow the city to <br />do is make the employees' insurance premium pre-tax dollars and would also <br />exempt those premiums from social security tax. The employees would stand <br />to gain whatever their income tax difference would be and the city would stand <br />to gain about $45,000.00 from not having to pay social security matching tax <br />on those premiums. <br />Mr. Anderson advised that at the time they were looking at that, they were also <br />looking at the flexible spending accounts type setup, and if they did that, there <br />is a potential cost to that of a one time cost of $450.00 set up and a$3.00 <br />monthly charge per actual participant. It would not be for all employees unless <br />they participated in that. <br />Mr. Anderson said they would recommend, if the Council approves, only <br />exploring the pre-taxing of the premiums at this stage, then looking at flexible <br />spending account as a second phase. He advised that the city currently offers <br />a 457 Supplemental Retirement Plan, which is basically like a private sector <br />401. Mr. Anderson said the one that the city currently has does not have field <br />