2006-041-RES-Health Reimbursement
RESOLUTION NO. 2006-041
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS,
PARIS, TEXAS, AUTHORIZING THE CITY MANAGER TO EXECUTE
ANY AND ALL NECESSARY DOCUMENTS ASSOCIATED WITH
ENTERING INTO A HEAL TH REIMBURSEMENT ARRANGEMENT PLAN
AND A SECTION 125 FLEXIBLE SPENDING ACCOUNT WITH TML
INTERGOVERNMENTAL EMPLOYEE BENEFITS POOL OR OTHER
VENDOR; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO
THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City Manager and the City Finance Director have identified the necessity
of entering into a Health Reimbursement Arrangement Plan and a Section 125 Flexible Spending
Account with TML Intergovernmental Employee Benefits Pool or other vendor; and,
WHEREAS, the City has received recommendations from representatives of the Texas
Municipal League Intergovernmental Employee Benefits Pool, which acts as the administrator of the
City's health insurance program; and,
WHEREAS, the City Council desires to authorize the City Manager to execute any and all
necessary documents associated with entering into a Health Reimbursement Arrangement Plan and
a Section 125 Flexible Spending Account; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS,
TEXAS:
Section 1. That the findings set out in the preamble to this resolution are hereby in all things
approved.
Section 2. That the City Manager is hereby authorized to execute any and all documents
necessary and required associated with entering into a Health Reimbursement Arrangement Plan and
a Section 125 Flexible Spending Account.
Section 3. That this resolution shall be effective May 1, 2006.
PASSED AND APPROVED this 13th day ofM h,
ATTEST:
APPROVED AS TO FORM:
/;
~/t" ;J. i!-e{)'tJ,Jil.
000 D. Lestock, Assistant City Attorney
CITY OF PARIS
SECTION 125
FLEXIBLE SPENDING ACCOUNT
SUBMITTED BY:
TML INTERGOVERNMENTAL
El\-IPLOYEE BENEFITS POOL
1821 Rutherford Lane, Suite 300
Austin, Texas 78754-5151
Phone (512) 719-6500
Benefit Service Specialist:
Linda Shoup
Page 1
SERVICE AGREEMENT FOR PLAN SUPERVISOR
This SERVICE AGREEMENT between the Member, (plan Sponsor), and TML Intergovernmental
Employee Benefits Pool, (Plan Supervisor) ,^~ll be effective on Mav t 2006.
WITNE SSE TH:
SECTION I
THE PLAN
1.1 The Plan Sponsor has adopted an Employee Flexible Benefits Plan under Section 125 of
the Internal Revenue Code. This Plan is offered to all eligible employees who are qualified by
employment status.
1.2 The Plan Participants are the employees enrolled in the Plan.
1.3 All contributions to the Plan shall be deposited in the name of the Plan with a Bank
designated by the Plan Supervisor subject to approval of the Plan Sponsor if requested by the Plan
Sponsor.
1.4 The Plan Sponsor agrees that a health care expense reimbursement account is a health
plan under Title II of the Health Insurance Portability and Accountability Act of 1996 (HIP AA). The Plan
Sponsor agrees that it is the Plan Sponsor's, and not the Plan Supervisor's, responsibility to ensure that its
health care expense reimbursement account plan, if any, is compliant with all relevant sections of HIP AA
Title II.
SECTION II
THE PLAN SUPERVISOR
2.1 The Plan Supervisor shall provide consulting services, and shall assist the Member and
the Plan Sponsor in the administration of the Flexible Benefits Plan.
2.2 The Plan Supervisor shall have the full responsibility for maintaining accounts for each
eligible person electing to participate in the Plan. The Plan Supervisor shall arrange for eligible claims
payments from funds deposited by the Member as directed by their participating employees. The claims
payments shall be made by the Plan Supervisor by issuing a check or draft to the participant upon the Plan
Bank Account, if such account is provided for this purpose, in an amount equal to the qualified charges
from the submitted claim. The claims submitted by the Plan Participants shall be paid within ten days of
receipt by the Plan Supervisor. Claim submissions on behalf of the Participant must equal or exceed
$25.00 per submission, except in the final month of the Plan Year.
2.3 To the extent that information is available to the Plan Supervisor, the Plan Supervisor
shall assist the Member as the Plan Sponsor in the preparation of any report, tax return or similar papers
required by state or the Federal Government pertaining to the operation or management of the Flexible
Benefits Plan; however, the ultimate responsibility for filing any governmental document shall be with
the Plan Sponsor.
Page 2
2.4 The Plan Supervisor shall render periodic reports to each participant, which shall include
the following:
a. Receipts of the Participant's Plan Contributions;
b. Disbursement of Plan Contributions through claims payments; and
c. Statements of (a) and (b) above shall automatically be provided each Participant
following the submission and payment of a qualified claim.
2.5 The Plan Supervisor, shall prepare a Plan Document for the Flexible Benefits Plan
sponsored by the Member. The Plan Sponsor shall assume the responsibility of obtaining legal review of
the Plan Document.
2.6 Unless otherwise provided, the Plan Supervisor is authorized to do all the things
necessary or convenient to carry out the terms and purposes of the Plan.
SECTION III
PROCEDURE FOR MAKING AND PAYMENT OF CLAIMS FOR BENEFITS FROM
THE FUND
3.1 Any covered person may make application for benefits from the Plan as provided by the
Plan upon the form or forms provided by the Plan Supervisor. The applicant shall fully and truthfully
complete such application for benefits and the applicant shall supply all such pertinent information
including copies of paid receipts, as may be required under the Section 125 rules and specified by the
Plan Supervisor.
3.2 The Plan Supervisor shall accept copies of any application for benefits made in the
appropriate manner, shall duly investigate and verify the statements made on the application and
determine benefit eligibility. If the facts as stated in such application entitle the covered person to receive,
payment of benefits from the Plan, the Plan Supervisor shall forthwith arrange for the proper payment.
3.3 Claim filings shall be mailed to the person or department designated by the Plan
Supervisor. Claims checks are processed each week. Only claims that equal or exceed twenty-five dollars
($25.00) or more shall be filed with the Plan Supervisor unless said claim is being submitted during the
last Plan Month of the Plan Year. During the last month, eligible claims of any amount shall be processed
by the Plan Supervisor.
3.4 All Plan benefits processed by the Plan Supervisor shall be mailed to the qualified Plan
Participant within ten (10) days of approval.
If the Plan Supervisor finds that the Plan Participant is not entitled to a claim payment under the
Plan, the claim application shall be denied, all or in part, and returned to the Plan Participant with the Plan
Supervisor's reason for denial. The Plan Participant may appeal a denial by the Plan Supervisor to the
Plan Sponsor. The Plan Sponsor's determination is final and conclusive upon the covered person.
3.5 The Plan Supervisor shall not be liable for any failure or refusal to payor honor any
application for benefits made pursuant to this Agreement; and the Plan Supervisor must be indemnified
by the Plan Sponsor for any liability related to its duties herein, and shall be reimbursed by the Plan,
Sponsor for any expense, loss, damage, or legal fees incurred by the Plan Supervisor in defending any
claims or demands made against the Plan Sponsor, the Plan Sup~rvisor or the Plan. This paragraph will
not apply for any loss due to the gross negligence or willful misconduct of the Plan Supervisor.
Page 3
SECTION IV
COSTS OF ADMINISTRATOR
4.1 The Plan Supervisor shall be entitled to a fee or fees for its service to the Plan and, under
this Agreement, the fee shall be paid in the form of an advance start-up costs, a pass through of printing or
printing preparation costs and monthly service fee.
ITEM
1. Set up Fee
2. Monthly Service Fee 2
COST
$50.00/Group
$5.00/Participant
PAYABLE
One time 1
Monthly
3. Special Reports 3 As agreed upon 30 days following receipt of report
(1) One time set up fee for each group that enrolls in the Section 125 Flexible Spending Plan.
(2) Monthly Service Fee includes:
a) processing contribution;
b) processing claims (review and verification);
c) paying claims (direct mail to employee);
d) paying dependent premium (if applicable);
e) employee fund balance statement with each reimbursement; and
f) statement of fund balances and projected year-end balance at close of Plan Year fourth
quarter. The flexible spending arrangement (FSA) participants have up to an additional 2
Yz months to spend money leftover in the FSAs at year's end on qualified health and
dependent care expenses, the IRS ruled May 18th. Expenses for qualified benefits
incurred during the grace period may be paid or reimbursed from benefits or
contributions remaining unused at the end of the immediately preceding plan year. Upon
exhaustion of that benefit monies can be accessed from current year contributions. The.
period must not extend beyond the 15th day of the third calendar month after the end of
the immediately preceding plan year to which it relates. The plan cannot permit cash-out
or conversion of unused benefits or contributions, during the grace period, to any other
taxable or nontaxable benefit. (Fourteen months and 15 days before the amounts are
forfeited under the use-it-or-Iose-it rule) Authorized in Notice 2005-42 for the current
cafeteria plan year.
(3) Normal Reports to the Plan Sponsor, at no additional cost are:
a) initial enrollment verification;
b) quarterly fund balance;
c) projected year-end fund balance at the close of the Plan Year fourth quarter; and
d) 2 Yz month grace period will be included in fund balance, plus interest earned if any.
Page 4
SECTION V
THE PLAN SPONSOR
5.1 As of the effective date of this Agreement, the Plan Sponsor shall provide the Plan
Supervisor with a complete list of all employees who are eligible for benefits under the Plan. The Plan
Sponsor shall arrange for enrollment meetings and, with the Plan Supervisor's assistance, complete Plan
enrollment.
5.2 The Plan Sponsor shall collect funds in accordance with authorized payroll reductions or
deductions and shall remit these monies to the Plan Supervisor on a monthly (or pay period) basis.
5.3 The Plan Sponsor shall forward the appropriate service fees to the Plan Supervisor on the'
first of each calendar month or in conjunction with the monthly plan fund collections.
5.4 The Plan Sponsor shall assist in the enrollment of eligible employees in the Plan, notify
the Plan Supervisor of any change of eligibility, cooperate with the Plan Supervisor with regard to proper
claim settlement, transmit to the Plan Supervisor proper claim settlement and transmit to the Plan
Supervisor all inquiries pertaining to the Plan.
5.5 The Plan Sponsor shall be responsible for filing any documents required by the Internal
Revenue Service.
5.6 The Plan Sponsor limits contributions to the Plan to $5,200 per employee, unless
otherwise specified below the signature line on this agreement.
SECTION VI
TERMINATION OF THE AGREEMENT
6.1 This Agreement may be terminated by the Plan Sponsor or the Plan Supervisor by written
notice of intention to terminate given to the other party, to be effective as of an annual plan anniversary
date. Said written notice shall be given not less than thirty (30) days prior to such termination. The
thirtieth (30th) day shall coincide with the last day of a calendar month. The Plan Supervisor may also
terminate this agreement following the termination of any medical, dental, or vision coverage provided by
the Plan Supervisor to the Plan Sponsor, to be effective upon 10 days written notice sent to the Plan
Sponsor, effective on the date specified in the notice. All obligations of the Plan Supervisor related to the
relevant rights of the covered Participant to payments of benefits from the Plan will be terminated and
extinguished on the effective date of termination given in the notice even though the claim for such'
benefits arose prior to the termination of this Agreement. Absent a written notice of termination this
agreement will annually renew on the effective date set forth at inception. In no case shall termination by
the Plan Supervisor relieve the Plan Sponsor of its obligation to maintain the Plan.
SECTION VII
QUALIFICATIONS
7.1 To qualify the Plan Sponsor must have on file a current Interlocal Agreement with the
TML Intergovernmental Employee Benefits Pool. The Plan Sponsor must have ten (10) percent of the
eligible employees participate in the Plan. Should these qualifications not be met, or maintained, the Plan
Supervisor may terminate this agreement pursuant to Section VI.
Page 5
SECTION VIII
MISCELLANEOUS PROVISIONS
8.1 In the event of resignation or inability to serve as the Plan Supervisor, the Plan Sponsor
may appoint a successor.
8.2 If during the operation of the Plan, the United States Government, the government of any
state or any instrumentality or either shall assess any tax against the Plan and the Plan Supervisor is
required to pay such tax, the Plan Supervisor shall report the payment to the Plan Sponsor who will
reimburse the Plan Sponsor for such tax or assessment.
8.3 The Plan Supervisor shall incur no liability to the Plan Sponsor (or to the employee ofthe
Plan Sponsor) for any act or failure to act not connected with processing and payment of claims as
provided in this Agreement, except for its negligence or willful misconduct, and the Plan Sponsor shall
hold the Plan Supervisor harmless from and indemnify it against any claims and all costs and expenses or
fees incurred in connection therewith which might be asserted by the Plan, the Plan Sponsor's employees
or other persons for which the Plan Supervisor would not be liable to the Plan Sponsor as set forth above.
8.4 Where the context of the Agreement requires, the singular shall include the plural and the
masculine gender shall include the feminine.
8.5 This Agreement may be amended by the Plan Sponsor and the Plan Supervisor at any
time by mutual written consent of said parties.
8.6 The Plan Sponsor hereby is designated the agent for service of legal process on behalf of
the Plan, in its principal office.
IN WITNESS THEREOF, the Plan Sponsor and the Plan Supervisor have executed this Agreement this
day of ,20_.
For Member
For TML Intergovernmental Employee Benefits Pool
By
By
Name
Name
Title Executive Director
Title
Address
Healthcare Limitation amounts are limited to $
established by Employer)
(maximum $5,200 or amount
The Flex Plan Year is
to
Page 6
CITY OF SOMEWHERE
SECTION 125
FLEXIBLE SPENDING ACCOUNT
SUBMITTED BY:
TML INTERGOVERNMENTAL
EMPLOYEE BENEnTS POOL
1821 Rutherford Lane, Suite 300
Austin, Texas 78754-5151
Phone 512/719-6500
Benefit Service Specialist:
BSS
SUMMARY PLAN DESCRIPTION
FLEXIBLE SPENDING ACCOUNT PLANS:
~ PREMIUM CONVERSION
~ UNREIMBURSED HEALTHCARE ACCOUNT
~ DEPENDENT CARE ASSISTANCE
Page 2
TABLE OF CONTENTS
TML INTERGO VERN'MENT AL .............................................................................................................................1 '
INTR 0 D U eTI ON............. ...... ....... ...... ..... .... II ........... .... ........... ............ ......... ft. ........ ...... .............. .......... ........ I.... ....... 4
GENERAL INFORl\1A TION.....................................................................................................................................4
NAME AND TYPE OF PLAN AND FISCAL yEAR............................................................................................................4
ADMINISTRATION OF THE PLAN .... ........ ...... ........ ..... ... ... ... .......... ........ ...... ... ........ ... ............ .... ... ....... ..... .......... ..... .....4
AGENTS FOR SERVICE OF LEGAL PROCESS................................................................................................................. 4
AMENDMENTS TO OR TERMINATION OF THE PLAN .....................................................................................................4
FLEXIBLE BENEFIT PLAN ....................................................................................................................................5
How THE PROGRAM WORKS......................................................................................................................................5
WHAT ARE BEFORE-TAX DOLLARS? .......................................................................................................................... 5
ELIGIBILITy............................................................................................................................... ................................. 5
CHANGES IN ELIGIBILITY... .... .... ............. ................. ................. ........ ....... .................. ...... ....... .............. ........... ..... ..... 5
CHOOSING A DEPOSIT AMOUNT .................................................................................................................................5
RESTRICTIONS ON CHANGING YOUR DEPOSIT AMOUNTS ..........................................................................................6
SEPARATION FROM SERVICE... ............. ....... ............. .............. ........ ...... ............... ......... ................ ........ ........... ........... 6
FORFEITURE OF BENEFITS ........... ......... ...... ............... ...... .... ..... .... .... ......... .............. .... ......... ... .......................... .........7
No TRANSFER BETWEEN ACCOUNTS..........................................................................................................................7
REIMBURSEMENTS .. ......... ....... ... ............. ....... ........ ..... ... ............. ........... ....... ... ................... ....... ............... .... ... .......... 7
FLEXIBLE SPENDING ACCOUNT STATEMENTS ............................................................................................................ 7
ACTIVE DUTY RESERVIST ... .... .... ......... ...... ............... ...... ...................... ....... ........ .... ..... ....................... ..... ...... ........... 7
THE EFFECT OF THE PLAN ON OTHER BENEFITS .......................................................................................8
CLAIMS INFORMATION ....... ..... .... ....... .... ...... ................ ..... ...... .......... .... .... ........... ........... ........... ........ .......... ....... 8
PAYMENT OF CLAIMS ................................................................................................................................................. 8
PREMIUM CONVERSION PLAN ...........................................................................................................................8
UNREIMBURSED HEALTH CARE SPENDING ACCOUNT .............................................................................8
WHAT EXPENSES ARE ELIGIBLE FOR REIMBURSEMENT? ............................................................................................ 8
How TO GET REIMBURSED ........................................................................................................................................ 9
PRIVACY OF YOUR HEALTH INFORl\1A TION .................................................................................................9
DEPENDENT CARE REIMBURSEMENT ACCOUNT ......................................................................................10
WHY You SHOULD BUDGET CAREFULLY ................................................................................................................1 0
How TO GET REIMBURSED ......................................................................................................................................1 0
TYPICAL ELIGmLE MEDICAL OR MEDICAL-RELATED EXPENSES .....................................................11
DEFINITIONS ....................................................................................................................,.....................................21 .
CAPITAL EXPENSES .............................................................................................................................................23
OPERATION AND MAINTENANCE .................. ........... ........ ............................. ....................... .............. .............. ........23
IMPROVEMENTS TO PROPERTY RENTED BY A PERSON WITH DISABILITIES............................................................... 23
El\fPLO'YEE ENROLLMENT FORl\1...................................................................................................................24
UNREIMBURSED HEALTH CARE REIMBURSEl\fENT FORl\1....................................................................25
DEPENDENT CARE REIMBURSEMENT FORl\1..............................................................................................26
Page 3
INTRODUCTION
The Member recognizes that many employees in today's work force are faced with childcare expenses. In addition, .
the Member recognizes that certain medical or health care expenses are not fully covered by your health benefit
program.
To assist employees with these expenses, we are offering you the opportunity to participate in the Member
Dependent Care and Umeimbursed Health Care Expense Flexible Spending Account Plans. These Plans are part of
the Member Section 125 Cafeteria Plan. These spending account plans allow you to pay for dependent care and
health care expenses that are not or cannot be reimbursed by your health benefit program, such as the monthly
contributions, deductibles and the benefit percentage that is your responsibility, with before-tax dollars. This plan
offers you the opportunity to make contributions to flexible spending accounts to cover these expenses with before-
tax moneys.
You will be reimbursed for childcare expenses and umeimbursed health care expenses from your flexible spending
accounts as you present your claims for payment.
We have written this booklet with as few technical terms as possible, so that you will be aware of your benefit
rights. Every effort has been made to make the booklet as complete and accurate as possible. However, if any
conflict should arise between this booklet and the Plans, the terms of the Plans will govern.
Member will be happy to supply you with any additional information so that you will have a complete
understanding of the benefits.
GENERAL INFORMATION
Name and Type of Plan and Fiscal Year
The names of the Plans are the Member Dependent Care Healthcare Reimbursement Plan and the Member
Healthcare Reimbursement Account Plan. The Dependent Care Flexible Spending Account Plan is a plan authorized
under Section 129 of the Internal Revenue Code. The Umeimbursed Healthcare Flexible Spending Account Plan is
authorized under Section 105 of the Internal Revenue Code. All Plans are provided under the Member Plan, which is
an authorized Internal Revenue Code Section 125 Cafeteria Plan.
Administration of the Plan
The Plan Sponsor is the Member or its designated staff.
The Plan Supervisor is the TML Intergovernmental Employee Benefits Pool.
Agents for Service of Legal Process
Legal process may be made on the Member.
Amendments to or Termination of the Plan
The Plan may be modified, amended or terminated in whole or in part, at any time by the Member or its designee.
Page 4
FLEXIBLE BENEFIT PLAN
A flexible benefits plan is a benefit designed to increase employee's spendable income by reducing their taxes.
Internal Revenue Code Section 125 allows employers to provide three basic types of flexible benefits plans to their
employees.
1. Premium only plan
2. Dependent Care spending account
3. Unreimbursed Healthcare spending account
How the Program Works
The Flexible Benefits Plan lets you set aside part of your pay on a before-tax basis to:
1. Pay certain insnrance premiums through the Pre-tax Premium Conversion Option;
2. Set up an Unreimbursed Health Care Reimbursement Account to pay certain medical, dental, vision
and hearing care expenses not covered by insurance (Umeimbursed Health Care Reimbursement Account
Maximums $5,200 or the amount established by the employer); and
3. Set up a Dependent Care Reimbursement Account to pay eligible child care and dependent care
expenses while you and your spouse (if married) are at work. $5,000 (or $2,500 for married employees who
file separate returns).
These options are explained in more detail in the sections to follow.
What are Before- Tax Dollars?
The before-tax dollars you contribute to this program is money that is never taxed for federal income tax and social
security tax purposes. Basically, the program reduces your taxable income.
Participating in the Flexible Benefits Plan will not affect your other benefits or your employment contract. They will
continue to be based on your actual income. Your W -2 form, however, will show a reduced amount of pay
according to your Pre-tax Premium and Reimbursement Account elections.
Eligibility
You are eligible for the flexible spending account plans for premium only, dependent care and/or health care
expenses on the plan's effective date if you are eligible to receive other employee benefits from your employer. You
will have the opportunity to make before-tax contributions to each of the flexible spending account plans. You can
make your elections by completing the election form and returning it to your personnel department.
Changes in Eligibility
You will cease to be eligible for the plan if the following occurs:
1. the plan terminates,
2. you are no longer an eligible employee of the Member, or
3. you elect to revoke your elections because you qualify for leave under the Family and Medical Leave Act
of 1993 (FMLA).
If you revoke your eligibility under the provisions of FMLA and then return to work you may reinstate your
elections on the same terms as prior to the leave.
Choosing a Deposit Amount
When you emoll in the plan, you must specify the amount of your income you want deducted, on a pre-tax basis for
the pre-tax premium plan, dependent care spending account and/or umeimbursed health care spending account.
Equal payroll deductions will be taken from each paycheck during the plan year. The unreimbursed healthcare
spending account contributions are established by the employer with a maximum amount of $5,200.
Page 5
Restrictions on Changing Your Deposit Amounts
You may not change or revoke your elections during the plan year without one of the following circumstances
occurring (as prescribed in federal regulations):
1. Change in legal marital status, including marriage, divorce or legal separation, death of spouse or
annulment.
2. Change in the number of dependents including birth, adoption, placement for adoption or death of a
dependent
3. Change in employment status, including commencement or tenr.ination of employment of the employee,
spouse or dependent.
4. Change in work schedule including an increase or decrease in the number of hours of employment by
employee, spouse, or dependent including a switch from full-time, and part-time status, a strike or lockout,
or commencement or return from an unpaid leave of absence.
5. The dependent satisfies or ceases to satisfy the requirements for unmarried dependents. An event that.
causes an employee's dependent to satisfy or cease to satisfy the requirements for coverage due to
attainment of age, student status or any similar circumstances as provided under the accident or health plan
under which the employee receives coverage.
6. A change in the place of residence or work site of the employee, spouse or dependent.
7. If the dependent child is dropped by CHIPS (Children's Health Insurance Program).
8. If the employee, spouse or dependent become entitled to Medicare or Medicaid, the employee may elect to
cancel the coverage on the employee, spouse or dependent.
9. If the plan receives a Qualified Medical Child Support Order (QMED) pertaining to an employee's.
dependent, an employer may elect to change the election without the consent of the employee.
10. If the plan sponsor significantly changes either the cost of coverage or the coverage itself during the year,
participants may change their benefit election as a result.
11. If FMLA applies to the employer, it applies to the Flex plan. An employee requesting leave under FMLA
may revoke his or her existing Flex plan. However, if the employer pays the employee's share of the
contribution, the employee may not revoke coverage.
12. If an employee loses health insurance coverage while on FMLA or protected leave the employee must
make a required premium payment for the employer to reinstate the employee's coverage upon request. An
employee on FMLA leave has the same rights as other employees to take advantage of the change in status.
rule. During the FMLA period, payment of contributions must continue without regard to leave. FMLA
requirements do not apply to non-health benefits such as life insurances or dependent care provided through
the Flex plan. If the employee fails to make a scheduled payment, the employer may make the payment on
the employee's behalf and recoup it after the employee returns from leave using the "catch-up" rules.
13. Substantial decrease in the medical providers available in the PPN, reduction of benefits for a specific type
of medical conditions or treatment and/or similar reduction ofloss of coverage.
14. Cessation of required contributions.
15. Any other change of status allowed under the regulations of the Internal Revenue Service.
If one of the above circumstances does occur during the plan year, you have 31 days from the occurrence to change.
or revoke your elections. The change in coverage must be consistent with the occurrence. Plan Administrator has
the right to request documentation of changes.
Separation from Service
An employee who terminates employment and later returns to work cannot rejoin the Flex plan for the balance of the
plan year.
Page 6
Forfeiture of Benefits
You forfeit any amount of dependent care reimbursement benefits and unreimbursed health care spending account
benefits if a claim for reimbursement is not provided to the Plan Supervisor within 90 days after the last day of
Grace Period or the last day of participation in the Plan, if earlier. Upon such forfeiture, your Dependent Care,
Reimbursement Account or Umeimbursed Health Care Spending Account shall be reduced to zero. At the
discretion of the Plan sponsor, forfeitures of benefits under the Plan may be reallocated to Participants in any
reasonable manner. Forfeitures of benefits may also be applied toward the cost of administering the Plan. Forfeited
benefits shall become the sole property of the Plan Sponsor.
In the event your employment terminates during the plan year, you have 90 days after the end of the plan year to
submit those expenses incurred up to the date of termination. All employee and dependent coverage will terminate
on the earliest of the end of the month your employment terminates or the end of the month in which you cease to
be an active, full-time Employee. The exception to this rule is that when such termination of coverage would
otherwise fall on the last day of the last month of the plan year, you may receive reimbursement for eligible,
expenses incurred through the fifteenth day of the third month following the end of the plan year (the grace period),
and you have up to 90 days after the end of the grace period to file a claim for reimbursement of eligible expenses
incurred during the plan year or the grace period.
No Transfer between Accounts
IRS rules do not allow any transfer of funds between accounts. Separate accounts must be mandated for medical
expense reimbursement and dependent care reimbursement.
Most Flexible Spending Accounts are not subject to Continuation of Coverage.
Reimbursements
If you are emolled in the TML IEBP Medical Plan, reimbursements from your unreimbursed health care spending
account will be automatic for deductibles (unless you are emolled in a Health Savings Account or access a debit)
card for approved Section 125 medical expenses, copays and eligible expenses that you were not reimbursed as part
of your medical claim. Dependent care and any unreimbursed health care expenses not submitted as a medical
claim, will be reimbursed by completing a claim form and attaching the appropriate documentation. If another
carrier, other than TML IEBP, is providing health care coverage, please submit copies of the other carrier's
explanation of benefits indicating the coverage available and the amount of reimbursement. Only claims that equal
or exceed $25.00 will be processed, except in the last month of the plan year. Claims are processed and checks'
mailed weekly.
Flexible Spending Account Statements
Each time a flex check is sent to the emollee it is accompanied with a statement indicating the account balance. A
statement is also sent to the employee 90 days prior to the end of the flexible benefit plan year indicating the
spending account balance.
Active Duty Reservist
If the Member considers a call to active duty "unpaid leave" this will be a "qualifying event" to drop dependent
coverage and the employee can reinstate the flexible spending option when they return to work.
If the Member considers a call to active duty "paid leave" this will not be considered a "qualifying event" and the
employee can drop dependent coverage but they can not change their flexible spending contributions. In other
words, the employee's pay will be reduced by the same amount as it was before being called to active duty.
Page 7
THE EFFECT OF THE PLAN ON OTHER BENEFITS
Some of the benefits provided by the Member Plan (e.g., pension benefits, group life insurance beneiits) are
detennined on the basis of your earnings. For the purpose of these benefits, the Plan provided by the Member, will
be based on your earnings before any salary reduction contributions to the spending account plans are taken into .
account.
Under present law, your earnings for the purpose of determining your Social Security benefits and FICA taxes do
not include salary reduction contributions under the Member Plan, including salary reduction contributions to these
spending account plans. In almost all cases, the value of the FICA, Federal and state income tax savings to you will
exceed the reduction in your eventual Social Security benefits.
Further information on this subject is available from the Member.
CLAIMS INFORMATION
Payment of Claims
In order to receive reimbursement for an eligible claim for dependent care or unreimbursed health care expenses,
you must complete the form supplied to you by your employer. This form may require you to submit additional
information pertaining to your claims, such as a signed statement from your physician for health care services
received.
All payments for claims will be reimbursed within lO business days of receipt. If claims remain at the end of the
Plan Year for which there are no remaining funds in your account to reimburse you, these claims will not be paid,
carried over or charged against the balance in your account in any subsequent Plan Year. You will not be.
reimbursed for these excess claims.
All payments for claims will be made directly to you and not any provider of service.
PREMIUM CONVERSION PLAN
The Premium Conversion Plan allows you to pay for health care contributions, which you pay and are payroll
deducted, on a pre-tax basis and reduce your taxable income. Examples are the contributions for dependent medical,
dental or vision coverage. Also included are contributions for optional employee life, but not dependent life. It is
like getting an instant tax refund every payday. In fact, many employees may even increase their take-home pay just.
by participating in this option.
Note: A maximum of $50,000 basic and/or optional life can be claimed on a pre-tax basis. Any group life
insurance in excess of$50,000 is taxable and must be paid with after tax dollars.
Once Enrolled. You May Not Chan2e your election to have your dependent contribution taken out of your
paycheck pre-tax for the remainder of the flex plan year unless a qualifying event occurs (see page 6).
UNREIMBURSED HEALTH CARE SPENDING ACCOUNT
The Umeimbursed Health Care Spending account reimburses an employee's pledge amount not to exceed the
employer's umeimbursed health care spending amount limit to a maximum of $5,200 per plan year for any health
care related expenses that have not been (or will not be) paid or reimbursed through a group or individual health care
plan.
What Expenses are Eligible for Reimbursement?
Only medical expenses that are not covered by your medical insurance and that are allowable by the Internal
Revenue Service (IRS) may be reimbursed from your account. Expenses for your dependents are included as long as
that person is a dependent as defined by the IRS.
Included is an alphabetical list of items that are encountered frequently by persons utilizing flexible spending
accounts. Some of these items may be reimbursed, and some may not; a brief note indicating which category the
item falls into follows each item.
Page 8
How to Get Reimbursed
Claiming your before-tax dollars to pay covered expenses is an easy process. Remember you must have at least $25
in expenses to be reimbursed. In addition, the medical care must be provided during the plan year for which you
have set up your account.
Your expenses will be reimbursed up to the amount you have pledged for the year in your Umeimbursed Health
Care Spending Account. The total yearly amount is available for reimbursement as soon as the plan year starts and
the expense incurred.
Step 1:
When yeu have a covered medical expense, obtain a receipt showing that date of service and the service provided
(you do not have to pay for the service before submitting it for reimbursement).
Before applying for reimbursemen~ submit any medical bills covered by insurance as you normally would to any
insurance company that covers you or your dependents. IRS allowable expenses not reimbursable by insurance can
then be submitted for reimbursement.
If the service provided is for a TML IEBP covered employee or dependen~ the amount reimbursable by flex will
automatically process a flex check after the claim is processed. If the service is covered under another insurance
policy, submit a copy of the Explanation of Benefits from that insurance company along with a Flex Reimbursement
Form for reimbursement (A copy of the form 'is included in this booklet).
If you are enrolled in both an Unreimbursed Health Care Spending Account and a Health Savings Account, your
Unreimbursed Health Care Spending Account will not reimburse you for any allowable expenses applied toward
satisfaction of your medical plan deductible. If you are enrolled in a Health Savings Account, expenses applied
toward your medical plan deductible can be reimbursed only under you Health Savings Account. Excep~ if your
medical plan deductible is more than the minimum deductible established by federal law for a qualified high-
deductible health plan, after you have satisfied the minimum deductible required under federal law, either your'
Umeimbursed Health Care Spending Account or your Health Savings Account may be used to reimburse expenses
applied to your deductible that exceed the federally-established minimum.
Step 2:
Mail your completed reimbursement claim form and documentation to:
TML Intergovernmental Employee Benefits Pool
PO Box 140167
Austin, Texas 78714-0167
Step 3:
You will receive a spending account reimbursement check made out to you and mailed to your home address.
Claims are paid within 10 working days from the date of receipt.
PRIVACY OF YOUR HEALTH INFORMATION
A Federal regulation, called the Privacy Rule, requires the Plan Sponsor of a Umeimbursed Health Care Spending
Account to protect the privacy of your and your dependent's health information. The Plan Sponsor and the Plan
Supervisor take their responsibilities to protect your health information seriously and will use and disclose
individually identifiable health information only when needed to pay claims submitted for reimbursement under the
Health Care Spending Account, when needed to administer the Health Care Spending Account or when required by .
law. The Privacy Rule prohibits the Plan Sponsor from using or disclosing any health information from the Health
Care Spending Account for employment-related actions and decisions, or for t.lJ.e administration of any other
employee benefit plan of the Plan Sponsor.
In addition to restrictions on how the Plan Sponsor and Plan Supervisor may use and disclose individually
identifiable health information, the Privacy Rule gives you and your covered dependents certain rights. These rights
include the right to access your health information, to amend (or correct) your health information and to receive an
accounting of certain disclosures of your health information.
Page 9
The Plan Sponsor is required to maintain a notice of its privacy practices that explains fully how the Plan Sponsor
and its business associates, including the Plan Supervisor, may use and disclose your health information and your
rights under the Privacy Rule. If you have not received a copy of the Plan Sponsor's notice of privacy practices for
your Health Care Spending Account, contact the Plan Sponsor.
DEPENDENT CARE REIMBURSEMENT ACCOUNT
You may set aside money in your Dependent Care Reimbursement Account to pay childcare expenses up to a,
maximum of $5,000 or $2,500 per year for married employees who file separate tax returns. Maximum benefits
notwithstanding any other provision of this Plan, no Participant shall receive Dependent Care Reimbursement
Benefits in excess of $5,000 (or $2,500 in the case of a married Participant filing a separate Federal income tax
return) in a calendar year. An eligible expense must enable the employee (and spouse, if married) to be gainfully
employed or to look for gainful employment. Special limitations to this account include the following:
. If you are married, your spouse must be employed in a paying job, a full-time student for five months in the
year, or disabled.
. The maximum age for eligible children is through age 12. Other dependents (such as children age 13 and
over, parents or spouse) can receive care if they are disabled or cannot otherwise care for themselves,
because of physical or mental impairments.
. Tuition for private school is not an eligible expense; only Pre-Kindergarten tuition expenses incurred for a
day care type facility will be accepted.
. The child or other dependent receiving the care must live in your home and must be claimed as a dependent
on your Federal Income Tax Return.
. You must pay a "qualified person" to care for your eligible dependents at your home, at a licensed day care
center, at a day camp, or at another location (except overnight camps). A "qualified person" providing
dependent care does not include any of your children under age 19 or any other person whom you claim as
a dependent.
. You must file a Form 2441 with the IRS, including the name, address and taxpayer identification number of
the person or organization, providing the dependent care services.
Money from this account will pay your eligible child care expenses tax-free. Of course, you may be able to claim tax
credit for child and dependent care costs. The credit can be claimed when you file your income tax return. For more
information about the tax credit, refer to IRS publication 503 - Child and Dependent Care Expenses. The tax credit
can be claimed for any expenses not paid through your Dependent Care Reimbursement Account, but you cannot
use the tax credit and the Dependent Care Reimbursement Account for the same expenses.
Why You Should Budget Carefully
It is important that you budget carefully when taking advantage of the Child Care Reimbursement Account. The
same tax law that permits this benefit also specifies that any money that is left in your account at the end of the plan
year must be forfeited. Your account balance cannot be transferred to your Unreirnbursed Health Care Spending
Account or carried forward to the next year. However, you will have 90 days after the end of the plan year and any
applicable grace period to claim dependent care expenses incurred in the previous plan year or during the grace
period before any unused balance is forfeited.
Even if you should over budget and have some money remaining unused in your account, you may still benefit due
to the amount of your tax savings.
Once Enrolled. You Mav Not Chane:e Your Election for the remainder of the flex plan year unless a qualifying
event occurs.
How to Get Reimbursed
Claiming your before-tax dollars to pay covered childcare expenses is an easy process. Remember, you must have at
least $25 in expenses to be reimbursed. In addition, the childcare must be provided during the plan year for which
you have set up your account.
Your expenses will be reimbursed up to the amount in your Child Care Reimbursement Account. You will be'
reimbursed for the remainder of your expenses as money is deposited into your account on the first of each month.
Page 10
Step 1:
When you have a covered child care expense, obtain a bill or receipt. This is your documentation for the expense. '
This documentation must include the name of the child/children the care was provided for along with the date the
care was provided and the amount charged. If a bill or receipt is not available, your childcare provider can document
your expense using the Statement of Certification provided at the bottom of the dependent care reimbursement form.
Step 2:
Fill out the dependent care reimbursement claim form. (A copy of the form is included in this booklet.) Be sure to
attach proper documentation for the expense to the form. Documentation includes one of the following:
· Bill
· Receipt
· Statement of Certification
Step 3:
Mail your completed reimbursement claim form and documentation to :
TML Intergovernmental Employee Benefits Pool
PO Box 140167
Austin, Texas 78714-0167
Step 4:
You will receive a spending account reimbursement check made out to you and mailed to your home address.
Claims are paid within 10 working days from the day of receipt.
TYPICAL ELIGIBLE MEDICAL OR MEDICAL-RELATED EXPENSES
The following, while not intended to be complete, illustrates medical or medical-related expenses, which may be
claimed as part of the Flexible Benefits plan. For complete details, please refer to IRS publication 502 - Medical,
and Dental Expense.
Abortion - Medical expenses associated with a legal abortion are reimbursable.
Acupuncture - Medical expenses paid for acupuncture are reimbursable.
Air Filter - If prescribed to treat a specific medical condition, this expense is reimbursable. Also see Personal use
items.
Alcoholism and drug abuse - Medical expenses paid to a treatment center for alcohol or drug abuse are
reimbursable. This includes meals and lodging provided by the center during treatment.
Alternative medicine - See Naturopathy.
Ambulance - Medical expenses paid for ambulance service are reimbursable.
Artificial Limb - Medical expenses paid for an artificial limb are reimbursable.
Artificial Teeth - See Medical aids.
Aspirin - See Over-the-counter.
Attendant - See Nurse services.
Autoctte - See Wheelchair;
Automobile - See Car.
Babysitting and child care - These expenses are not reimbursable under a health FSA, even if the care allows a
parent to get medical care. Also see Dependent care expenses.
Birth control pills - Medical expenses paid for birth control pills prescribed by a doctor are reimbursable.
Braille books and magazines - Medical expenses for the cost of Braille books and magazines for use by a visually
impaired person that is more than the price for regular books and magazines are reimbursable.
Page 11
Breast augmentation - Expenses related to breast augmentation (such as implants or injections) are not
reimbursable because the procedure is cosmetic in nature. However, medical costs related to the removal of breast
implants that are causing a medical problem are reimbursable.
Breast pump - Even if prescribed, the breast pump is used for the convenience of the mother is not reimbursable.
However, a breast pump may be reimbursable if prescribed to alleviate a specific medical condition affecting either.
the mother (such as a cyst, for example) or the child (such as an aliment that prevents nursing).
Breast reductions - Medical expenses related to breast reduction surgery are reimbursable only if a physician
substantiates that the procedure is medically necessary and not for cosmetic purposes (that is, to prevent or treat an
illness or disease).
Cancer Insurance - See Supplemental insurance policies.
Capital expenses - If their main purpose is medical care, capital expenses paid for special equipment installed in a
participant's home or for improvements to the home are reimbursable. For further details, see discussion under the
heading, "Capital Expenses" found later in this booklet.
Car - Medical expenses are reimbursable for special hand controls and other special equipment installed in a car for
the use of a person with disabilities. Also, the amount by which the cost of a car specially designed to hold a
wheelchair exceeds the cost of a regular car is a reimbursable medical expense. However, the cost of operating a
specially equipped car is not reimbursable (see Transportation).
Chair - The cost of a reclining chair purchased on the advice of a physician to alleviate a heart, back or other
condition is reimbursable.
Childcare - See Dependent care.
Childbirth classes - Expenses for childbirth classes are reimbursable, but are limited to expenses incurred by the .
mother-to-be. Expenses incurred by a "coach" - even if that is the father-to-be are not reimbursable. To qualify as
medial care, the classes must address specific medical issues, such as labor, delivery procedures and breathing
techniques.
Chiropractor - Expenses paid to a chiropractor for medical care are reimbursable.
Christian Science practitioners - Medical expenses paid to Christian Science practitioners are reimbursable.
Church of Scientology - See Scientology.
Clinic - Medical expenses for treatment at a health clinic are reimbursable.
COBRA coverage -COBRA premiums may not be reimbursed through their health FSAs.
Coinsurance amounts - Medical coinsurance amounts and deductibles are reimbursed.
Contact lenses - See Vision care.
Cosmetic surgery - Medical expenses for cosmetic surgery are reimbursable if the surgery is necessary to improve
a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an
accident or trauma, or disfiguring disease. However, medical expenses paid for other cosmetic surgery are not
reimbursable under a heath FSA. This applies to any procedure that is directed at improving the patient's appearance
and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. For
example, face lifts, hair transplants, hair removal (electrolysis) and liposuction generally are not deductible. If there.
is a concern that a medical or dental surgery could be considered cosmetic, a doctor's certification should be
obtained explaining how the procedure meaningfully promotes the proper function of the body or prevents or treats
an illness or disease. This will help ensure that the claim is reimbursable.
Crutches - Medical expenses paid to buy or rent crutches are reimbursable.
Dancing lessons, swimming lessons, etc. - Dancing lessons, swimming lessons, etc., are not reimbursable even if
they are recommended by a doctor.
Day care - See Dependent care.
Deductibles - Medical insurance deductibles and coinsurance amounts under the employer's plan are reimbursable.
Dental treatment - Medical expenses for dental treatment are reimbursable. Thjs includes fees paid to dentists for
X-rays, fillings, braces, extractions, dentures, etc. Also see Cosmetic Surgery;
Page 12
Dependent care expenses - Dependent care expenses (under Section 129, Internal Revenue Code) are not
reimbursable under a health spending account, but may be reimbursable under a dependent care spending account.
Diaper service - Payments for diapers or diaper services are not reimbursable unless they are needed'to relieve the
effects of a particular disease.
Diets - See Special foods.
Disability - See Braille books and magazines; Capital Expenses; Car; Guide dog; Learning disability;
Lifetime care; Mentally retarded; Personal use items; Schools; 'relevision; Therapy; Transportation; and,
Wheelchair. Also see discussion under the heading "Capital expenses" found later in this booklet.
Drugs - See Medicines.
Drug addictions - See Alcoholism.
Ear piercing - Expenses for ear piercing are not reimbursable.
Egg Donor Fees and Expenses - the Unreimbursed expense for egg donor fees for an attempted pregnancy. The
agency fee for procuring the donor and coordinating the transaction between the donor and recipient, medical and
psychological testing of the donor, and the legal fees for preparing a contract between the recipient and the donor are
deductible medical expenses under Code Section 213.
Electrolysis or hair removal- See Cosmetic surgery
Employment-related expenses - Employment-related expenses such as employment physicals are not
reimbursable. (Note, however, that physical exams that are not employment-related are reimbursable. See Physical
exams.)
Employment taxes - See Nursing services.
Equipment, supplies and diagnostic services - Equipment such as crutches, supplies such as bandages and
diagnostic devices such as blood sugar kits may be deductible medical expenses if they are for the diagnosis, cure,
mitigation, treatment or prevention of disease, or for the purpose of affecting the body structure or function.
Exercise programs - Unless prescribed by a physician to treat a specific medical condition, exercise programs are
related to general health and are not reimbursable.
Eyeglasses - See Vision care.
Eye surgery - Expenses for eye surgery to treat defective vision such as laser eye surgery or radial keratotomy are
reimbursable.
Face lifts - See Cosmetic surgery.
Fertility - Medical expenses related to the treatment of infertility, including in vitro fertilization, are reimbursable.
Fitness programs - Fitness programs or physical therapy for general health are not reimbursable.
Food - See Special foods.
Foreign Countries - Medical expenses incurred in foreign countries outside the United States are reimbursable.
Founder's fee - See Lifetime care.
Funeral expenses - Expenses for funerals are not reimbursable.
Group medical insurance - See Insurance premiums.
Guide dog or other animal - The cost of a guide dog or other animal used by the visually impaired or hearing
impaired is reimbursable. Costs associated with a dog or other animal trained to assist persons with other physical'
disabilities are also reimbursable, as are amounts paid for the care of these specially trained animals.
Hair transplant - See Cosmetic surgery.
Health club dues - Health club dues, YMCA dues, or amounts paid for steam baths for general health or to relieve
physical or mental discomfort not related to a particular medical condition are not reimbursable unless incurred to
fight a physician-diagnosed disease state of obesity.
Healthy baby care - See Nursing services.
Hearing aids - Medical expenses for a hearing aid and batteries are reimbursable.
Page 13
Home Exercise Equipment - Expenses for home exercise equipment are reimbursable only if all of the following.
conditions are met:
. The home exercise equipment is prescribed by your physician to treat an illness (including obesity) or
bodily impairment;
. Your physician certifies, in writing, that the home exercise equipment is needed to treat a disease or
impairment and is not being prescribed to promote general health; and
. You certify, in writing, that you would not have purchased the home exercise equipment for any other
reason than treating your disease or bodily impairment.
Hospital - Expenses incurred as a hospital inpatient or outpatient for laboratory, surgical and diagnostic services
qualify as medical expenses.
Hot tub - See Capital expenses.
Household help - The cost of household help, even if recommended by a doctor, is not reimbursable. However,
certain expenses paid to an attendant providing nursing-type services are reimbursable (see Nursing services).
Human guide - Expenses for a human guide - to take a blind child to school, for example - are reimbursable. Also
see Guide dog.
Impotence or sexual inadequacy - Medical expenses related to the treatment of impotence are reimbursable if
substantiated by a physician.
Infertility - See Fertility.
In-vitro fertilization - See Fertility.
Insurance premiums - Premiums for any health plan are not reimbursable.
Laboratory fees - Laboratory fees that are part of medical care are reimbursable.
Laetrile - Laetrile, even if prescribed by a doctor is not reimbursable.
LASIK - The cost of laser surgery to correct or promote the proper function of the eye is reimbursable. (Also see
Radial keratotomy.)
Lead-based paint removal - The cost of removing lead-based paints from surfaces in a home to prevent a child
who has (or has had) lead poisoning from eating the paint is reimbursable. These surfaces must be in poor repair
(peeling or cracking) or within the child's reach. The cost of repainting the scraped area, however, is not
reimbursable.
Learning disability - Tuition payments to a special school for a child who has severe learning disabilities caused
by mental or physical impairments, including nervous system disorders, are reimbursable. A doctor must
recommend that the child attend the school. See Schools, special. Also, tutoring fees paid on a doctor's
recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who
have severe learning disabilities are reimbursable.
Legal fees - Legal fees paid to authorize treatment for mental illness are reimbursable. However, any part of a legal
fee that is a management fee - for example, a guardianship or estate management fee - is not reimbursable.
Licensing requirement - Neither the tax code nor IRS regulations require a plan participant to determine whether a
provider is qualified, authorized under state law or licensed to practice before using hislher services. In Revenue
Ruling 63-91, the IRS ruled that: "Amounts paid for medical services rendered by practitioners, such as
chiropractors, psychotherapists, and others rendering similar type services, constitute expenses for 'medical care'
within the provisions of section 213 of the Code, even though the practitioners who perform the services are not
required by law to be, or are not (even though required by law) licensed, certified, or otherwise qualified to perform
such services." The main issue is the nature of the treatment, not the license held by the practitioner. Thus, services.
provided by a range of organizations and individuals may be reimbursable, including care provided by hospitals,
medical doctors, dentists, eye doctors, chiropractors, nurses, osteopaths, podiatrists, psychiatrists, psychologists,
physical therapists, acupuncturists, psychoanalysts and others.
Life insurance premiums - Life insurance premiums are not reimbursable because they could provide benefits that
would be received in a subsequent plan year, resulting in prohibited deferred compensation.
Page 14
Lifetime care - Part of a life-care fee or "founder's fee" paid either monthly or as a lump sum under an agreement
with a retirement home is reimbursable if it is allocable to medical care. The agreement must require a specified fee
payment as a condition for the home's promise to provide lifetime care, treatment and training of an employee's
physically or mentally impaired dependent upon the employee's death or inability to provide care are reimbursable. .
The payments must be a condition for the institution's future acceptance of the dependent and must not be
refundable.
Liposuction - See Cosmetic surgery.
Lodging and meals - The cost of lodging and meals at a hospital or similar institution are reimbursable if the
employee's main reason for being there is to receive medical care. (Also see Nursing home - The cost of lodging
not provided in a hospital or similar institution while an employee is away from home is reimbursable if four
requirements are met: (1) the lodging is primarily for and essential to medical care; (2) medical care is provided by a
doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital; (3) the .
lodging is not lavish or extravagant under the circumstances; and (4) there is no significant element of personal
pleasure, recreation or vacation in the travel away from home. The reimbursable amount cannot exceed $50 for each
night for each person. Lodging is included for a person assisting the person receiving the medical care. For example,
if a parent is traveling with a sick child, up to $100 per night is reimbursable as a medical expense for lodging.
Meals and lodging away from home for medical treatment that is not received at a medical facility, or for the relief
of a specific condition, are not reimbursable even if the trip is made on the advice of a doctor.
Long-term care insurance premiums - Long-term care insurance premiums are not reimbursable under a medical
FSA.
Marijuana - Marijuana, even if prescribed for medicinal purposes, is not a reimbursable expense.
Marriage counseling - Expenses for marriage counseling services do not qualify as medical expenses. However,
sexual inadequacy or incompatibility treatment is reimbursable if the treatment is provided by a psychiatrist.
Massage - Fees paid for massages are not reimbursable unless prescribed and substantiated by a physician to treat a
physical defect or illness.
Maternity clothes - Expenses for maternity clothes are not reimbursable.
Mattresses - Mattresses and mattress boards designed for use in the treatment of arthritis are reimbursable.
Meals - See Lodging and meals.
Medical conferences - Expenses for admission and transportation to a medical conference are reimbursable if the
medical conference concerns the chronic illness of yourself, your spouse or your dependent. The costs of the
medical conference must be primarily for and necessary to the medical care of you, your spouse or your dependent.
You must spend the majority of your time at the conference attending sessions on medical information. The cost of
meals and lodging while attending the conference is not reimbursable.
Medical alert devices - Personal emergency transmitters worn as a bracelet or necklace are not reimbursable.
Medical aids - Medical aids such as false teeth, hearing aids, orthopedic shoes, crutches and elastic hosiery are
reimbursable.
Medical information plan - Amounts paid to a plan that keeps medical information so that it can be retrieved from
a computer data bank for medical care are reimbursable.
Medical savings accounts (MSAs) - MSAs cannot be offered as part of a flex plan or FSA.
Medical services - Only legal medical services are reimbursable. Amounts paid for illegal operations or treatments,
regardless of whether they are rendered by licensed or unlicensed practitioners are not reimbursable.
Medicare Part A - The tax paid for Medicare Part A is not reimbursable.
Medicare Part B - Premiums paid for Medicare Part B are reimbursable.
Medicines - Amounts paid for prescribed medicines and drugs are reimbursable. A prescribed drug is one that 0trequires a prescription by a doctor for its use by an individual. The cost of insulin is also reimbursable.
Mentally retarded, special home for - The cost of keeping a mentally retarded person in a special home (not the
home of a relative) on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital
to community living is reimbursable.
Page 15
Naturopathy - The issue of whether naturopathy expenses are reimbursable is problematic. (Naturopathy is the
practice of treating a medical condition with "natural" methods, such as processed plant matter, for example.) There
is no directly applicable official guidance on whether such expenses should be reimbursed under a health FSA, and
scant (and contradictory) guidance that is indirectly applicable. Two questions are at the heart of the issue:
. Are naturopathic treatments IImedicine"? The answer to this question is: No. Section 213ft>) limits the
defInition of "medicine or drugs" to those prescribed by a physician, and cross-references the defInition of,
"physician" found in the Social Security Act (SSA). Naturopaths are not included in the SSA definition's
list of approved medical professionals. Thus, naturopathic treatment prescribed by a naturopath are net
reimbursable. (Presumably, a naturopathic treatment prescribed by an SSA-approved physician, such as an
M.D. would be reimbursable.)
. Is naturopathy "medical care"? The answer to this question is: No. The IRS allows a health FSA to
reimburse expenses for over-the-counter medicines and drugs. However, to be reimbursed, the
nonprescription medicines and drugs must be legally procured; generally accepted as falling within the
category of medicine and drugs; used to diagnose, cure, mitigate, treat or prevent a disease or disorder of a
structure or function of the body; and not used for general good health. Naturopathic treatments and,
remedies do not meet these guidelines.
Nicotine patches and gum - Over-the-counter drugs to help stop smoking are not reimbursable. (Also see Smoking
cessation programs.)
Non-prescription drugs and medicines - See Over-the-counter.
Nursing home - The cost of medical care in a nursing home or home for the aged for an employee, or for an
employee's spouse or dependent, is reimbursable. This includes the cost of meals and lodging in the home if the
main reason for being there is to get medical care.
Nursing services - Wages and other amounts paid for nursing services are reimbursable. Services need not be'
performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services
connected with caring for the patient's condition, such as giving medication or changing dressings, as well as
bathing and grooming the patient. Only the amount spent for nursing services is reimbursable. If the attendant also
provides personal and household services, these amounts must be divided between the time spent performing
household and personal services and the time spent on nursing services.
Meals - Amounts paid for an attendant's meals are also reimbursable. This cost may be calculated by dividing a
household's total food expenses by the number of household members to find the cost of the attendant's food, then
apportioning that cost in the same manner used for apportioning an attendant's wages between nursing services and,
all other services (see above).
Upkeep - Additional amounts paid for household upkeep because of an attendant are also reimbursable. This
includes extra rent or utilities paid because of having to move to a larger apartment to provide space for an attendant.
Infant care - Nursing or babysitting services for a normal, healthy infant are not reimbursable.
Social Security, unemployment (FUTA) and Medicare taxes paid for a nurse, attendant or other person who provides
medical care are reimbursable.
Nutritional supplements - The cost of nutritional supplements, vitamins, herbal supplements, "natural medicines",
etc. are not reimbursable, unless you can only obtain them legally with a physician's prescription. See Special
foods.
Obesity - Uncompensated amounts paid by individuals for participation in a weight-loss programs as treatment for
a specifIc disease or diseases diagnosed by a physician. The costs of purchasing diet food items are not eligible.
Optometrist - See Vision care.
Orthodontia - Expenses for orthodontic care are generally reimbursable, except care for cosmetic purposes. See
Cosmetic surgery.
Orthopedic shoes - See Medical aids.
Organ donor - See Transplants.
Osteopath - Osteopathic expenses are reimbursable.
Page 16
Over-the-counter - Over-the-counter drugs (t.lmt is, drugs availabl~ without a prescription) are reimbursable.
However, to be reimbursed over-the-counter drugs must be legally procured; generally accepted as falling within the
category of medicine and drugs; used to diagnose, cure, mitigate, treat or prevent a disease or disorder of a structure
or function of the body; and not used for general good health. Reimbursable over-the-counter drugs include antacids,
allergy medicines, pain relievers and cold medicines. Dietary supplements, such as vitamins, cosmetics and other
products used to maintain general good health are not reimbursable.
Oxygen - Amounts paid for oxygen or oxygen equipment to relieve breathing problems caused by a medical
condition are reimbursable.
Patterning exercises - See Therapy.
Personal use items - Items that are ordinarily used for personal, living and family purposes are not reimbursable
unless they are used primarily to prevent or alleviate a physical or mental defect or illness. For example, the cost of a
wig purchased at the advice of a physician for the mental health of a patient who has lost all of his or her hair from
disease is reimbursable.
If an item purchased in a special form primarily to alleviate a physical defect is one that in normal form is ordinarily
used for personal, living and family purposes, the cost of the special form in excess of the cost of the normal form is
reimbursable. Also see Braille books and magazines.
Phone equipment - Telephone equipment designed for a hearing-impaired person are reimbursable, as are the cost
of repairs.
Physical exams - Physical exams are generally reimbursable, except for employment-related physicals. See,
Employment-related expenses.
Pre-existing conditions - Medical expenses not covered because of the plan's pre-existing condition limitation are
reimbursable.
Pregnancy test - The cost of an over-the-counter pregnancy test is not reimbursable. A pregnancy test performed
by a physician, however, is reimbursable.
Prescription drugs. See Medicines.
Private hospital room. The extra cost of a private hospital room is reimbursable.
PRK (photorefractive keratectomy) - See Radial keratotomy.
Prosthesis - See Artificial limb.
Psychiatric care - Expenses for psychiatric care are reimbursable. These expenses include the cost of supporting a
mentally ill dependent at a specially equipped medical center where the dependent receives medical care. Also see
Psychoanalysis and Transportation.
Psychoanalysis - Expenses for psychoanalysis are reimbursable.
Psychologist - Expenses for psychological care are reimbursable.
Reasonable and customary charges, amounts in excess of - Medical expenses in excess of a Medical Plan's.
reasonable and customary charges are reimbursable.
Resort. See Spa or resort.
Retin-A - Reimbursable when prescribed by a physician to treat a specific medical condition (such as acne), but not
for cosmetic purposes (such as wrinkles).
Rogaine - Reimbursable when prescribed by a physician for a specific medical condition (such as hypertension),
but not for cosmetic purposes (that is, to stimulate hair growth).
Schools, special - Expenses paid to a special school for a mentally impaired or physically disabled person are
reimbursable if the main reason for using the school is its resources for treating the disability. This includes the cost.
of a school that:
. teaches Braille to a visually impaired child;
. teaches lip-reading to a hearing-impaired child; or
. provides remedial language training to correct a condition caused by a birth defect.
Page 17
The cost of meals, lodging and ordinary education supplied by a special school is reimbursable only if the main
reason for using the school is its resources for treating the mental or physical disability. The cost of sending a non-
disabled "problem child" to a special school for benefits the child may get from the course of study and disciplinary
methods is not reimbursable.
Scientology "audits" - Amounts paid to the Church of Scientology for "audits" do not qualify as expenses for
medical care.
Sexual counseling - Expenses for counseling regCl!ding sexual inadequacy or incompatibility are reimbursable if the
counseling is provided to a husband and/or wife by a psychiatrist.
Smoking program -. The cost of a stop-smoking program is reimbursable. In June 1999 the IRS reversed its
position on this issue based on scientific evidenced proving the addictive nature of tobacco. Stop-smoking drugs
prescribed by a physician are also reimbursable. The cost of nonprescription drugs such as nicotine patches or gum,
should be reimbursable when purchased to quit smoking.
Spa or resort - Although a visit to a spa or resort may be prescribed by a physician for medical treatment, only the
costs of the medical services provided are reimbursable, not the cost of transpor..ation. See Transportation and
Trips.
Special foods - The cost of special foods and/or beverages-even if prescribed- that substitute for other foods or
beverages that a person would normally consume and that satisfy Dlltritional requirements (such as the consumption
of bananas for potassium, for example) are not deductible. However, prescribed special foods or beverages are
reimbursable if they are consumed primarily to alleviate or treat an illness or disease, that are substantiated by a
physician and they are not part of normal nutritional fees. Special foods purchased as part of a weight loss program
are not reimbursable expenses because, according to the IRS, reduced-calorie foods are substitutes for the food
individuals would normally eat. Special foods and beverages are reimbursable only to the extent that their cost is
greater than the cost of the commonly available version of the same product.
Spouse medical expenses - These may be reimbursable if the spouse is of the opposite sex and does not file a
separate tax return.
Sterilization - The cost of a legal sterilization (a legally performed operation to make a person unable to have
children) is reimbursable.
Sunglasses - Prescription sunglasses are reimbursable. Non-prescription sunglasses may be reimbursable if they
meet the Section 213 definition of medical care.
Substance abuse - See Alcoholism and drug abuse.
Supplemental Insurance Policies - Certain supplemental insurance policies, such as policies covering cancer or
other specific diseases, hospital confmement and intensive care may be reimbursable under a Flexible Spending
Account.
Swimming lessons - See Dancing lessons.
Taxes - Sales and service taxes imposed on qualified medical care or products are reimbursable.
Teeth guards - These devices, prescribed to treat the grinding of teeth while sleeping, are reimbursable. Guards
designed for sports are not reimbursable.
Teeth whitening - These expenses are cosmetic and are not reimbursable.
Telephone - The costs of purchasing and repairing special telephone equipment that lets a hearing-impaired person
communicate over a regular telephone are reimbursable.
Television - The cost of equipment that displays the audio part of TV programs as subtitles for a hearing-impaired
person is reimbursable. This may include an adapter that attaches to a regular TV or the cost of a specially equipped
TV in excess of the cost of the same model regular TV set.
Tests - Diagnostic or screening tests - such as those that detect or evaluate the risk of heart disease, stroke, diabetes,
osteoporosis, cancer, etc. - qualify as medical care under Section 213 if there is a direct relationship between the test
and a medical diagnosis.
Therapy - Amounts paid for therapy received as medical treatment are reimbursable. Payments made to an
individual for special exercises administered to a mentally retarded child are also reimbursable. These so-called
"patterning" exercises consist mainly of coordinated physical manipulation of the child's arms and legs to imitate
crawling and other normal movements. Also see Fitness programs.
Page 18
Transplants - Payments for surgical, hospital, laboratory and transportation expenses for a donor or a possible
donor of a kidney or other organ are reimbursable.
Transportation - Amounts paid for transportation primarily for, and essential to, medical care are reimbursable
(except as provided below), these include:
· bus, taxi, train or plane fare, or ambulance service;
. actual car expenses, such as gas and oil (but not expenses for general repair, maintenance, depreciation and
insurance) ;
· parking fees and tolls;
. transportation expenses of a parent who must accompany a child who needs medical care;
. transportation expenses of a nurse or other person who can give injections, medications or other treatment
required by a patient who is traveling to get medical care and is unable to travel alone; and
. transportation expenses for regular visits to see a mentally ill dependent if these visits are recommended as
a part of treatment.
Instead of actual expenses, it is acceptable to use a flat rate of $0.15 per mile for each mile a car is used for medical
purposes. The cost of tolls and parking may be added to this amount.
Reimbursable expenses do not include:
. transportation expenses to and from work, even if a medical condition requires an unusual means of
transportation; or
. transportation expenses incurred if, for non-medical reasons, an employee chooses to travel to another city,
such as a resort, for an operation or other medical care prescribed by a doctor.
If a participant drives himself or herself to the location for the medical treatment, the expense is not reimbursable
because the claims substantiation rules cannot be satisfied.
Trips - Amounts paid for transportation to another city if the trip is primarily for and essential to receiving medical
services are . reimbursable (also see Lodging and meals). A trip or vacation taken for a change in environment,
improvement of morale or general improvement of health, is not reimbursable, even if it is taken at the advice of a
doctor. See Spa or resort.
Tuition - Charges for medical care included in the tuition of a college or private school are reimbursable if the '
charges are separately stated in the tuition bill. Also see Learning disability and Schools, special.
Tutors' fees - See Learning disability.
Vacation - See Trips.
Vaccines - Expenses for vaccines are reimbursable.
Vasectomy - See Sterilization.
Viagra - If prescribed to treat impotence as a specific medical condition, the cost of Viagra is reimbursable.
Vision care - Optometric services and medical expenses for eyeglasses and contact lenses needed for medical,
reasons are reimbursable. Eye exams and expenses for contact lens solutions are also reimbursable. However,
premiums for contact lens replacement insurance are not reimbursable. Also see Eye surgery.
Vitamins - Only expenses for vitamins prescribed by a physician that are only available by prescription and are to
treat a specific medical condition are reimbursable.
Wage continuation policies - Premiums paid under wage continuation policies are not reimbursable because they
could provide benefits that would be received in a subsequent plan year, resulting in prohibited deferred
compensation
Weight loss program - Expenses you pay to lose weight are reimbursable if it is a treatment for a specific disease
diagnosed by a physician (such as obesity, hypertension or heart disease). This includes fees you pay to join a'
weight reduction group and attend periodic meetings. Also see Health Club Dues.
Page 19
You cannot include the cost of diet food or beverages in medical expenses because that substitutes for what you
normally consume to satisfy your nutritional needs. You can include the cost of special food in medical expenses
only if:
1. The food does not satisfy your normal nutritional needs;
2. The food alleviates or treats an illness; ~1d
3. The need for the food is substantiated by a physician.
The amount you can include in medical expenses is limited to the amount by which the cost of the special food
exceeds the cost of a normal diet. Also see Special foods.
Well baby care - See Nursing services.
Wheelchair - Amounts paid for an autoette or a wheelchair used mainly for the relief of sickness or disability, and
not just to provide transportation to and from work, are reimbursable. The cost of operating and maintaining the
autoette or wheelchair is also reimbursable.
Wigs - See Personal use items.
X-ray fees - Amounts paid for X-rays taken for medical reasons are reimbursable.
Page 20
DEFiNITIONS
Dependent - A Participant's Spouse or an individual who is a dependent within the meaning of Section 152(a) of
the Internal Revenue Code of a Participant or a former Participant in the Plan.
1. a child (including adopted children and eligible foster children) or a descendant of a child;
2. a brother, sister, stepbrother, or stepsister
3. the father or mother, or an ancestor of either;
4. a stepfather or stepmother;
5. a son or daughter of a brother or sister of the plan participant;
6. a brother or sister of the father or mother of the plan participant
7. a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
8. an individual, who is not the plan participant's spouse, who lives with the plan participant and is a member
of the plan participant's household
A relative described above is a qualifying relative only ifhe or she receives more than one-half of his or her
support from the plan participant. Special roles apply in cases of multiple support agreements, in which no
one person contributes over one-half of the individual's support. The individual also must have gross
income less that the exemption amount ($3200 for 2005), not including certain income earned by disabled
individuals.
A Dependent for whom expenses can be reimbursed from the Dependent Care Reimbursement Account must meet
the following criteria:
1. Can be claimed as a dependent for Federal income tax purposes; and
2. Is under the age of 13; or
3. If over the age of 13, requires full time care because of physical or mental incapacity; or
4. Is the spouse of the employee and is physically or mentally incapable of caring for himself or herself.
If you are divorced, you can generally have your child's dependent care expenses reimbursed if you are the custodial
parent, i.e., if you have custody of the child for a longer period of time during the Plan Year than the other parent.
However, the following exceptions would override the custodial parent role and permit you, as a non-custodial
parent, to have your child's dependent care expenses eligible for the reimbursement account:
1. The custodial parent formally releases claim to the Federal income tax dependent exemption for the tax
year;
2. You provide over half of the support of the child under a multiple support agreement; or
3. You are entitled to the dependent exemption for Federal income tax as a result of an agreement executed
prior to 1985.
Payments made directly to a child or any other person that you can claim as a dependent cannot be reimbursed by
this Plan.
Employee - An individual employed by the Plan Sponsor who regularly works at least 20 hours per week, and at
least 5 months per year, except for:
1. Employees covered by a collective bargaining agreement;
2. Employees who are non-resident aliens who receive no earned income from the Employer which
constitutes income from sources within the United States;
3. Employees who are self-employed individuals as defined in Section 401 (c) of the Internal Revenue Code
(including sole proprietors and partners in a partnership); and
4. Employees who own (or are considered to own within the meaning of Section 318 of the Internal Revenue
Code) more than 2 percent of the outstanding stock of an S corporation or stock possessing more than 2
percent of the total combined voting power of all stock of such corporation.
Grace Period - The 2-month and 15-day period that begins the day following the end of the Plan Year.
Participant - Any Employee who has met the eligibility requirements of the Plan and has elected to participate in
the Plan by providing the Plan Sponsor with an executed Benefits Enrollment Form.
Plan Year - The l2-consecutive month period beginning the first day of the plan year.
Page 21
Salary Reduction Agreement - The agreement by an Employee authorizing the Plan Sponsor to reduce the
Employee's compensation while a Participant during the Plan Year for purposes of making contributions toward
benefits under the Plan.
Spouse - An individual who is legally married to a Participant but shall not include an individual separated from a
Participant under a decree of legal separation. A spouse must be of the opposite sex.
Status Change
1. With regards to the election to participate in the Plan and election for benefits other than Accident, Health
and Group Term Life, status change shall mean a change in status such as the marriage or divorce of the
Participant; the adoption, placement for adoption, birth or death of a child or other Dependent of the
Participant or the Participant's Spouse; the emancipation or coming of age of a child of the Participant so
that the child is no longer eligible as a Dependent under change in status in the opinion of the Plan Sponsor.
2. With regards to elections for accident, Health or Group Term Life benefits, status change shall mean events
that change an eligible Employee's legal marital status, number of dependents, the eligible Employee's,
Spouse's or dependent's employment status, work schedule, residence or work site, an event that causes an
eligible Employee's Dependent to satisfy or cease to satisfy the requirements for coverage, and such other.
events as provided in code or regulation.
Page 22
CAPITAL EXPENSES
Medical expenses incurred by employees for special equipment installed in the home or for improvements are
reimbursable under a health care spending account (subject to the discussion below) if their main purpose is medical
care. Under Internal Revenue Code Section 213, the cost of permanent improvements that increase the value of the
property may be partly deducted as a medical expense. The cost of the improvement is reduced by the increase in the
value of the property; the difference is a deductible medical expense. If the value of the property is not increased by
the improvement, the entire cost is deductible as a medical expense. Improvements made to accommodate a
residence to a person's disability do not usually increase the value of the residence, and the full cost is usually
reimbursable. These improvements include, but are not limited to:
· constructing entrance or exit ramps;
· widening doorways at entrances or exits;
. widening or otherwise modifying hallways and interior doorways;
. installing railing, support bars or other modifications to bathrooms;
. lowering or making other modifications to kitchen cabinets and equipment;
. moving or otherwise modifying electrical outlets and fixtures;
. installing porch lifts and other forms of lifts (but generally not elevators);
. modifying fire alarms, smoke detectors and other warning systems;
· modifying stairways;
· adding handrails or grab bars;
· modifying hardware on doors;
. modifying areas in front entrance and exit doorways; and
· re-grading the ground to provide access to the residence.
Only reasonable costs to accommodate a personal residence to a disabled condition are considered medical care. .
Additional costs for personal motives, such as for architectural or aesthetic reasons, are not reimbursable.
Operation And Maintenance
If a capital expense qualifies as a reimbursable medical expense, then expenses related to operation and maintenance
also qualify as medical expenses, as long as the medical reason for the capital expense still exists. This is so even if
none or part of the original capital expense qualified as a medical care expense.
Improvements to Property Rented by a Person with Disabilities
Amounts paid by a person with disabilities to buy and install special plumbing fixtures, mainly for medical reasons,
in a rented house are reimbursable medical expenses. For example, Don has arthritis and a heart condition. He
cannot climb stairs or get into a bathtub. On his doctor's advice, he installs a bathroom with a shower stall on the
first floor of his two-story rented house. Don's landlord did not pay any of the cost of buying and installing the
special plumbing and did not lower the rent. Don can deduct the entire amount he paid.
It is important that you budget carefully when taking advantage of the Medical Expense Reimbursement Account.
The same tax law that permits this benefit also specifies that any money that is left in your account at the end of the
plan year must be forfeited. Your account balance cannot be transferred to your Child Care Reimbursement Account
or carried forward to the next year. All employee and dependent coverage will terminate on the earliest of the end of
the month your employment terminates or the end of the month in which you cease to be an active, full-time
Employee. The exception to this rule is that when such termination of coverage would otherwise fall on the last day
of the last month of the plan year, in which case the coverage will not terminate until the fifteenth day of the third
month following the end of the plan year. If your employment terminates or you lose coverage before the end of the
plan year, you have 90 days from the end of the plan year to claim medical expenses incurred prior to your date of
termination. If your coverage is still effective on the last day of the plan year, you have 90 days from the end of the
grace period to claim medical expenses incurred during the plan year or the grace period.
Even if you should over budget and have some money remaining unused in your account, you may still benefit due
to the amount of your tax savings.
Money from your unreimbursed health care spending account will pay your medical expenses with before tax
dollars. Any expenses paid from this account may not be claimed again as a deduction on your income tax return.
Page 23
CTIO
FLEXIBLE
SPENDING
TML Intergovernmental Employee Benefits Pool
PO Box 140167
Austin, Texas 78714-0167
Fax: (512) 719-6505
IITML
~ Intergovernmental
Employee Benefits
Pool
Employer Name Employer Group #
Employee Name Social Security #
Street Address City State Zip Code o Check here if new
Date of Birth Check One Check One Date Employed
o Male o Single o Widowed
o Female o Married 0 Divorced
Spouse Name (First, M.I.) Date of Birth I request that my salary be reduced as follows:
I I Annually Monthly
Dependent Name (First, M.I.) Date of Birth Contribution for Medical Coverage $ $
I I Contribution for Dental Coverage $ $
Dependent Name (First, M.I.) Date ofBirth Other Contributions (SPECIFY)
I I $ $
Dependent Name (First, M.I.) Date ofBirth
I I Unreimbursed Health Care Expenses $ $
Dependent Name (First, M.I.) Date of Birth Dependent Care Expense $ $
I I Total Authorized Reductions $ $
EMPLOYEE ENROLLMENT FORM
AUTHORIZATION: I certify the above information to be correct and true to the best of my knowledge and that any children listed are
dependents under Section 152 of the Internal Revenue Code. I understand that any amounts remaining in my account(s) not used for expenses
incurred during the plan year will be forfeited in accordance with current plan provisions and tax laws. I also understand that the Flexible
Spending reduction(s) will be in effect for the plan year and cannot be revoked unless I experience a change in my family status, significant
change in cost or coverage of my health plan or my spouse's health plan or separation from service as prescribed by IRS rules. If a change in
family status occurs, you have 31 days from the occurrence to change or revoke your election. Furthermore, I hereby authorize my employer to
transfer my required health benefits contribution on a monthly basis to the TML Intergovernmental Employee Benefits Pool.
Employee Signature
Date
IF YOU DECLINE PARTICIPATION: The benefits of the plan have been thoroughly explained to me and r decline to
participate.
Date
CONFIDENTIALITY NOTICE: The information contained in this transmission, including any attachments, is for the sole use of the intended
recipient(s) and may contain confidential and privileged information. Any unauthorized review, use, disclosure, or distrIbution is prohibited by
Federal law. If you are not the intended recipient of this message, you are notified that you may not disclose, print, copy, or disseminate this
information. If you have received this transroission in error, please reply to the sender and delete or destroy the message. Unauthorized
interception of this transmission maybe a violation of criminal law
TML Intergovernmental Employee Benefits Pool
PO Box 140167
Austin, Texas 78714-0167
Fax: (512) 719-6505
IITML
~ Intergovernmental
Employee Benefits
Pool
Employer Name Employer Group #
Employee Name Social Security #
Street Address City State Zip Code o Check here if new
UNREIMBURSED HEAI,TH CARE REIMBURSEMENT FORM.
Incurred Total Amount Amount paid by Amount to be Expense for:
Date of Bill any Plan Reimbursed (Name)
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
$ $ $
Description of
Eligible Expense
TOTAL
AUTHORIZATION: I certify the above information to be correct and true to the best of my knowledge and that any children listed are
dependents under Section 152 of the Internal Revenue Code. I understand that any amounts remaining in my account(s) not used for expenses
incurred during the plan year will be forfeited in accordance with current plan provisions and tax laws. I also understand that the Flexible'
Spending reduction(s) will be in effect for the plan year and cannot be revoked unless I experience a change in my family status, significant
change in cost or coverage of my health plan or my spouse's health plan or separation from service as prescribed by IRS rules. If a change in
family status occurs, you have 31 days from the occurrence to change or revoke your election. Furthermore. I hereby authorize my employer to
transfer my required health benefits contribution on a monthly basis to the TML Intergovernmental Employee Benefits Pool.
Employee Signature
Date
CONFIDENTIALITY NOTICE: The infonnation contained in this transmission, including any attachments, is for the sole use of the intended
recipient(s) and may contain confidential and privileged infonnation. Any unauthorized review, use, disclosure, or distribution is prohibited by
Federal law. If you are not the intended recipient of this message, you are notified that you may not disclose, print, copy, or disseminate this
infonnation. If you have received this transmission in error, please reply to the sender and delete or destroy the message. Unauthorized
interception of this transmission may be a violation of criminal law
TML Intergovernmental Employee Benefits Pool
PO Box 140167
Austin, Texas 78714-0167
Fax: (512) 719-6505
RTML
t41 Intergovernmental
Employee Benefits
Pool
DEPENDENT CARE REIMBURSEMENT FORM
Employer Name Employer Group #
Employee Name Social Security #
Street Address City State Zip Code o Check here if new
Name of Individual or
Organization providing
Dependent Care Services
Tax ID
or SS#
Date
Incurred
Amt to be
Reimbursed
Expense for care
of: (Name)
$
Name
$
Address
$
Name
Total $
Employee Signature Date
AUTHORIZATION: I certify the above information to be correct and true to the best of my knowledge and that any children listed are
dependents under Section 152 of the Internal Revenue Code. I understand that any amounts remaining in my account(s) not used for expenses
incurred during the plan year will be forfeited in accordance with current plan provisions and tax laws. I also understand that the Flexible'
Spending reduction(s) will be in effect for the plan year and cannot be revoked unless I experience a change in my family status, significant
change in cost or coverage of my health plan or my spouse's health plan or separation from service as prescribed by IRS rules. If a change in
family status occurs, you have 31 days from the occu"ence to change or revoke your election. Furthermore, I hereby authorize my employer to
transfer my required health benefits contribution on a monthly basis to the TML Intergovernmental Employee Benefits Pool.
StatementofCerdficat1on:lcerti.&:thatIhaveprpYidJq;qqrelQr",0 ....' . . ,
dependent}fi'om to . . My'c:harg~fortRI~'~e;.vic~,:~as:
"'.,->
"~...,, '. '- .
. '):~~c~~[lnc611dr~nY)r:,
i': :'~':1;~<;;((::>;_:' -'_.'.'" >' :~;_-:,:..,.
.::,)("
.:.1,;,",
Name and Address of Provider
Provider's Signature
Tax ID or SS#
CONFIDENTIALITY NOTICE: The information contained in this transmission, including any attachments, is for the sole use of the intended
recipient(s) and may contain confidential and privileged information. Any unauthorized review, use, disclosure, or distribution is prohibited by
Federal law. If you are not the intended recipient of this message, you are notified that you may not disclose, print, copy, or disseminate this
information. If you have received this transmission in error, please reply to the sender and delete or destroy the message. Unauthorized
interception of this transmission may be a violation of criminal law
TML Intergovernmental Employee Benefits Pool
HEALTH REIMBURSEMENT ARRANGEMENT (HRA) PLAN
ARTICLE I. INTRODUCTION
1.~
Establishment of Plan
TML Intergovernmental Employee Benefits Pool (the "Employer or Pool") hereby establishes the TML
Intergovernmental Employee Benefits Pool Health Reimbursement Arrangement (HRA) Plan (the
"Plan") effective October 1, 2005 (the "Effective Date") for adoption by Member political subdivisions of
the Pool. Capitalized terms used in this Plan that are not otherwise defined shall have the meanings set
'forth in Article II.
This Plan is intended to permit an Eligible Employee to obtain reimbursement of Medical Care Expenses
on a nontaxable basis from the HRA Account.
Leaal Status
...
This Plan is intended to qualify as an employer-provided medical reimbursement plan under Code
99105 and 106 and regulations issued thereunder, and as a health reimbursement arrangement as
defined under IRS Notice 2002-45, and shall be interpreted to accomplish that objective. The Medical
Care Expenses reimbursed under the Plan are intended to be eligible for exclusion from participating
Employees' gross incomes under Code 9 1 05(b).
1.1
. ARTICLE II. DEFINITIONS
2.1 Definitions
"Administrator" means TML Intergovernmental Employee Benefits Pool.
"Benefits" means the reimbursement benefits for Medical Care Expenses described under Article VI.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation" means the wages or salary paid to an Employee by the Employer.
"Covered Individual" means a Participant, Spouse or Dependent.
"Dependent" means any individual who is a tax dependent of the Participant as defined in Code 9 152,
with the following exception: any child to whom Code 9 152(e) applies (regarding a child of divorced
parents, etc., where one or both parents have custody of the child for more than half of the calendar
year and where the parents together provide more than half of the child's support for the calendar year)
is treated as a dependent of both parents. Notwithstanding the foregoing, the HRA Account will provide
benefits in accordance with the applicable requirements of any OMCSO, even if the child does not meet
the definition of "Dependent."
"Effective Date" of this Plan has the meaning described in Section 1.1.
"Eligible Employee" means an employee who works for the Employer on a regular basis in the usual
course of the Employer's business. To be considered an Eligible Employee, the person must work at
least twenty (20) hours per week, and must receive all benefits of an employee, including but not limited
to vacation, sick leave and pension. An Eligible Employee who is on paid or unpaid leave under the
Family and Medical Leave Act of 1993 (FMLA) will be considered an active Eligible Employee for the
purposes of this Plan. An elected official while holding office is considered an Eligible Employee for
purposes of this Plan.
"Employer" means TML Intergovernmental Employee Benefits Pool or any related Member Employer
that adopts this Plan with the approval of TML Intergovernmental Employee Benefits Pool.
"Employment Commencement Date" means the first regularly scheduled working day on which the
Employee first performs an hour of service for the Employer for Compensation.
"Enrollment Form" means any form that may be provided by the Administrator for the purpose of
allowing an eligible Employee to participate in this Plan.
"FMLA" means the Family and Medical Leave Act of 1993, as amended.
Page 1
"Health FSA" means a health flexible spending arrangement as defined in Prop. Treas. Reg. ~ 1.125-2,
Q/A-7(a).
"Health Benefits Plan" means the plan(s) that the Employer maintains for its Employees (and for their
Spouses and Dependents that may be eligible under the terms of such plan), providing major medical
type benefits through a group health plan(s).
"HIPAA" means the Health Insurance Portability and Accountability Act of 1996, as amended.
"HRA" means a health reimbursement arrangement as defined in IRS Notice 2002-45.
"HRA Account" means the HRA Account described in Section 6.4.
"Medical Care Expenses" has the meaning defined in Section 6.2.
"Open Enrollment Period" with respect to a Plan Year means a period of time at some point preceding
the Plan Year, or such other period as may be prescribed by the Administrator.
"Participant" means a person who is an Eligible Employee and who is participating in this Plan in
accordance with the provisions of Article III.
"Period of Coverage" means the plan year, with the following exceptions: (a) for Employees who first
become eligible to participate, it shall mean the portion of the plan year following the date participation
commences; and (b) for Employees who terminate participation, it shall mean the portion of the plan
year prior to the date participation terminates, as described in Section 3.2. A different Period of
Coverage (e.g., monthly) may be established by the Administrator and communicated to Participants.
"Plan" means the TML Intergovernmental Employee Benefits Pool HRA Plan as set forth herein and as
amended from time-to-time.
"Protected Health Information" shall have the meaning described in 45 C.F.R. 9 160.103 and
generally includes individually identifiable health information held by, or on behalf of, the Plan.
"QMCSO" means a qualified medical child support order, as defined in ERISA 9609(a).
"Spouse" means an individual who is legally married to a Participant under the laws of any state, who
is the opposite gender from the Participant.
"USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994, as
amended.
ARTICLE III,ELlGIBILlTY AND PARTICIPATION
3.1 Enrollment Requirements .
The names, social security numbers, sexes and birth dates of all persons in a family enrolling in the
Plan will be provided to the Administrator on an enrollment form or a change form signed and dated by
the Participant and Employer and received by the Administrator.
a. Employees
To receive coverage, an Eligible Employee must enroll within 31 days of the commencement of
employment with the Employer, or within 31 days of the date the Employer first offers coverage.
If enrolled, an Eligible Employee's coverage will begin the later of:
1. The date the Eligible Employee became an active employee of the Employer working at
least 20 hours per week; or
2. The date the Eligible Employee completes any waiting period established by the
Employer.
Eligible Emp!oyees must enroll within the initial enrollment period or wait until the next open
enrollment period to enroll.
Page 2
b. Dependents
To cover Dependents under the Health Reimbursement Arrangement, at the time of initial
enrollment or during an open enrollment period, a Participant must furnish to the Administrator,
in writing, the names of his or her Dependents eligible to receive benefits under the HRA Plan.
Coverage for Dependents enrolled at the time of initial enrollment will be effective on the same
date that the Participant's coverage is effective. Coverage for Dependents enrolled during an
open enrollment period will be effective on the first day of the Plan Year following the open
enrollment period.
During the Plan Year, certain qualifying events will permit a Participant to add a Dependent(s)
other than during an open enrollment period. The Participant must add a Dependent(s) within
31 days of the qualifying event and must submit documentation of the qualifying event to the
Administrator, when requested. Coverage for Dependents enrolled within 31 days of a qualifying
event will be effective the first day of the month following the Administrator's receipt of an
approved enrollment form and any required documentation. Except, in the case of a newborn
child, the Participant has 60 days from the child's date of birth to add the child, and, when
enrolled within 60 days, coverage for the newborn child will be effective on the child's date of
birth.
Qualifying events are:
1. Mairiage;
2. Birth or adoption of a child;
3. Termination of a Spouse's employment;
4. Change from full-time to part-time of the Spouse's employment;
5. An unpaid leave of absence from the Spouse's employment; and
6. A significant increase (Le., an increase of at least 10%) in the cost of health coverage
under the Spouses employer-sponsored health plan.
c. Mentally or Physically Handicapped Children
If a Dependent covered under the HRA Plan reaches 19 years of age (at which time coverage
would normally terminate) but the child is mentally or physically incapable of supporting himself
or herself and is primarily dependent upon the Participant for support, coverage may be
continued. The Participant must submit satisfactory proof of the child's incapacity to the
Administrator within 31 days of the date the child reaches age 19. Coverage may continue for
such child as long as the incapacity continues, subject to payment of the required contribution
and all other terms of the Plan.
The Administrator may require satisfactory proof of the child's continued incapacity. The
Administrator may have a physician examine the child or may request proof to confirm the
incapacity, but not more often than once a year. If a Participant fails to submit proof when
reasonably required or refuses to allow the Administrator to examine the child, then coverage
for the child will terminate.
d. Active Duty Reservists
Participants who are active duty reservists or guard members and their covered Dependents
can maintain eligibility on the HRA Plan for up to 24 months. The date on which the Participant's
absence begins is the qualifying event for Continuation of Coverage (COC) to be offered to the
reservist or guard member. If a fire fighter or police officer employed by a Texas municipality is
called to active duty for any period, the employing municipality must continue to maintain any
health, dental or life coverage received through the date the fire fighter or police officer was
called to active military duty until the municipality receives written instructions from the fire
fighter or police officer to change or discontinue the coverage. Eligibility will meet or exceed
requirements of USERRA and/or regulatory compliance.
In administering this coverage, TML Intergovernmental Employee Benefits Pool will follow the
time guidelines of Continuation of Coverage under 42 U.S.C.A. 300bb-1 et seq. To quaiify for
this coverage, the Participant must give written notice to the Employer within 60 days of the
qualifying event. The Employer must notify TML Intergovernmental Employee Benefits Pool that
a Participant has been called to active duty and submit a copy of the Employer's Active
Reservist Policy.
Page 3
If the Participant will be on active duty for 31 days or less, the Employer will keep the Participant
on the plan with no change in coverage. If the Participant will be on active duty for more than .31
days, the Employer will notify TML Intergovernmental Employee Benefits Pool of the qualifying
event.
If TML Intergovernmental Employee Benefits Pool administers Continuation of Coverage,
Employer must notify TML Intergovernmental Employee Benefits Pool by sending a Qualifying
Event Notice and mark the qualifying event "Called to Active Duty." If the Employer administers
its own Continuation of Coverage, the Employer must notify TML Intergovernmental Employee
Benefits Pool of the termination if call to active duty is more than thirty-one (31) days. The
Employer is responsible for all required notices.
For the Participant to return to the HRA plan and continue his or her benefits with no waiHng
period, the Participant must return to work within the time period required by state and federal
law for such return.
The additional 2% contribution for Continuation of Coverage is not charged for a Participant
called to active duty.
3.2 Termination Date of Coverage
Information concerning rights to continuation of coverage is in the section of this Plan on Continuation of
Coverage.
a. Participant Coverage
Coverage will terminate on the earliest of:
1. The date this Plan terminates; or
2. The date the Employer is no longer participating under this Plan.
3. Upon Employee termination, the terminated employee has portability option allowed by
regulatory guidelines.
b. Dependent Coverage
Coverage will terminate on the earliest of:
1. The end of the month in which a Dependent no longer meets the definition of
Dependent under this Plan;
2. The date this Plan terminates;
3. The date the Employer is no longer participating under this Plan; or
4. The date the Participant voluntarily drops Dependent coverage.
Coverage for a Dependent cannot extend beyond the dat~ coverage for the Employee ends,
unless required by Article 615.071 of Chapter 615 of the Government Code for survivors of
certain peace officers killed in the line of duty.
c. Continuation of Coverage
Coverage will terminate on the earliest of:
1. The end of the month in which the Covered Individual voluntarily drops coverage;
ARTICLE IV. METHOD AND TIMING OF ENROLLMENT
4.1 Enrollment When First Eligible
An employee who first becomes eligible to participate in this Plan will commence participation on the
first day of the month after the eligibility requirements have been satisfied, provided that an Enrollment
Form, if such is necessary, is submitted to the Administrator before the first day of the month in which
participation will commence. Once enrolled, the Eligible Employee's participation will continue from
month-to-month and year-to-year until the Eligible Employee's participation ceases pursuant to Article
III. The Enrollment Form shall identify the Spouse and Dependents whose medical expenses may be
submitted to the HRA. The Participant must promptly notify the Administrator if this information changes.
Page 4
ARTICLE V. BENEFITS OFFERED AND METHOD OF FUNDING
5.1 Benefits Offered
When an Eligible Employee becomes a Participant in accordance with Articles III and IV, an HRA
Account will be established for slIch Participant to receive Benefits in the form of reimbursements for
Medical Care Expenses, as described'in Article VI. In no event shall Senefits be provided in the form of
cash or any other taxable or nontaxable benefit other than reimbursement for Medical Care Expenses.
5.2 Employer and Participant Contributions
a. Employer Contributions. The Employer funds the full amount of the HRA Accounts.
b. Participant Contributions. There are no Participant contributions for Benefits under the Plan.
c. No Funding Under Cafeteria Plan. Under no circumstances will the Benefits be funded with
salary reduction contributions, employer contributions (e.g., flex credits) or otherwise under a
cafeteria plan, nor will salary reduction contributions or employer contributions be treated as
Employer contributions to the Plan. '
5.3 Funding This Plan
All of the amounts payable under this Plan shall be paid from the general assets of the Employer.
Nothing herein will be construed to require the Employer or the Administrator to maintain any fund or to
segregate any amount for the benefit of any Covered Individual, and no Covered Individual or other
person shall have any claim against, right to, or security or other interest in any fund, account or asset of
the Employer from which any payment under this Plan may be made. There is no trust or other fund
from which Benefits are paid.
ARTICLE VI. HEALTH REIMBURSEMENT BENEFITS
6.1 Benefits
The Plan will reimburse Participants for Medical Care Expenses up to the unused amount in the
Participant's HRA Account, as set forth and adjusted under Section 6.4.
6.2 Eligible Medical Care Expenses
Under the HRA Account, a Participant may receive reimbursement for Medical Care Expenses incurred
during a Period of Coverage.
a. Incurred. A Medical Care Expense is incurred at the time the medical care or service giving rise
to the expense is furnished, and not when the individual incurring the expense is formally billed
for, is charged for or pays for the medical care. Medical Care Expenses incurred before a
Covered Individual first becomes covered by the Plan are not eligible.
b. Medical Care Expenses Generally. "Medical Care Expenses" means expenses incurred by a
Participant or by his or her Spouse or Dependents for medical care, as defined in Code 9 213
(including, for example, amounts for certain hospital bills, doctor and dental bills and
prescription drugs). Reimbursements due for Medical Care Expenses incurred by the
Participant or the Participant's Spouse or Dependents shall be charged against the Participant's
HRA Account.
c. Cannot Be Reimbursed or Reimbursable From Another Source. Medical Care Expenses can
only be reimbursed to the extent that the Participant or other person incurring the expense is not
reimbursed for the expense (nor is the expense reimbursable) through the Health Benefits Plan,
other health coverage or any other accident or health plan (but see Section 6.8 if the other
health plan is a Health Flexible Spending Account). If only a portion of a Medical Care Expense
has been reimbursed elsewhere (e.g., because the Health Benefits Plan imposes copayment or
deductible limitations), the HRA Account can reimburse the remaining portion of such Medical
Care Expense if it otherwise meets the requirements of this Article VI.
6.3 Maximum Benefits
a. Maximum Benefits. The maximum dollar amount that may be credited to an HRA Account for an
Employee who participates for an entire 12-month Period of Coverage shall be determined by
the Employer. Unused amounts may be carried over to the next Period of Coverage, as
provided in Section 6.5.
Page 5
b. Changes. For subsequent plan years, the maximum dollar limit may be changed by the
Employer and shall be communicated to Empioyees through the Enrollment Form, the Schedule
of Medical Expense Benefits or Plan document.
c. Nondiscrimination. Reimbursements to highly compensated Individuals may be limited or
treated as taxable compensation to comply with Code 9 105(h), as may be determined by the
Administrator in its sole discretion.
6.4 Establishment of Account
The Administrator will establish and maintain an HRA Account. The HRA Account so established will
reimburse eligible medical expenses per Section 213.
a. Crediting of Accounts. A Participant's HRA Account will be credited at the beginning of each
month with an amount equal to the applicable maximum dollar limit for the Period of Coverage
divided by the number of months in that Period of Coverage (e.g., divided by 12 in a 12-month
Plan Year), increased by any carryover of unused HRA Account balance from a prior Period(s)
of Coverage.
b. Debiting of Accounts. A Participant's HRA Account will be debited during each Period of
Coverage for any reimbursement of Medical Care Expenses incurred during the Period of
Coverage.
c. Available Amount. The amount available for reimbursement of Medical Care Expenses is the
amount credited to the Participant's HRA Account under subsection (a) reduced by prior
reimbursements debited under subsection (b).
6.5 Carryover of Accounts
If any balance remains in the Participant's HRA Account for a Period of Coverage after all
reimbursements have been made for the Period of Coverage, such balance shall be carried over to
reimburse the Participant for Medical Care Expenses incurred during a subsequent Period of Coverage.
6.6 Reimbursement Procedure
a. Timing. In cases where a debit card tied to the HRA Account is not used; within 30 days a~er
receipt by the Administrator of a reimbursement claim from a Participant, the Employer will
reimburse the Participant for the Participant's Medical Care Expenses (if the Administrator
approves the claim), or the Administrator will notify the Participant that his or her claim has been
denied (see Section 8.1 regarding procedures for claim denials and appeals procedures). This
time period may be extended for an additional 15 days for matters beyond the control of the
Administrator, including in cases where a reimbursement claim is incomplete. The Administrator
will provide written notice of any extension, including the reasons for the extension, and will
allow the Participant 45 days in which to complete an incomplete reimbursement claim.
b. Claims Substantiation. A Participant who seeks Benefits may apply for reimbursement by
submitting an application in writing to the Administrator in such form as the Administrator may
prescribe, by no later than the last day of the third month following the close of the Plan Year in
which the Medical Care Expense was incurred, setting forth:
. The person or persons on whose behalf Medical Care Expenses have been incurred;
· The nature and date of the Medical Care Expenses so incurred;
. The amount of the requested reimbursement; and
. A statement that such Medical Care Expenses have not otherwise been reimbursed
and are not reimbursable through any other source and that Health Flexible Spending
Account coverage, if any, for such Medical Care Expenses has been exhausted.
The application shall be accompanied by bills, invoices or other statements from 'an
independent third party showing that the Medical Care Expenses have been incurred and the
amounts of such Medical Care Expenses, together with any additional documentation that the
Administrator may request.
c. Claims Denied. For reimbursement claims that are denied, see the appeals procedure in Article
VIII.
Page 6
6.7 Continuation of Coverage (CaC)
a. Introduction
The right to Continuation of Coverage was created by a federal law, the Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA). Continuation of Coverage can become available to
Participants and their Dependents when they would otherwise lose group health coverage. For
additional information about rights and obligations for Continuation of Coverage under the HRA
.plan and under federal law, Participants should review the Plan or contact TML
Intergovernmental Employee Benefits Pool, 1821 Rutherford Lane, Suite 300, Austin, Texas
78754, (512) 719-6500.
b. What Is Continuation of Coverage?
Continuation of Coverage is a continuation of Plan coverage when coverage would otherwise
end because of a life event known as a "qualifying event." Specific qualifying events are listed
later in this section. After a qualifying event, Continuation of Coverage must be offered to each
person who is a "qualified beneficiary." Participants, their Spouses and their Dependent children
could become qualified beneficiaries if coverage under the Plan is lost because of the qualifying
event. Under the Plan, qualified beneficiaries who elect Continuation of Coverage may be
required to pay the full cost of coverage plus an additional 2%, depending on the policy of the
Employer.
A Participant will become a qualified beneficiary if he or she loses coverage under the Plan
because either one of the following qualifying events happens:
1. The Participant's hours of employment with the Employer are reduced; or
2. The Participant's employment with the Employer ends for any reason other than the
Participant's gross misconduct.
The Spouse of the Participant will become a qualified beneficiary if he or she loses coverage
under the HRA Plan because any of the following qualifying events happens:
1. The Participant dies;
2. The Spouse's hours of employment are reduced;
3. The Spouse's employment ends for any reason other than his or her gross misconduct;
4. The Spouse becomes entitled to Medicare benefits (under Part A, Part B or both); or
5. The Spouse divorces 'or legally separates from the Participant.
Dependent children will become qualified beneficiaries if they lose coverage under the HRA
Plan because any of the following qualifying events happens:
1. The Participant dies;
2. The Participant's hours of employment with the Employer are reduced;
3. The Participant's employment with the Employer ends for any reason other than the
Participant's gross misconduct;
4. The Participant becomes entitled to Medicare benefits (Part A, Part B or both);
5. The Participant and his or her Spouse divorce or legally separate; or
6. The child no longer meets the definition of Dependent under this plan.
Sometimes, filing a proceeding in bankruptcy under Title II of the United States Code can be a
qualifying event. If a proceeding in bankruptcy is filed with respect to the Employer and the
bankruptcy results in the loss of coverage for any Retiree covered under the Plan, the Retiree
will become a qualified beneficiary with respect to the bankruptcy. The Retiree's Spouse,
surviving Spouse and Dependent children will also become qualified beneficiaries if bankruptcy
results in their losing coverage under the Plan.
c. When Is Continuation of Coverage Available? .
The Plan will offer Continuation of Coverage to qualified beneficiaries only after the
Administrator has been notified that a qualifying event has occurred. When the qualifying event
is the end of employment or reduction of hours of employment, death of the Participant,
commencement of a proceeding in bankruptcy with respect to the Employer or the Participant's
becoming entitled to Medicare benefits (under Part A, Part B or both), the Employer must notify
TML Intergovernmental Employee Benefits Pool of the qualifying event.
Page 7
d. Participant must Give Notice of Some Qualifying Events
For the other qualifying events (divorce or legal separation of the Participant and Spouse or a
Dependent child's losing eligibility for coverage as a Dependent child), the Participant must
notify the Administrator within 60 days after the qualifying event occurs. The Employee must .
provide this notice to: TML Intergovernmental Employee Benefits Pool, 1821 Rutherford Lane,
Suite 300, Austin, Texas 78754, (512) 719-6500. '
e. How Is Continuation of Coverage Provided?
Once the Administrator receives notice that a qualifying event has occurred, Continuation of
Coverage will be offered to each of the qualified beneficiaries. Each qualified beneficiary will
have an independent right to elect Continuation of Coverage. Participants may elect
Continuation of Coverage on behalf of their Spouses, and parents may elect Continuation of
Coverage on behalf of their children.
Continuation of Coverage is a temporary continuation of coverage. When the qualifying event is
the death of the Participant, the Participant's becoming entitled to Medicare benefits (Part. A,
Part B or both), divorce or legal separation of the Participant from his or her Spouse or a
Dependent child's losing eligibility as a Dependent child, Continuation of Coverage lasts for up
to a total of 36 months. When the qualifying event is the end of employment or reduction of the
Particpant's hours of employment, and the Participant became entitled to Medicare benefits less
than 18 months before the qualifying event, Continuation of Coverage for qualified beneficiaries
other then the Participant lasts until 36 months after the date of Medicare entitlement. For
example, if a Participant becomes entitled to Medicare 8 months before the date on which his or
her employment terminates, Continuation of Coverage for the Participant's Spouse and
Dependent children can last up to 36 months after the date of Medicare entitlement, which. is
equal to 28 months after the date of the qualifying event (36 months minus 8 months).
Otherwise, when the qualifying event is the end of employment or reduction of the Participant's
hours of employment, Continuation of Coverage generally lasts for only up to a total of 18
months. There are two ways in which this 18-month period of Continuation of Coverage can be
extended.
f. Disability Extension of 18-Month Period of Continuation of Coverage
If a Participant or a Dependent covered under the Plan is determined by the Social Security
Administration to be disabled and the Participant notifies TML Intergovernmental Employee
Benefits Pool in a timely fashion, the Participant and any of his or her Dependents may be
entitled to receive up to an additional 11 months of Continuation of Coverage for a total
maximum of 29 months. The disability must have started at some time before the 60th day of
Continuation of Coverage and must last at least until the end of the 18-month period of
Continuation of Coverage.
g. Second Qualifying Event Extension of 18.Month Period of Continuation of Coverage
If a Covered Individual who originally was covered under this Plan as a Dependent Spouse or
child experiences another qualifying event while receiving 18 months of Continuation of
Coverage, The Covered Individual may get up to 18 additional months of Continuation of
Coverage, for a maximum of 36 months, if notice of the second qualifying event is properly
given to the Plan, This extension may be available to the Spouse and any Dependent children
receiving Continuation of Coverage if the Participant or former Participant dies, becomes
entitled to Medicare benefits (Part A, Part B or both) or gets divorced or legally separated, or if
the Dependent child stops being eligible under the Plan as a Dependent child, but only if the
event would have caused the Spouse or Dependent child to lose coverage under the Plan had
the first qualifying event not occurred.
6.8 Coordination of Benefits; Health Flexible Spending Account to Reimburse First
Benefits under this Plan are intended to reimburse Participants' solely for Medical Care Expenses not
previously reimbursed or reimbursable elsewhere. To the extent that an otherwise eligible Medical Care
Expense is payable or reimbursable from another source, that other source shall payor reimburse prior
to payment or reimbursement from this Plan. Without limiting the foregoing, if the Participant's Medical
Care Expenses are covered by both this Plan and by a Health Flexible Spending Account, then this
Plan is not available for reimbursement of such Medical Care Expenses until after amounts available for
reimbursement under the Health Flexible Spending Account have been exhausted.
Page 8
ARTICLE VII. HIPAA PRIVACY AND SECURITY
7.1 Permitted Disclosure of EnrollmentlDisenrollment Information
The Plan may disclose to the Employer information on whether an individual is participating in the Plan.
7.2 Permitted Uses and Disclosures of Summary Health Information
The Plan may disclose Summary Health Information to the Employer, provided that the Employer
requests the Summary Health Information for the purpose of modifying, amending or terminating the
Plan. "Summary Health Information" means information (1) that summarizes the claims history, claims
expenses or type of claims experienced by individuals for whom a plan sponsor had provided health
benefits under a Health Plan; and (2) from which the information described at 42 CFR 9 164.514(b){2)(i)
has been deleted, except that the geographic information described in 42 CFR 9 164.514(b )(2)(i)(B)
need only be aggregated to the level of a five-digit ZIP code.
ARTICLE VIII. APPEALS PROCEDURE
8.1 Procedure If Benefits Are Denied Under This Plan
If a claim for reimbursement under this Plan is wholly or partially denied, appeals shall be reviewed in
accordance with the appeal provision in the Benefit Plan.
ARTICLE IX. RECORDKEEPING AND ADMINISTRATION
9.1 Administrator
The administration of this Plan shall be under the supervision of the Administrator. It is the principal duty
of the Administrator to see that this Plan is carried out, in accordance with its terms, for the exclusive
benefit of persons entitled to participate in this Plan without discrimination among them.
9.2 Powers of the Administrator
The Administrator shall have such duties and powers as it considers necessary or appropriate to
discharge its duties. It shall have the exclusive right to interpret the Plan and to decide all matters
thereunder, and all determinations of the Administrator with respect to any matter hereunder shall be
conclusive and binding on all persons. Without limiting the generality of the foregoing, the Administrator
shall have the following discretionary authority:
a. To construe and interpret this Plan, including all possible ambiguities, inconsistencies and
omissions in the Plan and related documents, and to decide all questions of fact, questions
relating to eligibility and participation, and questions of benefits under this Plan;
b. To prescribe procedures to be followed and the forms to be used by Eligible Employees and
Participants to enroll in and submit claims pursuant to this Plan;
c. To prepare and distribute information explaining this Plan and the benefits under this Plan in
such manner as the Administrator determines to be appropriate;
d. To request and receive from all Eligible Employees and Participants such information as the
Administrator shall from time to time determine to be necessary for the proper administration of
this Plan;
e. To furnish each Eligible Employee and Participant with such reports with respect to the
administration of this Plan as the Administrator determines to be reasonable and appropriate;
f To receive, review and keep on file such reports and information concerning the benefits
covered by this Plan as the Administrator determines from time-to-time to be necessary and
proper;
g. To appoint and employ such individuals or entities to assist in the administration of this Plan as
it determines to be necessary or advisable, including legal counsel and benefit consultants;
h. To sign documents for the purposes of administering this Plan, or to designate an individual or
individuals to sign documents for the purposes of administering this Plan;
i. To secure independent medical or other advice and require such evidence as it deems
necessary to decide any claim or appeal; and
Page 9
j. To maintain the books of accounts, records and other data in the manner necessary for proper
administration of this Plan and to meet any applicable disclosure and reporting requirements. ,
9.3 Reliance on Participant, Tables, etc.
The Administrator may rely upon the information submitted by an Eligible Employee or Participant as
being proper under the Plan and shall not be responsible for any act or failure to act because of a
direction or lack of direction by an Eligible Employee or Participant. The Administrator will also be
entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions
and reports that are furnished by accountants, attorneys or other experts employed or engaged by the
Administrator.
9.4 Provision for Third-Party Plan Service Providers
The Administrator may employ the services of such persons as it may deem necessary or desirable' in
connection with the operation of the Plan. Unless otherwise provided in the service agreement,
obligations under this Plan shall remain the obiigation of the Employer.
9.5 Fiduciary Liability
To the extent permitted by law, the Administrator shall not incur any liability for any acts or for failure to
act except for their own willful misconduct or willful breach of this Plan.
9.6 Health Benefits Plan Contracts
The Employer shall have the right (a) to enter into a contract with one or more vendors for the purposes
of providing any Benefits under the Plan; and (b) to replace any of such vendors or contracts. Any
dividends, retroactive rate adjustments or other refunds of any type that may become payable under
any such contract shall not be assets of the Plan but shall be the property of, and be retained by, the
Employer, to the extent that such amounts are less than aggregate Employer contributions toward such
contract.
9.7 Inability to Locate Payee
If the Employer is unable to make payment to any Participant or other person to whom a payment is due
under the Plan because it cannot ascertain the identity or whereabouts of such Participant or other
person after reasonable efforts have been made to identify or locate such person, then such payment
and all subsequent payments otherwise due to such Participant or other person shall be forfeited
following a reasonable time after the date that any such payment first became due.
9.8 Effect of Mistake
In the event of a mistake as to the eligibility or participation of an individual, or the allocations made to
the account of any Participant, or the amount of Benefits paid or to be paid to a Participant or other
person, the Administrator shall, to the extent that it deems administratively possible and otherwise
permissible under Code 9 105, the regulations issued thereunder or other applicable law, cause to be
allocated or cause to be withheld or accelerated, or otherwise make adjustment of, such amounts as
will, in its judgment, accord to such Participant or other person the credits to the HRA Account, or
distributions to which he or she is properly entitled under the Plan. Such action by the Administrator may
include withholding of any amounts due to the Plan or the Employer from Compensation paid by the
Employer.
ARTICLE X. GENERAL PROVISIONS
10.1 Expenses
All reasonable expenses incurred in administering the Plan are currently paid by the Employer.
10.2 No Contract of Employment
Nothing herein contained is intended to be or shall be construed as constituting a contract or other
arrangement between any Eligible Employee and the Employer to the effect that such Eligible Employee
will be employed for any specific period of time. All Eligible Employees are considered to be employed
at the will of the Employer.
Page 10
10.3 Amendment and Termination
This Plan has been established with the intent of being maintained for an indefinite period of time.
Nonetheless, the Administrator may amend or terminate all or any part of this Plan at any time for any
reason by resolution of the Administrator's Board of Trustees or by any person or persons authorized by
the Board of Trustees to take such action, and any such amendment or termination will automatically
apply to the Member Employers that are participating in this Plan.
10.4 Governing Law
This Plan shall be construed, administered and enforced according to the laws of the State of Texas to
the extent not superseded by the Code or any other federal law.
10.5 Code Compliance
It is intended that this Plan meet all applicable requirements of the Code, and of all regulations issued
thereunder. This Plan shall be construed, operated and administered accordingly, and in the event of
any conflict between any part, clause or provision of this Plan and the Code, the provisions of the Co'de
shall be deemed controlling, and any conflicting part, clause or provision of this Plan shall be deemed
superseded to the extent of the conflict.
10.6 No Guarantee of Tax Consequences
Neither the Administrator nor the Employer makes any commitment or guarantee that any amounts paid
to or for the benefit of a Participant under this Plan will be excludable from the Participant's gross
income for federal, state or local income tax purposes. It shall be the obligation of each Participant to
determine whether each payment under this Plan is excludable from the Participant's gross income for
federal, state and local income tax purposes, and to notify the Administrator if the Participant has any
reason to believe that such payment is not so excludable. '
10.7 Indemnification of Employer
If any Participant receives one or more payments or reimbursements under this Plan on a tax-free basis,
and such payments do not qualify for such treatment under the Code, such Participant shall indemnify
and reimburse the Employer for any liability it may incur for failure to withhold federal income taxes,
Social Security taxes or other taxes from such payments or reimbursements.
10.8 Non-Assignability of Rights
The right of any Participant to receive any reimbursement under this Plan shall not be alienable by the
Participant by assignment or any other method and shall not be subject to claims by the Participant's
creditors by any process whatsoever. Any attempt to cause such right to be so subjected will not be
recognized, except to such extent as may be required by law.
10.9 Headings
The headings of the various Articles and Sections (but not subsections) are inserted for convenience of
reference and are not to be regarded as part of this Plan or as indicating or controlling the meaning or
construction of any provision.
10.10 Plan Provisions Controlling
In the event that the terms or provisions of any summary or description of this Plan, or of any other
instrument, are in any construction interpreted as being in conflict with the provisions of this Plan as set
forth in this document, the provisions of this Plan shall be controlling.
10.11 Severability
Should a court of competent jurisdiction subsequently invalidate any part of this Plan, the remainder of
the Plan shall be given effect to the maximum extent possible.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing instrument comprising
the TML Intergovernmental Employee Benefits Pool HRA Plan, TML Intergovernmental Employee Benefits Pool
has caused this Plan to be executed in its name and on its behalf, on this day of 2005.
TML Intergovernmental Employee Benefits Pool
By:
Page 11