Ordinance 26790006.90000
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08/30/88
ORDINANCE NO. 2679
AN ORDINANCE OF THE CITY DF EDMONDS, WASHINGTON,
APPROVING AND ADOPTING A SALARY REDUCTION PLAN,
INSTRUCTING THE CITY CLERK AND CITY A':TORNEY TO
SUBMIT SAID PLAN TO THE IRS AND ESTABLISHING. A TIME
WHEN IT SHALL BECOMF EFFECTIVE.
WHEREAS, the City Council of the City nf Edmonds,
Washington, finds that a salary reduction program would provide a
benefit to its employees wit!iot,+- additional cost to the City, and
WHEREAS, said p.an must be both adopted by the City and
approved by the IRS, now, therefore,
THE: CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON DO
ORDAIN AS FOLLOWS:
Section 1. A salary reduction plan, in the form shown in
the attached Exhibit "A", incorporated by this reference as fully
as if herein set forth, is hereby approved.
Section 2. The City Clerk is instructed to provide a
certified copy of this ordinance and the attached Exhibit "A" to
the City Attorney. The City Attorney is hereby authorized to
submit the ordinance to the Internal Revenue Service for
approval.
Section 3. A summary of this ordinance consisting of the
title shall be published. This ordinance is a matter within the
legislative discretion of the City Council of the City of Edmonds
and is not subject to referendum. This ordinance shall be
effective upon the latter of five (5) days after t`:e date of
WSS508320 -I-
publication of the aforementioned su.nmary or upon n(,tification of
approval by *he Internal Revenue Service, whichever is later.
APPROVED
a
A AUG TEN
ATTEST/AUTHENTICATED: /
CIPY CLERK, JACQUELINE G. PARRETT
APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY:
BY:
FILED WITH THE CITY CLERK: August 30, 1988
PASSEL) BY THE CITY COUNCIL: September 6, 1988
PUBLISHED: September 11, 1988
E"FECTIVE DATE: September 16, 1988
ORDINANCE NO. 2679
WSS508320 -2-
i HE CITY OF EDMONDS
PRLMIUM ONLY PLAN
MASTER PLAN DOCUMENT
EFFECTIVE September 6. 1988
PRESENTED BY
STEPHEN KUNSTLER
FRED. S. JAMES & CO. OF WASHINGTON
1700 FOURTH AND BLANCHARD BUILDING
SEATTLE . WASHINGTON 98121
(206) 441-5900
AUGUST 30. 1988
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SECTION
SUBSECTION
1
1.1
1.2
2
2.i
2.2
3
3.1
3.2
4
4.1
4.2
4.3
4.4
4.5
5
5.'.
6
6.1
7
7.1
8
8.1
9
n i
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THE CITY OF EDMOND`'
PREMIUM ONL1 PLAN
MASTER PLAN DOCUMFNT
TABLE OF CONTENTS
FST^BLISHMENT OF THE PLAN
Establishment of the Plan
Applicability of the Plan
DEFINITIONS
Definitions
Gender and Number
ELIGIBILITY AND PARTICIPATION
Date of Participation
Duration
BENEFITS
Flexible Dollars
Benefits
Substitution
Notification of Employees
Rights Against the City
ELECTION OF BENEFITS AND APPLICATION
Election of Benefits
ACCOUNTS AND RECORDS OF THE PLAN
Accounts and Records
INCOMPETENCY
Incompetency
CONTRIBUTIONS AND FINANCING
Contributions and Financing
NON -ALIENATION OF BENEFITS
Non -Alienation
E3Er*f its
PAGE
1
1
2
3
4
4
5
6
6
6
6
8
ILIM
KIM
TABLE OF CONTENTS
(contirued)
SECTION
SUBSECTION
PAGE
10
ADMINISTRATION
10.1
The Committee
12
10.2
Fiduciaries
I2
10.3
Administration
12
10.4
Indemrification
13
10.5
Expenses of Administration
13
10.6
Rights of the Company to Inspect the
Records of the Plan and Trust Fund
13
11
CHANGES IN THE PLAN
11.1
Amendmen* and Termination of the Plan
14
11.2
Final Distributions
14
12
ILLEGALITY OF PARTICULAR PROVISION
12.1
Illegality of Particular Provision
5
13
EFFECT OF MISTAKE
13.1
Effect of Mistake
16
14
APPLICABLE LAWS
14.1
Applicable Laws
17
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SECTION 1. ESTABLISHMENT OF THE Pl4N
1.1 Establishment of the Plan
i
The City of Edmonds hereby establishes a premium only plait within the meaning of
Section 125 of the Internal Revenue Code of 1954, for its eligible Employees
effective as of July 1, 1987, to be known as "Tre City of Edmonds Premium Only
Plan" as set forth in this document.
;he purpose of this Plan is to provide eligible Employees a means of paying
their premiums on a salary reduction, pre-tlx basis for Employer Sponsored
medical, dental and vision benefits. Such benefits are provided in a manner
which affords tic Employee the discretion to allocate the Plan funds so that he
may utilize those benefits which are best suited to his needs and obtain them
with advantageous tax treatment where possible.
1.2 Applicability of the Plan
The provisions of this Plan are applicable only to the Employees of the li'v of
Edmonds in current employment o,. or after the Effective DaLe.
An Employee who retired or separated from employment prior to the Effective
Date, or beneficiaries of such an Employee, shall not be entitled to benefits
after the Effective Date under the provisions of this Plan anless the Employee
is rehired and then becomes eligible for benefits.
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1
SECTION 2. DEFINITIONS
2.1 Definitions
Whenever used in the Plan, the following terms shall have the respective
meanings set forth below unless otherwise expressly provided, and when the
uefirad meaning is intended, the term is capitalized.
A. The term "Beneficiary" means the person or person ;esignated by a
Participant pursuant to Subsection 6.1.
B. The term "Code" mears the Internal Revenue Code of 1954, as amended, anri
the regulations thereunder.
C. The term "Committee" means the administrative committee appointed by the
City of tdr_,nds as provided in Subsection 11.1.
D. The term "Covered Dependent" means (1) a spouse who is legally married to
the Participant and not separated from him under a court decree of legal
separation, or (2) an unmarried child of the Participant who is primarily
dependent upor the Participant for suloort and maintenance and is Pither
(a) under the ace of 19 or (b) under ale 25 and a full-time student or (c)
over 19 years of age and incapable of self-sustaining emp;oyment because of
developmental disability or physical handicap. "Child" means and includes
natural cw1 dren, adopted children, foster children and stepchildren who
depeid upon the Covered Employee for support and reside with them in a
parent -child relationship. This shall also include any person for whom the
Covered Employee has assumed legal responsibility and has tre appropriate
legal documents to this effect.
E. ine erm "City" means The City of Edmonds.
F. The term 'Effective Date" means July 1, 198/.
G. The term "Employee" means a common law employee of the City.
N. The term "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
I. The term "Participant" means an Employee who meets the conditions of
Subsection 3.1.
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J. The term 'Plan" means The City of Edmonds Premium Only Plan effective as of
, and as it may be amended from time to time.
K. The term "Plan Year" means the Plan Year from to
L. The term "Premium Only Dollars" means those dollar amounts specified in
Subsectior 4.1(a) which a Participant may choose to reduce his salary to
pay the premiums for the benefits described in Subsection 4.2.
M. The term "Salary Reduction Agreement" means an agreement between a
Participant and the City under which the City reduces the Participant's
current salary and the City contributes the amount of the red W ion to the
Plan on behalf of the Participant as a before -tax contribution.
2.2 Gender and Number
Except wher otherwise indicated by the context, any masculine terminology sha.,
al_ include the feminine and the definition of any term in singular shall also
include the plu^al.
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SECTION, 3. EL'GIBILITV AND PARTICIPATION
3.1 Date of Partici atic,n
An employee who is regularly scheduled to work 17� or more hours per week who
has been enrolled in the medical, dental and vision plan.
3.L Duration ,
A Participant shall cease to be a Participant when the conditions of Subsection
3.1 are no longer satisfied.
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SECTION 4. BENEFITS
4.1 Flexible Dollars
A. General: A Participant's Premium Only Dollars with respect to a Plan Yea
shall be an amount a Participant may elect prior to the beginning of the
Plan Year to have the City pay on his behalf to the Plan pursuant to a
Salary Reduction Agreement. These Premium Only Dollars shall be used for
qualified medical, dental and vision premiums that are incurred during thl
Plan Year to provide Participant and Dependent coverage.
The City reserves the right to reduce the amount of the Participant's
Salary Reduction Agreement in order to assure compliance with the require-
ments of the Internal Revenue Code for favorable tax treatment.
B. Form of Salary RedLCti0n Agreement: The Salary Reduction Agreement shall
be in a form which permits the City to reduce the Participant's current
salary and contribute the amount of the reduction to the Plan on behalf of
the Participant. The Salary Reduction Agreement shall apply only to
amounts of the Participant's pay that have not been actually or
constructively received as of the date of the Salary Reduction Agreement.
Any amounts so elected shall not become currently available to provide for
the type of coverage elected under this Plan. The amount of the Salary
Reduction shall be deemed to be a City contribution for purposes of the
Code.
C. The total Premium Only Dollars which may be used by a Participant pursuant
to paragraphs A and B shall be determined by the City prior to the
commencement of each Plan Year, and shall be a uniform amount for all
si^iilarly si.uated Participants.
D. Changes in Election: If a Participant has a qualified change in status due
to a family status change (e.g., birth, death, marriage, divorce, loss of
employment by spouse, or other change in employment status, such as a
reduction in hours) he may change the Salary Reduction Agreemert with
respect to the Plan Year in accordance with procedures adorr_ed by the
Committee.
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A Participant may apply his Premium Only Dullars toward the following:
A. Medical, Dental and Vision Premiums: Premium Only Dnllars may be used for
premium payments for coverage under the City's comprehensive medical, dental
and vision plans sponsored by the City providing benefits described in
section 213(d) of the Code. Premium payments shall be made on the
Participant's behalf directly by the City. Medical, dental and vision
benefits shall be payable pursuant to the terms of the insurance prlicies
and/or plans maintained by the City.
4.3 Substitution
The City shall be substituted for all rights of a Participant to recover
attorney fees against any adverse party. Participants shall do nothing to 1
prejudice such rights of the City and further they agree to do all acts
necessary to preserve and take advantage of such rights. If payment has been
made by the City in such instances and if the adverse party reimburses the
Participant directly, the City shall have the right to recover such payment from
any Participant.
4.4 Notification of Employees
The City shall communicate in writing to all eligible Employees the terms and
conditions of the Plan.
4.5 Rights Against the City
Neither the establishment of the Plan, nor any modification thereof, nor any
distributions hereunder, shall be ;onstrued as giving to any Participant or any
person whomsoever any legal or equitable rights against the City, its Board
members, or managers, or as giving any person the right to be retained in the
employ of the City.
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SEU IUN 5. ELFCTION OF BENEFITS
5.1 Election of Benefits
Election of Insurance Coverage: Prior to the commencement of a Plan Year, or
upon the commencement of participation in the Plan, if later, an Employee who is
eligible to participate in the Plan shall be automatically enrolled in the plan
unless said Employee designates on a form provided by the Committee that he does
not wish to participate. the Employee shall provide the Committee with all
information required by an insurer of such benefits.
9
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SECTION 6. ACCOUNTS AND RECORDS OF THE PLAN
6.1 Accounts and Records
The Committee ;hall establish and maintain record keeping accounts in the name
of each Participant at the time he first becomes a Participant in the Plan.
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SECTION 7. INCOMPETENCY
7.1 Incompetency
Every person receiving or claiming benefits under the Plan shall be presumed to
be mentally and physically competent and of age until the Committee receives a
wri+ten notice, in a form and manner acceptable to the Committee, that such per-
son is mentally or physically incompetent or a minor, and that a guardian, con-
servator or other person legally invested with the care of his estate has been
appointed. If, however, the Committee shall find that any person to whom a
benefit is payable under the Plan is unable to care for his affairs because of
any mental or physical incompetency or because he is a minor, any payment due,
unless a prior claim therefor, shall have been made by a duly appoirted legal
representative of his estate, may be paid to the spouse, a child, a parent, or a
brother or sister, or beneficiary or to any person with whom he is residing, or
to any other person or institution deemed by the Committee to have incurred
expense for such person otherwise entitled to payment.
In the event a guardian, conservator or other person legally vested with the
care of the estate of any person receiving or claiming benefits under the Plan
shall be appointed by a court of competent jurisdiction, payments shall be made
to such guardian or conservator or other person, provided that proper proof of
appointment is furnished in a form and manner suitable to the Committee. To the
extent permitted by law, any such payment so made shall be a complete discharge
of any liability therefor under the Plan.
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SECTION 8. CONTRIBUTIONS AND FINANCING
8.1 Contributions and Financing
Participants are not required to contribite to this Plan. All payment. will be
made directly by the Cit%, in accordance with 4.1(A).
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SECTION 9. NON -ALIENATION OF BENEFITS
9.1 Non -Alienation
No benefit payable under the provisions of the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge shall be void; nor shall such
benefits be in any manner liable for or subject to the debts, contracts,
liabilities, engagements, or torts of, or claims against. any Participant,
Covered Dependent or Beneficiary, including claims of creditors, claims for
alimony or suppert, and any like or unlike claims.
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SECTION 10. ADMINISTRATION
10.1 The Committee
The City shall appoint a Committee consisting of one or more persons who shall
serve at the pleasure of the City. Members of the Committee shall serve without
compensation, but they shall be entitled to reimbursement of thei, expenses
properly and actually incurred in an official capacity. The City may at any
time and from time to time remove any member of the Committee or appoint new
members. Any member may resign at any time upon 30 days' written notice in
writing delivered to the City. The members of the Committee may act at a
meeting or without a meeting, by a majority of the members ct the Committee at
the time in office. Whenever there are three or more members in office, a
majority of the members may act without giving notice to or consulting the
remaining members. The Committee may appoint a member as their secretary who
shall have such of the powers and responsibilities of the Committee relating to
the administration of benefits Lider the Plan as the Committee shall delegate.
The secretary shall serve at the pleasure of the Committee.
10.2 Fiduciaries
The Committee shall be the administrator of the Plan and the Committee .hall be
a named fiduciary under the Plan in accordance with ERISA. As the fiduciary,
the Committee shall discharge its duties under the Plan solely in the interests
of the Participants in the Plan and their Beneficiaries, and for the exclusive
purpose of providing benefits to Participants and their Beneficiaries, and
defraying the reasonable expenses of administering the plan.
10.3 Administration
The Committee shall administer the Plan and shall have the authority to exercise
the powers and discretion conferred on it by the Plan and shall have such other
powers and authorities necessary or proper for the administration of the Plan as
shall be determined from time to time by the City.
The Committee shall keep complete records and accounts necessary or proper to
administer the Plan and shall render su-h statements to the City as the City may
request.
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The Committee may adopt such rules and regulations for the administration of the
Plan as it shall consider advisable and shall have full power and authority to
enforce, construe, interpret and administer the Plan. All interpretations under
this Plan and all determination of fact made in good faith by the Committee
shall be binding on the Participants, their Beneficiaries, and all other persons
interested.
The Committee may adopt such rules and regulations for the conduct of its
business as it deems advisable and may employ such agents, attorneys,
accountants, investment advisors or other persons, who may also be employed by
the City, as in its opinion may be desirable for the administration of the Plan,
and may pay such person reasonable compensation. The Committee may delegate to
any agent, attorney, accountant or other person selected by it, any power or
duty vested in, imposed upon, or granted to it by the °lan.
10.4 Indemnification
The City and the Committee shall be indemnified by the City and saved harmless
against any claims, and the expenses of defending against such claims, resulting
from any action or conduct relating to the administration of the Plan except
claims arising from gross negligence, willful neglect, or willful misconduct.
The City reserves the right to select and approve counsel and also the right to
take the lead in any action in which it may be liable as an indemnitor.
10.5 Expenses of Administration
Any expense incurred by the City or the Committee relative to the administration
of the Plan shall be paid by the City.
10.6 Rights of the City to Inspect the Records of the Plan and Trust Fund
The City may at its own expense at ary time or from time to time cause an
examination of the books and records of the Plan to be made by such attorneys,
accountants, auditors or other agents as it shall select for that purpose and
may cause a report of such examination to be made.
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SECTION 11. CHANGES iN THE PLAN
11.1 Amendment and Termination of the Plan
The City expects the Plan to be permanent, but since future conditions affecting
the City cannot be anticipated or foreseen, the City must necessarily and does
hereby reserve the right to amend, modify or terminate the Plan at any time.
The City may snake any modifications or amendments to the Plan that are necessary
or appropriate to qualify or maintain the Plan as a plan meeting the
requirements of the applicable sections of the Code, or any applicable
provisions of ERISA. The Plan shall not at any time be used for or diverted to
purposes other than for the exclusive benefit of Participants and their
Beneficiaries, and no amendment shall divest any person of his interest therein,
except as may be required by the Internal Revenue Service or other governmental
authority, or give any person any assignable or exchangeable interest or any
right or thing of exchangeable value in advance of the time distribution is to
be made to such person.
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SECTION 12. ILLEGALITY OF PARTICULAR PROVISION
12.1 Illegality of Particular Provision
The illegality of any particular provision of this Plan shall not affect the
other provisions, but the Plan shall be construes in all respects as if such
invalid provision were omitted.
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SECTION 13. EFFECT OF MISTAKE
13.1 Effect of Mistake
In the event of a mistake as to the eligibility or participation of an Employee,
or the allocations made to the account of any Participant, or the amount of
distributions made or to be made to a Participant or other person, the Committee
shall, to the extent it deems possible, cause to be all cated 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
account or distributions to which he is properly entitled under the Plan.
t
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SECTION 14. APPLICABLE LAWS
:4.1 Applicable Laws
To the extent not preempted by ERISA, the Plan shall be governed by one
construed according to the laws of the State of Washington.
IN WITNESS WHEREOF, The City of Edmonds has caused this instrument to be
executed, effective as of September 6, 1988.
THE CITY OFIDMONDS
ATTEST:
dACQ ELINE G. PARRETT
CITY CLERK
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