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Home My WebLink AboutC-3819(C) - Basic Plan Document and Related Adoption Agreement for Retiree Medical ProgramADMINISTRATION RESOURCES CORPORATION BASIC PLAN DOCUMENT AMENDED AND RESTATED ADOPTION AGREEMENT FOR CITY OF NEWPORT BEACH This is the Adoption Agreement referred to in the Basic Plan Document ("Basic Plan Document'. This Adoption Agreement plus the Basic Plan Document, as amended from time to time, constitutes the Plan for the Adopting Employer. ADOPTING EMPLOYER INFORMATION: Employer Name: City of Newport Beach Address: 3300 Newport Boulevard City, State Zip: Newport Beach, CA 92663 Phone/Fax Number: 949-644-3127/949-644-3339 Contact Person: Name: Lauren Farley Title: Risk Manager Address: 3300 Newport Boulevard City, State Zip Newport Beach, CA 92663 Phone/Fax No.: 949-644-3302/949-644-3305 Email Address: Ifarley@city.newport-beach.ca.us EMPLOYEES AND/OR PARTICIPANTS: There were more than fifty (50) Employees in the last twelve months? ® Yes ❑ No There were more than twenty (20) Employees in the last calendar year? ® Yes ❑ No Check the one that applies (check only one boA): ❑ The Plan benefits active Employees only. ❑ The Plan benefits terminated Employees only. ® The Plan benefits both active Employees and terminated Employees. MISCELLANEOUS: Name of Plan: City of Newport Beach Medical Expense Reimbursement Plan Addendum(s) Attached: ® Yes ❑ No Joint Powers Agreement Attached: ❑ Yes ® No ARTICLE I: INTRODUCTION 1.1 Original effective date: January 1, 2006 mont ,ay, year Effective date of restatement: January 1, 2006 mont ,ay, year © Hitesman & Associates, PA 2007 Page 1 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) ARTICLE II: DEFINITIONS 2.8 Dependent means: ® "Dependent" for purposes of Section 152 of the Code determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B). ❑ Other (Describe): Note: Dependent cannot be defined more broadly than "dependent" for purposes of Section 105 of the Code. 2.12 Entry Date means: ❑ Date Employee becomes eligible to participate. ® Other (Describe): First day of full-time employment with the Adopting Employer. 2.14 Health Care Expense means: ® Maximum permitted by law. ❑ An expense which but for the deductible under a specified group medical coverage sponsored by the Adopting Employer, would have been paid by that group medical coverage. Specified group medical coverage: ❑ Other (Describe): Note: Health Care Expense cannot be defined more broadly than the description in IRS Revenue Ruling 2002-41 and IRS Notice 2002-45. If the definition is different for Participants once they terminate employment, who have chosen to spend down their accounts in lieu of COBRA, complete again: ® N/A — definition does not change. ❑ Maximum permitted by law. ❑ An expense which but for the deductible under a specified group medical coverage sponsored by the Adopting Employer, would have been paid by that group medical coverage. Specified group medical coverage: ❑ Other (Describe): 2.22 Plan Year is: January 1— December 31 ont77, ay, year 2.23 The initial "short" Plan Year is: n/a (—th, day, year 2.25 Spouse means: ® An individual who is legally married to a Participant and who is treated as a "spouse" under the Code. ❑ Other (Describe): Note: Must be more restrictive than Code. 2.26 Name of Trust: Trust Agreement Governing the Medical Expense Reimbursement Plan of the City of Newport Beach © Hitesman & Associates, PA 2007 Page 2 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) ARTICLE IV: ELIGIBILITY AND PARTICIPATION OF EMPLOYEES 4.1 Eligibility requirements are as follows (check and complete only those that apply): ❑ Age (Describe): ❑ Length of Service (Describe): ® Employment Classification (e.g., union, part-time, full-time) (Describe): Full-time Employee ❑ Coverage under a specified group medical plan (Describe): ❑ Other (Describe): 4.4 Termination of Contributions: ® As provided in the Basic Plan Document ❑ Other (Describe): 4.5 Termination of Participation: ® As provided in the Basic Plan Document ❑ Other (Describe): ARTICLE V: BENEFITS UNDER THE PLAN 5.2 Claims time period: Eighteen (18) months from the date the expense was incurred. 5.4 Timing of Reimbursement: ® As provided in the Basic Plan Document ❑ Other (Describe): 5.6 Post -death Access by Spouse & Dependents: ❑ As provided in the Basic Plan Document. ® Other (Describe): As provided in the Basic Plan Document, but eliminate the last sentence of Section 5.6(a). 5.8 Forfeiture occurs: ❑ As provided in the Basic Plan Document. ® Other (Describe): One year after the expiration of applicable claims run- out period. © Hitesman & Associates, PA 2007 Page 3 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) 5.8 Use of forfeitures: ❑ Pay administrative costs which would otherwise be paid from the Trust (i.e., Participants' HC Account balances) ❑ Contributed to the HC Accounts of all Participants on a per capita basis. ® Other (Describe): Pay administrative costs, if any not paid by the City, remainder to be contributed to accounts of Participants. Note: Under no circumstances will the amounts revert to the Adopting Em to er. 5.11 Which plan pays first: ❑ This Plan ® Flex plan ❑ Other (Describe): Note: The choice of which plan pays first cannot be left to the Participant. 5.12(d) Other Limitations, if any: n/a ARTICLE VI: CONTRIBUTIONS 6.1 Type of Contributions: ® Employer Contributions ® Mandatory Salary Reduction Contributions (Identify name and relevant provision of labor agreements requiring such contributions and attach copy of labor agreement) : ® Mandatory Contribution of Accumulated Paid Time Off, Vacation, Sick Leave, or Severance (Identify name and relevant provision of labor agreements requiring such contributions and attach copy of labor agreement) : Note: Any elective employee contributions will be returned within thirty days of discovery that the contribution was made by individual election. Further, any elective transfer of sick leave or other compensation accumulations will be returned to the employee within 30 days of discovery that the contribution was made by individual election. Back taxes or penalties may be owing. 6.1 Availability for reimbursement of HC Account balance: ❑ As soon as deposited ❑ Upon termination of employment ® Other (Describe): See attached Addendum A. © Hitesman & Associates, PA 2007 Page 4 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) 6.3 Direction of Investments: ❑ Plan Administrator ® Participant ❑ Other (Describe): ARTICLE XI: GENERAL PROVISIONS 12.6 Reasonable fees of Claims Administrator shall be paid as follows: ❑ Charged to the Plan and paid from the Trust, with the Trust being the sole source of such payment. ❑ Charged to the Plan and paid from the general assets of the Adopting Employer. ® Other (Describe): Charged to the Plan and paid from forfeitures held in the Trust; if such forfeitures are inadequate, paid from the general assets of the Adopting Employer. Bill to: Attention: Billing Address Phone Number Fax Number: City of Newport Beach Christine Musial P.O. Box 1768, Newport Beach, CA 92658-8915 949-644-3310 949-644-3305 If the payment is different for Participants once they terminate employment, complete again: ® N/A ❑ Charged to the Plan and paid from the general assets of the Adopting Employer. ❑ Charged to the Participant and paid from the Participant's HC Account. ❑ Other (Describe): 12.6 Reasonable fees of Trustee shall be paid as follows: ❑ Charged to the Plan and paid from the Trust, with the Trust being the sole source of such payment. ® Charged to the Plan and paid from the general assets of the Adopting Employer. ❑ Other (Describe): 12.7 Governing law — State of California (&W h9t one state ACKNOWLEDGEMENTS 1. Pursuant to Section 2.8(a), any collectively bargained Employees participating in this Plan participate because the collective bargaining agreement provides for coverage under this Plan. 2. This Plan has been duly adopted or authorized to be adopted by the Adopting Employer's Managing Body. 3. This Plan is a "covered entity" for purposes of the Privacy Rules under the Health Insurance Portability and Accountability Act (HIPAA). ADOPTING EMPLOYER: City of Newport Beach Date: By: Its: © Hitesman & Associates, PA 2007 Page 5 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) Addendum A Administration Resources Corporation Basic Plan Document Adoption Agreement for City of Newport Beach 6.1 A Participant shall have access to his/her HC Account prior to termination of employment in cases of hardship. Hardship access shall be allowed only if: (i) the Participant or the Participant's Spouse or Dependent has a terminal illness, or (ii) the Participant or the Participant's Spouse or Dependent incurs catastrophic uninsured Health Care Expenses in excess of $5,000 in a Plan Year. For this purpose, a "terminal illness" exists if the individual's physician certifies that the individual has suffered an illness or injury expected to result in such individual's death within five (5) years of the date of certification. Access to the HC Account in case of hardship is only for reimbursement of Health Care Expenses as defined in Section 2.14 of the Plan. © Hitesman & Associates, PA 2007 Page 6 Administration Resources Corporation Basic Plan Adoption Agreement (No 010107) AMENDMENT NO. 1 TO CITY OF NEWPORT BEACH BASIC PLAN DOCUMENT August 2007 The City of Newport Beach hereby amends the Basic Plan Document of its Medical Expense Reimbursement Plan, first effective January 1, 2006, as follows: 1) Definition of Employer Contribution, Section 2.11 will be amended to add the following sentences at the end thereof: "Mandatory employee contributions (i.e., mandatory salary reduction contributions and mandatory contributions of accumulated sick leave, vacation, and severance), which are not actually or constructively received by the Participant, will be considered Employer Contributions for purposes of the Plan." 2) Prohibition of Elective Employee Contributions. Section 6.2 is deleted and replaced with the following section: "Sec. 6.2. No Elective Employee Contributions. Except for contributions required for continuation coverage as described in Article IX, no contributions other than Employer Contributions are required nor will they be accepted. As provided in Section 2.11, Mandatory employee contributions (i.e., mandatory salary reduction contributions and mandatory contributions of accumulated sick leave, vacation, and severance), which are not actually or constructively received by the Participant, will be considered Employer Contributions for purposes of the Plan." This Amendment is effective retrospectively to the initial effective date of the Plan, January 1, 2006. Date: �' 3� U% By: r Its: Ci CITY OF NEWPORT BEACH BASIC PLAN DOCUMENT ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document TABLE OF CONTENTS ARTICLEI. INTRODUCTION.............................................................................................................. 1 ARTICLEII. DEFINITIONS................................................................................................................ 2 ARTICLEIII. PLAN SPONSOR............................................................................................................ 5 ARTICLE IV. ELIGIBILITY AND PARTICIPATION OF EMPLOYEES.......................................................... 6 ARTICLE V. BENEFITS UNDER THE PLAN........................................................................................... 8 ARTICLEVI. CONTRIBUTIONS........................................................................................................ 12 ARTICLE VII. CLAIMS DETERMINATIONS AND REVIEW OF DENIED CLAIM ......................................... 13 ARTICLE VIII. HIPAA PRIVACY AND SECURITY PROVISIONS............................................................. 17 ARTICLE IX. CONTINUATION COVERAGE......................................................................................... 21 ARTICLE X. PLAN ADMINISTRATION............................................................................................... 24 ARTICLE XI. PLAN AMENDMENT AND TERMINATION........................................................................ 25 ARTICLE XII. GENERAL PROVISIONS............................................................................................... 26 ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE I. INTRODUCTION 1.1 Establishment. An executed Adoption Agreement plus this Basic Plan Document constitute the "Plan" for a Plan Sponsor. The Effective Date of the Plan is set forth in the Adoption Agreement. 1.2 Purpose. The purpose of the Plan is to provide certain Employees with an opportunity to receive reimbursement for certain Health Care Expenses as provided in this Plan. It is the intention of the Plan Sponsor that the benefits provided and payable under this Plan be eligible for exclusion from the gross income of Participants as provided by Sections 105(b) and 106 of the Code. In addition, it is the intention of the Plan Sponsor that the Plan qualify as a Health Reimbursement Arrangement ("HRA' under IRS Revenue Ruling 2002-41 (June 26, 2002) and IRS Notice 2002-45 (June 26, 2002). 1.3 HIPAA Privacy and Security Rules. This Plan is a "covered entity" for purposes of the Privacy Rules and Security Rules as described in greater detail in Article VIII below. 1.4 Not ERISA Plan. This Plan is not an employee welfare benefit plan for purposes of ERISA. 1.5 Trust. This Plan is intended to be funded through a Trust, reflected in a separate document. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE II. DEFINITIONS The following words and phrases are used in this Plan and shall have the meanings set forth in this Article unless a different meaning is clearly required by the context or is defined within an Article. 2.1 Adoption Agreement means the separate agreement, or portions thereof, completed and executed by an Plan Sponsor setting forth the Plan Sponsor's selection of options under the Plan. 2.2 Basic Plan Document means this document, which together with an executed Adoption Agreement constitutes the Plan for a Plan Sponsor. 2.3 Claims Administrator means Administration Resources Corporation, designated by and under contract with the Plan Sponsor to perform certain administrative functions. 2.4 Code means the Internal Revenue Code of 1986, as amended from time to time. 2.5 Covered Individual means a Participant, Dependent of a Participant and the Spouse of a Participant, and any other person appropriately covered under the Plan. 2.6 Dependent means as defined in the Adoption Agreement. However, Dependent cannot be defined more broadly than "dependent" for purposes of Section 105 of the Code. 2.7 Employee means any person employed by the Plan Sponsor on or after the Effective Date, except that it shall not include a self-employed individual as described in Section 401(c) of the Code. All employees who are treated as employed by a single employer under Subsections (b), (c) or (m) of Section 414 of the Code are treated as employed by a single employer for purposes of this Plan. Employee does not include the following: (a) Any employee included within a unit of employees covered by a collective bargaining unit unless such agreement provides, whether specifically or generally, for coverage of the employee under this Plan; (b) Any employee who is a nonresident alien and receives no earned income from the Plan Sponsor from sources within the United States; and (c) Any employee who is a leased employee as defined in Section 414(n)(2) of the Code. 2.8 ePHI means PHI maintained or transmitted in electronic media, including, but not limited to, electronic storage media (i.e., hard drives, digital memory medium) and transmission media used to exchange information in electronic storage media (i.e., internet, extranet, and other networks). PHI transmitted via facsimile and telephone is not considered to be transmissions via electronic media. 2.9 Employer Contribution means a nonelective contribution made by the Plan Sponsor on behalf of each Participant in the Plan. The Employer Contribution is an amount that has not been actually or constructively received by the Participant, and it is made available to the Participant exclusively for reimbursement under the Plan. 2.10 Entry Date means the date as of which an Employee becomes a Participant in this Plan as set forth in the Adoption Agreement. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document 2.11 ERISA means the Employee Retirement Income Security Act of 1974 and regulations thereunder, as amended from time to time. Plans sponsored by public sector entities are not subject to ERISA. 2.12 HC Account means "health care account" and is the record keeping account established under the Plan for each Participant. 2.13 Health Care Expense means as defined in the Adoption Agreement, provided it is defined no more broadly than the description in IRS Revenue Ruling 2002-41 and IRS Notice 2002-45. Notwithstanding the foregoing, if the Plan Sponsor sponsors a cafeteria plan, Health Care Expense shall not include premiums that may be paid on a pre-tax basis in accordance with the terms of such cafeteria plan, which may include premiums for major medical coverage provided by the Employer and premiums for coverage under an insurance contract, health maintenance organization agreement, or other benefit agreement providing coverage issued on a non -group, individual basis. To the extent Health Care Expense is defined in the Adoption Agreement to include premiums for qualified long-term care insurance, the amount of such premium that will qualify as a Health Care Expense shall be limited to the portion that constitutes "eligible long- term care premiums" as defined in Section 213(d)(10) of the Code. 2.14 Health Reimbursement Arrangement ("HRA") means an employer funded medical reimbursement program within the meaning of IRS Revenue Ruling 2002-41 (June 26, 2002) and IRS Notice 2002-45 (June 26, 2002). 2.15 Highly Compensated Individual means an individual who is (1) one of the 5 highest paid officers, (2) a shareholder who owns more than 10 percent in value of the stock of the employer, or (3) among the highest paid 25 percent of all Employees, except (1) Employees who have not completed 3 years of service, (2) Employees who have not attained age 25, (3) pan: -time or seasonal Employees, (4) Employees not included in the plan who are included under a collective bargaining agreement, and (5) Employees who are nonresident aliens and who receive no earned income from a source within the United States. 2.16 HIPAA means the Health Insurance Portability and Accountability Act of 1996 and regulations thereunder, as amended from time to time. 2.17 Managing Body means the person or persons with authority to make decisions for the Plan Sponsor. 2.18 Participant means an Employee who has become and not ceased to be a Participant pursuant to Article IV. In addition, Participant includes persons "deemed" to be Participants under a specific provision of this Plan. 2.19 PHI means health information that: (a) Is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; (b) Relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (c) Either identifies the individual or reasonably could be used to identify the individual. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document 2.20 Plan means the Plan Sponsor's Plan as may be amended from time to time. It consists of a completed Adoption Agreement plus the Basic Plan Document. The name of the Plan is identified in the Adoption Agreement. 2.21 Plan Sponsor means state or political subdivision thereof that adopts this Plan by completing and executing an Adoption Agreement, which may include a joint powers agreement. 2.22 Plan Year means the twelve (12) month period beginning and ending as indicated in the Adoption Agreement. The initial Plan Year may be a "short" Plan Year beginning and ending as indicated in the Adoption Agreement. The records of the Plan will be kept based upon the Plan Year. 2.23 Privacy Rules means the Standards of Privacy of Individually Identifiable Health Information at 45 C.F.R. part 160 and part 164 at subparts A and E. 2.24 Representative means, for the claims and appeal procedures, the person entitled to act on behalf of the claimant with respect to a benefit claim or appeal. In order for the Plan to recognize a person as a Representative, written notification to that affect signed by the claimant and notarized must be received by the Plan. An assignment for purposes of payment is not designation of a "Representative." 2.25 Security Incident means "security incident" as defined in 45 C.F.R. Section 164.304, which generally defines "security incident" to include attempted or successful unauthorized access, use, disclosure, modification, or destruction of ePHI. 2.26 Security Rules means the Security Standards and Implementation Specifications at 45 C.F.R. Part 160 and Part 164, subpart C. 2.27 Spouse means "Spouse" as defined in the Adoption Agreement and within the requirements of the Code. 2.28 Trust means the trust identified in the Adoption Agreement, created for the purpose of accepting and holding Employer Contributions, and limited other contributions, made under the Plan. 2.29 Trustee means the person or persons identified as a "Trustee" under the Trust. ©HaynesHitesman, PC 2005 4 City of Newport Beach Basic Plan Document ARTICLE III. PLAN SPONSOR 3.1 Adoption of Plan. A Plan Sponsor may adopt the Plan by resolution duly adopted by its Managing Body, as represented and warranted in the Adoption Agreement, and upon execution of an Adoption Agreement. 3.2 Cessation of Employer Participation. A Plan Sponsor may cease to be an Plan Sponsor in accordance with Article X. 3.3 Recordkeeping and Reporting. A Plan Sponsor shall furnish, or arrange for the furnishing, to the Claims Administrator the information with respect to each Covered Individual necessary to enable the Claims Administrator to maintain records sufficient to determine the benefits due to or which may become due and to prepare and provide any reports required by law. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE IV. ELIGIBILITY AND PARTICIPATION OF EMPLOYEES 4.1 Eligibility Requirements. Each Employee shall be eligible to participate in this Plan upon meeting the eligibility requirements set forth in the Adoption Agreement. 4.2 Participant Status. An Employee who has met the eligibility requirements described in Section 4.1 shall be a Participant as of the Employee's Entry Date. 4.3 Conditions of Participation. As a condition of participation and receipt of benefits under this Plan, the Participant agrees to: (a) Observe all Plan rules and regulations; (b) Consent to inquiries by the Claims Administrator and Plan Sponsor with respect to any provider of services involved in a claim under this Plan; (c) Submit to the Plan Sponsor all notifications, reports, bills, and other information required by the Plan or which the Claims Administrator and may reasonably require; and (d) Cooperate with all reasonable requests of the Claims Administrator and Plan Sponsor that may by necessary for the proper administration of the Plan. Failure to do so relieves the Plan, Plan Sponsor, and Claims Administrator of any obligations under this Plan with respect to that Participant and any others claiming entitlement to benefits under this Plan through that Participant. 4.4 Termination of Contributions. Unless provided otherwise in the Adoption Agreement, a Participant shall cease to be eligible to receive contributions under this Plan at midnight of the earliest of the following dates: (a) The date of the death of the Participant; (b) The date of termination of the Participant's employment with the Plan Sponsor; (c) The date contributions cease pursuant to the terms of an applicable collective bargaining agreement; (d) The date of the Participant's failure to meet the eligibility requirements of Section 4.1, as may be amended from time to time in accordance with Article X; or (e) The date of termination of the Plan in accordance with Article X. Termination of contributions under this Plan shall not prevent a former Participant from receiving continuation coverage required by applicable law. 4.5 Termination of Participation. Unless provided otherwise in the Adoption Agreement, a Participant automatically ceases to be a Participant at midnight of the earliest of the following dates: ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document (a) The date of the death of the Participant; (b) The date of termination of the Participant's employment with the Plan Sponsor; (c) The date of the Participant's failure to meet the eligibility requirements of Section 4.1, as may be amended from time to time in accordance with Article X; or (d) The date the balance of the Participant's HC Account reaches zero, if no further contributions will be made to said account under Article VI; or (e) The date of termination of the Plan in accordance with Article X. Termination of participation in this Plan shall not prevent a former Participant (or his/her Spouse and/or Dependents) from receiving continuation coverage required by applicable law or ongoing access to the Participant's HC Account as provided in Section 5.6. 4.6 Deemed Participants. For certain purposes, persons that were not Employees are deemed to be Participants as required by law (e.g., a medical child support order). ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE V. BENEFITS UNDER THE PLAN 5.1 Health Care ("HC") Account. The HC Account will be credited with the Employer Contribution. A Participant's HC Account will be decreased from time to time in the amount of payments made to the Participant for Health Care Expenses. During his/her lifetime, the Participant shall be named as the "holder" of the HC Account. 5.2 Claims for Reimbursement. Claims for reimbursement under this Plan shall be made by completing a claim form and submitting such form to the Claims Administrator. The Claims Administrator is entitled to rely on the information provided on the claim form in processing claims under this Plan. A claim must be submitted for payment within the time period indicated in the Adoption Agreement. Where circumstances beyond the Participant's control prevent submission within the described time frame, notice of a claim with an explanation of the circumstances may be accepted by the Claims Administrator as a timely filing. Claims shall be determined in accordance with Article VII. 5.3 Incurred Expenses. To be reimbursable, the Participant must have incurred a Health Care Expense after his/her Entry Date. An expense is "incurred" when the Participant is provided with the care giving rise to the Health Care Expense, not when the service is billed or paid. Reimbursement shall not be made for future projected expenses. 5.4 Timing of Reimbursement. Unless provided otherwise in the Adoption Agreement, a Participant shall be reimbursed twice per month. All reimbursements shall be payable to the holder of the HC Account. 5.5 Maximum Reimbursement. The maximum reimbursement a Participant may receive at any time shall be the amount of the Participant's HC Account balance at the time the reimbursement request is processed. The maximum reimbursement requirements apply to the Participant, Spouse, and Dependents on an aggregate basis, not an individual basis. If a Participant's claim is for an amount that is more than the Participant's current HC Account balance, the excess, unreimbursed part of the claim will be carried into the subsequent month(s), to be paid as the balance of the Participant's HC Account becomes adequate. Notwithstanding the foregoing, the excess, unreimbursed portion of a claim will not be carried over into the subsequent month(s) if: (i) the claim has been pending at least eighteen (18) months; or (ii) no further contributions will be made to the Participant's HC Account under Article VI. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document 5.6 Termination of Eligibility. (a) Termination of Employment or Failure to Meet the Eligibility Requirements. (1) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, in the event a Participant's participation in the Plan terminates because of a termination of employment (in circumstances other than the Participant's death) or because the Participant fails to meet the eligibility requirements of Section 4.1, and the former Participant or the former Participant's Spouse and/or Dependents had incurred a Health Care Expense prior to the date of termination of participation that would have been reimbursable out of the Participant's HC Account but that has not been submitted for reimbursement, the former Participant may submit such Health Care Expense for reimbursement in accordance with Section 5.2. Such claims must be submitted within 30 days following the termination of the Participant's participation (the "claims run -out period"). (2) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the former Participant may continue to access the HC Account following termination of employment or cessation of eligibility for purposes of obtaining reimbursement of Health Care Expenses. Such access shall continue until the earliest to occur of the events identified in Section 4.5(a), (d), or (e). Such access shall also be provided to those individuals, if any, who at the time of the termination of the Participant's participation were the Participant's Spouse or Dependents. Such access to the Participant's HC Account by a Spouse and Dependents shall cease upon the earlier of the date of termination of the Participant's access or the date the Spouse ceases to be a Spouse or the Dependent ceases to be a Dependent, as the case may be. If continuation coverage is required by applicable law, the access described in this Section 5.6(a)(2) shall be provided only if offered as and selected in lieu of such continuation coverage. (b) Death. (1) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, in the event a Participant's participation in the Plan terminates because of the Participant's death and the former Participant, or the former Participant's Spouse and/or Dependents, had incurred a Health Care Expense prior to the Participant's death that would have been reimbursable out of the Participant's HC Account but that has not been submitted for reimbursement, the deceased Participant's estate may submit such Health Care Expense for reimbursement in accordance with Section 5.2. A certified copy of the deceased Participant's death certificate and proof that the person acting upon behalf of such Participant's estate has authority to do so must be submitted with such claims. Such claims must be submitted within 180 days following the death of the Participant (the "claims run -out period'. (2) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the deceased Participant's surviving Spouse, if any, may continue to access the Participant's HC Account for purposes of obtaining reimbursement of Health Care Expenses incurred by him/her until the earlier of: (i) the date on which the HC Account balance reaches zero; or (ii) the date on ©HaynesHitesman, PC 2005 9 City of Newport Beach Basic Plan Document which the surviving Spouse dies. No claim shall be paid to a surviving Spouse pursuant to this Section 5.6(b)(2) unless a certified copy of the deceased Participant's death certificate has been provided to the Claims Administrator. If continuation coverage is required by applicable law, the access described in this Section 5.6(b)(2) shall be provided only if offered as and selected in lieu of such continuation coverage. (3) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the deceased Participant's surviving Dependents, if any, may continue to access the Participant's HC Account for purposes of obtaining reimbursement of Health Care Expenses incurred by them until the earlier of: (i) the date on which the HC Account balance reaches zero; or (ii) the date the last surviving Dependent dies. No claim shall be paid to a surviving Dependent pursuant to this Section 5.6(b)(3) unless a certified copy of the deceased Participant's death certificate has been provided to the Claims Administrator. If continuation coverage is required by applicable law, the access described in this Section 5.6(b)(3) shall be provided only if offered as and selected in lieu of such continuation coverage. (4) No one other than the Participant's Spouse and Dependants may have access to the Participant's HRA Account following the Participant's death. (5) In the event the deceased Participant has no surviving Spouse or Dependents, upon the expiration of the 180 -day claims run -out period referenced above, the remaining balance of the deceased Participant's HC Account shall be forfeited in accordance with Section 5.8. (6) If a deceased Participant is survived by a Spouse or Dependents, following expiration of the 180 -day claims run -out period referenced above, the surviving Spouse, if any, shall be named as the "holder" of the deceased Participant's HC Account. If there is no surviving Spouse, or upon the surviving Spouse's death, the surviving Dependent(s) shall be named as "holder" of the deceased Participant's HC Account. 5.7 Nondiscrimination. This Plan is intended to be nondiscriminatory and to meet the requirements under applicable sections of the Code. If the Plan Sponsor determines before or during any Plan Year, that the Plan may fail to satisfy any nondiscrimination requirement imposed by the Code or any limitation on benefits provided to Highly Compensated Individuals, the Plan Sponsor may take such action as the Plan Sponsor deems appropriate, under rules uniformly applicable to similarly situated Participants, to assure compliance with such requirements or limitation. 5.8 HC Account Forfeitures. Unless provided otherwise in the Adoption Agreement, any amount remaining in a Participant's HC Account shall be forfeited following the later to occur of: (1) the expiration of the applicable claims run -out period following the termination of Participant's participation in the Plan, (2) the termination of any continuation coverage provided by the Plan under applicable law, or (3) the termination of any coverage provided by the Plan in lieu of continuation coverage required by applicable law. Amounts forfeited hereunder shall be used for the purposes described in the Adoption Agreement. However, under no circumstances will the amounts revert to the Plan Sponsor. 5.9 Medical Child Support Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize medical child support orders as required under applicable state law or under the Child Support Performance and Incentive Act of 1998. Participants involved in a divorce or ©HaynesHitesman, PC 2005 10 City of Newport Beach Basic Plan Document child custody matter should be directed to have their legal counsel contact the Claims Administrator. 5.10 Domestic Relations Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize and provide coverage under the Plan pursuant to a domestic relations order as required under applicable state law, unless providing such coverage causes the Plan to fail to meet the requirements imposed upon HRAs by the Code, including, but not limited to, any HRA guidance issued thereunder, and/or results in the imputation of income to the Participant. To the extent coverage required by a domestic relations order differs from continuation coverage otherwise available to the Spouse, it shall be provided in lieu of and as an alternative to such continuation coverage. Participants involved in a divorce matter should be directed to have their legal counsel contact the Claims Administrator. 5.11 Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'). Continued coverage shall be provided only if and as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'), as amended. To the extent not contained in Article IX, the Plan Sponsor shall, within the parameters of the law, establish uniform policies by which to provide such continuation coverage, including but not limited to providing alternative coverage in lieu of COBRA as provided in the regulations. There shall also be compliance with any state laws concerning continuation of health insurance coverage to the extent applicable and not preempted by federal law. 5.12 Coordination with Cafeteria Plan. To the extent the Plan Sponsor also sponsors a cafeteria plan within the meaning of Section 125 of the Code, and a Covered Individual incurs expenses eligible for reimbursement under both programs, which program pays first is described in the Adoption Agreement. However, the choice cannot be left to the Participant. 5.13 Further Limitations on Benefits. (a) This Plan does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are payable under any worker's compensation law or other employer, union, association or governmental sponsored group insurance plan. (b) This Plan does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are received by the Participant, the Participant's Spouse or the Participant's Dependent under any health and accident insurance policy or program, whether or not premiums are paid by the Plan Sponsor or by the Participant, the Participant's Spouse or the Participant's Dependent child. (c) Amounts reimbursed under a dependent care assistance program described in Section 129 of the Code shall not be reimbursed under this Plan. (d) Other limitations, if any, as set forth in the Adoption Agreement. ©HaynesHitesman, PC 2005 11 City of Newport Beach Basic Plan Document ARTICLE VI. CONTRIBUTIONS 6.1 Employer Contributions. The Plan Sponsor shall make a fixed contribution per Participant. The amount of the Employer Contribution may change from time to time. The Plan Sponsor will communicate the amount of the Employer Contribution and any restrictions on the use thereof to the Participants and the Claims Administrator. The Employer Contributions shall be available for reimbursement as described in the Adoption Agreement. 6.2 No Employee Contributions. Except for contributions required for continuation coverage as described in Article IX, no contributions other than Employer Contributions are required nor will they be accepted. 6.3 Trust. All contributions shall be held in the Trust. The investment of the assets of the Trust shall be directed as provided in the Adoption Agreement. ©HaynesHitesman, PC 2005 12 City of Newport Beach Basic Plan Document ARTICLE VII. CLAIMS DETERMINATIONS AND REVIEW OF DENIED CLAIM The following procedures apply: 7.1 Initial Claim Determination. (a) Time Frame for Decision. The decision maker must determine the claim within thirty (30) days of receipt of the claim. (b) Extension of Time. If the decision maker is not able to determine the claim within this time period due to matters beyond its control, the decision maker may take an additional period of up to fifteen (15) days to determine the claim. If this additional time will be needed, the decision maker must notify the claimant or the claimant's Representative prior to the expiration of the initial thirty (30) day time period for determining the claim. This extension is only available once. Notification: The notification of the need for the extension must include a description of the "matters beyond the Plan's control" that justify the extension and the date by which a decision is expected. (c) Incomplete Claims. There is no special rule if a claim is incomplete. Incomplete claims can be addressed through the extension of time described above. If the reason for the extension is the failure to provide necessary information and the claimant is appropriately notified, the decision maker's period of time to make a decision is "tolled." Tolling: The period of time in which the decision maker must determine a claim is suspended from the date upon which notification of the missing necessary information is sent until the date upon which the claimant responds. Notification: For this purpose, notification can be made orally to the claimant or the health care professional, unless the claimant requests written notice. The notification will include a time frame in which the necessary information must be provided. Once the necessary information has been provided, the decision maker must decide the claim within the extension described above. If the requested information is not provided within the time specified, the claim may be decided without that information. 7.2 Decision. (a) Notification of Decision. Written (or electronic) notification of the decision maker's determination must be provided to the claimant or the claimant's Representative. Such notification must be provided only where the decision is adverse. "Adverse" means: • A denial, reduction, or termination of, or • A failure to provide or make payment (in whole or in part) for a benefit. ©HaynesHitesman, PC 2005 13 City of Newport Beach Basic Plan Document (b) Adverse Decision. For adverse claim determinations, the notification shall reflect at least the following: • State the specific reason(s) for determination; • Reference specific Plan provision(s) upon which the determination is based; • Describe additional material or information necessary to complete the claim and why such information is necessary; • Describe Plan procedures and time limits for appeal of the determination, and the right to obtain information about those procedures; and • Disclose any internal rule, guidelines, protocol or similar criterion relied on in making the adverse determination (or state that such information will be provided free of charge upon request); and • Where the decision involves scientific or clinical judgment, disclose either (1) an explanation of the scientific or clinical judgment applying the terms of the Plan to claimant's medical circumstances, or (2) a statement that such explanation will be provided at no charge upon request. Notice of the adverse determination may be provided in written or electronic form. Electronic notices will be provided in a form that complies with applicable legal requirements. (c) Not Adverse Decision. For claim determinations that are not adverse, notice will be provided that informs the claimant or the claimant's Representative the claim has been accepted. 7.3 Access to Relevant Documents. In order (1) to evaluate whether to request review of an adverse determination, and (2) if review if requested, to prepare for such review, the claimant or the claimant's Representative will have access to all relevant documents. Relevant: A document, record or other information is "relevant" if it was relied upon in making the determination, or was submitted to the Plan, considered by the Plan, or generated in the course of making the benefit determination without regard to whether it was relied upon. 7.4 Appeal a Denied Claim. If a claim is denied, in whole or part, the claimant or the claimant's Representative may request the denied claim be reviewed. (a) Requesting Review. The claimant or the claimant's Representative has a period of 180 days to appeal the claim determination. The appeal request must be in writing and should be sent to the address specified in the notification of adverse decision described above. ©HaynesHitesman, PC 2005 14 City of Newport Beach Basic Plan Document (b) Submission & Consideration of Comments. The claimant or the claimant's Representative will have the opportunity to submit documents, written comments, or other information in support of the appeal. The review of the adverse benefit determinations will take into account all new information, whether or not presented or available at the initial determination. No deference will be afforded to the initial determination. (c) Consultation with Independent Medical Expert. In the case of a claim denied on the grounds of a medical judgment, a health professional with appropriate training and experience will be consulted. The health care professional who is consulted on appeal will not be the individual who was consulted, if any, during the initial determination or a subordinate of that individual. Disclosure: If the advice of a medical or vocational expert was obtained by the Plan in connection with the claim denial, the names of each such expert shall be provided, regardless of whether the advice was relied upon. (d) Time Frame for Decision. If claimant or the claimant's Representative requests a review of a denied claim within the time frame described above, the decision maker shall review of claim and make a determination no later than 60 days from the date the review request was received. (e) Decision. The review of the claim will be conducted by the Plan Sponsor. It will be made by a person different from the person who made the initial determination and such person will not be a subordinate of the original decision maker. The information in the administrative record shall be reviewed. Additional information submitted shall be considered. The decision shall be based upon that information plus the terms of the Plan and past interpretations of the same and similar Plan provisions. The decision maker may rely upon protocols, guidelines, or other criterion. (f) Notification of Decision. Written (or electronic) notification of the decision maker's determination must be provided to the claimant or the claimant's Representative. Such notification must be provided whether the decision is adverse or not adverse. "Adverse" means: • A denial, reduction, or termination of, or • A failure to provide or make payment (in whole or in part) for a benefit. (g) Adverse Decision. For adverse appeal determinations, the notification shall reflect at least the following: • State the specific reason(s) for determination; • Reference specific Plan provision(s) upon which the determination is based; • Disclose any internal rules, guidelines, protocol or similar criterion relied on in making the adverse determination (or state that such information will be provided free of charge upon request); • A statement indicating entitlement to receive upon request, and without charge, reasonable access to or copies of all documents, records or other information relevant to the determination; and ©HaynesHitesman, PC 2005 15 City of Newport Beach Basic Plan Document Where the decision involves scientific or clinical judgment, disclose either (1) an explanation of the scientific or clinical judgment applying the terms of the Plan to claimant's medical circumstances, or (2) a statement that such explanation will be provided at no charge upon request. Notice of the adverse determination may be provided in written or electronic form. Electronic notices will be provided in a form that complies with applicable legal requirements. (h) Not Adverse Decision. For claim determinations that are not adverse, notice will be provided that informs the claimant or the claimant's Representative the decision has been reversed, and the claim accepted. ©HaynesHitesman, PC 2005 16 City of Newport Beach Basic Plan Document ARTICLE VIII. HIPAA PRIVACY AND SECURITY PROVISIONS The Privacy Rules under HIPAA apply to this Plan. The Security Rules under HIPAA apply to this Plan beginning April 20, 2006. 8.1 Use and Disclosure of PHI. The Plan will use PHI to the extent of and in accordance with the uses and disclosures permitted by HIPAA. Specifically, the Plan will use and disclose PHI for purposes related to health care treatment, payment for health care and health care operations. The Plan will also use and disclose PHI as permitted by authorization of the subject of PHI. (a) Payment includes activities undertaken by the Plan to obtain premiums or determine or fulfill its responsibility for coverage and provision of Plan benefits that relate to an individual to whom health care is provided. These activities include, but are not limited to, the following: (1) Determination of eligibility, coverage and cost sharing amounts (for example, cost of a benefit, plan maximums and co -payments as determined for an individual's claim); (2) Coordination of benefits; (3) Adjudication of health benefits claims (including appeals and other payment disputes); (4) Subrogation of health benefit claims; (5) Establishing employee contributions; (6) Risk adjusting amounts due based on enrollee health status and demographic characteristics; (7) Billing, collection activities and related health care data processing; (8) Claims management and related health care data processing, including auditing payments, investigating and resolving payment disputes and responding to participant inquiries about payments; (9) Obtaining payment under a contract for reinsurance (including stop -loss and excess of loss insurance); (10) Medical necessity reviews or reviews of appropriateness of care or justification of charges; (11) Utilization review, including pre -certification, preauthorization, concurrent review and retrospective review; (12) Disclosure to consumer reporting agencies related to the collection of premiums or reimbursement (the following PHI may be disclosed for payment purposes: name and address, date of birth, Social Security number, payment history, account number and name and address of provider and/or health Plan; and (13) Reimbursement to the Plan. ©HaynesHitesman, PC 2005 17 City of Newport Beach Basic Plan Document (b) Health care operations include, but are not limited to, the following activities: (1) quality assessment; (2) Population -based activities relating to improving health or reduction health care costs, protocol development, case management and care coordination, disease management, contacting health care providers and patients with information about treatment alternatives and related functions; (3) Rating provider and Plan performance, including accreditation, certification, licensing or credentialing activities; (4) Underwriting, premium rating and other activities relating to the creation, renewal or replacement of a contract of health insurance or health benefits, and ceding, securing or placing a contract for reinsurance of risk relating to health care claims (including stop -loss insurance and excess of loss insurance); (5) Conducting or arranging for medical review, legal services and auditing function, including fraud and abuse detection and compliance programs; (6) Business planning and development, such as conducting cost -management and planning -related analyses related to managing and operating the Plan, including formulary development and administration, development or improvement of payment methods or coverage policies; (7) Business management and general administration activities of the Plan, including, but not limited to: a. Management activities relating to the implementation of and compliance with HIPAA's administrative simplification requirements; b. Customer service, including data analyses for policyholders; (8) Resolution of internal grievances. (9) Due diligence in connection with the sale or transfer of assets to a potential successor in interest, if the potential successor in interest is a covered entity under HIPAA or following completion of the sale or transfer, will become a covered entity. 8.2 Plan Sponsor's Obligations. Under HIPAA, the Plan may not disclose PHI to the Plan Sponsor (as defined by the Privacy Rules under HIPAA) unless the Plan Sponsor agrees to certain conditions. The Plan Sponsor agrees to the following conditions, thereby allowing the Plan to disclose PHI to the Plan Sponsor. The Plan Sponsor will: (a) Not use or further disclose PHI other than as permitted or required by the Plan document or as required by law; (b) Ensure that any agents, including a subcontractor, to whom the Plan provides PHI received from the Plan agree to the same restrictions and conditions that apply to the Plan Sponsor with respect to such PHI; ©HaynesHitesman, PC 2005 18 City of Newport Beach Basic Plan Document (c) Not use or disclose PHI for employment related actions and decision unless authorized by an individual; (d) Not use or disclose PHI in connection with any other benefit or employee benefit plan of the Plan Sponsor unless authorized by an individual; (e) Report to the Plan any PHI use or disclosure, that is inconsistent with the uses or disclosures provided for, of which it becomes aware; (f) Make available to an individual for inspection and copying PHI about the individual as allowed by and in accordance with HIPAA; (g) Make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA; (h) Make available the information required to provide an accounting of disclosures; (i) Make internal practices, books and records relating to the use and disclosure of PHI received from Plan available to the HHS Secretary for the purposes of determining the Plan's compliance with HIPAA; and, (j) If feasible, return or destroy all PHI received for the Plan that the Plan Sponsor still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible). 8.3 Plan Sponsor's Obligations under Security Rules. If the Plan Sponsor creates, receives, maintains, or transmits ePHI, the Plan Sponsor will: (a) Implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of ePHI; (b) Ensure that any agents, including subcontractors, to whom the Plan Sponsor provides ePHI or to whom ePHI is provided on behalf of Plan Sponsor implement reasonable and appropriate security measures to protect the ePHI; (c) Report to the Plan any Security Incident of which it becomes aware; and (d) Implement reasonable and appropriate security measures to ensure that only those persons identified in Section 8.4 have access to ePHI and that such access is limited to the purposes identified in Section 8.5. 8.4 Adequate separation between the Plan and the Plan Sponsor must be maintained. In accordance with HIPAA, only the following employees or classes of employees may be given access to PHI and ePHI: (1) The benefit manager; and, (2) Staff designated by the benefits manager. The Plan Sponsor shall identify, by name, these persons in writing to the Claims Administrator. ©HaynesHitesman, PC 2005 19 City of Newport Beach Basic Plan Document 8.5 Limitation of PHI and ePHI Access and Disclosure. The persons described in Section 8.4 above may only have access to, and use and disclose, PHI and ePHI for Plan administration functions that the Plan Sponsor performs for the Plan. 8.6 Noncompliance Issues. If the person described in Section 8.4 above does not comply with this Plan document, the Plan Sponsor shall provide a mechanism for resolving issues of noncompliance, including, but not limited to, disciplinary action against such person. ©HaynesHitesman, PC 2005 20 City of Newport Beach Basic Plan Document ARTICLE IX. CONTINUATION COVERAGE 9.1 Compliance with COBRA. Continued coverage for the Plan shall be provided only if and as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA'S as amended. 9.2 COBRA Policies and Procedures. To the extent not provided herein, the Plan Sponsor shall, within the parameters of the law, establish uniform policies by which to provide such continuation coverage. 9.3 Notification Procedures. The Plan requires the notifications described below with respect to continuation coverage under COBRA: (a) Notice of qualifying event. Under the law, a Covered Individual (or a representative acting on behalf of the Covered Individual) has the responsibility to inform the Plan of a divorce, legal separation, or a child losing dependent status under the Plan (the "qualifying event') within sixty (60) days of the latest of: (i) the date of the qualifying event; (ii) the date coverage would be lost because of the qualifying event; or (iii) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notification by telephone is not acceptable. Electronic (including emailed or faxed) or hand -delivered notifications are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above. The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the qualifying event; (4) include a detailed description of the event; (5) identify the effective date of the event; and (6) be accompanied by any documentation providing proof of the event (i.e., the divorce decree). If no notification is received within the required time period, no continuation coverage will be provided. If the notification is incomplete, it will be deemed timely if the Plan is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no continuation coverage will be provided. (b) Notice of second qualifying event. A Covered Individual (or a representative acting on behalf of the Covered Individual) must notify the Plan of the death of the employee, divorce or separation from the employee, or a dependent child's ceasing to be eligible for coverage as a dependent under the Plan, if that event occurs within the eighteen (18) month continuation period (or an extension of that period for disability or for pre- termination Medicare entitlement). The notification must be provided within sixty (60) days after such a second qualifying event occurs in order to be entitled to an extension of the continuation period. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notice by telephone is not acceptable. Electronic ©HaynesHitesman, PC 2005 21 City of Newport Beach Basic Plan Document (including emailed or faxed) or hand -delivered notifications are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above. The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the initial qualifying event and who are receiving COBRA coverage at the time of the notice; (4) identify the nature and date of the initial qualifying event that entitled the Covered Individuals to COBRA coverage; (5) include a detailed description of the event; (6) identify the effective date of the event; and (7) be accompanied by any documentation providing proof of the event (i.e., the divorce decree). If no notification is received within the required time period, no extension of the continuation period will be provided. If the notification is incomplete, it will be deemed timely if the Plan is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no extension of the continuation period will be provided. (c) Notice of disability. A Covered Individual (or a representative acting on behalf of the Covered Individual) must notify the Plan when a Covered Individual has been determined to be disabled under the Social Security Act within sixty (60) days of the latest of: (i) the date of the disability determination; (ii) the date of the qualifying event; (iii) the date coverage would be lost because of the qualifying event; or (iv) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. Notwithstanding the foregoing, notification must be provided before the end of the first eighteen (18) months of continuation coverage. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notice by telephone is not acceptable. Electronic (including emailed or faxed) or hand -delivered notices are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above. The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the initial qualifying event and who are receiving COBRA coverage at the time of the notice; (4) identify the nature and date of the initial qualifying event that entitled the qualified beneficiaries to COBRA coverage; (5) state the name of the disabled Covered Individual; (6) identify the date upon which the disabled Covered Individual became disabled; (7) identify the date upon which the Social Security Administration made its determination of disability; and (8) include a copy of the determination of the Social Security Administration. ©HaynesHitesman, PC 2005 22 City of Newport Beach Basic Plan Document If no notification is received within the required time period, no extension of the continuation period will be provided. If the notification is incomplete, it will be deemed timely if the Plan is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no extension of the continuation period will be provided. If such person has been determined under the Social Security Act to no longer be disabled, the person must notify the Plan of that determination within thirty (30) days of the later of: (i) the date of such determination; or (ii) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. The notification must be in writing and be mailed to the Plan. Regardless of when the notification is provided, continuation coverage will terminate retroactively on the first day of the month that begins thirty (30) days after the date of the determination, or the end of the initial coverage period, if later. If the notification is not provided within the required time, the Plan reserve the right to seek reimbursement of any benefits provided by the Plan between the date coverage terminates and the date the notification is provided. (d) Notice of Coverage Under Another Group Health Plan or Medicare. A Covered Individual must notify the Plan immediately if any Covered Individuals receiving continuation coverage actually become covered by another group health plan or Medicare. Regardless of when such notification is provided, coverage will terminate retroactively to the date of the coverage under the other group health plan or Medicare. If, for whatever reason, a Covered Individual on continuation coverage receives any benefits under the Plan after coverage is to cease under the foregoing rule, the Plan reserve the right to seek reimbursement from such Covered Individual. ©HaynesHitesman, PC 2005 23 City of Newport Beach Basic Plan Document ARTICLE X. PLAN ADMINISTRATION 10.1 Rules and Decisions. Except as otherwise specifically provided herein, the Plan Sponsor may adopt such rules and procedures as it deems necessary, desirable, or appropriate. All rules and decisions of the Plan Sponsor shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Plan Sponsor shall be entitled to rely upon information furnished by a Participant or legal counsel, or other entity acting on behalf of the Plan Sponsor. 10.2 Other Powers and Duties of the Plan Sponsor. The Plan Sponsor shall also have such other duties and powers as may be necessary to discharge its duties under the Plan including, but not limited to, discretion to construe and interpret the Plan in a non-discriminatory manner, to decide all questions of eligibility and to determine all questions arising in the administration and application of the Plan. ©HaynesHitesman, PC 2005 24 City of Newport Beach Basic Plan Document ARTICLE XI. PLAN AMENDMENT AND TERMINATION 11.1 Amendment by Plan Sponsor. The Plan Sponsor reserves the right to amend, alter, or wholly revise this Plan or the Adoption Agreement, prospectively or retrospectively, at any time by the action of its Managing Body, and the interest of each Participant is subject to the powers so reserved. The Plan Sponsor expressly may amend, alter or wholly revise this Plan or the Adoption Agreement if it determines it necessary or desirable, with or without retroactive effect, to comply with the law. Such changes shall not affect any right to benefits that accrued prior to such amendments. Such amendment shall be made in writing and shall be delivered promptly to the Claims Administrator and Trustee. 11.2 Plan Sponsor's Right to Terminate. Although the Plan Sponsor expects the Plan to be maintained for an indefinite time, the Plan Sponsor reserves the right to terminate the Plan or any portion of the Plan at any time. In the event of the dissolution, merger, consolidation, or reorganization of the Plan Sponsor, the Plan shall terminate unless the Plan is continued by a successor to the Plan Sponsor in accordance with the resolution of such successor's Managing Body. Such termination shall not affect any right to benefits that accrued prior to such termination. Such action shall be made in writing and shall be delivered to the Claims Administrator and Trustee at least ninety (90) days prior to the effective date of the termination. ©HaynesHitesman, PC 2005 25 City of Newport Beach Basic Plan Document ARTICLE XII. GENERAL PROVISIONS 12.1 No Reversion to the Plan Sponsor. No part of the corpus or income of the Trust shall revert to the Plan Sponsor or be used for or diverted to, purposes other than the exclusive benefit of participants and other persons entitled to benefits under the Plan. 12.2 Persons Dealing With Trust. No person dealing with the Trust shall be required to see to the application of any money paid or property delivered to the Trust, or to determine whether or not the Trust is acting pursuant to any authority granted to them under the Trust. 12.3 Non -Alienation of Benefits. Subject to Sections 5.9 and 5.10 hereof, benefits payable under this Plan shall not be subject to anticipation, alienation, sale, transfer, execution, or levy of any kind either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Participant, prior to actually being received by the person entitled to the benefit under the terms of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable under the Plan shall be void. The Plan Sponsor and/or Claims Administrator shall not in any manner be made liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan. 12.4 Action by Plan Sponsor. Whenever the Plan Sponsor, under the terms of this Plan, is permitted or required to do or perform any act or matter or thing, it shall be done and performed by the Managing Body of the Plan Sponsor or such representatives of the Plan Sponsor as the Managing Body may designate. 12.5 No Guarantee of Tax Consequences. Notwithstanding any provision in this Plan to the contrary, this Plan makes no commitment or guarantee that any amounts paid to or on behalf of a Participant under this Plan will be excludable from the Participant's gross income for federal or state income tax purposes. It shall be the obligation of each Participant to determine whether each payment is excludable from the Participant's gross income for federal and state income tax purposes, and to notify the Plan Sponsor if the Participant has reason to believe that any such payment is not so excludable. 12.6 Compensation and Expenses. The Claims Administrator shall be entitled to reasonable fees for its services hereunder, which shall be described in an Administrative Services Agreement between the Claims Administrator and the Plan Sponsor. Such fees and any expenses incurred by the Claims Administrator in connection with the Plan (including expenses and fees of persons hired or employed by them) shall be paid as described in the Adoption Agreement. The compensation of the Trustee, as provided for in the Trust document, shall also be paid as described in the Adoption Agreement. 12.7 Governing Law. This Plan shall be construed and enforced according to the laws of the State identified in the Adoption Agreement, except to the extent preempted by federal law. 12.8 Family and Medical Leave Act of 1993 ("FMLA"). Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with FMLA, to the extent the Plan Sponsor is subject to such law. 12.9 Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"). Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with USERRA and other veterans rights statutes. ©HaynesHitesman, PC 2005 26 City of Newport Beach Basic Plan Document 12.10 Plan Not a Contract of Employment. The Plan is not an employment agreement and does not assure the continued employment of any Employee or Participant for any period of time. Nothing contained in the Plan shall interfere with the Plan Sponsor's right to discharge an Employee at any time, regardless of the effect such discharge may have upon the individual as a Participant in this Plan. 12.11 Medicare Secondary Payer. The Plan shall comply with the Medicare secondary payer rules found in 42 U.S.C. § 1395y. In general, the Plan shall pay benefits primary to Medicare if any one of the following conditions is satisfied: (a) the Plan Sponsor employed twenty (20) or more employees for each working day in at least twenty (20) weeks in either the calendar year in which the claim is made or the preceding calendar year, the Participant is employed by the Plan Sponsor, and the Participant is actually covered by Medicare by reason of obtaining the age of 65; (b) the Plan Sponsor employed 100 or more employees on at least 50% of its regular business days during the calendar year preceding the year in which the claim was made, the Participant is employed by the Plan Sponsor, and the Participant is actually covered by Medicare by reason of disability; and (c) the Participant is entitled to Medicare by reason of end stage renal disease and the claim is made during the twelve (12) month period beginning in the first month in which such Participant is entitled to benefits under Medicare (regardless of whether he/she applies for such benefits). In all other cases, the Plan shall pay benefits secondary to Medicare. 12.12 Medicare Part D. The Plan shall cooperate with Medicare Part D prescription drug plans (and Covered Individuals who are enrolled in such plans) with respect to coordination of benefits between he Plan and the Medicare Part D plan, including the provision of information to the Medicare Part D plan (or the Covered Individuals) regarding the benefits provided under the Plan for costs covered by the Medicare Part D plan. Covered Individuals enrolled in Medicare Part D plans shall cooperate with the Plan so that the Plan may perform its obligations under this subsection. ©HaynesHitesman, PC 2005 27 City of Newport Beach Basic Plan Document CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. It December 13, 2005 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Dennis Danner, Director, x3123, ddanner (aD city. newport- beach. ca. us Human Resources Department Barbara Ramsey, Director, x3300, bramsey @city.newport- beach.ca.us SUBJECT: Contracts and Related Documents Initiating Vendor Support of Retiree Medical Program RECOMMENDATION: 1. Approve the Group Funding Agreement (Contract) (and related Plan Sponsor Submission Information) with ING Life Insurance and Annuity Company, the Investment Manager. 2. Approve the Trust Agreement with ING National Trust, the Trustee. 3. Approve the Administrative Services Agreement (Contract) with Administrative Resources Corporation (ARC), the Plan Supervisor. 4. Approve the Basic Plan Document and related Adoption Agreement. 5. Authorize the City Manager to sign the above documentation on the City's behalf. 6. Appoint the Administrative Services Director (Chair), Human Resources Director (Vice Chair), Assistant City Manager, and Deputy Administrative Services Director as members of the City's Retiree Medical and Deferred Compensation Committee. 7. Authorize a Budget Amendment appropriating $75,000 from unappropriated General Fund Balance to Account Numbers 0510 -8080 ($15,000) and 6310 -8075 ($60,000). DISCUSSION: This action represents the final step in implementing the program change to the City's retiree medical program, as authorized by the City Council several months ago. At that time, the City Council approved conversion of the City's Retiree Medical Program from a Contracts and Related Documents Initiating Vendor Support of Retiree Medical Program December 13, 2005 Page 2 defined benefit -type plan to a defined contribution -type (i.e., individual account) plan. It will be several years before the transition will be fully completed, but it will begin with the first pay period in 2006. The new plan and conversion procedure have been successfully negotiated with all Employee Associations as part of the Meet and Confer process. In response to an RFP, several vendor proposals for administration of the new plan were received. City staff and outside counsel, Shana Saichek of Carney, Badley, and Spellman, have analyzed the proposals and conducted detailed discussions with the lead firms. Selections have been made, and the resulting documents are now ready for City Council approval. This is a milestone for the City and its employees - the culmination of a series of program adjustments intended to address an unfunded liability for the City and eliminate problems with the benefit provided to employees by the old plan. Nationally, providing future funding for long- established Retiree Medical programs is becoming very problematic, in both the public and private sectors. A recent front page article in the Wall Street Journal addressed exactly that issue, and the Government Accounting Standards Board (GASB) has established increased reporting requirements regarding unfunded liabilities for these programs. Among other things, these unfunded liabilities can potentially affect a state or local agency's bond ratings. It is fortuitous that the City chose to begin addressing our own program's unfunded liability several years ago, before the problem became worse. That timely action, along with a cooperative effort by the City and the Employee Associations, has resulted in this new program. The new defined contribution format eliminates unfair provisions of the previous program, enables enhancements to the program for the majority of City employees, and caps the City's unfunded liability for the old program. In addition, staff has developed a budgeting plan to eliminate this remaining unfunded liability over a maximum period of 25 years, with steadily decreasing contributions required during that time. Since the City's only financial obligation for the new program will be on a pay -as- you-go basis, while employees are still on active duty, there will be no unfunded liability. It was the intention from the inception of this plan design to outsource many aspects of the administration of this program. By providing trust services and investment alternatives, as well as managing individual investment accounts, ING will be filling a void in the technical capability that would not be prudent or cost effective to accomplish by in -house staff. Claims administration and handling by ARC is also an ideal candidate for outsourcing; the City already works with another vendor in a similar context. Although the transition and implementation process of this program will be challenging for all concerned, in the long run City staff time currently dedicated to retiree medical issues will be freed up for other requirements. The price structure for these contracts is such that actual cost will vary over a fairly tight range, depending on participation and investment levels, as well as other specified services that will be provided from time to time. Administration fees are based on a per Contracts and Related Documents Initiating Vendor Support of Retiree Medical Program December 13, 2005 Page 3 capita charge; and investment fees depend on average account balances and other variables. The City's share of the cost for the remainder of this fiscal year is projected to be approximately $75,000. The annual operating cost for the first year will be approximately $95,000. Over time, this cost is projected to rise slightly, and then eventually decline to less than $20,000 (in today's dollars). This is consistent with the cost estimate that was provided during the City Council's earlier review of the program conversion and MOU discussions. Although the funds to administer this program were not appropriated in the current year's budget, that amount was included as part of our fund balance estimates. The current action would appropriate those funds. This newly appointed Retiree Medical and Deferred Compensation Committee will designate primary points of contact for outside vendors supporting the City's Retiree Medical and Deferred Compensation programs with regard to day to day administrative matters. The Committee itself will have responsibility to make occasional changes in authorized investment options, decide on plan design changes, and implement modifications necessitated by changes in IRS or other governing law and regulations. Environmental Review: The City Council's approval of this agenda item does not require environmental review. Public Notice: This agenda item may be noticed according to the Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Funding Availability: Available in General Fund. Alternatives: Do not approve the contracts, and direct staff to find another way to administer the program. Prepared by: Submitted by: Richard Ao� Deputy Administrative Services Director Dennis Danner Administrative Services Director Barbara Ramsey Human Resources Director Attachments: Application and Group Funding Agreement (Contract) (and related Plan Sponsor Submission Information) with ING Life Insurance and Annuity Company, the Investment Manager. Trust Agreement with ING National Trust, the Trustee. Administrative Services Agreement (Contract) with Administrative Resources Corporation (ARC), the Plan Supervisor. Basic Plan Document and Adoption Agreement. Budget Amendment. G ._ - Application IN For Funding Agreement ( "Contract') Non -ERISA Governmental Health Reimbursement Arrangement ING Life Insurance and Annuity Company 151 Farmington Avenue Hartford, CT 05155 -8022 Contract Contract Holder/Trustee Name Holder I Cit of Newport Beach Information Address (No. & Street/ PO Box) 3300 Newport Boulevard /P.O. Box 1768 CityRown State Zip Code Newport Beach CA 92663 Plan Sponsor Plan Sponsor Name Information City of Newport Beach Address (No. & Street/ PO Box) 3300 New ort Boulevard /P.O. Box 1768 Citylfown State Zip Code Newport Beach CA 92663 Employer Tax Identification No. Trust Tax Identification No. 95- 6000751 Account Type of Contract Information ® Allocated ❑ Unallocated Will this Contract change or replace any existing Life Insurance or Annuity Contracts? ❑ Yes C9 No Other Financial Provider Name Account No. Date to be cancelled Right of For allocated contracts, do participants have the right to elect investment allocations in Participant Accounts? Investment Selection 5d Yes ❑ No Anti -Fraud Certain states require the following statement: Any person who knowingly presents a false or fraudulent claim for Statement payment of a loss or benefit or knowingly presents false information in an application for insurance may be guilty of a crime and may be subject to fines and confinement in prison. Funding Is the Plan also funded with Investment Options through another Financial Provider? ❑ Yes ® No Information If Yes, please identify Provider and type of Investment Option. Provider Type of Investment Option 300 -HRA -12/04 300 HRA (1 Z104) Page 1 of 2 — Incomplete without all pages Signatures & Certification I understand that amounts withdrawn from the Fixed Account may be subject to a market value adjustment and a withdrawal charge, as specified in the Contract. I further understand that payments and account values (if any), when based on the investment experience of a separate account, are variable and not guaranteed as to fixed dollar amount. We, as Contract Holderrfruslee and Plan Sponsor, acknowledge receipt of the current information book for the group funding agreement applied for and the current prospectuses pertaining to all of the available Investment Options. The Contractholdedrrustee /Plan Sponsor acknowledge that they have received the offering materials and/or prospectuses for the product, and have read and understand them and further state that based upon these materials, they are making an independent judgment, understand and have evaluated the risks associated with this type of investment, and are capable of making investment decisions. The Effective Date of the Contract is the Contract Holder/Trustee's date of signature below. Please check one. %Directed Trust Account, ING National Trust (115 only) ❑Sed- Trusteed (VEBA or 115) Signature and Title and State Where Date (mmlddlyyyy) Witness's Signature Date (mmldd/yyyy) Plan Sponsor Signature and Title and State Where (mmldd/yyyy) 300 HRA (12/04) 300 -HRA -1 2/04 Page 2 of 2 — Incomplete without all pages Sponsor Special Requests /Instructions Producer Information Field Office Name Producer Name Office Code Producer Code Percentage of Participation Producer's Note Do you have any reason to believe any existing Life Insurance or Annuity Contracts will be modified or replaced if this Contract is issued? ❑ Yes ❑ No Producer's Signature Producer's Name (please print) License No. (if applicable) Hartford Service Center Use Only Comments Corrections and amendments: Errors and omissions may be corrected by the Company but no change in Plan, classification, amount, or extra benefits shall be made without written consent of the Contract Holder/Trustee and Plan Sponsor. 300 HRA (12/04) 300 -HRA -1 2/04 Page 2 of 2 — Incomplete without all pages INGAO) ING Life Insurance and Annuity Company Home Office: 151 Farmington Avenue Hartford, Connecticut 06156 1- 888- 410 -9482 Group Funding Agreement (Nonparticipating) GFA -HRA (12/04) INGjk ING Life Insurance and Annuity Company 151 Farmington Avenue Hartford, Connecticut 06156 1 -888 -410 -9482 You may call the toll -free number shown above to request information about this Contract. ING Life Insurance and Annuity Company, a stock company herein called the Company, we, us, our, will pay benefits according to the terms and conditions set forth in this Group Funding Agreement, alternately referred to herein as the "Contract" or as the "Group Contract." Specifications Plan SPECIMEN Type of Plan SPECIMEN Type of Contract [ALLOCATED or UNALLOCATED] Contract Holder SPECIMEN Group Contract Number SPECIMEN Contract Effective Date SPECIMEN This Contract is Delivered in [STATE] and is Subject to the Laws of that Jurisdiction. THE VARIABLE FEATURES OF THIS CONTRACT ARE DESCRIBED IN SECTION 3. This Contract is a legal contract and constitutes the entire legal relationship between the Company and the Contract Holder. It states the Company's contractual rights and obligations as well as the rights and obligations of the Contract Holder and Participants. IT IS, THEREFORE, IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. Signed at the Home Office on the Contract Effective Date. D L� I/ President Secretary Group Funding Agreement (Nonparticipating) ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS GROUP CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT TO THE FIXED ACCOUNT MAY RESULT IN EITHER AN INCREASE OR DECREASE IN CONTRACT VALUE. GFA -HRA (12/04) Table of Contents Page Contract Schedule 3 Definitions 4 Section 1. General Contract Provisions 6 1.01 Entire Contract .................................................................................................. ............................... 6 1.02 Nonparticipating Contract .................................................................................. ............................... 6 1.03 Control of Contract ............................................................................................ ............................... 6 1.04 Incontestability ................................................................................................... ............................... 6 1.05 Grace Period ..................................................................................................... ............................... 6 1.06 Change of Contract ........................................................................................... ............................... 6 1.07 Payments .......................................................................................................... ............................... 7 1.08 Deferral of Payment .......................................................................................... ............................... 7 1.09 State Laws ........................................................................................................ ............................... 7 1.10 Maintenance Fee .............................................................................................. ............................... 7 1.11 Charges for Additional Services ........................................................................ ............................... 7 Section 2. Contributions, Accounts and Contract Value 8 2.01 Contributions .................................................................................................... ............................... 8 2.02 Individual Accounts ........................................................................................... ............................... 8 2.03 Unallocated Account ......................................................................................... ............................... 8 2.04 Reports to Contract Holder ............................................................................... ............................... 8 2.05 Contract Value .................................................................................................. ............................... 9 2.06 Experience Credit ............................................................................................. ............................... 9 Section 3. Separate Account 9 3.01 General ............................................................................................................. ............................... 9 3.02 Funds Available ................................................................................................. ............................... 9 3.03 Change or Substitution of Funds ....................................................................... ............................... 9 3.04 Accumulation Units ........................................................................................... ............................... 9 3.05 Accumulation Unit Value ................................................................................... ............................... 10 3.06 Net Investment Factor ....................................................................................... ............................... 10 3.07 Charges to the Separate Account ..................................................................... ............................... 10 3.08 Fund Transfers .................................................................................................. ............................... 10 3.09 Frequent Trading Restrictions ........................................................................... ............................... 10 3.10 Withdrawals from the Separate Account ........................................................... ............................... 10 Section 4. Fixed Account 11 4.01 Fixed Account Minimum Guaranteed Interest Rate ........................................... ............................... 11 4.02 Transfers from the Fixed Account ..................................................................... ............................... 11 4.03 Withdrawals from the Fixed Account ................................................................. ............................... 11 Section 5. Transfers, Withdrawals and Distributions 11 5.01 Equity Wash Restrictions .................................................................................. ............................... 11 5.02 Transfers .......................................................................................................... ............................... 11 5.03 Systematic Allocation ........................................................................................ ............................... 11 5.04 Withdrawals ...................................................................................................... ............................... 12 5.05 Withdrawal Charge ........................................................................................... ............................... 12 5.06 Waiver of Withdrawal Charge ........................................................................... ............................... 12 5.07 Payment of Amounts Withdrawn from Fixed Account ....................................... ............................... 12 5.08 Transferred Asset Benefit (TAB) Recovery Charge .......................................... ............................... 13 Section 6. Termination of Contract 13 6.01 Termination ...................................................................................................... ............................... 13 GFA -HRA (12104) 2 Contract Schedule Maintenance Fee (see 1.10) [The initial maintenance fee for each Individual Account is [range of $0 to $60] as of the Individual Account Effective Date.] Daily Charges to the Separate Account (see 3.07) The initial Daily Asset Charge (expressed as an annual percentage) for this Contract is [range from 0.00% to 1.90 %] as of the Contract Effective Date. Fixed Account Minimum Guaranteed Interest Rate (see 4.01) The Company guarantees that interest will be credited at an annual effective yield that is at least equal to 1.00 %. Withdrawal Charge (see 5.05) [For each withdrawal from Fund(s) or Fixed Account, we may deduct a withdrawal charge. This charge is a percentage of the amount withdrawn. The withdrawal charge is as follows: Contract Years ComDleted Withdrawal Charae [Less than 1 7% 1 but less than 2 6% 2 but less than 3 5% 3 but less than 4 4% 4 but less than 5 3% 5 but less than 6 2% 6 but less than 7 1 % 7 or more 0 %] The withdrawal charge will never exceed the maximum permitted by National Association of Securities Dealers, Inc. (NASD) rules.) Waiver of Withdrawal Charge (see 5.06) [The withdrawal charge does not apply when the withdrawal from Funds or Fixed Account is: (a) Used to pay Qualified Medical Expenses; or (b) Due to the transfer of the Individual Account value or the Unallocated Account value, as applicable, to another contract issued by the Company for the Plan, subject to various conditions agreed to by the Contract Holder and the Company.] GFA -HRA (12/04) Definitions Code The Internal Revenue Code of 1986, as it is amended from time to time Competing Investment Option Any Investment Option, except for the Fixed Account, offered under this Contract or such other contract or investment program offered by the Company or its affiliates or other financial providers to the Contract Holder in connection with the Plan, which: (a) provides a direct or indirect guarantee of investment performance; or (b) is, or which may be, invested primarily in assets other than common or preferred stock; or (c) is, or which may be, invested primarily in financial vehicles, (such as mutual funds, trusts, and insurance company contracts) which are in turn, invested primarily in assets other than common or preferred stock. Contract This agreement between the Company and the Contract Holder. The Contract may be an allocated type of Contract, under which Individual Accounts are maintained, or it may be an unallocated type of Contract, under which only an Unallocated Account is maintained. The type of Contract is indicated in the specifications section on the Contract cover page. Contract Value The current value of the Contract's Individual Accounts or Unallocated Account, as applicable. (See 2.05.) Contract Year The period of 12 months measured from the date the first Contribution is applied to this Contract or from any anniversary of such date. Contract Holder The entity, or person, named in the specifications section on the Contract cover page, to which the Contract is issued. Contribution Payments made to us for allocation to Individual Accounts, or to an Unallocated Account, as applicable, under this Contract (see 2.01). Daily Asset Charge A charge, expressed as an annual rate, on the Contract Value of the Individual Account, or the Unallocated Account, as applicable, that will be deducted daily from amounts invested in the Separate Account to reimburse the Company for risks, expenses and for profit. (See 3.07.) Effective Date Contract Effective Date is the date shown in the specifications section on the Contract cover page. Individual Account Effective Date, applicable to an allocated type of Contract only, is the date on which we establish an Individual Account. Fixed Account An Investment Option that credits interest and is an obligation of our General Account. It is an accumulation option with a guaranteed minimum interest rate. The Company may credit a higher rate, which is not guaranteed. See 4.03 and 5.04 for the charges that may apply to withdrawals from the Fixed Account; a Market Value Adjustment may also apply. Fund A variable Investment Option available under this Contract. The Funds are open -end registered investment management companies (mutual funds) in which the Separate Account invests. See 3.10 and 5.04 for the charges that may apply to withdrawals from Funds. GFA -HRA (12/04) 4 General Account The account that holds the assets of the Company other than those held in the Separate Account Good Order A Contract Holder's instruction to us is in Good Order when it utilizes such medium as we may require and when it is given with such clarity and completeness that we are not required to exercise any discretion in carrying it out. Home Office Our main office located at 151 Farmington Avenue, Hartford, Connecticut 06156. Individual Account An account, or accounts established by the Contract Holder for each Participant to maintain a record of transactions and the value of Contributions as invested under the allocated type of Contract. (See 2.02.) Investment Options The Funds (see Section 3) and the Fixed Account (see Section 4) available under this Contract. Market Value Adjustment The process of adjusting an amount withdrawn from the Fixed Account to a market value (see 5.07) Participant A person who is covered under the Plan or program for which this Contract is issued. Plan The health reimbursement arrangement or program as named on the Contract cover page and for which this Contract is issued. The Plan is not a part of the Contract and the Company is not bound by the terms of the Plan. Plan Sponsor The entity, or its successor, which established the Plan. Qualified Medical Expenses Medical expenses, as defined under Section 213 of the Code and as certified by the Plan Sponsor or the Plan Sponsor's designee. Separate Account An account that buys and holds shares of the Funds through its subaccounts. Unallocated Account An account established for a Plan where the Company does not maintain any individual account records or investment account balances for the Participants. (See 2.03.) Valuation Date The date and time at which accumulation unit values are calculated. Currently, this calculation is made after the close of business of the New York Stock Exchange on any normal business day, Monday through Friday, that the New York Stock Exchange is open. GFA -HRA (12/04) 5 Section 1. General Contract Provisions 1.01 Entire Contract The entire Contract consists of this document, any application, any attachments and any endorsements incorporated. 1.02 Nonparticipating Contract This Contract is nonparticipating. The Contract Holder or a Participant has no right to share in our earnings. 1.03 Control of Contract This is a Contract between the Contract Holder and the Company. The Contract Holder has title to the Contract. By notifying us in writing, the Contract Holder of an allocated type of Contract may allow Participants to choose Investment Options for his or her Individual Account(s). We will make payments only at the written direction of the Contract Holder. The Contract is not subject to the claims of any creditors of the Contract Holder, the Plan Sponsor, or the Participant, except to the extent permitted by law. The Contract Holder may assign or transfer his or her rights under the Contract to the extent permitted by law. Any assignment or transfer made under the Contract must be submitted to the Company's Home Office in writing and will not be effective until accepted by the Company. 1.04 Incontestability We will not cancel this Contract because of any error of fact. 1:05 Grace Period This Contract and all Individual Accounts (if applicable) will remain in effect even if Contributions are not continued. 1.06 Change of Contract Only a Company officer at the level of Vice President or higher, or an officer with written delegation of authority from a Vice President or higher officer, may change the terms of this Contract. No other Company officer, employee, agent or representative can change this Contract. Except as noted below, this Contract may be changed at any time by written mutual agreement between the Contract Holder and the Company. For changes we initiate requiring Contract Holder consent, we notify the Contract Holder 60 calendar days in advance of the change and consider that the Contract Holder has agreed to the change unless we receive written notice that the Contract Holder does not agree to the change at least 30 calendar days before the date the change becomes effective. If we propose a change requiring Contract Holder consent and the Contract Holder does not agree to the change, we have the right: (a) For an allocated type of Contract, to: (1) Not establish new Individual Accounts; and (2) Stop accepting Contributions to existing Individual Accounts. (b) For an unallocated type of Contract, to stop accepting Contributions. We will not reduce the minimum guaranteed interest rate for the Fixed Account. We have the right to change the net investment factor (see 3.06) and the Market Value Adjustment provision (see 5.07) without Contract Holder consent. We may change these provisions by notifying the Contract Holder In writing at least 30 calendar days before the change becomes effective for the net investment factor and least 90 calendar days before the change becomes effective for the Market Value Adjustment provision. If we do this, the applicable change(s) will apply only to Individual Accounts established, and Contributions GFA -HRA (12/04) received, on or after the date the change becomes effective, or to Contributions received on or after the date the change becomes effective for the Unallocated Account, as applicable. In addition, we may change this Contract as required to comply with state and federal law without Contract Holder consent by notifying the Contract Holder at least 30 calendar days before the date the change becomes effective. With regard to Individual Accounts or to the Unallocated Account, as applicable, any such changes will be applied as necessary for compliance with the pertinent law(s). As required by law, we will make any change of Contract by endorsement, which may be subject to regulatory approval in the state where the Contract is delivered. 1.07 Payments We make payments as directed by the Contract Holder. Payment requests must be in writing or as we otherwise allow in our administrative practice. We determine the amount of any payment based on the Individual Account value, or the Unallocated Account value, as applicable, as of the next Valuation Date following our receipt of a payment request in Good Order at our Home Office. Generally, we make payments within seven calendar days. 1.08 Deferral of Payment We may defer payment up to a period of six months or as otherwise provided by state and /or federal law. 1.09 State Laws This Contract complies with the laws of the state in which it is delivered. Any payments are equal to or greater than the minimum required by such laws. 1.10 Maintenance Fee We may deduct an annual maintenance fee from the Contract's Individual Accounts. The amount of the initial maintenance fee, if any, for this Contract is shown on the Contract Schedule under Maintenance Fee. The maintenance fee does not apply to an unallocated type of Contract. Subject to Contract Holder consent (see 1.06), the amount of the maintenance fee may change after the Contract Effective Date. The annual fee will never exceed $60. The fee, if any, is deducted proportionately from each Investment Option in which the Individual Account is invested on the anniversary of the Individual Account Effective Date. The fee is also deducted if the entire Individual Account value is withdrawn. If a Participant has more than one Individual Account, we may deduct the fee proportionately from all Individual Accounts. We may eliminate the fee for an Individual Account established with one lump -sum Contribution. 1.11 Charges for Additional Services The Company and the Contract Holder may agree in writing to have additional services provided to the Plan by the Company, its licensed representatives or other service providers under a separate administrative services agreement. The charges for such additional services and the frequency at which the charges may be paid will be specified in a separate agreement between the Contract Holder or Plan Sponsor (as applicable) and us. If the Company provides the additional services, all or a portion of the charges described above may be billed and paid directly to us by the Contract Holder or Plan Sponsor, as applicable. With regard to such additional services as may be provided by the Company, its licensed representatives or other service providers (or any combination thereof), we may also agree lo: (a) Deduct all or a portion of the amount of any such charges from the Individual Accounts for an allocated type of Contract or from the Unallocated Account for an unallocated type of Contract, and /or (b) Adjust the Daily Asset Charge, to the extent allowed in accordance with 3.07, to provide for recovery of all or a portion of the amount of any such charges. GFA -HRA (12/04) In the event that we agree to deduct the amount of any charges described above from Individual Accounts or from the Unallocated Account, as applicable, we will deduct the amount of the charge(s) proportionately from each Investment Option in which the Individual Accounts or Unallocated Account, respectively, are invested. Section 2, Contributions, Accounts and Contract Value 2.01 Contributions We allocate Contributions in whole percentages among the Investment Options available as directed by the Contract Holder or a Participant, as applicable. Changes in future Contribution investment allocation instructions may be made at any time without charge. We reserve the right to establish minimum Contribution amounts and to refuse to accept any Contribution. All Contributions must adhere to Good Order requirements. 2.02 Individual Accounts We will maintain an Individual Account for each Participant under the allocated type of Contract. Multiple source records may be maintained for each Individual Account to distinguish between periodic, single lump - sum, and transferred Contributions. For each Individual Account, the Contract Holder will direct that the Contributions allocated to that Individual Account and its source records, if applicable, be credited among one or more of the following Investment Options (subject to availability, as indicated on the Contract Schedule): (a) The Fixed Account; and (b) The Fund(s) in which the Separate Account invests. Contributions must be allocated in whole percentages. With the consent of the Contract Holder, the Participant may direct the investment allocation of his or her Individual Account. If we do not receive investment allocation instructions, unless otherwise agreed with the Contract Holder, we will return the Contribution. The investment allocation may be changed at any time. The Company reserves the right to limit the total number of Contract Investment Options chosen by the Contract Holder. 2.03 Unallocated Account We will maintain one Unallocated Account under the unallocated type of Contract. Multiple source records may be maintained in the Unallocated Account to distinguish between periodic, single lump -sum, and transferred Contributions. We must be told the whole percentage of the Contributions allocated to the Fixed Account and to the Funds in which the Separate Account invests (subject to availability, as indicated on the Contract Schedule). The investment allocation may be changed at any time. The Company reserves the right to limit the total number of Contract Investment Options chosen by the Contract Holder. Contributions will be allocated to the Unallocated Account and its source records, if applicable, as directed by the Contract Holder. No Individual Accounts are allowed under the unallocated type of Contract. 2.04 Reports to Contract Holder With respect to the Contract Value of Individual Accounts or the Unallocated Account, each calendar year we will provide a report to the Contract Holder and, if applicable, to the Participants, of: (a) The value of any amounts, as applicable, held in: (1) The Fixed Account; and (2) The Fund(s) in which the Separate Account invests. (b) The number of any Fund(s) Record Units; and GFA -HRA (12/04) (c) The Fund(s) Record Unit Value. Such number or values will be as of a date no more than 60 calendar days before the date of the report. 2.05 Contract Value As of a particular Valuation Date, the Contract Value of any Individual Account or of the Unallocated Account, as applicable, is equal to: (a) Any amounts in the Fixed Account, including Fixed Account interest added by us; plus (b) The value of all Separate Account Record Units; minus (c) Any amounts withdrawn; minus (d) Any applicable fees or charges deducted; and minus (e) Any maintenance fees (applicable for Individual Accounts only). 2.06 Experience Credit We may apply experience credits (investment, administrative or other) under this Contract and may apply such credits as: (a) A reduction in the maintenance fee; (b) A reduction in the Daily Asset Charge to the Separate Account; and (c) An increase in the Fixed Account interest rate. We will apply experience credits at our sole discretion as we deem appropriate for the class of contracts to which the Contract is issued. Section 3. Separate Account 3.01 General The Separate Account, established under Title 38a, Section 38a -433 of the Connecticut General Statutes, buys and holds shares of the Funds available under the Contract. We own the assets held in the Separate Account; we are not a trustee of those assets. Income, gains or losses, realized or unrealized, are credited to or charged against the Separate Account without regard to our other income, gains or losses. Separate Account assets, to the extent of reserves and other Contract liabilities, cannot be charged with liabilities arising out of any other business we conduct. 3.02 Funds Available We reserve the right to limit the number of Funds in which an Individual Account or the Unallocated Account, as applicable, may be invested, at one time or cumulatively. 3.03 Change or Substitution of Funds We reserve the right to stop offering any Fund or to add Funds. We may substitute shares of a Fund for shares of another Fund. We will provide the Contract Holder with reasonable advance notice of any elimination, addition or substitution of a Fund. If the Plan is subject to ERISA, we will seek Contract Holder consent in advance of any Fund substitution. Consent will be deemed given unless, following notice of substitution and within a prescribed time period, the Contract Holder notifies us in writing that it does not consent and provides us with alternative investment instructions for the shares that would otherwise be affected by the substitution. 3.04 Accumulation Units Each Contribution allocated to one or more of the Funds is credited to an Individual Account or the Unallocated Account, as applicable, as accumulation units. The number of accumulation units is calculated by dividing the amount of the Contribution allocated to the Fund by the accumulation unit value (see 3.05) as of the next Valuation Date following our receipt of the Contribution in Good Order at our Home Office. GFA -HRA (12/04) 3.05 Accumulation Unit Value The value of each accumulation unit for any Fund for the current Valuation Date is computed by multiplying the net investment factor (see 3.06) by the accumulation unit value from the prior Valuation Date. Accumulation unit values may increase or decrease from Valuation Date to Valuation Date. 3.06 Net Investment Factor The net investment factor is used to compute the accumulation unit value for any Fund. For each Valuation Date, for each Fund, the net investment factor is equal to 1.0000000, plus the net return rate. The net return rate equals: [a - b - c) Where -e a is the value of the shares of the Fund held by the Separate Account on the current Valuation Date; b is the value of the shares of the Fund held by the Separate Account on the prior Valuation Date; c is taxes or provisions for taxes, if any. on the Separate Account (with any federal income tax liability offset by foreign tax credits to the extent allowed); d is the total value of the accumulation units of the Separate Account on the prior Valuation Date; and e is Separate Account daily charges for Daily Asset Charges as shown on the Contract Schedule under Daily Charges to the Separate Account. The net return rate may be greater or less than zero percent. 3.07 Charges to the Separate Account We may deduct a Daily Asset Charge from the Individual Account value or the Unallocated Account value, as applicable, invested in the Separate Account. The initial Daily Asset Charge, if any, for this Contract is shown on the Contract Schedule under Daily Charges to the Separate Account and is deducted daily. Subject to Contract Holder consent (see 1.06), the Daily Asset Charge may change after the Contract Effective Date. On an annual basis, the charge will never exceed 1.40% (1.90% if the Contract includes the Transferred Asset Benefit described in 5.08) or be less than 0.00 %. Charges to the Separate Account do not include investment advisory fees and other expenses charged by a Fund investment manager. Such fees are disclosed in the applicable Fund prospectus. 3.08 Fund Transfers Subject to equity wash restrictions (see 5.01), all or any portion of the Individual Account value or all or any portion of the Unallocated Account, as applicable, held in a Fund may be transferred to any other Fund or to the Fixed Account. The Individual Account value or Unallocated Account value, as applicable, will be based on the Fund's accumulation unit value next determined after we receive a transfer request in Good Order. 3.09 Frequent Trading Restrictions The Company will monitor all applicable Fund transaction activity and will restrict transactions that constitute Frequent Trading. Our current definition of Frequent Trading is more than one purchase and sale of the same underlying Fund within a 30 -day period. We may modify our general standard, or the standard as it may apply to a particular Fund, at any time without prior notice, if required by the underlying Fund(s) in which the Separate Account invests and /or by state or federal regulatory requirements. 3.10 Withdrawals from the Separate Account If the Contract Holder requests a partial or full withdrawal (see 5.04) from the Funds, the withdrawal is subject to equity wash restrictions (see 5.01). A withdrawal charge (see 5.05) and a TAB Recovery Charge (see 5.08) may also apply. GFA -HRA (12/04) 10 Section 4. Fixed Account 4.01 Fixed Account Minimum Guaranteed Interest Rate We guarantee that interest will be credited to the Fixed Account at an annual effective yield that is at least equal to the minimum guaranteed interest rate disclosed on the Contract Schedule under Fixed Account Minimum Guaranteed Interest Rate. The Company, in its discretion, may credit interest at a rate greater than the minimum guaranteed interest rate. We will make available to the Contract Holder the rate currently being credited to amounts held in the Fixed Account. 4.02 Transfers from the Fixed Account Subject to equity wash restrictions (see 5.01), all or any portion of the amount in the Fixed Account may be transferred to any available variable Investment Option. 4.03 Withdrawals from the Fixed Account If the Contract Holder or a Participant, as applicable, requests a partial or full withdrawal (see 5.04) from the Fixed Account, the withdrawal is subject to equity wash restrictions (see 5.01). A withdrawal charge (see 5.05) and a TAB Recovery Charge (see 5.08) may also apply. In addition, the amount withdrawn may be subject to a Market Value Adjustment (see 5.07). Section 5. Transfers, Withdrawals and Distributions 5.01 Equity Wash Restrictions Transfers and withdrawals described in this Contract are subject to the following equity wash restrictions: (a) Direct transfers from the Fixed Account to Competing Investment Options are not permitted; (b) For a period of 90 calendar days following any transfer from the Fixed Account, no transfers may be made to a Competing Investment Option; (c) For a period of 90 calendar days following any transfer in a Competing Investment Option, no transfers may be made from the Fixed Account; and (d) For a period of 90 calendar days following any withdrawal from the Contract for purposes other than for the payment of Qualified Medical Expenses, no transfers may be made from the Fixed Account. 5.02 Transfers Subject to the provisions of Sections 3, 4 and this Section 5, the Contract Holder or a Participant, as applicable, may transfer all or any portion of the Individual Account value or the Unallocated Account value, as applicable, among the available Investment Options. The Individual Account value, or Unallocated Account value, as applicable, on any amount transferred from a Fund will be based on the Fund's accumulation unit value next determined after we receive the transfer request in Good Order at our Home Office. The Contract Holder may request a transfer by following the procedures we establish in accordance with our existing administrative practices. We reserve the right to establish a minimum transfer amount. 5.03 Systematic Allocation With the consent of the Contract Holder and provided Funds are available under this Contract (see Section 3), a Participant may initiate, under the allocated type of Contract only, a Systematic Allocation which provides a dollar- cost - averaging or account rebalancing option on Fund transfers. Dollar- cost - averaging involves allocating amounts to one Fund and having it reallocated to other Funds in substantially equal GFA -HRA (12/04) 11 monthly installments. The amount applied to a Systematic Allocation must be no less than $100 per month over a period of at least 12 months. We must consent to Systematic Allocations for a period longer than 24 months. Systematic Allocation for account rebalancing involves reallocation of Funds using predetermined percentages on a scheduled basis. Systematic Allocations may not be made from, or to, the Fixed Account. We reserve the right to limit the Funds that can be used to pay out or receive Systematic Allocations. No Participant may have more than one Systematic Allocation in effect unless we consent otherwise. A Participant may revoke a Systematic Allocation at any time. 5.04 Withdrawals Subject to the provisions of Sections 3, 4 and this Section 5, and as allowed by the Plan, if applicable, the Contract Holder or a Participant, as applicable, may withdraw all or any portion of the Individual Account value or the Unallocated Account value, as applicable. The withdrawal will be made proportionately from the Investment Options in which the Individual Account or the Unallocated Account, as applicable, is invested. The Individual Account value or the Unallocated Account value, as applicable, of any amount withdrawn from a Fund will be based on the Fund's accumulation unit value next determined after we receive the withdrawal request in Good Order. The Contract Holder may request a withdrawal by following the procedures we establish in accordance with our existing administrative practices. A withdrawal charge (see 5.05) and a TAB Recovery Charge (see 5.08) may apply to amounts withdrawn from Funds or the Fixed Account. Amounts withdrawn from the Fixed Account may also be subject to a Market Value Adjustment (see 5.07). If applicable, the maintenance fee is deducted if the entire Individual Account value is withdrawn (see 1.10). 5.05 Withdrawal Charge With regard to amounts withdrawn from Funds or Fixed Account, we may deduct a withdrawal charge from the Individual Account value withdrawn, or in the event of a withdrawal by the Contract Holder, from the entire amount withdrawn. The charge, if any, is a percentage of the amount withdrawn from the Funds or Fixed Account. The withdrawal charge will never be more than the maximum permitted by National Association of Securities Dealers, Inc. (NASD) rules. The withdrawal charge, if any, is shown on the Contract Schedule under Withdrawal Charge. 5.06 Waiver of Withdrawal Charge The withdrawal charge (see 5.05) does not apply in any of the circumstances shown on the Contract Schedule under Waiver of Withdrawal Charge. In addition, we reserve the right to reduce, waive or eliminate the withdrawal charge in a nondiscriminatory manner. 5.07 Payment of Amounts Withdrawn from Fixed Account With regard to withdrawals made proportionately from all Investment Options in accordance with 5.04, the Company will pay an unadjusted lump sum from the Fixed Account for the purpose of paying Qualified Medical Expenses. The Company will also pay an unadjusted lump sum from the Fixed Account with regard to withdrawals that are due to the transfer of the Individual Account value or the Unallocated Account value, as applicable, to another contract issued by the Company for the Plan, subject to various conditions agreed to by the Contract Holder and the Company. On any amount withdrawn from the Fixed Account for purposes other than those described in the preceding paragraph, the Company reserves the right to pay the Fixed Account withdrawal amount in accordance with either (a) or (b) below, as elected by the Contract Holder. to the event the Contract Holder has elected (a) below, any applicable withdrawal charge (see 5.05) will be determined and deducted before we make the first payment. GFA -HRA (12/04) 12 (a) In equal principal payments, with interest, over a period not to exceed 60 months. Interest, as used above will not be more than two percentage points below any rate determined prospectively by the Company for this class of Contract. In no event will the credited interest rate be less than the minimum guaranteed interest rate disclosed on the Contract Schedule under Fixed Account Minimum Guaranteed Interest Rate. (b) As a single payment which has been subjected to a Market Value Adjustment. The amount of the withdrawal will be adjusted to a market value amount equal to the lesser of (1) or (2): (1) The value of the following factor multiplied by the amount being withdrawn on the date of the withdrawal: Factor= 0 + al 535 (1 + b) s2s Where: a is the Fixed Account base credited rate (as determined monthly by us for this class of contract) as of the date of withdrawal; and b is the rate for a 7 -year Treasury Bond as published in the Salomon Smith Barney Bond Market Roundup (if unavailable a similar service will be utilized) for the week prior to the withdrawal plus 0.25°/x. (2) The value of the amount being withdrawn. 5.08 Transferred Asset Benefit (TAB) Recovery Charge A Transferred Asset Benefit, if agreed to by the Company, may reimburse the Plan for all or a portion of any termination charges or adjustments assessed by a prior funding arrangement. If a TAB has been made available to the Contract Holder, the arrangement is supported by a separate endorsement incorporated as a part of this Contract. Any full or partial withdrawal will be subject to a TAB Recovery Charge with the exception of withdrawal for which a waiver of withdrawal charge applies (see 5.06). The TAB Recovery Charge, if any, will be determined according to the number of Contract Years between the date the first Contribution is applied to this Contract and the date of the withdrawal. If a TAB Recovery Charge applies, a table of TAB Recovery Charge percentages and the TAB duration will be described in the endorsement. The amount of any applicable withdrawal will be multiplied by the applicable percentage from the table of TAB Recovery Charge percentages to determine the TAB Recovery Charge. The TAB Recovery Charge, if any, will be applied at the time of the applicable full or partial withdrawal, regardless of the method elected for Payment of Amounts Withdrawn from Fixed Account (see 5.07). Section 6. Termination of Contract 6.01 Termination Either the Company or the Contract Holder may terminate this Contract for any reason by giving written notice to the other party at least 90 calendar days before a termination date specified in the notice. The Company will pay the Contract's Current Value (see 2.05), determined as of the Contract termination date, provided that if the Company has initiated the termination, we will not apply a withdrawal charge (see 5.05), a Market Value Adjustment (see 5.07) or a TAB Recovery Charge (see 5.08). Notwithstanding the preceding, payments or transfers upon termination are otherwise subject to any limitations or restrictions that appear elsewhere in this Contract and will be made in accordance with our existing administrative practices and procedures. The Contract Holder may not make any Contributions to this Contract after the termination date. The Company will provide any services necessary to fulfill our obligations or transfer such responsibility to a successor and the Contract Holder agrees to pay us for such services. GFA -HRA (12/04) 13 Plan Sponsor Submission ING Life Insurance and Annuity Company ING p Ha Farmington Avenue Information Hartford, CT 06156 -8022 ING Health Reserve Account (HRA) Fax: 860- 723 -9673 ING Life Insurance and Annuity Company (ILIAC), ING National Trust and ING Financial Advisers, LLC (member SIPC) may be referred to as ING. Submit with Application. Part 1 — Case Profile Contract Contract Holderrrrustee Name Holder/Trustee Cit 0f N wart Beach Information Address(No. B Street /PO Box) 3300 Newport Boulevard /P.O. Box 1768 CityTown State ZIP 3 Plan Sponsor or Plan Sponsor or Named Fiduciary Name Named Fiduciary Cit of Newport Beach Information Atltlress (No. & Stree PO Box, Crty town, State, ZIP) 3300 Newport Boulevard /P.O. Box 1768, Newport Contact Name and Phone Number If ING is not the exclusive provider, list the names of other carriers: Market ' ❑ Healthcare ❑ Education ® Government (non ERISA public employers only) Trust Type ❑ VEBA, IRC Section 501(c)(9) ® IRC Section 115 Contributions Contribution Frequency (check all that apply) Employer ❑ Annually ❑ Quarterly ❑ Monthly ❑ Semi - Monthly Id Bi- Weekly ❑ Weekly I Total Number of Eligible Employees Ron Total Takeover Plan Assets A. Estimated 1 "year Enrollment (Number of Participants) 800 B. Estimated Average Annual Amount (Contribution oer Participant) ER S1 9Ln. no Form No. 82362 Non -ERISA Gov HRA (1 210 112 00 5) Page 1 of 9 — Incomplete without all pages C. Estimated 1 "Year Cash Flow (A x B) ER $9g 2 _- 000. 00 Special Does this case require any special Case Notations regarding processing restrictions? Requests Contract Is this Contract to be linked with an existing Master Billing Group? ❑ Yes D<No Administration If Yes, indicate Master Billing Group No. Forfeiture Account A forfeiture account will be established upon notification from the Plan Sponsor to ING of a participant's benefit forfeiture in accordance with the terms of the plan. Assets will be invested in this account as follows until disposed of in accordance with the terms of the plan document: 100 % ING Fixed Account Fund HRA HRA Administrative Agent Name Telephone No. Administrative Administration Resources Corp. (763) 421 -5510 Agent Information Address (No. 8 Street/PO Box, City/Town. State, ZIP) 11490 Xeon Street NW, Suite 200, Coon Rapids, MN 55448 -3149 Daily Asset Charge The Daily Asset Charge applies to the variable investment options only. The charge does not include Mutual Fund Investment Advisory and Administrative Fees or other fund operating expenses. These separate expenses are added to the Daily Asset Charge to determine the total cost of the variable investment options. Fees The Daily Asset Charge will be 0. 70% • The Maintenance Fee will be 930.00 (The maintenance fee will be deducted on a pro -rata basis from each account in which there is an interest, and will only apply to allocated accounts.) • See separate agreement regarding fees for administrative services. Form No. 82362 Non -ERISA Gov HRA (1 210 112 00 5) Page 1 of 9 — Incomplete without all pages Compensation Compensation will be paid in the following manner: 0 % of Contributions in the First Case Year 0 % of Transferred Assets in the First Case Year 0 % Asset Based Commissions for Case Years 1 through 5 starting in Case Month 13 Fees Paid to ING ING receives payments from mutual fund investment managers: by Mutual Funds 12b•1 Fees: Some funds offered under our products pay ING Financial Advisers, LLC a fee ranging from 0.15 % - 0.50% of assets in their applicable funds for distribution and other services provided on behalf of those funds. These fees (sometimes referred to as "12b -1 Fees ") vary from fund to fund. Administration and Other Fees: ING receives, or may receive, fees of up to $12 per Participant per Fund from one or more of the applicable funds. Alternatively, ING may receive up to 0.425% of assets in administrative fees from one or more of the applicable funds. These fees, where received, cover the following types of administrative services only and do not constitute payment for investment advisory services or costs of distribution: accounting, recordkeeping, prospectus printing and /or delivery/mailing, proxy printing and /or mailing and tabulation, periodic fund reports printing and /or mailing. For information on which funds pay ING such fees and at what level, please consult your ING Representative. Written confirmation will be provided upon request. Other Mutual Fund Fees and Expenses: The charges listed above do not include mutual fund investment advisory fees or other fund operating expenses. Please refer to the mutual fund prospectuses and investment option summaries for more complete information about all expenses and fees. Fees and Charges Transferred Asset Benefit (TAB) is available to compensate for cancellation penalties imposed by your Plan's for Transferrred present financial provider when you transfer your Plan's assets to the ING HRA Contract. When the TAB feature Asset Benefit is elected, ING will apply a TAB amount of up to 7% of the assets transferred to the HRA Contract. To be eligible (TAB) Option for TAB, ING must be the exclusive provider for all contributions to the Plan. (Requires Product If you elect the Transferred Asset Benefit (TAB) to absorb surrender charges paid by the plan to a prior carrier, Manager Approval) your Daily Asset Charge (DAC) will be increased by up to 0.35% of assets and your ING Fixed Account credited rate will be reduced by the same amount. You may be subject to a TAB Recovery Charge for up to 5 years. Please ask your ING representative for additional information regarding this feature. Will the TAB option be offered? ❑Yes g No If Yes is selected above, the completed TAB request letter and TAB approval letter must accompany this paperwork. Form No. 82362 Non -ERISA Gov HRA (12/01/2005) Page 2 of 9 - Incomplete without all pages and Enrollments rrvicess ING will create participant accounts and invest assets in accordance with fund replacement instructions to be provided by the Plan Sponsor or Named Fiduciary in conjunction with account information provided by the existing investment provider. The Plan Sponsor or Named Fiduciary, by executing this form, acknowledges that they understand the terms that apply to the investment options available under the contract, accept responsibility for these investment directions on participants' behalf consistent with the terms of the plan and agree to indemnify and hold ING harmless from any claim that may arise from investing these funds as it has directed. The Plan Sponsor or Named Fiduciary, by executing this form, takes full responsibility for communicating all changes to plan participants. All plan participants will receive ING's contract disclosure material, fund one -page summaries and fund performance in a Participant Guide. They will be informed that fund prospectuses are available by calling their local representative. The participants will be instructed to use ING's 800 number or ING Access on the Internet to view account balance information, process fund transfers (movement of existing assets) and /or allocation changes (the direction of future contributions), after the effective date of this transfer. ING must receive the appropriate information in an automated format from the existing provider. This Takeover Process will: • Establish participant accounts to receive contributions with investment allocations based on fund replacement instructions received from the Plan Sponsor and account information provided by the existing provider. The automated file from the existing provider, via an Excel file must include each Participant's name, address, Social Security Number, birth date, gender and allocation information indicating the specific investments and their whole percentages. Upon receipt of a file in good order containing this information, ING will establish accounts based on the investment allocations indicated and the fund replacement instructions from the Plan Sponsor. Any employee that currently does not have an account with the existing provider and will be enrolling in the plan for the first time will be enrolled according to the enrollment process for new participants. • Hold assets in an unallocated account if Participant accounts are not established before assets are transferred from the current carrier, and /or investment instructions at a participant level are not provided on the day the wire is received. For investment into the unallocated account, ING is instructed to accept faxed investment information from the existing provider, broker or existing HRA Administrative Agent on the day the wire is received by ILIAC. The responsible party will fax ING an accounting by investment option of the existing assets at a Plan level, as of liquidation. These assets will be deposited into the plan level Unallocated Asset Account according to the fund replacement instructions provided by the Plan Sponsor at or before the liquidation. If assets are received without instructions, they will remain un- invested pending this information. • Invest assets at the Participant level as follows: (check one) ® ING Fixed Account or ❑ Pursuant to the attached instructions provided by the Plan Sponsor or Named Fiduciary or the existing HRA Adminstrative Agent or existing provider. Any Participant reallocation information provided by fund must be equal to the investment by fund in the unallocated account in order to accurately invest the assets. We will allocate the assets for all Participants on the date of receipt of the instructions if they are received in good order on a business day prior to the final close of the New York Stock Exchange (NYSE), generally, 4:00 PM Eastern Time. Assets received in good order after the final close of the NYSE or on a non - business day will be processed the next day that the NYSE is open. If assets are not applied into specific investments according to fund replacement instructions, any interest earned while waiting for reallocation instructions will be posted to the Participant accounts the first business day following the reallocation of the principal. Unless other instructions are provided, we will determine the amount of interest to be posted to each Participant account on a pro -rata basis that utilizes the amount of principal to determine the amount of the interest. New Participant Enrollment Process The Plan Sponsor or Named Fiduciary authorizes ING to enroll new participants in the Funding Agreement and allocate their contributions to the ING Fixed Account, until such time that the participant makes an allocation change, if permitted. Prior to ING's acceptance of contributions, the Plan Sponsor or Named Fiduciary agrees to provide the following information: • SSN • Name • Address • Date of Birth • Gender Form No. 82362 Non -ERISA Gov HRA (12/01/2005) Page 3 of 9 — Incomplete without all pages M Part 2 - Data Remittance and Deposit Options Available Data Remittance To ensure accuracy and timeliness in the processing of Plan Contributions, ING offers 3 options. Select only one method you wish to use. ING requires one (1) of three (3) methods to accommodate your submission of census and contribution remittances. ❑ Voice Response Unit (VRU) ® Internet File Transfer (IFT) ❑ Internet Direct Payment Date of first contribution submission to ING: 1 -12 -06 Submission frequency by location and source: pvary 1'wn wApk< Deposit Method You must select only one Deposit Method ® ACH Debit - Money is electronically transferred from the Plan Sponsor's Bank Account to ING when remittance data is received (ACH Debit Section must be completed). ❑ ACH Credit - Plan Sponsor initiates electronic transfer of money, which is received the following business day by ING. ❑ Wire Transfer- Plan Sponsor initiates money transfer to ING via federal reserve system. Automated Clearing House (ACH) Debit Account Information ING will access the bank account below upon receipt of remittance data and will process an Automated Clearing House (ACH) debit transaction from the customer account. Funds will be transferred to the Operating Account at Wachovia Bank in Winston - Salem, North Carolina. In consideration of your participation in this Plan, in the unlikely event of an ACH debit error, ING agrees to indemnify and hold the Customer harmless from any loss you may suffer from the above transaction. This authorization applies to all of the subsidiaries and affiliates of the Customer and is effective immediately. Termination of this Agreement must be submitted in writing and will be effective upon receipt of written request by ING. Bank account information can be updated by the customer via ING approved mediums that have been made available to the customer (VRU /Intemet Direct Payment) or by contacting ING at 800 - 238 -6212. ING will confirm to the Customer when bank account information has been updated. Upon receipt of your bank account information, ING will process a "pre- note" $0.00 transaction to verify account information. This takes approximately ten (10) business days from the date ING receives this completed form. Once all information is acknowledged for accuracy, ING will thereafter access Customer bank account each time remittance information is sent to ING by the Customer for an amount which may vary from time to time. Customer will verify amount through selected remittance medium. Bank Name Bank Contact Person City National Bank Miguel Rivera .1 /iAAr..nn 1�1_ P C)....., / On Ong C1_1_ I'M 1811 Von Karman Avenue #120. Irvine. CA 92612 =.7 Fax ACH Debit Confirmation Election If you have selected ACH Debit as your payment method, ING will return a confirmation of receipt upon processing your remittance. Please indicate below your preference for receiving this confirmation. ❑ Mail Back - Written confirmation mailed to the following address (No. & Street /PO Box, City/Town, State, ZIP): Fax Back — Confirmation sent to Fax No (include area �) E -Mail — Confirmation sent to E -Mail Address dkurth @city.newport — beach.ca.us and kwills @city.newport— beach.ca.us Plan Sponsor Contact Contact No. of Pavroll Locations I Plan No. 3300 Newport Boulevard /P.O. Box 1768. Newport Beach. CA Telephone No. (Please include area code) Fax No. (949) 644 -3022 (949) 644 -3024 Email Address (if available) cindyh@city.newport— beach.ca.us Form No. 82362 Non -ERISA Gov HRA (1 210 112 0 0 5) Page 5 of 9 — Incomplete without all pages Part 1 — Case Profile - Continued Fund Selections ❑ Select all the funds listed below. ® Select only the funds chosen below which must include the ING Fixed Account. ❑ ING Fixed Account Only Stability of Principal ® [598) ING Fixed Account Bonds ❑ [363] ING GNMA Income Fund - Class A ❑ [463] ING Government Fund - Class A ® [497] ING Intermediate Bond Fund - Class A ❑ [304] Lord Abbett Bond - Debenture Fund, Inc. - Class P ❑ [928) Pioneer High Yield Fund - Class R ® [501) Pioneer Strategic Income Fund - Class R Asset Allocation ® [469] ING Strategic Allocation Balanced Fund - Class A ® [468) ING Strategic Allocation Growth Fund - Class A ® [470] ING Strategic Allocation Income Fund - Class A Balanced ❑ [474) ING Balanced Fund - Class A ® [193] Pax World Balanced Fund Large Cap Value ❑ [201 ] AIM Basic Value Fund - Class R ❑ [223] AIM Charter Fund - Class R ❑ [326) American Century$ Equity Income Fund - Class R S6 [329] American Century° Large Company Value Fund - Class R ❑ [472] ING Equity Income Fund - Class A ❑ [485] ING Index Plus LargeCap Fund - Class A ❑ [245] ING MagnaCap Fund - Class A ❑ [491) ING Value Opportunity Fund - Class A ❑ [351) Oppenheimer Main Street Funds - Class N [357] Mutual Shares Fund - Class R ❑ [980) Pioneer Equity Income Fund - Class R ❑ [988) Pioneer Fund - Class R Large Cap Growth ❑ [204] AIM Constellation Fund - Class R ❑ [328] American Century° Growth Fund - Class R ❑ [325) American Century° Ultra$ Fund - Class R ❑ [471] ING Growth Fund - Class A ❑ [246[ ING LargeCap Growth Fund - Class A ® [349] Oppenheimer Capital Appreciation Fund - Class N ❑ [5161 Pioneer Growth Shares - Class R ® [837] TCW Galileo Select Equities Fund - Class K Small /Mid /Specialty ❑ [202] AIM Mid Cap Core Equity Fund - Class R ❑ [295] AIM Small Cap Growth Fund - Class R ® [715] Allianz CCM Mid -Cap Fund - Class R ❑ [355] Franklin Rising Dividends Fund - Class R ❑ [354] Franklin Small -Mid Cap Growth Fund - Class R ❑ [360] Franklin Utilities Fund - Class R ❑ [458] ING Financial Services Fund - Class A ❑ [197] ING Global Science and Technology Fund - Class A ® [489] ING Index Plus MidCap Fund - Class A ® [493] ING Index Plus SmallCap Fund - Class A ❑ [428] ING MidCap Opportunities Fund - Class A ❑ [292] ING Real Estate Fund - Class A ❑ [473] ING Small Company Fund - Class A ❑ [365] ING SmallCap Opportunities Fund - Class A ❑ [305] Lord Abbett Developing Growth Fund, Inc - Class P ® [301] Lord Abbett Growth Opportunities Fund - Class P ® [352) Oppenheimer Main Street$ Small Cap Fund - Class N ❑ [324] Pioneer Mid Cap Value Fund - Class R ❑ [836] TCW Galileo Opportunity Fund - Class K ❑ [835] TCW Galileo Value Opportunities Fund - Class K Global /international Growth ❑ [327] American Century$ International Growth Fund - Class R ❑ [313] ING Emerging Countries Fund - Class 0 ❑ [364] ING Global Value Choice Fund - Class A ❑ [498] ING International Fund - Class 0 ❑ [366) ING International SmallCap Growth Fund - Class A ® (356] Mutual Discovery Fund - Class R ❑ [350] Oppenheimer Global Fund - Class N ❑ [358] Templeton Developing Markets Trust - Class R ® [359] Templeton Foreign Fund - Class R Proprietary Funds: Shares of the ING Funds are not insured by the Federal Deposit Insurance Corporation; Shares of the ING Funds are not deposits or other obligations of ING National Trust or any of its affiliates; Shares of the ING Funds are not obligations of, and are not guaranteed by the U.S. government, its agencies or instrumentalities; The ING Funds involve investment risks, including possible loss of principal amount invested; and ING Investment Management, Inc., (IIM), an affiliate of ING and ING National Trust, acts as investment advisor to, and shareholder servicing agent for, the ING- advised funds listed above, and provides other services for these funds. IIM receives fees for providing these services, as described in the fund prospectuses. Form No. 82362 Non -ERISA Gov HRA (1 210 112 00 5) Page 4 of 9 — Incomplete without all pages Part 3 - Res onsibilities, Authorization, Approval and Signatures Plan Sponsor or Authorized Designee for purposes of authorizing HRA administrator fees. Named Fiduciary Select a plan design that best meets Plan Sponsors benefit objectives. Responsibilities Choose investment options from those available under the funding vehicle. Assume overall responsibility for HRA operation. Appoint an HRA Administrative Agent. Electronically provide ING with completed enrollment information. Provide ING with all required New Business Plan Sponsor Submission paperwork, including but not limited to the signed contract application and signed Plan Sponsor Submission paperwork. Review plan document and all other plan related documents with your tax and legal counsel. Review and maintain all documents, data and reports provided by ING and /or the HRA Administrative Agent. Initiate any asset transfer activity (i.e., transfer from existing investment provider to ING) by providing current custodian or trustee with liquidation letter and any other required documentation. Initiate electronic fund transfer of contributions. Provide contribution data in an automated format. Ensure accuracy of allocation data provided by the Plan Sponsor, Named Fiduciary or existing HRA Administrative Agent and /or previous investment provider in case of transferred assets. Review and reconcile contribution information. Provide newly eligible individual enrollment information to ING before funds are deposited into the contract. Authorize HRA Administrative Agent to initiate plan disbursements and ensure accuracy of information provided to ING. Plan Sponsor or Named Fiduciary Responsibilities delegated to the HRA Administrator Authorize HRA Administrator to collect administration fees from participant accounts when applicable under the Administrative Services Agreement. Prepare Plan and Trust documents, if applicable, for Plan Sponsor approval. Establish capability to receive participant level data from ING. Provide plan specification and related HRA design consulting. Perform discrimination testing as required under applicable federal law to assist plan sponsor in complying with federal qualification requirements for your Plan. Administer plan in accordance with the plan document, trust agreement and all applicable federal and state laws and regulations including but not limited to the requirements of the Internal Revenue Code (IRC). Communicate plan and plan related changes, and answer plan- related questions from participants. Provide participant benefit statements. Obtain appropriate statement from sponsor and /or participant representing that request for qualified medical reimbursement has not and will not be the subject of (1) a duplicate claim request or (2) any type of claim from an HRA, Flexible Spending Arrangement (FSA), or other medical expense payment or reimbursement plan. Test and monitor for participation, non - discrimination and contribution limits compliance as applicable. Provide technical support and guidance to Plan Sponsors regarding legislative and regulatory changes, their impact on the program and provide recommendations for appropriate modifications if necessary. Determine eligibility and qualification for all plan disbursements and submit requests to ING using secured methods as agreed upon by both parties. Obtain annual Level II SAS 70 audit report and make available to Plan Sponsor and ING. Maintain Errors and Omissions insurance of at least $1 million per occurrence and $2 million in the aggregate and provide evidence of such coverage at any time upon the request of ING. Maintain a Fidelity Bond or Commercial Crime insurance of at least $1 million per occurrence and $2 million in the aggregate and provide evidence of such coverage at any time upon request of ING. Generate any required Payee Statements and Information Returns under HRA Administrators Employer Identification Number (EIN) as required. Provide timely claims processing including any adjudication where necessary. Distribute reimbursements to participants. Provide plan participants with a call center and transaction web site with links to ING's web site and call center. Collect and maintain participant dependent information. Complete and file IRS Form 990 as required. Form No. 82362 Non -ERISA Gov HRA (12 /01 12005) Page 6 of 9 — Incomplete without all pages ING Respond to HRA product questions from Plan Sponsors or Named Fiduciaries and producers. Responsibilities Provide HRA product literature (hard copy and web- based). Distribute welcome packets to Plan Sponsors and participants. As applicable, fulfill HRA Administrative Agent request for participant data maintained by ING and required by the HRA Administrative Agent to process claims. Coordinate enrollment activity with Plan Sponsor or Named Fiduciary and producer. Timely processing and application of contributions and investment allocation instructions, if applicable. Electronically interface with HRA Administrative Agent, as applicable, for disbursements using secured methods as agreed upon by both parties. Provide secure Internet access and toll -free telephone service for account inquiries, allocation changes and fund transfers. Availability of a Customer Service Associate to provide service on account information, fund allocations and distribution request initiation. Daily reconciliation of plan and participant activity. Perform fund valuations on a daily basis. Quarterly sponsor reports showing fund activity and account balances. Provide quarterly participant statement of activity mailed directly to participant. Plan Sponsor or Plan Sponsor /Named Fiduciary acknowledges that the Plan is not subject to Title I of the Employee Named Fiduciary Retirement Income Security Act ( "ERISA ") and that the trust meets the requirements of IRC Sections Authorizations, 501(c)(9) and /or 115. Agreements Plan Sponsor)Named Fiduciary has received materials describing the actual or estimated charges, fees, and Signature discounts, penalties or adjustments currently in effect and which may be applied in connection with the purchase, holding, exchange or termination of the Funding Agreement. • The Plan's selection of investments under the Funding Agreement is based solely upon the printed disclosure material provided by ING. • ING is not responsible for the selection or supervision of service providers or any Fiduciaries to the Plan (e.g., investment advisers, record keepers or HRA Administrators). Where a sales representative of ING is also a Service Provider to the Plan, or undertakes a Fiduciary role, he /she is not acting on behalf of ING when providing those services, or when acting in any fiduciary capacity and is not receiving any compensation from ING for such services. • Plan Sponsor /Named Fiduciary hereby agrees that if the HRA Administrator is terminated or unable to act for any reason then Plan Sponsor /Named Fiduciary, will be responsible for fulfilling the responsibilities delegated to the HRA Administrator until such time as a replacement HRA Administrator is properly designed and assumes such responsibilities. • ING's obligations to the Plan are governed solely by the terms of its Funding Agreement, Plan Sponsor Submission Information and ING Trust Agreement, if applicable. • Plan Sponsor /Named Fiduciary has read and understands the information described or referred to previously and is authorized to sign these forms on behalf of the Plan. • Plan Sponsor /Named Fiduciary hereby provides written direction to ING allowing allocation changes and /or inter -fund transfers to be made by Participants in allocated accounts. Not applicable to unallocated contracts. • Plan Sponsor /Named Fiduciary hereby provides written direction to ING to accept instructions for authorized parties of the HRA Administrative Agent with regard to the processing of claims and withdrawals. Plan Sponsor /Named Fiduciary acknowledges that neither ING, nor anyone acting as its agent, is a party to, or Fiduciary of, the Plan for any purpose, or has any responsibility for any tax or other requirements or consequences to the Plan or to any Participant or Beneficiary of the Plan. I acknowledge that I have consulted my tax or legal advisor regarding the tax and other consequences of the Plan. Plan Sponsor /Named Fiduciary understands that they have selected a funding agreement and that the tax laws provide for exclusion of taxation on earnings on Participants' account balances. Although the funding agreement provides features and benefits that may be of value to Participants, it does not provide any additional tax benefit beyond that provided by the Plan. Plan Sponsor /Named Fiduciary acknowledges that the information they have provided in this form is accurate, and that the fees and compensation disclosed in this form are reasonable. • Plan Sponsor /Named Fiduciary acknowledges and approves the description of the responsibilities of the various parties outlined in this form. • Plan SponsonNamed Fiduciary agrees to indemnify and hold ING harmless from any preexisting compliance or regulatory issue associated with the Plan including any exposure caused by any outside third party prior to converting to ING. Plan Sponsor /Named Fiduciary has received and read ING's Excessive Trading Policy. Plan Sponsor or Named Fiduciary Name (please type orprint) Tax ID No. Citv of New ort Beach 95- 6000751 Plan Sponsor or Named Fiduciary's Signature Date (mm/dd/yyyy) Form No. 82362 Non -ERISA Gov HRA (1210112005) Page 7 of 9 — Incomplete without all pages Part 4— Producer, Field Office, & Marketing Information Distribution/ Complete the below Agent and /or Broker information. Producer Agent- includes Career Agent (ING FA Only)- appointed with ING Life Insurance and Annuity Company, registered representative of ING Financial Advisers, LLC. Receive commission based compensation. Broker- (Non ING FA Only) appointed with ING Life Insurance and Annuity Company, but affiliated with a broker dealer other than ING Financial Advisers, LLC. Receive commission based compensation. List names and codes of all Agents and Brokers enrolling and servicing this case. Checkoff whether the representative is an Agent or Broker. ❑ Agent Representative Name Broker Dealer Affiliation Office Rep. % Last 4 digits of ❑ Broker Code No. Participation SSN N/A ❑ Agent Representative Name Broker Dealer Affiliation Office Rep. % Last 4 digits of ❑ Broker Code No. Participation SSN ❑ Agent Representative Name Broker Dealer Al Offce Rep. % Last dig its of ❑ Broker Code No. Participation SSN ❑ Agent Representative Name Broker Dealer Affiliation Office Rep, % Last 4 digits of ❑ Broker Code No. Partdpation SSN ❑ Agent Representative Name Broker Dealer Aflilialion Office Rep. % Last 4 digits of ❑ Broker Code No. Participation SSN Field Office Sales Manager Name and Title (Please print) Approval Gavin T. Gruenberg, Major Accounts Specialist Sales Manager's Signature Marketing Proposal Date RFP Date Information Consultant Name Telephone No. Form No. 82362 Non -ERISA Gov HRA (12/01/2005) Page 8 of 9— Incomplete without all pages Part 5 — Domestic Emerging Markets CONFIDENTIAL INFORMATION Domestic Emerging Markets . ING defines Domestic Emerging Markets as those high growth segments of the United States population that control a large and ever - increasing segment of the economy. To help us better serve our Plan Sponsors and their Participants, please tell us about the demographics of this new rase. This information will help ING provide our customers with specialized capabilities and services, e.g., bilingual capabilities, the Calendar of African American History, and /or brochures and books to help women meet their special financial needs. The information, if provided, will be confidential except when used to direct these and other ING resources. Thank you. Are any of the following Domestic Emerging Markets significantly represented in the Employee population (ke., 20% of the Employee population or greater): African American Asian American Latino /Hispanic Other Emerging Market: Please specify Yes No Unknown ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ If Yes % if known % if known % if known if known Complete the following based on the demographics of the person(s) who are the decision makers for the purchase of ING's program /service. ❑ woman ❑ African American ❑ Asian American ❑ Latino /Hispanic ❑ Other Emerging Market— Please Specify: ❑ None of the above Form No. 82362 Non -ERISA Gov HRA (12/01/2005) Page 9 of 9 — Incomplete without alt Pages TRUST AGREEMENT Governing the CITY OF NEWPORT BEACH MEDICAL EXPENSE REIMBURSEMENT PLAN (1217,05 ed ) C \Documents and Scuinyssmulter 0001.. Seumpsl emporap Internet Eiles.OLR59 JIRA IRC 115 TRUST AGREEMENT) doc Integral Part Trust 51 15 IRC Plan Trust Agreement THIS TRUST AGREEMENT, effective as of the first day of January I, 2006, between the City of Newport Beach, California (the "Employer ") in its corporate capacity and as the Plan Sponsor of the City of Newport Beach Medical Expense Reimbursement Plan (the "Plan "), and ING National Trust (the "Trustee "). WITNESSETH: WHEREAS, the Employer has adopted the Plan, which is intended to meet the requirements of Sections 105 and 106 )of the Internal Revenue Code of 1986, as amended ( "Code "), and other applicable guidance governing heath reimbursement arrangements for the benefit of the employees therein described; and WHEREAS, the Employer has established or desires to establish a trust constituting a part of the Plan, pursuant to which assets are held to provide for the funding of and payment of benefits under the Plan; and WHEREAS, the Employer has the power to manage and control the assets of the Plan; and WHEREAS, the Employer has elected to invest the assets of the Plan by means of an investment program ithe "Program ") offered by ING Life Insurance and Annuity Company ( "ILIAC') through its broker- dealer affiliate ING Financial Advisors, LLC (the "Broker "), and in connection therewith, ILIAC provides recordkeeping services to the Plan and the Broker provides brokerage services to the Plan; and WHEREAS, the Employer wishes to appoint the Trustee as a trustee to the Plan solely with respect to the Program assets in accordance with the terms and conditions of this Agreement; NOW, THEREFORE, the Employer and the Trustee, each intending to be legally bound, agree as follows: SECTION 1 - ESTABLISHMENT AND OPERATION OF TRUST 1.1 Appointment and Acceptance of Trustee. The Employer hereby establishes with the Trustee a trust consisting of such sums of money and such other property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee, and hereby appoints the Trustee as trustee with respect to the assets invested through the Program and held pursuant to this Agreement as such assets shall exist from time to time (the "Fund "). For purposes of the Agreement, Plan assets invested through the Program in a self- directed brokerage account shall also be considered to be part of the Fund. The Fund shall be held by the Trustee in trust and dealt with in accordance with the provisions of this Agreement. The Fund shall not include any interest in any direct or indirect investments in real property, leaseholds, mineral interests or participations in a real estate investment trust or corporation organized under Section 50t(c) or 501(c)(25) of the Code. The Trustee shall have no responsibility for any property until it is received and accepted by the Trustee, or for any property of the Plan not delivered to the Trustee and accepted by the Trustee to be a part of the Fund. The Trustee hereby accepts its appointment, acknowledges that it assumes the duties established by this Agreement, and agrees to be bound by the terms contained herein. 1.2 Trustee Responsibilities. The Trustee shall receive and hold the assets of the Fund in accordance with the terns of this Agreement. The duties of the Trustee hereunder are as a directed trustee and the Trustee shall act solely in accordance with the instructions of the Authorized Parties in accordance with Sections 2.2 and 2.3 of this Agreement ( "Authorized Instructions "). Nothing in this Agreement is intended to give the Trustee any discretionary responsibility, authority or control with respect to the management or administration of the Plan or the management of the assets of the Plan. Further, the Trustee is not a party to the Plan and has no duties or responsibilities other than those that may be expressly contained in this Agreement. In any case in which a provision of this Agreement conflicts with any provision in the Plan, this Agreement shall control. 13 Exclusive Benefit. Except as may be permitted by law, by the terms of the Plan, or by this Agreement, at no time prior to the satisfaction of all liabilities with respect to participants and their beneficiaries under the Plan shall any part of the Fund be used for or diverted to any purpose other than for the exclusive benefit of the participants and their beneficiaries. The assets of the Fund shall be held for the exclusive purposes of providing benefits to participants of the Plan and their beneficiaries and defraying the reasonable expenses of administering the Plan and the Trust. C: \Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc Integral Part Trust 51 15 IRC 1.4 Standard of Care. The Trustee shall discharge its duties under this Agreement with the care and skill required under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Trustee shall not be liable for any acts or omissions of another person other than the negligent acts or omissions of its own employees, agents or affiliates including ILIAC and Broker. The Trustee shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, direction, instruction, consent, certification or other instrument reasonably believed by it to be genuine and delivered by the proper party or parties. 1.5 Contributions. The Trustee shall receive contributions or other amounts for deposit to the Plan that are delivered to the Trustee or its designated agent for deposit to or for the benefit of the Plan. In accordance with Authorized Instructions, the Trustee shall transmit contributions received to the Broker for the purpose of settling the Plan's investment transactions. The Employer shall have sole duty and responsibility for the determination of the accuracy or sufficiency of the contributions to be made under the Plan and for the transmittal of contributions or other amounts to the Plan. The Trustee shall have no duty or responsibility (a) to determine the amounts to be contributed to or transferred to the Plan or on behalf of the participants of the Plan, (b) to collect any contributions or transfers to the Plan or to enforce the collection of any such contributions or transfers, or (c) for the adequacy of amounts deposited to the Fund to meet and discharge any of the Plan's liabilities. 1.6 Return of Contributions. Notwithstanding any other provision of this Agreement contributions made by the Employer based upon mistake of fact may be returned to the Employer within one year of such contribution, provided that the return of contributions under this Section 1.6 may not violate any provision of the Plan, and shall make such return plus any earnings to the Employer. The Trustee shall return contributions under this Section 1.6 only in accordance with Authorized Instructions and the Trustee shall have no duty to determine whether the return of such contributions is permitted under this Section 1.6 and the Plan. In the alternative, the Employer may reduce its contributions to the Plan for a subsequent year by contributions made by the Employer based upon a mistake of fact or law, with or without earnings thereon, to the extent that such reduction is permitted by law and by the terms of the Plan. 1.7 Distributions. The Trustee shall make distributions and disbursements from the Fund solely in accordance with Authorized Instructions. The Employer agrees that the Trustee shall not have any responsibility or duty under this Agreement to see to the proper application of any payment, to determine the tax effect of any payment, or to determine whether a distribution or disbursement to any person paid in accordance with Authorized Instructions is appropriate under the terms of the Plan and applicable law. 1.8 Compliance with Law. The Trust is intended to be tax - exempt under Section 115 of the Code. The Employer represents that the Trust qualifies as an integral part of the Employer's essential government function as required by Section 115 of the Code and that the Plan constitutes a health reimbursement arrangement tinder Code Sections 105 and 106 and as described in Notice 2002 -45 and Revenue Ruling 2002 -41. The Employer will advise the trustee promptly if the Employer becomes aware of changes in the law that may affect its status as a 115 trust or health reimbursement arrangement as described herein. SECTION 2 - AUTHORITIES 21 Authority to Execute Agreement The Employer hereby certifies that it has the power and authority to enter into this Agreement on behalf of the Plan. The person(s) signing below as representatives of the Employer each warrant, as individuals, that each is an authorized representative of the Employer, all signatures are genuine and the persons indicated are authorized to sign. 2.2 Authorized Parties. The Employer shall concurrently with the execution of this Agreement, furnish the Trustee with a written list of the names, signatures, and extent of authority of all persons authorized to direct the Trustee and otherwise act on behalf of the Employer under the terms of this Agreement. Such persons designated by the Employer to act on its behalf hereunder are "Authorized Parties ". The Employer hereby confirms to the Trustee that ILIAC, the Broker, and the designated administrative agent are Authorized Parties, for purposes C: \Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc 3 Integral Part Trust 5115 IRC of making distributions and disbursements from the Fund to pay Plan benefits and settling Plan investment transactions, respectively. The Trustee shall be entitled to rely on and shall be fully protected in acting upon directions, instructions, and any information provided by an Authorized Party until notified in writing by the Employer of a change of the identity or extent of authority of an Authorized Party. 2.3 Authorized Instructions. All directions and instructions to the Trustee from an Authorized Party ( "Authorized Instructions ") shall be in writing, transmitted by mail (including electronic mail) or by facsimile The Trustee shall be entitled to rely on and shall be fully protected in acting in accordance with all such directions and instructions which it reasonably believes to have been given by an Authorized Party and in failing to act in the absence thereof. SECTION 3 - POWERS AND DUTIES 3.1 General Powers and Duties of Trustee. In administering the Trust, the Trustee shall be specifically authorized to: (a) In accordance with Authorized Instructions, receive, hold and maintain custody of, and disburse Plan assets; (b) Hold securities or other Plan property in book entry form or through another agent or nominee, including without limitation in an omnibus account arrangement, provided that the Trustee's records clearly indicate that such securities or other property are held for the exclusive benefit of the Plan and its participants and beneficiaries; (c) Appoint domestic agents, sub - trustees, sub - custodians or depositories (including affiliates of the Trustee) as to part or all of the Fund, except that the indicia of ownership of any asset of the Fund shall not be held outside thejurisdiction of the District Courts of the United States unless in compliance with the standards of Section 404(b) of ERISA and regulations thereunder; (d) Collect income payable to and dividends or other distributions due to the Fund and sign on behalf of the Plan any declarations, affidavits, and certificates of ownership required to collect income and principal payments; (e) Collect proceeds from assets of the Fund that may mature or be called; (f) Until Authorized Instructions are received, hold the assets of the Fund uninvested, or invest the assets of the Fund in bank accounts of any bank, and the Trustee may retain any earnings on such deposits as part of its compensation for services hereunder; (g) Submit or cause to be submitted to the Employer all information received by the Trustee regarding ownership rights pertaining to property held in the Fund; (h) Exercise all voting rights relating to securities held in the Fund as directed by the Employer;. (i) Commence or defend suits or legal proceedings and represent the Fund in all suits or legal proceedings in any court or before any other body or tribunal as the Trustee shall deem necessary to protect the Fund provided, however, that the Trustee shall not be obligated to do so unless it has been indemnified by the Employer and the Plan against all expenses and liabilities sustained in connection with such action; (j) After providing notification to the Employer, employ suitable agents and legal counsel and, as part of its reimbursable expenses under this Agreement, pay their reasonable compensation and expenses. The Trustee shall be entitled to rely on and may act upon advice of counsel on all matters, and, if the use of such counsel is authorized by Employer, the Trustee shall be without liability for any action reasonably taken or omitted pursuant to such advice; C:1Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \01,K59 \HRA IRC 115 TRUST AGREEMENT4.doc 4 Integral Part Trust 5115 1 R (k) Make, execute and deliver any and all documents, agreements or other instruments in writing as is necessary or desirable for the accomplishment of any of the powers and duties in this Agreement; and (1) Generally take any action, whether or not expressly authorized, which the Trustee may deem necessary or desirable for the fulfillment of its duties hereunder. SECTION 4 - INVESTMENT OF THE FUND 4.1 Investment of the Fund. The assets of the Fund shall be invested and reinvested among the investments selected by the Employer. The Employer shall have sole responsibility for the investment and reinvestment of the assets of the Fund, except to the extent that the Plan permits participants to instruct the Employer or its authorized representative with respect to the investment of their individual accounts among investment options selected by Employer. The Trustee shall have no duty or responsibility for (i) selecting or providing advice with respect to the selection of any investment options offered under the Plan, (ii) determining or reviewing any securities or other property purchased for or held by the Plan, or (iii) providing advice with respect to the purchase, retention, redemption, or sale of any securities or other property for the Plan. In the event the Employer has selected particular investment options offered through the Program into which Plan assets previously invested with another investment provider are to be placed (a procedure known as "mapping "), the Trustee shall bear no duty or responsibility for determining the suitability of the Program investment offerings selected for this purpose. 4.2 Investment Transactions. Under the plan services agreement, the Broker receives instructions from the Employer or, if the Plan so provides, from the Plan participants, and executes plan -level trade instructions. All investment transactions for the Fund shall be effected by the Broker and the Trustee's sole responsibility therefore shall be to, solely in accordance with Authorized Instructions, (a) timely transmit trade instructions and funds to the Broker for purposes of settling the Plan's investment transactions, (b) receive and hold title to securities purchased on the Plan's behalf, (c) cooperate with the Broker in the transfer of securities or other property of the Plan in connection with the redemption or sale of securities or other property, and (d) collect from the Broker proceeds received upon such redemptions or sales. SECTION 5 - REPORTING AND RECORDKEEPING 5.1 Records and Reports. The Trustee shall keep accurate records of all amounts received to and disbursed from the Fund and the investments and other transactions of the Fund for at least six years following the date of such transaction. The Trustee shall provide a report of the assets of the Fund to the Employer from time to time, but at least annually. The Trustee may rely on the fair market value of the property of the Fund as reported by the recordkeeper and the Trustee shall be fully protected in relying on such values. 5.2 Review of Reports. If, within ninety (90) days after the Trustee mails to the Employer a statement with respect to the Fund, the Employer has not given the Trustee written notice of any exception or objection thereto, the statement shall be deemed to have been approved, and in such case the Trustee shall not be liable for any matters in such statements. The Employer or its agent, upon giving prior written notice to Trustee, shall have the right at its own expense to inspect the Trustee's books and records directly relating to the Fund during normal business hours. The Trustee shall be reimbursed its actual costs for making such books and records available for inspection. 5.3 Non -Fund Assets. The duties of the Trustee shall be limited to the assets held in the Fund, and the Trustee shall have no duties with respect to assets held by any other person including, without limitation, any other trustee for the Plan. The Employer hereby agrees that the Trustee shall not serve as, and shall not be deemed to be, a co- trustee under the circumstances, and shall have no co- fiduciary liability for any other person or trustee. C: \Documents and Settings \scoulter.000 \1-ocal Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc 5 Integral Part Trust 51 15 IRC SECTION 6 - COMPENSATION, EXPENSES, TAXES, INDEMNIFICATION 6.1 Compensation and Expenses. The Trustee shall be entitled to compensation for services under this Agreement as set forth in Exhibit A. The Employer acknowledges that the Trustee may increase the amount of compensation on an annual basis with sixty (60) days' prior written notice to the Employer. The Trustee shall also be entitled to receive as part of its compensation any amounts earned under Section 3.l(f) and to reimbursement for expenses incurred by it in the discharge of its duties under this Agreement in accordance with Section 3.1. The Trustee is authorized to charge and collect from the Fund any and all such fees and expenses, unless the Employer objects within 30 days of receiving notice of the Trustee's intent to collect its fees and expenses from the Fund. 6.2 Tax Obligations. To the extent an Authorized Party has provided necessary information to the Trustee, the Trustee shall use reasonable efforts to assist such Authorized Party to notify the Employer of any responsibility for payment of taxes, withholding, certification and reporting requirements, claims for exemptions or refund, interest, penalties and other related expenses of the Fund ( "Tax Obligations "). Notwithstanding the foregoing, the Trustee shall have no responsibility or liability for any Tax Obligations now or hereafter imposed on the Employer or the Fund by any taxing authorities, domestic or foreign, except as provided by applicable law. To the extent the Trustee is responsible under any applicable law for payment of any Tax Obligation on behalf of the Fund or the Trust, the Employer shall cause the appropriate Authorized Party to inform the Trustee of all Tax Obligations, shall direct the Trustee with respect to the performance of such Tax Obligations, and shall provide the Trustee with all information required by the Trustee to meet such Tax Obligations. 6.3 Indemnification. The Employer, and to the extent permitted by the law, the Plan, shall indemnify and hold harmless the Trustee from all claims, liabilities, losses. damages and expenses, including reasonable attorney's fees and expenses (including Tax Obligations) incurred by the Trustee in connection with this Agreement, except as a result of the Trustee's own negligence or willful misconduct. This indemnification shall survive the termination of this Agreement. The Trustee agrees to indemnify and hold harmless the Employer and Plan from any loss, liability, claim suit or judgment resulting from the work or acts done or omitted by the Trustee's officers, employees or agents in carrying out the responsibilities the Trustee have agreed in writing to perform to the proportionate extent that it results from the negligence or wrongdoing of the Trust or any of its officers, employees, agents or affiliates including ILIAC and Broker. The Trustee's agreement to indemnify the Employer and Plan shall not extend to any loss, liability, claim suit or judgment based upon the negligence of the Employer, Plan or agent or to any injury or damage which results from the Company's reliance on information transmitted by the Employer, its agent or participants. 6.4 Force Maieure. The Trustee shall not be responsible or liable for any losses to the Fund resulting from nationalization, expropriation, devaluation, seizure, or similar action by any governmental authority, de facto or de jute; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting the Fund's property; or acts of war, terrorism, insurrection or revolution; or acts of God; or any other similar event beyond the control of the Trustee or its agents. This Section shall survive the termination of this Agreement. SECTION 7 - AMENDMENT, TERMINATION, RESIGNATION, REMOVAL 7.1 Amendment. This Agreement may be amended only by written agreement signed by the parties hereto. 7.2 Removal or Resignation of Trustee. The Trustee may be removed with respect to all or part of the Fund upon receipt of sixty (60) days' written notice from the Employer. The Trustee may resign as Trustee hereunder upon sixty (60) days' written notice delivered to the Employer. In the event of such removal or resignation, the successor trustee will be appointed by the Employer, and the retiring Trustee shall transfer the Fund, less such amounts as may be reasonable and necessary to cover its compensation and direct expenses including but not limited to, a pro -rata share of the fees described in Section 6.1. In the event the Employer fails to appoint a successor trustee within sixty (60) days of receipt of written notice of resignation, the Trustee reserves the right to C: \Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc 6 Integral Part Trust SI 15 IRC seek the appointment of a successor trustee from a court of competent jurisdiction. The Employer shall indemnify the Trustee from any costs incurred by the Trustee in seeking such appointment. The Trustee shall have no duties, responsibilities or liability with respect to the acts or omissions of any successor trustee. 7.3 Mercer or Consolidation of Trustee. Any entity into which the Trustee maybe merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Trustee is a party, or any entity succeeding to the trust business of the Trustee, shall become the successor of the Trustee hereunder, without the execution or filing of any instrument or the performance of any further act on the part of the parties hereto. 7.4 Plan Termination. Upon termination of the Plan, the Trustee shall distribute all assets then constituting the Fund, less any fees and expenses payable from the Fund, pursuant to the written instructions of the Employer. The Trustee shall be entitled to assume that such distributions are in full compliance with and not in violation of the terms of the Plan or any applicable law. 7.5 Property Not Transferred. The Trustee reserves the right to retain such property as is not suitable for distribution or transfer at the time of the termination of the Plan or this Agreement and shall hold such property for the benefit of those persons or other entities entitled to such property until such time as the Trustee is able to make distribution. The Employer shall indemnify the Trustee from any costs incurred by the Trustee for retaining the property until it can be distributed. Upon the appointment and acceptance of a successor trustee, the Trustee's sole duties shall be those of a custodian with respect to the property not transferred. SECTION 8 - ADDITIONAL PROVISIONS 8.1 Assignment or Alienation. Except as may be provided by law, the Fund shall not be subject to any form of attachment, garnishment, sequestration or other actions of collection afforded creditors of the Employer, participants or beneficiaries under the Plan. The Trustee shall not recognize any assignment or alienation of benefits unless an Authorized Instruction is received. 8.2 Governing Law, This Agreement shall be construed in accordance with and governed by the laws of the State of Connecticut, to the extent not preempted by Federal law. 8.3 Necessary Parties. The Trustee reserves the right to seek a judicial or administrative determination as to its proper course of action under this Agreement. Nothing contained herein will be construed or interpreted to deny the Trustee or the Employer the right to have the Trustee's account judicially determined. To the extent permitted by law, only the Trustee and the Employer shall be necessary parties in any application to the courts for an interpretation of this Agreement or for an accounting by the Trustee, and no participant under the Plan or other person having an interest in the Fund shall be entitled to any notice or service of process. Any final judgment entered in such an action or proceeding shall, to the extent permitted by law, be conclusive upon all persons. The Employer shall indemnify the Trustee for any costs incurred by the Trustee in seeking such judgment. 8.4 Notices. All notices and other communications hereunder shall be in writing and shall be sufficient if delivered by hand or if sent by telefax or mail (including electronic mail), postage prepaid, addressed: (a) If to the Trustee Catherine M. Krokus President ING National Trust 151 Farmington Ave., TNA1 Hartford, Connecticut 06156 (b) If to the Employer: Administratative Services Director C: \Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc Integral Part Trust 5115 IRC City of Newport Beach 3300 Newport Blvd. P.O. Box 1768 Newport Beach, CA 92658 -8915 The parties may by like notice, designate any future or different address to which subsequent notices shall be sent. Any notice shall be deemed given when received. 8.5 No Third Party Beneficiaries. The provisions of this Agreement are intended to benefit only the parties hereto, their respective successors and assigns, and participants and their beneficiaries under the Plan. There are no other third party beneficiaries. 8.6 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by one counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the effective date set forth above. City of Neicport Beach, California ING National Trust By: By: _ Name: Name: Title: Title: C:'.Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK59 \HRA IRC 115 TRUST AGREEMENT4.doc 8 Integral Part Trust 3115 1RC EXHIBIT A FEES In consideration for services rendered according to the terms of this Agreement, the Trustee shall be paid according to the following fee schedule: $750 per calendar year In the event the annual payment is not received by the Trustee as of December 15th of a calendar year, the Trustee shall notify the Employer. The Employer shall, on behalf of the Plan, immediately forward to the Trustee the difference between the amount due and the amount the Trustee received. C: \Documents and Settings \scoulter.000 \Local Settings \Temporary Internet Files \OLK591HRA IRC 115 TRUST AGREEMENT4.doc H'26GO.03 AETNATRCST I DOC ADMINISTRATIVE SERVICES AGREEMENT MEDICAL EXPENSE REIMBURSEMENT PLAN FOR THE CITY OF NEWPORT BEACH ADMINISTRATION RESOURCES CORPORATION 11490 Xeon Street NW, Ste 200 Coon Rapids, MN 55448 -3149 Telephone 763.421.5510 1.800.588.2020 Fax 763.421.7628 (1 217105 ed.) ADMINISTRATIVE SERVICES AGREEMENT NEWPORT BEACH MEDICAL EXPENSE REIMBURSEMENT PROGRAM (MERP) This Agreement is effective this day of , 2005, between THE CITY OF NEWPORT BEACH ( "Plan Sponsor ") and Administration Resources Corporation, a Minnesota corporation ( "Plan Supervisor "). RECITALS WHEREAS, the Plan Sponsor has established THE CITY OF NEWPORT BEACH Medical Expense Reimbursement Plan (MERP) employee benefit plan (hereafter referred to as "Plan "), which enables certain eligible individuals to receive reimbursement on a pre -tax basis for the payment of certain out -of- pocket medical expenses that are not reimbursed by any other source; and WHEREAS, the Plan Sponsor has also established a tax - advantaged Voluntary Employees' Beneficiary Association (VEBA) Trust or Integral Trust vehicle pursuant to IRC §501(c)(9) or 1RC § 115, respectively (hereafter referred to as "Trust "); and WHEREAS, the Plan Sponsor desires to use the services of a third party administrator for the Plan as provided by the Plan Supervisor; and WHEREAS, Plan Supervisor agrees to provide Plan administration services on behalf of Plan Sponsor according to the following terms and conditions. NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 DUTIES AND RESPONSIBILITIES OF THE PLAN SUPERVISOR 1.1 The Plan Supervisor shall perform the following services for the Plan Sponsor and any optional services initialed by Plan Sponsor on Schedule A of this Agreement. (a) Initial Employee Communication and Ongoing Reporting. Upon initial eligibility, mail appropriate employee communication materials to claims active and non- claims active participants. Thereafter, distribute via US mail reimbursements and explanations of benefit materials to participants and maintain a participant website. (b) Claim Reimbursement Processing. Process all claims for any and all services selected on Schedule A presented for payment in accordance with the terms of the Plan, and any written claim procedures or other practices established by the Plan Sponsor and communicated to the Plan Supervisor, including, but not limited to, reasonable investigatory work to determine claim eligibility under the Plan and preparing and distributing benefit checks or drafts to Plan Participants and in accordance with all applicable federal and state laws and regulations including but not limited to the Internal Revenue Code. (c) Inquiries. Answer inquiries from the Plan Sponsor, and plan participants concerning requirements, procedures, or benefits of the Plan. (d) Claim Reimbursement File. Maintain claim reimbursement files. (e) Standard Reports. Prepare and provide to the Plan Sponsor standard reports of all disbursements made. Additional or custom reports may be available for a fee and in a format to be agreed upon in writing by the Plan Sponsor and the Plan Supervisor. (f) Collect administration fees from participant accounts when applicable under this agreement; (g) Provide plan specification and related MERP design consulting and prepare plan and trust documents, as requested in Section A of Schedule A incorporated as part of this agreement, for Plan Sponsor approval (h) Establish capability to receive participant level data from ING; (i) Perform discrimination testing as required under applicable federal law to assist Plan Sponsor in complying with federal qualification requirements for the plan as requested in Section C of Schedule A incorporated as part of this agreement; [Where is Schedule A; is this references accurate ?] (j) Administer plan in accordance with the plan documents, trust agreement and all applicable federal and state laws and regulations, including but not limited to the requirements of the IRC (k) Provide participant benefit statements annually; (1) Obtain appropriate statement from Plan Sponsor and /or participant representing that request for qualified medical reimbursement has not and will not be the subject of (1) a duplicate claim request or (2) any type of claim from a health reimbursement arrangement (HRA), Flexible Spending Arrangement (FSA), or other medical expense payment or reimbursement plan. (m)Test and monitor... [please insert from ING Submission Information, page 6, bottom half of page] (n) Provide technical support and guidance to Plan Sponsors regarding legislative and regulatory changes, their impact on the program and provide recommendations for appropriate modifications, if necessary. (o) Determine eligibility and qualification for all plan disbursements and submit requests to ING using secured methods as agreed upon by both parties. (p) Obtain annual Level II SAS 70 audit report and make available to Plan Sponsor and ING. (q) Maintain Errors and Omissions insurance of at least $1 million per occurrence and $2 million in the aggregate and provide evidence of such coverage at any time upon the request of ING. (r) Maintain a Fidelity Bond or Commercial Crime insurance of at least $1 million per occurrence and $2 million in the aggregate and provide evidence of such coverage at any time upon request of ING. (s) Generate any required Payee Statements and Information Returns under MERP Administrator's Employer Identification Number (EIN) as required. (t) Provide timely claims processing including any adjudication where necessary. (u) Provide plan participants with a call center and transaction web site with links to ING's web site and call center. (v) Collect and maintain participant dependent information as it relates to the terms of the plan document. (w) Prepare quarterly financial statement and serve as liaison between the Trust's Independent Auditors and the Trustees and assist the auditors in filing the necessary annual tax returns including completion and filing of IRS Form 990, to the extent required. (x) Communicate plan and plan- related changes, and answer plan - related questions from participants. 1.2 Plan Supervisor accepts responsibility only for the ministerial and nondiscretionary services described in this Agreement and only to the extent that Plan Sponsor furnishes accurate and timely information to Plan Supervisor. The services to be performed by Plan Supervisor shall be performed within the framework of policies, interpretations, rules, practices and procedures set or established by the Plan Sponsor. Plan Supervisor shall not have discretionary authority or control respecting management of the Plan and shall not have authority to exercise any control respecting disposition of the assets of the Plan and shall not render investment advice with respect to any money or other property of the Plan Sponsor or the Plan and shall have no authority or responsibility to do so. 1.3 Plan Supervisor does not assume Plan Sponsor's fiduciary responsibility, with respect to actions which are taken by Plan Supervisor, so long as Plan Supervisor is acting in accord with the Plan, policies, and procedures of the Trust. 1.4 Allocation and Posting of Earnings to Participant Accounts. Plan Supervisor shall work with the financial advisors, trustees, and investment managers for the plan to determine the net earnings of the trust fund as of the end of each calendar quarter. Once this amount is determined and agreed to by each of the parties, Plan Supervisor will allocate a pro -rata share of the net eamings to the account of all participants in the health reimbursement Plans of all Plan Sponsors who are a party to this Agreement. Pro -rata calculations shall be based upon the account balance of each such participant as of the close of business on the last business day of the calendar quarter. Once the pro -rata amount is allocated to all participants, the amount for the quarter shall be added to each participant's account and this amount shall be posted for each participant on the Plan Supervisor's MERP participant website. 1.5 Shareholder Communications For securities held in the account other than employer stock, Plan Supervisor will cause all proxies and accompanying materials solicited by an entity, and all prospectuses issued by a company whose securities are held in account ( "shareholder communications ") to be mailed to the Plan Sponsor within a reasonable period of time after the receipt of such shareholder communications by Plan Supervisor. In the event a participant makes a request to the Plan Supervisor for a copy of any shareholder communication, the Plan Supervisor shall forward such request, within a reasonable time period, to the Plan Sponsor who shall be responsible for responding to such request. Plan Supervisor has no responsibility to disseminate copies of shareholder communications to participants who have invested their accounts in the securities for which such shareholder communications have been received or to any other person. If the shareholder communications include a requirement, request, or opportunity for action (such as a proxy, consent, election, instruction, direction, approval, or similar action) (the 3 "Proxies "), the Plan Sponsor will solely be responsible for soliciting and forwarding proxy votes in accordance with the plan document and the requirements of the law. In no case will Plan Supervisor be under any duty to determine how, or if, Proxies are voted or to take any other action in connection with any shareholder communication. Plan Supervisor will be under no obligation to forward or return any other corporate material received on behalf of the account unless required by law except to the extent provided in this paragraph. SECTION 2 DUTIES AND RESPONSIBILITIES OF THE PLAN SPONSOR 2.1 Plan Documentation. The Plan Sponsor shall determine the benefit and administrative provisions of the Plan and shall be solely responsible for the terms of the Plan and /or the Summary Plan Description. Plan Sponsor will further review documents provided and be responsible for all terms within the documents that define the parameters of the Plan. 2.2 Eligibility Determination. Plan Sponsor shall make all benefit eligibility determinations required under any of the plans covered by this Agreement. 2.3 Miscellaneous. The Plan Sponsor shall be responsible for taking the following actions: (a) Provide the Plan Supervisor with a complete and accurate list of all individuals eligible for benefits under the Plan (hereafter known as "Plan Participants ") and who are enrolled at any time during the year in the Plan, changes in benefit eligible status, contributions on behalf of employees, and such other information as the Plan Supervisor may reasonably require in order to render the services contemplated by this Agreement. (b) Notify the Plan Supervisor of any changes in eligibility and Plan Participants. (c) The Plan Sponsor will be responsible for COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation and any state continuation requirements except to the extent Plan Supervisor assumes responsibility for administering COBRA continuation under a separate agreement between Plan Supervisor and Plan Sponsor. [Note — this duty may switch to Plan Supervisor.] (d) Distribute to Plan Participants and provide or return to the Plan Supervisor as needed, appropriate and necessary materials and documents, including, but not limited to, plan summaries, Plan amendments, or other change summaries, enrollment forms, and claim reimbursement forms as may be necessary for the operation of the Plan or to satisfy the requirements of law. (e) Satisfy annual return requirements and other regulatory requirements imposed by law. (f) Utilize and maintain the Plan Supervisor as the single, sole and exclusive Plan Supervisor to assist the Plan Sponsor in administering the Plan. (g) Provide the Plan Supervisor with any additional information as may be reasonably requested by the Plan Supervisor from time to time, (h) Mail and /or otherwise distribute all fund prospectuses as necessary. 4 SECTION 3 FUNDING 3.1 Fundin . The Plan Sponsor will transmit contributions directly to the trustee for the Trust. The Plan Supervisor shall coordinate with and receive funds directly from the trustee for the Trust for purposes of reimbursing the eligible benefits of participants. SECTION 4 PLAN SUPERVISOR'S FEE 4.1 Administrative Fee. In exchange for the services rendered pursuant to this Agreement, the Plan Supervisor shall receive the amount determined in accordance with Schedule A that is attached hereto and herein incorporated by reference. Such fee rates stated on Schedule A may be subject to change not more frequently than annually by the Plan Supervisor and will become effective as indicated on Schedule A except that in the event Plan Supervisor is requested to perform tasks beyond the scope of its current duties as outlined in this Administration Services Agreement, Plan Supervisor reserves the right, from time to time, to renegotiate the fee structure to arrive at mutual agreement of the concerned parties. A mutually agreed upon maximum will be determined after each project has been reevaluated and a contract amendment shall be attached and made part of the original. All changes to Schedule A shall be given to Plan Sponsor at least sixty (60) days prior to the effective date of the changes, and any changes will likewise be incorporated by reference under the terms stated on such Schedule A. 4.2 Nonpayment If the Plan Sponsor, for any reason whatsoever, fails to make a required administrative fee payment by the due date (i.e., within the 30 days following the invoice date), the Plan Supervisor may suspend the performance of its services until such time as the Plan Sponsor makes the proper remittance. The Plan Supervisor may charge interest to the Plan Sponsor on all past due fees at the rate of one and one -half percent (1.5 %) per month, or the maximum rate allowed by law, whichever is less. 4.3 Litieation Fees. Additional fees for services rendered by the Plan Supervisor in connection with arbitration or litigation concerning the Plan or any claim thereunder shall be paid pursuant to a separate written agreement between the Plan Sponsor and the Plan Supervisor. Unless the parties enter into such an agreement, the Plan Supervisor is not required to provide any services to the Plan Sponsor or the Plan in connection with arbitration or litigation concerning the Plan. 5 SECTION 5 LIMITS OF THE PLAN SUPERVISOR'S RESPONSIBILITY AND INDEMNIFICATION 5.1 Fundin . The Plan Supervisor shall have no responsibility, risk, liability or obligation for the funding of Plan benefits. The responsibility and obligation for funding Plan benefits shall be solely and totally the responsibility of the Plan Sponsor. 5.2 Claim Processing Errors. The Plan Supervisor shall be liable for the recovery of claim processing errors arising from the Plan Supervisor's performance pursuant to the terms of this Agreement. The Plan Supervisor agrees to indemnify the Plan Sponsor and hold the Plan Sponsor harmless against any and all loss, damage, and expense with respect to this benefit program resulting from or arising out of the negligent, dishonest, fraudulent, or criminal acts of Plan Supervisor's employees, acting alone or in collusion with others. The Plan Supervisor shall use diligent efforts toward the recovery of such losses. 5.3 Independent Contractor. The Plan Supervisor is, and shall remain, an independent contractor with respect to the services being performed by the Plan Supervisor pursuant to this Agreement and shall not for any purpose be deemed an employee of the Plan Sponsor, nor shall the relationship of the parties be deemed that of partners or joint venturers. 5.4 Indemnification by the Plan Sponsor for Claims Decisions. If the Plan Sponsor reverses a claim payment decision made by the Plan Supervisor, the Plan Sponsor shall notify the Plan Supervisor in writing of such decision and agrees to indemnify, hold harmless, and defend the Plan Supervisor from and against any and all liabilities, losses, damages, claims, lawsuits, causes of action, costs, and expenses the Plan Supervisor may incur because of any such reversal. In the event any claim or demand or lawsuit is brought against the Plan Sponsor and the Plan Sponsor requests the Plan Supervisor to participate in the cause of action or provide information or testimony relating thereto, the Plan Supervisor shall participate to the extent reasonably necessary with counsel provided by the Plan Sponsor and all costs of said legal counsel shall be paid by the Plan Sponsor. Also, any additional services required to be performed by the Plan Supervisor shall be paid for by the Plan Sponsor according to the fee schedule to be agreed upon by the parties at such time. 5.5 No Guarantee of Benefits. The Plan Supervisor does not assume any responsibility, risk, liability or obligation for the general policy direction of the Plan, the adequacy of funding thereof, or any act or omission or breach of duty by parties other than Plan Supervisor. The Plan Supervisor is not and shall not be deemed a guarantor with respect to any benefits payable under the Plan. 5.6 Indemnification for Plan Design/Intemretation. It is agreed and understood by the Plan Sponsor that the Plan Supervisor is not engaged in the practice of law. The resolution of any legal issues concerning the Plan, its coverage, or its interpretation are the responsibility of the Plan Sponsor and its legal counsel. The Plan Sponsor shall indemnify, hold harmless, and defend the Plan Supervisor from and against any and all liabilities, losses, damages, claims, lawsuits, or causes of action, and any costs and expenses associated therewith (including any attorneys' fees the Plan Supervisor may incur or be asked to pay), arising, directly or indirectly, out of the design and /or interpretation of the Plan, including, but not limited to, any liability, losses, damages, claims, lawsuits, or causes of action and any costs and expenses associated therewith (including any attorneys' fees the Plan Supervisor may incur or be asked to pay) arising under any state, federal or local law or regulation. 5.7 General Indemnification. Subject to Section 5.2 and to the extent not covered above, dle Plan Sponsor shall indemnify, hold harmless, and defend the Plan Supervisor and its directors, trustees, officers, employees, and agents from and against any and all liabilities, losses or damages arising out of any claims, lawsuits, or causes of action, and any costs and expenses associated therewith (including any attorneys' fees the Plan Supervisor may incur or be asked to pay), which arise, directly or indirectly, from the Plan Sponsor's act or omission to act in its administration of the Plan, including, but not limited to, any liability, losses, damages, claims, lawsuits, or causes of action and any costs and expenses associated therewith (including any attorneys' fees the Plan Supervisor may incur or be asked to pay) arising under any law. 5.8 Misconduct or Neelk�ence. Notwithstanding the foregoing provisions of this Section 5, no party or person shall be entitled to indemnification or to be held harmless pursuant to this Section 5 if such party or person has engaged in criminal, willful, or intentional misconduct or was negligent with respect to the matter for which the party or person is seeking indemnification or to be held harmless. 5.9 Plan Sponsor as Fiduciary. Notwithstanding anything in the Agreement to the contrary, any delegation of authority or duties pursuant to this Agreement construed by a court of law or governmental agency to make the Plan Supervisor a fiduciary shall be null and void, and such duties are hereby retained by the Plan Sponsor. 5.10 Plan Supervisor's Duty to Indemnify. Plan Supervisor shall indemnify Plan Sponsor for any actual losses or damages which arise out of claims, lawsuits, or causes of action for injunctive relief by a third party, and any costs and expenses associated therewith (including any reasonable attorneys' fees), caused by any negligent action or omission to act by Plan Supervisor. At all times the Plan Supervisor shall have the opportunity to consult with the Plan Sponsor relating to all settlements to which it is a party. 7 5.11 Plan Sponsor Authority. Plan Sponsor has the sole, complete and final discretionary authority to determine conclusively all questions concerning the administration and /or interpretation of the Plan. Plan Sponsor has authority to, and shall interpret and construe the terms of the Plan and determine all questions of eligibility and status of employees and their dependents under the Plan. Plan Sponsor's determinations are binding on all persons, subject to the claims procedures of the Plan. SECTION 6 RECORDS During the term of this Agreement, the Plan Supervisor shall maintain the records and files in conjunction with the administrative services to be performed hereunder and consistent with the federal or state law record retention requirements. All records and files generated are, and will remain, the property of the Plan Sponsor. Upon termination of this Agreement, all records and files in the Plan Supervisor's possession will be returned to the Plan Sponsor and Plan Sponsor will thereafter be solely responsible for retention of such records and files. The term "records and files" shall include the claim files, election forms, and claim reimbursement forms. SECTION 7 TERMINATION 7.1 Sixty -Day Notice. This Agreement shall continue indefinitely until either party shall give the other party not less than sixty (60) days advance written notice of its intent to terminate. 7? Bankruptcy and Insolvency. Notwithstanding the provisions of Section 7. 1, the Plan Supervisor may terminate this Agreement immediately in the event that the Plan Sponsor files for bankruptcy, or becomes insolvent such that Plan Sponsor's liabilities exceed its assets and Plan Sponsor is unable to meet its ongoing obligations to fund the plan and /or pay services fees to the Plan Supervisor. 73 Termination. In the event this Agreement terminates,, the Plan Supervisor and the Plan Sponsor may agree in writing to have the Plan Supervisor process the incurred but unpaid claims as of the date of termination for such length of time as the parties determine appropriate. ARC processing fees for such length of time shall be the ARC rates in effect immediately prior to termination. 7.6 Cost to Transfer. In the event this Agreement is terminated, direct costs associated with transferring information from the Plan Supervisor or to any other persons or entities on behalf of the Plan Sponsor shall be paid for by the Plan Sponsor, unless the Agreement is terminated due to an uncured breach of this Agreement by the Plan Supervisor in which case the Plan Supervisor will pay direct costs associated with transferring information to persons so designated by the Plan Sponsor. This information will be provided in Plan Supervisor's standard format and media. In addition, the Plan Supervisor shall be entitled to retain such records as it deems necessary after consultation with Plan Sponsor to protect itself from potential future litigation and /or claims by Plan participants. The Plan Sponsor shall pay the direct cost of delivering any and all records to the Plan Sponsor and all such records retained by Plan Supervisor will automatically be destroyed by the Plan 8 Supervisor at the end of seven (7) years following the date of the creation of the record or termination of this Agreement. SECTION 8 MISCELLANEOUS PROVISIONS 8.1 Severability. if any provision of this Agreement is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision, and this Agreement shall be construed and enforced as if such provision had not been included. 8.2 Amendment. This Agreement may be amended by the Plan Supervisor and the Plan Sponsor at any time by mutual written consent of both parties. No amendment, under any circumstances, may prejudice or reduce any benefits which might be paid for any cause prior to the amendment. 8.3 Entire Agreement. This Agreement is the entire agreement of the parties and supersedes all prior contracts, representations, understandings, memoranda and other communications between the parties. 8.4 Governing Law; Jurisdiction. This Agreement will be construed as to both validity and performance and governed by and enforced in accordance with the laws of the State of California. Any legal action relating to this Agreement must be brought in a court located in the State of California. 8.5 Waiver. Failure to enforce any provision of this Agreement does not affect the rights of the parties to enforce such provision in another circumstance. Neither does it affect the rights of the parties to enforce any other provision of this Agreement at any time. 8.6 HIPAA Compliance. This Agreement shall incorporate the provisions contained in the signed Business Associate Agreement, attached as Schedule B. IN WITNESS WHEREOF, Plan Sponsor and Plan Supervisor have executed this Agreement effective the date stated in the first paragraph of this Agreement. In signing below, the Plan and the Plan Sponsor acknowledges receipt, understanding, and approval of the Agreement and the attached Schedule A. PLAN SPONSOR PLAN SUPERVISOR THE CITY OF NEWPORT BEACH ADMINISTRATION RESOURCES CORPORATION By: By: Title: Title: Date:' Date: 9 SCHEDULE A CITY OF NEWPORT BEACH EFFECTIVE '2005 'file Plan Supervisor shall receive fees for services rendered as reasonable compensation for administering the Plans during the time period identified above. An initial to the left of an item below indicates Plan Sponsor requests Plan Supervisor to provide the service for the fee indicated. Please Initial to Authorize Service A. Plan and trust establishment Documents and IRS filing: $1,500 • Preparation of plan and trust documents* • Assistance with filing trust document with IRS - - IRS Filing Fee is not included in the above fee and would be paid directly by Cite of Newport Beach. • Preparation of draft of plan summary Assumes 2 hours of legal assistance. Additional legal assistance is available, if desired, at $225 - $300 per hour. B. HRA claim processing and administration services $21.50 per participant per month - Initial group set tip, mail participant administration kits to participants, process requests for reimbursement, issue checks or male automatic direct deposits to participants, customer service via telephone, email, and /or letter, and provide online Nveb access to plan sunumry, administration forms, and account status information. $335 per time - HRA discrimination testing. C. FSA claim processinLi and administration services $4.15 per participant per month (for a participant who does not also have an HRA account; if the participant also has an HRA account, the FSA administration fee would be $3.65 per participant per month) - Initial group set up, mail participant administration kits to participants, process requests for reimbursement, issue checks or make automatic direct deposits to participants, customer service via telephone, email, and /or letter, and provide online Nveb access to plan sumnuirc. administration forms. and account status information. $325 per time - FSA discrimination testing. CITY OF NEWPORT BEACH BASIC PLAN DOCUMENT ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document TABLE OF CONTENTS ARTICLE I. INTRODUCTION ............................................................................... ............................... 1 ARTICLE II. DEFINITIONS .................................................................................. ..............................2 ARTICLE III. PLAN SPONSOR ............................................................................. ............................... 5 ARTICLE IV. ELIGIBILITY AND PARTICIPATION OF EMPLOYEES ............................ ..............................6 ARTICLE V. BENEFITS UNDER THE PLAN ............................................................. ..............................8 ARTICLE VI. CONTRIBUTIONS ......................................................................... ............................... 12 ARTICLE VII. CLAIMS DETERMINATIONS AND REVIEW OF DENIED CLAIM .......... ............................... 13 ARTICLE VIII. HIPAA PRIVACY AND SECURITY PROVISIONS .............................. ............................... 17 ARTICLE IX. CONTINUATION COVERAGE .......................................................... ............................... 21 ARTICLE X. PLAN ADMINISTRATION ................................................................ ............................... 24 ARTICLE XI. PLAN AMENDMENT AND TERMINATION ......................................... ............................... 25 ARTICLE XII. GENERAL PROVISIONS ................................................................ ............................... 26 ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE I. INTRODUCTION 1.1 Establishment. An executed Adoption Agreement plus this Basic Plan Document constitute the "Plan" for a Plan Sponsor. The Effective Date of the Plan is set forth in the Adoption Agreement. 1.2 Purpose. The purpose of the Plan is to provide certain Employees with an opportunity to receive reimbursement for certain Health Care Expenses as provided in this Plan. It is the intention of the Plan Sponsor that the benefits provided and payable under this Plan be eligible for exclusion from the gross income of Participants as provided by Sections 105(b) and 106 of the Code. In addition, it is the intention of the Plan Sponsor that the Plan qualify as a Health Reimbursement Arrangement ( "HRA') under IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26, 2002). 1.3 HIPAA Privacy and Security Rules. This Plan is a "covered entity" for purposes of the Privacy Rules and Security Rules as described in greater detail in Article VIII below. 1.4 Not ERISA Plan. This Plan is not an employee welfare benefit plan for purposes of ERISA. 1.5 Trust. This Plan is intended to be funded through a Trust, reflected in a separate document. C)HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE II. DEFINITIONS The following words and phrases are used in this Plan and shall have the meanings set forth in this Article unless a different meaning is clearly required by the context or is defined within an Article. 2.1 Adoption Agreement means the separate agreement, or portions thereof, completed and executed by an Plan Sponsor setting forth the Plan Sponsor's selection of options under the Plan. 2.2 Basic Plan Document means this document, which together with an executed Adoption Agreement constitutes the Plan for a Plan Sponsor. 2.3 Claims Administrator means Administration Resources Corporation, designated by and under contract with the Plan Sponsor to perform certain administrative functions. 2.4 Code means the Internal Revenue Code of 1986, as amended from time to time. 2.5 Covered Individual means a Participant, Dependent of a Participant and the Spouse of a Participant, and any other person appropriately covered under the Plan. 2.6 Dependent means as defined in the Adoption Agreement. However, Dependent cannot be defined more broadly than "dependent" for purposes of Section 105 of the Code. 2.7 Employee means any person employed by the Plan Sponsor on or after the Effective Date, except that it shall not include a self - employed individual as described in Section 401(c) of the Code. All employees who are treated as employed by a single employer under Subsections (b), (c) or (m) of Section 414 of the Code are treated as employed by a single employer for purposes of this Plan. Employee does not include the following: (a) Any employee included within a unit of employees covered by a collective bargaining unit unless such agreement provides, whether specifically or generally, for coverage of the employee under this Plan; (b) Any employee who is a nonresident alien and receives no earned income from the Plan Sponsor from sources within the United States; and (c) Any employee who is a leased employee as defined in Section 414(n)(2) of the Code. 2.8 ePHI means PHI maintained or transmitted in electronic media, including, but not limited to, electronic storage media (i.e., hard drives, digital memory medium) and transmission media used to exchange information in electronic storage media (i.e., internet, extranet, and other networks). PHI transmitted via facsimile and telephone is not considered to be transmissions via electronic media. 2.9 Employer Contribution means a nonelective contribution made by the Plan Sponsor on behalf of each Participant in the Plan. The Employer Contribution is an amount that has not been actually or constructively received by the Participant, and it is made available to the Participant exclusively for reimbursement under the Plan. 2.10 Entry Date means the date as of which an Employee becomes a Participant in this Plan as set forth in the Adoption Agreement. OcHaynesHiteSman, PC 2005 City of Newport Beach Basic Plan Document 2.11 ERISA means the Employee Retirement Income Security Act of 1974 and regulations thereunder, as amended from time to time. Plans sponsored by public sector entities are not subject to ERISA. 2.12 HC Account means "health care account" and is the record keeping account established under the Plan for each Participant. 2.13 Health Care Expense means as defined in the Adoption Agreement, provided it is defined no more broadly than the description in IRS Revenue Ruling 2002 -41 and IRS Notice 2002 -45. Notwithstanding the foregoing, if the Plan Sponsor sponsors a cafeteria plan, Health Care Expense shall not include premiums that may be paid on a pre -tax basis in accordance with the terms of such cafeteria plan, which may include premiums for major medical coverage provided by the Employer and premiums for coverage under an insurance contract, health maintenance organization agreement, or other benefit agreement providing coverage issued on a non - group, individual basis. To the extent Health Care Expense is defined in the Adoption Agreement to include premiums for qualified long -term care insurance, the amount of such premium that will qualify as a Health Care Expense shall be limited to the portion that constitutes "eligible long- term care premiums" as defined in Section 213(d)(10) of the Code. 2.14 Health Reimbursement Arrangement ( "HRA ") means an employer funded medical reimbursement program within the meaning of IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26, 2002). 2.15 Highly Compensated Individual means an individual who is (1) one of the 5 highest paid officers, (2) a shareholder who owns more than 10 percent in value of the stock of the employer, or (3) among the highest paid 25 percent of all Employees, except (1) Employees who have not completed 3 years of service, (2) Employees who have not attained age 25, (3) part-time or seasonal Employees, (4) Employees not included in the plan who are included under a collective bargaining agreement, and (5) Employees who are nonresident aliens and who receive no earned income from a source within the United States. 2.16 HIPAA means the Health Insurance Portability and Accountability Act of 1996 and regulations thereunder, as amended from time to time. 2.17 Managing Body means the person or persons with authority to make decisions for the Plan Sponsor. 2.18 Participant means an Employee who has become and not ceased to be a Participant pursuant to Article IV. In addition, Participant includes persons "deemed" to be Participants under a specific provision of this Plan. 2.19 PHI means health information that: (a) Is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; (b) Relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (C) Either identifies the individual or reasonably could be used to identify the individual. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document 2.20 Plan means the Plan Sponsor's Plan as may be amended from time to time. It consists of a completed Adoption Agreement plus the Basic Plan Document. The name of the Plan is identified in the Adoption Agreement. 2.21 Plan Sponsor means state or political subdivision thereof that adopts this Plan by completing and executing an Adoption Agreement, which may include a joint powers agreement. 2.22 Plan Year means the twelve (12) month period beginning and ending as indicated in the Adoption Agreement. The initial Plan Year may be a "short" Plan Year beginning and ending as indicated in the Adoption Agreement. The records of the Plan will be kept based upon the Plan Year. 2.23 Privacy Rules means the Standards of Privacy of Individually Identifiable Health Information at 45 C.F.R. part 160 and part 164 at subparts A and E. 2.24 Representative means, for the claims and appeal procedures, the person entitled to act on behalf of the claimant with respect to a benefit claim or appeal. In order for the Plan to recognize a person as a Representative, written notification to that affect signed by the claimant and notarized must be received by the Plan. An assignment for purposes of payment is not designation of a "Representative." 2.25 Security Incident means "security incident" as defined in 45 C.F.R. Section 164.304, which generally defines "security incident" to include attempted or successful unauthorized access, use, disclosure, modification, or destruction of ePHI. 2.26 Security Rules means the Security Standards and Implementation Specifications at 45 C.F.R. Part 160 and Part 164, subpart C. 2.27 Spouse means "Spouse" as defined in the Adoption Agreement and within the requirements of the Code. 2.28 Trust means the trust identified in the Adoption Agreement, created for the purpose of accepting and holding Employer Contributions, and limited other contributions, made under the Plan. 2.29 Trustee means the person or persons identified as a "Trustee" under the Trust. OHaynesFlitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE III. PLAN SPONSOR 3.1 Adoption of Plan. A Plan Sponsor may adopt the Plan by resolution duly adopted by its Managing Body, as represented and warranted in the Adoption Agreement, and upon execution of an Adoption Agreement. 3.2 Cessation of Employer Participation. A Plan Sponsor may cease to be an Plan Sponsor in accordance with Article X. 3.3 Recordkeeping and Reporting. A Plan Sponsor shall furnish, or arrange for the furnishing, to the Claims Administrator the information with respect to each Covered Individual necessary to enable the Claims Administrator to maintain records sufficient to determine the benefits due to or which may become due and to prepare and provide any reports required by law. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE IV. ELIGIBILITY AND PARTICIPATION OF EMPLOYEES 4.1 Eligibility Requirements. Each Employee shall be eligible to participate in this Plan upon meeting the eligibility requirements set forth in the Adoption Agreement. 4.2 Participant Status, An Employee who has met the eligibility requirements described in Section 4.1 shall be a Participant as of the Employee's Entry Date. 4.3 Conditions of Participation. As a condition of participation and receipt of benefits under this Plan, the Participant agrees to: (a) Observe all Plan rules and regulations; (b) Consent to inquiries by the Claims Administrator and Plan Sponsor with respect to any provider of services involved in a claim under this Plan; (c) Submit to the Plan Sponsor all notifications, reports, bills, and other information required by the Plan or which the Claims Administrator and may reasonably require; and (d) Cooperate with all reasonable requests of the Claims Administrator and Plan Sponsor that may by necessary for the proper administration of the Plan. Failure to do so relieves the Plan, Plan Sponsor, and Claims Administrator of any obligations under this Plan with respect to that Participant and any others claiming entitlement to benefits under this Plan through that Participant. 4.4 Termination of Contributions. Unless provided otherwise in the Adoption Agreement, a Participant shall cease to be eligible to receive contributions under this Plan at midnight of the earliest of the following dates: (a) The date of the death of the Participant; (b) The date of termination of the Participant's employment with the Plan Sponsor; (c) The date contributions cease pursuant to the terms of an applicable collective bargaining agreement; (d) The date of the Participant's failure to meet the eligibility requirements of Section 4.1, as may be amended from time to time in accordance with Article X; or (e) The date of termination of the Plan in accordance with Article X. Termination of contributions under this Plan shall not prevent a former Participant from receiving continuation coverage required by applicable law. 4.5 Termination of Participation. Unless provided otherwise in the Adoption Agreement, a Participant automatically ceases to be a Participant at midnight of the earliest of the following dates: ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document (a) The date of the death of the Participant; (b) The date of termination of the Participant's employment with the Plan Sponsor; (c) The date of the Participant's failure to meet the eligibility requirements of Section 4.1, as may be amended from time to time in accordance with Article X; or (d) The date the balance of the Participant's HC Account reaches zero, if no further contributions will be made to said account under Article VI; or (e) The date of termination of the Plan in accordance with Article X. Termination of participation in this Plan shall not prevent a former Participant (or his /her Spouse and /or Dependents) from receiving continuation coverage required by applicable law or ongoing access to the Participant's HC Account as provided in Section 5.6. 4.6 Deemed Participants. For certain purposes, persons that were not Employees are deemed to be Participants as required by law (e.g., a medical child support order). OHaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document ARTICLE V. BENEFITS UNDER THE PLAN 5.1 Health Care ( "HC ") Account. The HC Account will be credited with the Employer Contribution. A Participant's HC Account will be decreased from time to time in the amount of payments made to the Participant for Health Care Expenses. During his/her lifetime, the Participant shall be named as the "holder" of the HC Account. 5.2 Claims for Reimbursement. Claims for reimbursement under this Plan shall be made by completing a claim form and submitting such form to the Claims Administrator. The Claims Administrator is entitled to rely on the information provided on the claim form in processing claims under this Plan. A claim must be submitted for payment within the time period indicated in the Adoption Agreement. Where circumstances beyond the Participant's control prevent submission within the described time frame, notice of a claim with an explanation of the circumstances may be accepted by the Claims Administrator as a timely filing. Claims shall be determined in accordance with Article VII. 5.3 Incurred Expenses. To be reimbursable, the Participant must have incurred a Health Care Expense after his /her Entry Date. An expense is "incurred" when the Participant is provided with the care giving rise to the Health Care Expense, not when the service is billed or paid. Reimbursement shall not be made for future pro)ected expenses. 5.4 Timing of Reimbursement. Unless provided otherwise in the Adoption Agreement, a Participant shall be reimbursed twice per month. All reimbursements shall be payable to the holder of the HC Account. 5.5 Maximum Reimbursement. The maximum reimbursement a Participant may receive at any time shall be the amount of the Participant's HC Account balance at the time the reimbursement request is processed. The maximum reimbursement requirements apply to the Participant, Spouse, and Dependents on an aggregate basis, not an individual basis. If a Participant's claim is for an amount that is more than the Participant's current HC Account balance, the excess, unreimbursed part of the claim will be carried into the subsequent month(s), to be paid as the balance of the Participant's HC Account becomes adequate. Notwithstanding the foregoing, the excess, unreimbursed portion of a claim will not be carried over into the subsequent month(s) if: (i) the claim has been pending at least eighteen (18) months; or (ii) no further contributions will be made to the Participant's HC Account under Article VI. ©HaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document 5.6 Termination of Eligibility. (a) Termination of Employment or Failure to Meet the Eligibility Requirements. (1) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, in the event a Participant's participation in the Plan terminates because of a termination of employment (in circumstances other than the Participant's death) or because the Participant fails to meet the eligibility requirements of Section 4.1, and the former Participant or the former Participant's Spouse and /or Dependents had incurred a Health Care Expense prior to the date of termination of participation that would have been reimbursable out of the Participant's HC Account but that has not been submitted for reimbursement, the former Participant may submit such Health Care Expense for reimbursement in accordance with Section 5.2. Such claims must be submitted within 30 days following the termination of the Participant's participation (the "claims run -out period "). (2) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the former Participant may continue to access the HC Account following termination of employment or cessation of eligibility for purposes of obtaining reimbursement of Health Care Expenses. Such access shall continue until the earliest to occur of the events identified in Section 4.5(a), (d), or (e). Such access shall also be provided to those individuals, if any, who at the time of the termination of the Participant's participation were the Participant's Spouse or Dependents. Such access to the Participant's HC Account by a Spouse and Dependents shall cease upon the earlier of the date of termination of the Participant's access or the date the Spouse ceases to be a Spouse or the Dependent ceases to be a Dependent, as the case may be. If continuation coverage is required by applicable law, the access described in this Section 5.6(a)(2) shall be provided only if offered as and selected in lieu of such continuation coverage. (b) Death. (1) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, in the event a Participant's participation in the Plan terminates because of the Participant's death and the former Participant, or the former Participant's Spouse and /or Dependents, had incurred a Health Care Expense prior to the Participant's death that would have been reimbursable out of the Participant's HC Account but that has not been submitted for reimbursement, the deceased Participant's estate may submit such Health Care Expense for reimbursement in accordance with Section 5.2. A certified copy of the deceased Participant's death certificate and proof that the person acting upon behalf of such Participant's estate has authority to do so must be submitted with such claims. Such claims must be submitted within 180 days following the death of the Participant (the "claims run -out period "). (2) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the deceased Participant's surviving Spouse, if any, may continue to access the Participant's HC Account for purposes of obtaining reimbursement of Health Care Expenses incurred by him /her until the earlier of: (i) the date on which the HC Account balance reaches zero; or (ii) the date on GHaynesHitesman, PC 2005 City of Newport Beach Basic Plan Document which the surviving Spouse dies. No claim shall be paid to a surviving Spouse pursuant to this Section 5.6(b)(2) unless a certified copy of the deceased Participant's death certificate has been provided to the Claims Administrator. If continuation coverage is required by applicable law, the access described in this Section 5.6(b)(2) shall be provided only if offered as and selected in lieu of such continuation coverage. (3) Notwithstanding anything herein to the contrary, unless provided otherwise in the Adoption Agreement, the deceased Participant's surviving Dependents, if any, may continue to access the Participant's HC Account for purposes of obtaining reimbursement of Health Care Expenses incurred by them until the earlier of: (i) the date on which the HC Account balance reaches zero; or (ii) the date the last surviving Dependent dies. No claim shall be paid to a surviving Dependent pursuant to this Section 5.6(b)(3) unless a certified copy of the deceased Participant's death certificate has been provided to the Claims Administrator. If continuation coverage is required by applicable law, the access described in this Section 5.6(b)(3) shall be provided only if offered as and selected in lieu of such continuation coverage. (4) No one other than the Participant's Spouse and Dependants may have access to the Participant's HRA Account following the Participant's death. (5) In the event the deceased Participant has no surviving Spouse or Dependents, upon the expiration of the 180 -day claims run -out period referenced above, the remaining balance of the deceased Participant's HC Account shall be forfeited in accordance with Section 5.8. (6) If a deceased Participant is survived by a Spouse or Dependents, following expiration of the 180 -day claims run -out period referenced above, the surviving Spouse, if any, shall be named as the 'holder" of the deceased Participant's HC Account. If there is no surviving Spouse, or upon the surviving Spouse's death, the surviving Dependent(s) shall be named as "holder" of the deceased Participant's HC Account. 5.7 Nondiscrimination. This Plan is intended to be nondiscriminatory and to meet the requirements under applicable sections of the Code. If the Plan Sponsor determines before or during any Plan Year, that the Plan may fail to satisfy any nondiscrimination requirement imposed by the Code or any limitation on benefits provided to Highly Compensated Individuals, the Plan Sponsor may take such action as the Plan Sponsor deems appropriate, under rules uniformly applicable to similarly situated Participants, to assure compliance with such requirements or limitation. 5.8 HC Account Forfeitures. Unless provided otherwise in the Adoption Agreement, any amount remaining in a Participant's HC Account shall be forfeited following the later to occur of: (1) the expiration of the applicable claims run -out period following the termination of Participant's participation in the Plan, (2) the termination of any continuation coverage provided by the Plan under applicable law, or (3) the termination of any coverage provided by the Plan in lieu of continuation coverage required by applicable law. Amounts forfeited hereunder shall be used for the purposes described in the Adoption Agreement. However, under no circumstances will the amounts revert to the Plan Sponsor. 5.9 Medical Child Support Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize medical child support orders as required under applicable state law or under the Child Support Performance and Incentive Act of 1998. Participants involved In a divorce or Occ�HaynesHitesman, PC 2005 10 City of Newport Beach Basic Plan Document child custody matter should be directed to have their legal counsel contact the Claims Administrator. 5.10 Domestic Relations Orders. Notwithstanding any provision of this Plan to the contrary, this Plan shall recognize and provide coverage under the Plan pursuant to a domestic relations order as required under applicable state law, unless providing such coverage causes the Plan to fail to meet the requirements imposed upon HRAs by the Code, including, but not limited to, any HRA guidance issued thereunder, and /or results in the imputation of income to the Participant. To the extent coverage required by a domestic relations order differs from continuation coverage otherwise available to the Spouse, it shall be provided in lieu of and as an alternative to such continuation coverage. Participants involved in a divorce matter should be directed to have their legal counsel contact the Claims Administrator. 5.11 Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA'J. Continued coverage shall be provided only if and as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA'), as amended. To the extent not contained in Article IX, the Plan Sponsor shall, within the parameters of the law, establish uniform policies by which to provide such continuation coverage, including but not limited to providing alternative coverage in lieu of COBRA as provided in the regulations. There shall also be compliance with any state laws concerning continuation of health insurance coverage to the extent applicable and not preempted by federal law. 5.12 Coordination with Cafeteria Plan. To the extent the Plan Sponsor also sponsors a cafeteria plan within the meaning of Section 125 of the Code, and a Covered Individual incurs expenses eligible for reimbursement under both programs, which program pays first is described in the Adoption Agreement. However, the choice cannot be left to the Participant. 5.13 Further Limitations on Benefits (a) This Plan does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are payable under any worker's compensation law or other employer, union, association or governmental sponsored group insurance plan. (b) This Plan does not cover expenses incurred for any loss caused by or resulting from injury or disease for which benefits are received by the Participant, the Participant's Spouse or the Participant's Dependent under any health and accident insurance policy or program, whether or not premiums are paid by the Plan Sponsor or by the Participant, the Participant's Spouse or the Participant's Dependent child. (c) Amounts reimbursed under a dependent care assistance program described in Section 129 of the Code shall not be reimbursed under this Plan. (d) Other limitations, if any, as set forth in the Adoption Agreement ©HaynesHitesman, PC 2005 11 City of Newport Beach Basic Plan Document ARTICLE VI. CONTRIBUTIONS 6.1 Employer Contributions. The Plan Sponsor shall make a fixed contribution per Participant. The amount of the Employer Contribution may change from time to time. The Plan Sponsor will communicate the amount of the Employer Contribution and any restrictions on the use thereof to the Participants and the Claims Administrator. The Employer Contributions shall be available for reimbursement as described in the Adoption Agreement. 6.2 No Employee Contributions. Except for contributions required for continuation coverage as described in Article IX, no contributions other than Employer Contributions are required nor will they be accepted. 6.3 Trust. All contributions shall be held in the Trust. The investment of the assets of the Trust shall be directed as provided in the Adoption Agreement. CciHaynesHitesman, PC 2005 12 City of Newport Beach Basic Plan Document ARTICLE VII. CLAIMS DETERMINATIONS AND REVIEW OF DENIED CLAIM The following procedures apply: 7.1 Initial Claim Determination. (a) Time Frame for Decision. The decision maker must determine the claim within thirty (30) days of receipt of the claim. (b) Extension of Time. If the decision maker is not able to determine the claim within this time period due to matters beyond its control, the decision maker may take an additional period of up to fifteen (15) days to determine the claim. If this additional time will be needed, the decision maker must notify the claimant or the claimant's Representative prior to the expiration of the initial thirty (30) day time period for determining the claim. This extension is only available once. Notification: The notification of the need for the extension must include a description of the "matters beyond the Plan's control" that justify the extension and the date by which a decision is expected. (c) Incomplete Claims. There is no special rule if a claim is incomplete. Incomplete claims can be addressed through the extension of time described above. If the reason for the extension is the failure to provide necessary information and the claimant is appropriately notified, the decision maker's period of time to make a decision is "tolled." Tolling: The period of time in which the decision maker must determine a claim is suspended from the date upon which notification of the missing necessary information is sent until the date upon which the claimant responds. Notification: For this purpose, notification can be made orally to the claimant or the health care professional, unless the claimant requests written notice. The notification will include a time frame in which the necessary information must be provided. Once the necessary information has been provided, the decision maker must decide the claim within the extension described above. If the requested information is not provided within the time specified, the claim may be decided without that information. 7.2 Decision. (a) Notification of Decision. Written (or electronic) notification of the decision maker's determination must be provided to the claimant or the claimant's Representative. Such notification must be provided only where the decision is adverse. "Adverse" means: • A denial, reduction, or termination of, or • A failure to provide or make payment (in whole or in part) for a benefit. ©HaynesHitesman, PC 2005 13 City of Newport Beach Basic Plan Document (b) Adverse Decision. For adverse claim determinations, the notification shall reflect at least the following: • State the specific reason(s) for determination; • Reference specific Plan provision(s) upon which the determination is based; • Describe additional material or information necessary to complete the claim and why such information is necessary; • Describe Plan procedures and time limits for appeal of the determination, and the right to obtain information about those procedures; and • Disclose any internal rule, guidelines, protocol or similar criterion relied on in making the adverse determination (or state that such information will be provided free of charge upon request); and • Where the decision involves scientific or clinical judgment, disclose either (1) an explanation of the scientific or clinical judgment applying the terms of the Plan to claimant's medical circumstances, or (2) a statement that such explanation will be provided at no charge upon request. Notice of the adverse determination may be provided in written or electronic form. Electronic notices will be provided in a form that complies with applicable legal requirements. (c) Not Adverse Decision. For claim determinations that are not adverse, notice will be provided that informs the claimant or the claimant's Representative the claim has been accepted. 7.3 Access to Relevant Documents. In order (1) to evaluate whether to request review of an adverse determination, and (2) if review if requested, to prepare for such review, the claimant or the claimant's Representative will have access to all relevant documents. Relevant: A document, record or other information is "relevant" if it was relied upon in making the determination, or was submitted to the Plan, considered by the Plan, or generated in the course of making the benefit determination without regard to whether it was relied upon. 7.4 Appeal a Denied Claim. If a claim is denied, in whole or part, the claimant or the claimant's Representative may request the denied claim be reviewed. (a) Requesting Review. The claimant or the claimant's Representative has a period of 180 days to appeal the claim determination. The appeal request must be in writing and should be sent to the address specified in the notification of adverse decision described above. OI-laynesHitesman, PC 2005 14 City of Newport Beach Basic Plan Document (b) Submission & Consideration of Comments. The claimant or the claimant's Representative will have the opportunity to submit documents, written comments, or other information in support of the appeal. The review of the adverse benefit determinations will take into account all new information, whether or not presented or available at the initial determination. No deference will be afforded to the initial determination. (c) Consultation with Independent Medical Expert. In the case of a claim denied on the grounds of a medical judgment, a health professional with appropriate training and experience will be consulted. The health care professional who is consulted on appeal will not be the individual who was consulted, if any, during the initial determination or a subordinate of that individual. Disclosure: If the advice of a medical or vocational expert was obtained by the Plan in connection with the claim denial, the names of each such expert shall be provided, regardless of whether the advice was relied upon. (d) Time Frame for Decision. If claimant or the claimant's Representative requests a review of a denied claim within the time frame described above, the decision maker shall review of claim and make a determination no later than 60 days from the date the review request was received. (e) Decision. The review of the claim will be conducted by the Plan Sponsor. It will be made by a person different from the person who made the initial determination and such person will not be a subordinate of the original decision maker. The information in the administrative record shall be reviewed. Additional information submitted shall be considered. The decision shall be based upon that information plus the terms of the Plan and past interpretations of the same and similar Plan provisions. The decision maker may rely upon protocols, guidelines, or other criterion. (f) Notification of Decision. Written (or electronic) notification of the decision maker's determination must be provided to the claimant or the claimant's Representative. Such notification must be provided whether the decision is adverse or not adverse. "Adverse" means: • A denial, reduction, or termination of, or • A failure to provide or make payment (in whole or in part) for a benefit. (g) Adverse Decision. For adverse appeal determinations, the notification shall reflect at least the following: • State the specific reason(s) for determination; • Reference specific Plan provision(s) upon which the determination Is based; • Disclose any internal rules, guidelines, protocol or similar criterion relied on in making the adverse determination (or state that such information will be provided free of charge upon request); • A statement indicating entitlement to receive upon request, and without charge, reasonable access to or copies of all documents, records or other information relevant to the determination; and ©HaynesHitesman, PC 2005 15 City of Newport Beach Basic Plan Document Where the decision involves scientific or clinical judgment, disclose either (1) an explanation of the scientific or clinical judgment applying the terms of the Plan to claimant's medical circumstances, or (2) a statement that such explanation will be provided at no charge upon request. Notice of the adverse determination may be provided in written or electronic form. Electronic notices will be provided in a form that complies with applicable legal requirements. (h) Not Adverse Decision. For claim determinations that are not adverse, notice will be provided that informs the claimant or the claimant's Representative the decision has been reversed, and the claim accepted. l' �HaynesHitesman, PC 2005 16 City of Newport Beach Basic Plan Document ARTICLE VIII. HIPAA PRIVACY AND SECURITY PROVISIONS The Privacy Rules under HIPAA apply to this Plan. The Security Rules under HIPAA apply to this Plan beginning April 20, 2006. 8.1 Use and Disclosure of PHI. The Plan will use PHI to the extent of and in accordance with the uses and disclosures permitted by HIPAA. Specifically, the Plan will use and disclose PHI for purposes related to health care treatment, payment for health care and health care operations. The Plan will also use and disclose PHI as permitted by authorization of the subject of PHI. (a) Payment includes activities undertaken by the Plan to obtain premiums or determine or fulfill its responsibility for coverage and provision of Plan benefits that relate to an individual to whom health care is provided. These activities include, but are not limited to, the following: (1) Determination of eligibility, coverage and cost sharing amounts (for example, cost of a benefit, plan maximums and co- payments as determined for an individual's claim); (2) Coordination of benefits; (3) Adjudication of health benefits claims (including appeals and other payment disputes); (4) Subrogation of health benefit claims; (5) Establishing employee contributions; (6) Risk adjusting amounts due based on enrollee health status and demographic characteristics; (7) Billing, collection activities and related health care data processing; (8) Claims management and related health care data processing, including auditing payments, investigating and resolving payment disputes and responding to participant inquiries about payments; (9) Obtaining payment under a contract for reinsurance (including stop -loss and excess of loss insurance); (10) Medical necessity reviews or reviews of appropriateness of care or justification of charges; (11) Utilization review, including pre - certification, preauthorization, concurrent review and retrospective review; (12) Disclosure to consumer reporting agencies related to the collection of premiums or reimbursement (the following PHI may be disclosed for payment purposes: name and address, date of birth, Social Security number, payment history, account number and name and address of provider and /or health Plan; and (13) Reimbursement to the Plan. (UHaynesllitesman, PC 2005 17 City of Newport Beach Basic Plan Document (b) Health care operations include, but are not limited to, the following activities: (1) Quality assessment; (2) Population -based activities relating to improving health or reduction health care costs, protocol development, case management and care coordination, disease management, contacting health care providers and patients with information about treatment alternatives and related functions; (3) Rating provider and Plan performance, including accreditation, certification, licensing or credentialing activities; (4) Underwriting, premium rating and other activities relating to the creation, renewal or replacement of a contract of health insurance or health benefits, and ceding, securing or placing a contract for reinsurance of risk relating to health care claims (including stop -loss insurance and excess of loss insurance); (5) Conducting or arranging for medical review, legal services and auditing function, including fraud and abuse detection and compliance programs; (6) Business planning and development, such as conducting cost - management and planning - related analyses related to managing and operating the Plan, including formulary development and administration, development or improvement of payment methods or coverage policies; (7) Business management and general administration activities of the Plan, including, but not limited to: a. Management activities relating to the implementation of and compliance with HIPAA's administrative simplification requirements; b. Customer service, Including data analyses for policyholders; (8) Resolution of internal grievances. (9) Due diligence in connection with the sale or transfer of assets to a potential successor in interest, if the potential successor in interest is a covered entity under HIPAA or following completion of the sale or transfer, will become a covered entity. 8.2 Plan Sponsor's Obligations. Under HIPAA, the Plan may not disclose PHI to the Plan Sponsor (as defined by the Privacy Rules under HIPAA) unless the Plan Sponsor agrees to certain conditions. The Plan Sponsor agrees to the following conditions, thereby allowing the Plan to disclose PHI to the Plan Sponsor. The Plan Sponsor will: (a) Not use or further disclose PHI other than as permitted or required by the Plan document or as required by law; (b) Ensure that any agents, including a subcontractor, to whom the Plan provides PHI received from the Plan agree to the same restrictions and conditions that apply to the Plan Sponsor with respect to such PHI; OHaynesHitesman, PC 2005 18 City of Newport Beach Basic Plan Document (c) Not use or disclose PHI for employment related actions and decision unless authorized by an individual; (d) Not use or disclose PHI in connection with any other benefit or employee benefit plan of the Plan Sponsor unless authorized by an individual; (e) Report to the Plan any PHI use or disclosure, that is inconsistent with the uses or disclosures provided for, of which it becomes aware; (f) Make available to an individual for inspection and copying PHI about the individual as allowed by and in accordance with HIPAA; (g) Make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA; (h) Make available the information required to provide an accounting of disclosures; (i) Make internal practices, books and records relating to the use and disclosure of PHI received from Plan available to the HHS Secretary for the purposes of determining the Plan's compliance with HIPAA; and, (j) If feasible, return or destroy all PHI received for the Plan that the Plan Sponsor still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible). 8.3 Plan Sponsor's Obligations under Security Rules. If the Plan Sponsor creates, receives, maintains, or transmits ePHI, the Plan Sponsor will: (a) Implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of ePHI; (b) Ensure that any agents, including subcontractors, to whom the Plan Sponsor provides ePHI or to whom ePHI is provided on behalf of Plan Sponsor implement reasonable and appropriate security measures to protect the ePHI; (c) Report to the Plan any Security Incident of which it becomes aware; and (d) Implement reasonable and appropriate security measures to ensure that only those persons identified in Section 8.4 have access to ePHI and that such access is limited to the purposes identified in Section 8.5. 8.4 Adequate separation between the Plan and the Plan Sponsor must be maintained. In accordance with HIPAA, only the following employees or classes of employees may be given access to PHI and ePHI: (1) The benefit manager; and, (2) Staff designated by the benefits manager. The Plan Sponsor shall identify, by name, these persons in writing to the Claims Administrator. OHaynesHitesman, PC 2005 19 City of Newport Beach Basic Plan Document 8.5 Limitation of PHI and ePHI Access and Disclosure. The persons described in Section 8.4 above may only have access to, and use and disclose, PHI and ePHI for Plan administration functions that the Plan Sponsor performs for the Plan. 8.6 Noncompliance Issues. If the person described in Section 8.4 above does not comply with this Plan document, the Plan Sponsor shall provide a mechanism for resolving issues of noncompliance, including, but not limited to, disciplinary action against such person. ©HaynesHitesman, PC 2005 20 CO of Newport Beach Basic Plan Document ARTICLE IX. CONTINUATION COVERAGE 9.1 Compliance with COBRA. Continued coverage for the Plan shall be provided only if and as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA') as amended, 9.2 COBRA Policies and Procedures. To the extent not provided herein, the Plan Sponsor shall, within the parameters of the law, establish uniform policies by which to provide such continuation coverage. 9.3 Notification Procedures. The Plan requires the notifications described below with respect to continuation coverage under COBRA: (a) Notice of qualifying event. Under the law, a Covered Individual (or a representative acting on behalf of the Covered Individual) has the responsibility to inform the Plan of a divorce, legal separation, or a child losing dependent status under the Plan (the "qualifying event') within sixty (60) days of the latest of: (i) the date of the qualifying event; (ii) the date coverage would be lost because of the qualifying event; or (iii) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notification by telephone is not acceptable. Electronic (including emailed or faxed) or hand - delivered notifications are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above, The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the qualifying event; (4) include a detailed description of the event; (5) identify the effective date of the event; and (6) be accompanied by any documentation providing proof of the event (i.e., the divorce decree). If no notification is received within the required time period, no continuation coverage will be provided. If the notification is incomplete, it will be deemed timely if the Plan Is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no continuation coverage will be provided. (b) Notice of second qualifying event. A Covered Individual (or a representative acting on behalf of the Covered Individual) must notify the Plan of the death of the employee, divorce or separation from the employee, or a dependent child's ceasing to be eligible for coverage as a dependent under the Plan, if that event occurs within the eighteen (18) month continuation period (or an extension of that period for disability or for pre - termination Medicare entitlement). The notification must be provided within sixty (60) days after such a second qualifying event occurs in order to be entitled to an extension of the continuation period. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notice by telephone is not acceptable. Electronic ©HaynesHltesman, PC 2005 21 City of Newport Beach Basic Plan Document (including emailed or faxed) or hand - delivered notifications are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above. The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the initial qualifying event and who are receiving COBRA coverage at the time of the notice; (4) identify the nature and date of the initial qualifying event that entitled the Covered Individuals to COBRA coverage; (5) include a detailed description of the event; (6) identify the effective date of the event; and (7) be accompanied by any documentation providing proof of the event (i.e., the divorce decree). If no notification is received within the required time period, no extension of the continuation period will be provided. If the notification is incomplete, it will be deemed timely if the Plan is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no extension of the continuation period will be provided. (c) Notice of disability. A Covered Individual (or a representative acting on behalf of the Covered Individual) must notify the Plan when a Covered Individual has been determined to be disabled under the Social Security Act within sixty (60) days of the latest of: (i) the date of the disability determination; (ii) the date of the qualifying event; (iii) the date coverage would be lost because of the qualifying event; or (iv) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. Notwithstanding the foregoing, notification must be provided before the end of the first eighteen (18) months of continuation coverage. The notification must be provided in writing and be mailed to the Plan. Oral notification, including notice by telephone is not acceptable. Electronic (including emailed or faxed) or hand - delivered notices are not acceptable. The notification must be postmarked no later than the last day of the sixty (60) day notice period described above. The notification must: (1) state the name of the Plan; (2) state the name and address of the employee or former employee who is or was covered under the Plan; (3) state the name(s) and address(es) of all Covered Individuals who lost coverage due to the initial qualifying event and who are receiving COBRA coverage at the time of the notice; (4) identify the nature and date of the initial qualifying event that entitled the qualified beneficiaries to COBRA coverage; (5) state the name of the disabled Covered Individual; (6) identify the date upon which the disabled Covered Individual became disabled; (7) identify the date upon which the Social Security Administration made its determination of disability; and (8) include a copy of the determination of the Social Security Administration. GHaynesHitesman, PC 2005 22 City of Newport Beach Basic Plan Document If no notification is received within the required time period, no extension of the continuation period will be provided. If the notification is incomplete, it will be deemed timely if the Plan is able to determine the plan to which it applies, the identity of the employee and the Covered Individuals, the qualifying event, and the date on which the qualifying event occurred, provided that the missing information is provided within thirty (30) days. If the missing information is not provided within that time, the notification will be ineffective and no extension of the continuation period will be provided. If such person has been determined under the Social Security Act to no longer be disabled, the person must notify the Plan of that determination within thirty (30) days of the later of: (i) the date of such determination; or (ii) the date on which the Covered Individual was informed of the responsibility to provide notice and the procedures for doing so. The notification must be in writing and be mailed to the Plan. Regardless of when the notification is provided, continuation coverage will terminate retroactively on the first day of the month that begins thirty (30) days after the date of the determination, or the end of the initial coverage period, if later. If the notification is not provided within the required time, the Plan reserve the right to seek reimbursement of any benefits provided by the Plan between the date coverage terminates and the date the notification is provided. (d) Notice of Coverage Under Another Group Health Plan or Medicare. A Covered Individual must notify the Plan immediately if any Covered Individuals receiving continuation coverage actually become covered by another group health plan or Medicare. Regardless of when such notification is provided, coverage will terminate retroactively to the date of the coverage under the other group health plan or Medicare. If, for whatever reason, a Covered Individual on continuation coverage receives any benefits under the Plan after coverage is to cease under the foregoing rule, the Plan reserve the right to seek reimbursement from such Covered Individual. cQHaynesHitesman, PC 2005 23 City of Newport Beach Basic Plan Document ARTICLE X. PLAN ADMINISTRATION 10.1 Rules and Decisions. Except as otherwise specifically provided herein, the Plan Sponsor may adopt such rules and procedures as it deems necessary, desirable, or appropriate. All rules and decisions of the Plan Sponsor shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Plan Sponsor shall be entitled to rely upon information furnished by a Participant or legal counsel, or other entity acting on behalf of the Plan Sponsor. 10.2 Other Powers and Duties of the Plan Sponsor. The Plan Sponsor shall also have such other duties and powers as may be necessary to discharge its duties under the Plan including, but not limited to, discretion to construe and interpret the Plan in a non - discriminatory manner, to decide all questions of eligibility and to determine all questions arising in the administration and application of the Plan. OHaynesHitesman, PC 2005 24 City of Newport Beach Basic Plan Document ARTICLE XI. PLAN AMENDMENT AND TERMINATION 11.1 Amendment by Plan Sponsor. The Plan Sponsor reserves the right to amend, alter, or wholly revise this Plan or the Adoption Agreement, prospectively or retrospectively, at any time by the action of its Managing Body, and the interest of each Participant is subject to the powers so reserved. The Plan Sponsor expressly may amend, alter or wholly revise this Plan or the Adoption Agreement if it determines it necessary or desirable, with or without retroactive effect, to comply with the law. Such changes shall not affect any right to benefits that accrued prior to such amendments. Such amendment shall be made in writing and shall be delivered promptly to the Claims Administrator and Trustee. 11.2 Plan Sponsor's Right to Terminate. Although the Plan Sponsor expects the Plan to be maintained for an indefinite time, the Plan Sponsor reserves the right to terminate the Plan or any portion of the Plan at any time. In the event of the dissolution, merger, consolidation, or reorganization of the Plan Sponsor, the Plan shall terminate unless the Plan is continued by a successor to the Plan Sponsor in accordance with the resolution of such successor's Managing Body. Such termination shall not affect any right to benefits that accrued prior to such termination. Such action shall be made in writing and shall be delivered to the Claims Administrator and Trustee at least ninety (90) days prior to the effective date of the termination. ©HaynesHitesman, PC 2005 25 City of Newport Beach Basic Plan Document ARTICLE XII. GENERAL PROVISIONS 12.1 No Reversion to the Plan Sponsor. No part of the corpus or income of the Trust shall revert to the Plan Sponsor or be used for or diverted to, purposes other than the exclusive benefit of participants and other persons entitled to benefits under the Plan. 12.2 Persons Dealing With Trust. No person dealing with the Trust shall be required to see to the application of any money paid or property delivered to the Trust, or to determine whether or not the Trust is acting pursuant to any authority granted to them under the Trust. 12.3 Non - Alienation of Benefits. Subject to Sections 5.9 and 5.10 hereof, benefits payable under this Plan shall not be subject to anticipation, alienation, sale, transfer, execution, or levy of any kind either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Participant, prior to actually being received by the person entitled to the benefit under the terms of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable under the Plan shall be void. The Plan Sponsor and /or Claims Administrator shall not in any manner be made liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan. 12.4 Action by Plan Sponsor. Whenever the Plan Sponsor, under the terms of this Plan, is permitted or required to do or perform any act or matter or thing, it shall be done and performed by the Managing Body of the Plan Sponsor or such representatives of the Plan Sponsor as the Managing Body may designate. 12.5 No Guarantee of Tax Consequences. Notwithstanding any provision in this Plan to the contrary, this Plan makes no commitment or guarantee that any amounts paid to or on behalf of a Participant under this Plan will be excludable from the Participant's gross income for federal or state income tax purposes. It shall be the obligation of each Participant to determine whether each payment is excludable from the Participant's gross income for federal and state income tax purposes, and to notify the Plan Sponsor if the Participant has reason to believe that any such payment is not so excludable. 12.6 Compensation and Expenses. The Claims Administrator shall be entitled to reasonable fees for its services hereunder, which shall be described in an Administrative Services Agreement between the Claims Administrator and the Plan Sponsor. Such fees and any expenses incurred by the Claims Administrator in connection with the Plan (including expenses and fees of persons hired or employed by them) shall be paid as described in the Adoption Agreement. The compensation of the Trustee, as provided for in the Trust document, shall also be paid as described in the Adoption Agreement. 12.7 Governing Law. This Plan shall be construed and enforced according to the laws of the State identified in the Adoption Agreement, except to the extent preempted by federal law. 12.8 Family and Medical Leave Act of 1993 ( "FMLA "). Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with FMLA, to the extent the Plan Sponsor is subject to such law. 12.9 Uniformed Services Employment and Reemployment Rights Act of 1994 ( "USERRA "). Notwithstanding any provision of this Plan to the contrary, this Plan shall be operated and maintained in a manner consistent with USERRA and other veterans rights statutes. rJHaynesHitesman, PC 2005 26 City of Newport Beach Basic Plan Document 12.10 Plan Not a Contract of Employment. The Plan is not an employment agreement and does not assure the continued employment of any Employee or Participant for any period of time. Nothing contained in the Plan shall interfere with the Plan Sponsor's right to discharge an Employee at any time, regardless of the effect such discharge may have upon the individual as a Participant in this Plan. 12.11 Medicare Secondary Payer. The Plan shall comply with the Medicare secondary payer rules found in 42 U.S.C. § 1395y. In general, the Plan shall pay benefits primary to Medicare if any one of the following conditions is satisfied: (a) the Plan Sponsor employed twenty (20) or more employees for each working day in at least twenty (20) weeks in either the calendar year in which the claim is made or the preceding calendar year, the Participant is employed by the Plan Sponsor, and the Participant is actually covered by Medicare by reason of obtaining the age of 65; (b) the Plan Sponsor employed 100 or more employees on at least 50% of its regular business days during the calendar year preceding the year in which the claim was made, the Participant is employed by the Plan Sponsor, and the Participant is actually covered by Medicare by reason of disability; and (c) the Participant is entitled to Medicare by reason of end stage renal disease and the claim is made during the twelve (12) month period beginning in the first month in which such Participant is entitled to benefits under Medicare (regardless of whether he/she applies for such benefits). In all other cases, the Plan shall pay benefits secondary to Medicare. 12.12 Medicare Part D. The Plan shall cooperate with Medicare Part D prescription drug plans (and Covered Individuals who are enrolled in such plans) with respect to coordination of benefits between he Plan and the Medicare Part D plan, including the provision of information to the Medicare Part D plan (or the Covered Individuals) regarding the benefits provided under the Plan for costs covered by the Medicare Part D plan. Covered Individuals enrolled in Medicare Part D plans shall cooperate with the Plan so that the Plan may perform its obligations under this subsection. OHaynesHitesman, PC 2005 27 City of Newport Beach Basic Plan Document ADMINISTRATIVE RESOURCES CORPORATION BASIC PLAN DOCUMENT ADOPTION AGREEMENT FOR CITY OF NEWPORT BEACH This is the Adoption Agreement referred to in the City of Newport Beach Basic Plan Document ( "Basic Plan Document'). This Adoption Agreement plus the City of Newport Beach Basic Plan Document, as amended from time to time, constitutes the Plan. PLAN SPONSOR INFORMATION: Employer Name: City of Newport Beach Address: 3300 Newport Boulevard City, State Zip: Newport Beach, CA 92663 Phone /Fax Number: (9491 644 - 3127/(449) 644 -1li9 Contact Person: Name: Title: Risk Manager Address: 330D NpwpnrtPln,0pirprd City, State Zip Newport Beach, CA 92663 Phone /FaxNo.: (949) 644-3302L049)-644-3305 Email Address: lfarlev@city .newport- beach.ca.us EMPLOYEES AND /OR PARTICIPANTS: There were more than fifty (50) Employees in the last twelve months? ® Yes ❑ No There were more than twenty (20) Employees in the last calendar year? E� Yes ❑ No Check the one that applies (checkonlyone boA): ❑ The Plan benefits active Employees only. ® The Plan benefits terminated Employees only. ❑ The Plan benefits both active Employees and terminated Employees. MISCELLANEOUS: Name of Plan: Citv of NemDort Beach Medical Expense ReimbiLr-sement Plan Addendum(s) Attached: ❑ Yes ® No Joint Powers Agreement Attached: ❑ Yes 93 No ARTICLE I: INTRODUCTION 1.1 Effective Date means: January 1 2006 month, day, year) Original Effective Date: Restatement Date (date Adoption Agreement is effective): 2) HaynesHitesman, PC 2005 Administration Resources corporation month, day, ream Page 1 Basic Plan Adoption Agreement ARTICLE II: DEFINITIONS 2.6 Dependent means: © "Dependent" for purposes of Section 152 of the Code determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B). ❑ Other (Describe): Note: Dependent cannot be defined more broadly than "dependent" for purposes of Section 105 of the Code. 2.10 Entry Date means: ❑ Date Employee becomes eligible to participate. ® Other (Describe): first day of full -time employment 2.13 Health Care Expense means: © Maximum permitted by law. ❑ An expense which but for the deductible under a specified group medical coverage sponsored by the Plan Sponsor, would have been paid by that group medical coverage. Specified group medical coverage: ❑ Other (Describe): 2.22 2.22 2.27 Note: Health Care Expense cannot be defined more broadly than the description in IRS Revenue Ruling 2002 -41 and IRS Notice 2002-45. If the definition is different for Participants once they terminate employment, complete again: ® N/A - definition does not change. ❑ Maximum permitted by law. ❑ An expense which but for the deductible under a specified group medical coverage sponsored by the Plan Sponsor, would have been paid by that group medical coverage. Specified group medical coverage: ❑ Other (Describe): Plan Year is: ianua 1 , 9006 (morndar, rear) The initial "short" Plan Year is: Spouse means: ® An individual who is legally married to a Participant and who is treated as a "spouse" under the Code. ❑ Other ( Descrlbe): Note: Must be more restrictive than Code. 2.28 Name of Trust: Trust Agre ment Goyern;ng the Medical Exnense Reimbursement Plan of the City of Newport Beach 0c HaynesHitesman, PC 2005 Page Administration Resources Corporation Basic Plan Adoption Agreement ARTICLE IV: ELIGIBILITY AND PARTICIPATION OF EMPLOYEES 4.1 Eligibility requirements are as follows (check and complete only those that apply): ❑ Age (Describe): n /a 4.5 ❑ Length of Service (Describe): n /a ® Employment Classification (e.g., union, part-time, full -time) (Describe): any fall -time employment ❑ Coverage under a specified group medical plan (Describe): n /a ❑ Other (Describe): n/a Termination of Contributions: ® As provided in the Basic Plan Document ❑ Other (Describe): Termination of Participation: ® As provided in the Basic Plan Document ❑ Other (Describe): ARTICLE V: BENEFITS UNDER THE PLAN 5.2 Claims time period: eiehteen (18) months from date expense incurred 5.4 Timing of Reimbursement: ® As provided in the Basic Plan Document ❑ Other (Describe): 5.6(a) Post - termination Access: ❑ As provided in the Basic Document. ® Other (Describe): 5.6(a)(1) eliminate last sentence 5.6(b) Post -death Access by Spouse & Dependents: ❑ As provided in the Basic Document. ® Other (Describe): 5.6(x)(2) eliminate last sentpnce 5.8 Forfeiture occurs: ❑ As provided in the Basic Document. ® Other (Describe): one year after expiration of applicable claims runout period 5.8 Use of forfeitures: ❑ Pay administrative costs which would otherwise be paid from the Trust (i.e., Participants' HC Account balances) © HaynesHitesman, PC 2005 Page i Administration Resources Corporation Basic Plan Adoption Agreement Administration Resources Corporation Basic Plan Document Adoption Agreement For City of Newport Beach 6.1 A Participant shall have access to his/her HC Account prior to termination of employment in cases of hardship. Hardship access shall be allowed only if: (i) the Participant or the Participant's Spouse or Dependent has a terminal illness, or (ii) the Participant or the Participant's Spouse or Dependent incurs catastrophic uninsured Health Care Expenses in excess of $5,000 in a Plan Year. For this purpose, a "terminal illness" exists if the individual's physician certifies that the individual has suffered an illness or injury expected to result in such individual's death within five (5) years of the date of certification. ❑ Charged to the Participant and paid from the Participant's HC Account. ❑ Other (Describe): 12.6 Reasonable fees of Trustee shall be paid as follows: ❑ Charged to the Plan and paid from the Trust, with the Trust being the sole source of such payment. ❑ Charged to the Plan and paid from the general assets of the Plan Sponsor. ® Other (Describe): charge to Plan Spansor 12.7 Governing law — State of Cal if orni A (anb 1W one state) ACKNOWLEDGEMENTS 1. Pursuant to Section 2.8(a), any collectively bargained Employees participating in this Plan participate because the collective bargaining agreement provides for coverage under this Plan. 2. This Plan has been duly adopted or authorized to be adopted by the Plan Sponsor's Managing Body. 3. This Plan is a "covered entity" for purposes of the Privacy Rules under the Health Insurance Portability and Accountability Act (HIPAA). PLAN SPONSOR: Pity of Newport Reach Date: By: Its: © HaynesHitesman, PC 2005 Page 5 Administration Resources Corporation Basic Plan Adoption Agreement ❑ Contributed to the HC Accounts of all Participants on a per capita basis. ® Other (Describe): pay administrative rusts if any not paid by the City and then contributed to accounts of all participants Note: Under no circumstances will the amounts revert to the Plan Sponsor 5.12 Which plan pays first: ❑ This Plan ® Flex plan ❑ Other (Describe): Note: The choice of which plan pays first cannot be left to the Partici ant. 5.13(d) Other Limitations, if any: ARTICLE VI: CONTRIBUTIONS 6.1 Availability for reimbursement of HC Account balance: ❑ As soon as deposited ❑ Upon termination of employment ® Other (Describe): see attarhed 6.3 Direction of Investments: ❑ Plan Sponsor ® Participant ❑ Other (Describe): ARTICLE XI: GENERAL PROVISIONS 12.6 Reasonable fees of Claims Administrator shall be paid as follows: ❑ Charged to the Plan and paid from the Trust, with the Trust being the sole source of such payment. ❑ Charged to the Plan and paid from the general assets of the Plan Sponsor. ® Other (Describe): charge to Plan Sponsor Bill to: City of Newport Beach Attention: Christine Musial Billing Address: P _ Box 1768, Npwnnrt Bparh, CA 92658 -8915 Phone Number: (949) 644 -3310 Fax Number: (949) 644 -3305 If the payment is different for Participants once they terminate employment, complete again: ® N/A ❑ Charged to the Plan and paid from the Trust, with the Trust being the sole source of such payment. ❑ Charged to the Plan and paid from the general assets of the Plan Sponsor. © HaynesHitesman, PC 2005 Page 4 Administration Resources Corporation Basic Plan Adoption Agreement City of Newport Beach BUDGET AMENDMENT 2005 -06 EFFECT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates X Increase Expenditure Appropriations AND Transfer Budget Appropriations SOURCE: from existing budget appropriations from additional estimated revenues from unappropriated fund balance EXPLANATION: This budget amendment is requested to provide for the following: NO. BA- 06BA -032 AMOUNT: $75,000.00 Increase in Budgetary Fund Balance X Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance To increase expenditure appropriations for the administrative fees related to the Retiree Medical Program. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Fund Account 010 3605 REVENUE ESTIMATES (3601) Fund /Division Account EXPENDITURE APPROPRIATIONS (3603) Division Number Account Number Division Number Account Number Division Number Account Number Division Number Account Number Signed: Signed: Signed: Financial Administrative Description General Fund - Fund Balance Description Description 0510 City Attorney 8080 Services - Professional & Technical 6310 Retiree Insurance 8075 Administrative Fees City City Council Approval: City Clerk Services Director Amount Debit Credit $75,000.00 " ' Automatic $15,000.00 �.. rt rt rt rt rt rt .,'� , ` —.✓ lam.-` Date Dat Date