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R2003-0103 07-28-03 RESOLUTION NO. R2003-103 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO ENTER INTO A CONTRACT FOR PARTICIPATION IN A RETIREMENT HEALTH SAVINGS PROGRAM. WHEREAS, the City's employees are an asset and render valuable services on behalf of the City; and WHEREAS, the establishment of a retiree health savings plan for such employees serves the interests of the City by enabling it to provide reasonable security regarding such employee's health needs during retirement, by providing increased flexibility in its personnel management system, and by assisting in the attraction and retention of competent personnel; and WHEREAS, the City has determined that the establishment of the retiree health savings plan (the "Plan") serves the above objectives; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That the City hereby adopts the Plan in the form of the ICMA Retirement Corporation's VantageCare Retirement Health Savings Program. Section 2. That the assets of the Plan shall be held in trust, with the City serving as trustee, for the exclusive benefit of Plan participants and their beneficiaries, and the assets of the Plan shall not be delivered to any other purpose prior to the satisfaction of all liabilities of the Plan. The City has executed the Declaration of Trust of the City of Pearland Integral Part Trust in the form of the model trust made available by the ICMA Retirement Corporation Section 3. That the Benefits Coordinator shall be the coordinator and contact for the Plan and shall receive necessary reports, notices, etc. PASSED, APPROVED and ADOPTED this the A.D., 2003. 28th dayof July MAYOR ATTEST: ~l'Y S~I:~RETARY' APPROVED AS TO FORM: DARRIN M. COKER CITY ATTORNEY EMPLOYER VANTAGECARE RETIREMENT HEALTH SAVINGS (RHS) PLAN ADOPTION AGREEMENT Plan Number: 8_ Employer Retirement Health Savings Plan Name: City of Pearland I. Employer Name: _ C.~ ty ~f p~arl And State: Texas I1. The Employer hereby attests that it is a unit of a state or local government or an agency or instrumentality of one or more units of a state or local government. III. The Effective Date of the Plan: ,~;it~u~ary. 1, 2004 IV. The Employer intends to utilize the Trust to fund only welfare benefits pursuant to the following welfare ben- efit plan(s) established by the Employer: '~ ....... ~1[ re ~la-n rovided b ICMA V. Eligible Groups and Participant Eligibility Requirements A. The following group or groups of Employees are eligible to participate in the VantageCare Retirement Health Savings Plan: X All Employees (Including Full & Part Time) All Full-Time EmPloyees Non-Union Employees Public Safety Employees -- Police .... Public Safety Employees 7' Firefighters General Employees' Collectively-Bargained Employees (Specify unit). Other (specify below) The group specified must correspond to a group of the same designation that is defined in the statutes, ordi- nances, rules, regulations, personnel manuals or other material in effect in the state or locality of the Employer. [~1 If this box is checked, in lieu of mandatory participation, the Employer provides for a one-time irrevoca- ble election by eligible Employees to participate in RHS. Until such time as the election is made, the Employee shall not participate in the Plan or receive contributions pursuant to Section VI. Newly eligible Employees shall be provided an election window of 60 days (no more than 60 calendar days) from the date of initial eligibility, during which they may make the election to participate. Participation may begin no earlier than the calendar mont~h following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to participate may be made in a later year. An annual election window of 30 .days (no more than 60 calendar days) shall be provided during which the election may be made. The election window shall run from ~ to ~ (insert your annual time frame for the election window, e.g. October 1 to November 29). Participation may begin no earlier than the calendar year following theYear of the elec- tion. Once made, the election is irrevocable and may not be revoked while the participant is a member of the group covered by the RHS plan. If the Employer's underlying welfare benefit plan or funding under this VantageCare Retirement Health Savings Plan is in whole or part a non-collectively bargained, self-insured plan, the nondiscrimination requirements of Internal Revenue Code (IRC) Section 105(h) will apply. These rules may impose taxation 'on the benefits received 11 by highly compensated Employees if the Plan discriminates in favor of highly compensated Employees in terms of eligibility or benefits, The Employer should discuss these rules with appropriate counsel, B. Participant Eligibility 1. Minimum period of service required for participation is tq/_A. _ (write N/A if an Employee is eligible to partici- pate or to elect to participate immediately upon employment). 2..Minimum age required for eligibility to Participate is tq/~.. (write N/A if no minimum age is required).. Vi.Contribution Sources and Amounts A. Mandatory.Contributions 1. Direct Employer Contributions The Employer shall contribute on behalf of each Participant Year. .% of earnings or $ , for the plan Definition of earnings: [~1 2. Mandatory Leave Contributions The Employer will make mandatory contributions of leave as follows: [~1 Yes [~1 No ACcrued Sick Leave* Accrued Vacation* I~1 Yes [~ No Other* (describe) Yes I~l No * Please provide the formula for determining the Accrued Leave contribution: An Employee shall n_D[ have the right to discontinue or vary the rate of annual leave contributions. ~ 3. Mandatory Employee Compensation Contributions · The Employer will make mandatory contributions of Employee compensation as follows: [~1 Reduction in Salary - _ _% of earnings (as'defined in VI.A.1.) or $_ ,. will be contributed for the Plan Year. [~1 Decreased Merit or Pay Plan Adjustment - All or a portion of the Employees' annual merit or pay plan adjustment will be contributed as follows: An Employee shall not have the right to discontinue or vary the rate of mandatory contributions of Employee compensation. 12 B. Elective Contributions 1. Elective Pre-Tax Contributions The Employer will permit each Employee to make the following elections to make pre-tax contributions to the Plan: [~1 a. Irrevocable Election for Pre-Tax Contributions from Compensation: A one-time, irrevocable election of the amount of Employer contributions of compensation made on his or her behalf. The Employer limits the amount elected to either a fixed percentage or a range of percentages of an Employee's earnings % of earnings (as defined in VI.AA.) or up to % of earnings (as defined in VI.AA) for the Plan Year. Newly eligible Employees shall be provided an election window of days (no more than 60) from the date of initial eligibility during which they may make the election to contribute. Contributions may begin no earlier than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to contribute may be made in a later year. An annual election window of days (no more than 60) shall be provided during which the election may be made. The election window shall run fromto (insert your annual time frame for the election window). Contributions may begin no ear- lier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. b. Irrevocable Election for pre-Tax Contributions of Accrued Leave: A one-tim.e, irrevocable election.of the amount of employer contributions of Employee accrued sick .[~i vacation Yes [~1 No other ~ (describe) leave made on his or her behalf. Longevity The Employer limits the amount elected as shown below: Newly eligible Employees shall be provided an election window of ..days (no more than 60 calendar days) from the date of initial eligibility during which they may make the election to contribute. Contributions may begin no earlier than the calendar month following the end of the election window. If the Employee does not make the election in the year of initial eligibility, the election to contribute may be made in a later year. An annual election windOw of ' .days (no more than' 60 calendar days) shall be provided during which the election may be made. The election Window shall run from to (insert your annual time frame for the election window). Contributions may begin no earlier than the calendar year following the year of the election. Once made, the election is irrevocable and may not be revoked. I~1 c. Annual Prospective Election for Pre-Tax Contributions of Leave: An annual, irrevocable election to have his or her I~1 sick I~l vacation I~1 other (describe) leave to be accrued in the next calendar year contributed to the Plan on his or her behalf. 13 The .Employer limits the amount elected as shown below: Contributions of future leave accruals will Plan I~1. a~ earned I~1 at the ~hd~of the calendar year. The election to. cc ' - :'be ~ade in the cale~d~r year before the ~begin~"Once ~de, ~h~ calendar years reV~3ked by the Employee oh ~nnUal basis: An annual election window°f 60 Employees (ir Wh~cii c0r~tribut In rul COUIq Employer should contril With approp~ 2. Voluntary Afte Each Employee may co of earning§. (as defined a voluntary after-tax'basis. In no event may aggregate E~pI°yee v°luntar of total contributions in any Plan.Year. ...... i'discOntinue or vary An Employee shall By adopting this'~ection, the'E~ ~ges Interna Employee after tax ntegral pa~ ICMA-RC contributions are allowable in' an insubstantial e. no more than Year). The Employer should discuss this issue with appropriate counsel. nl C. Limits on Total Contributions The total contribution on behalf of each Participant (including both Mandatory and Elective Contributions) for each Plan Year shall not exceed the following limit(s): % of earnings (as defined in VI.A.1.). i~l There is no Plan-defined limit on the percentage or dollar amount of earnings that may be contributed. Limits on individual contribution types are defined within the appropriate section above. See Section V.A. for a discussion of nondiscrimination rules that may apply to non-collectively bargained self- insured Plans. 14 VII. Vesting Schedule A. The account is 100% vested at all times, unless specified otherwise in B. below. B. The following vesting schedule applies to Direct Employer Contributions outlined in VI.A.I: Years of Specified Service Percent Completed Vesting % _ % - % .% .% % % C. The account will become 100% vested upon the death, disability, retirement, or attainment of benefit eligibility by a Participant. Definition of retirement: D. Any period of service by a Participant prior to a rehire of the Participant by the Employer shall not count toward the vesting schedule outlined in B. above. VIII. Forfeiture Provisions ~. :. Upon separation.from the 'serVice of the Employer or Upon.reversion to the.Trust of a Participant's account assets remaining upon the participant's death (as outlined in Section XI), a Participant's non-vested funds shall: I~1 Remain in the Trust to be reallocated among all Plan Participant's as Direct Employer Contributions for the next and succeeding contribution cycle(s). Remain in the Trust to be reallocated on an equal dollar basis among all Plan Participants. Remain in the Trust to be reallocated among all Plan Participants based upon Participant account bal- ances. ~ Revert to the Employer. In the case of separation from service, the Participant's non-vested funds shall be applied as shown above. In the case of reversion due to the Participant's death under Section XI, the remaining account assets shall be.applied as shown above. IX. Eligibility Requirements to Receive Medical Benefit Payments from the VantageCare Retirement Health Savings Plan A. A Participant is eligible to receive benefits: At retirement only (as defined in Section VlI.C.) At separation from service with the following restrictions At age _ _ only .At retirement and age --60 At retirement or age _ 15 B. Termination prior to general benefit eligibility: A Participant who separates from the service of the Employer prior to attaining benefit eligibility as outlined in Section IX.A. or C. will be eligible to receive benefits: ]~1 Immediately upon separation from service. I~1 At age C. A Participant who dies or becomes totally and permanently disabled (as defined by the Social Security Administration) will become immediately eligible to receive medical benefit payments from his/her VantageCare Retirement Health Savings Plan account. ' X. Permissible Medical Benefit Payments Benefits eligibie for payment consist of: A. ]( All Medical Expenses eligible under IRC Section 213' other than direct long-term care expenses, OR B. The following Medical Expenses (select only the expenses you wish to cover under the · VantageCare Retirement Health Savings Plan): Medical Insurance Premiums Medical Out-of-Pocket Expenses* Medicare Part B Insurance Premiums Medicare Supplement Insurance Premiums COBRA Premiums Dental Insurance Premiums Dental Out-of-Pocket Expenses* · Long Term Care insurance Premiums 'Other (Must be .eligible under IRC SeCtion 213)* . * See Section V.A. for a discussion of nondiscrimination rules which may apply to non-collectively bargained, self-insured Plans. XI. Death Benefit In the event of a participant's death, the following shall apply: Account Transfer: The surviving spouse and/or surviving eligible dependents (as defined in Section XIII.F.) of the deceased Participant are immediately eligible to maintain the account and utilize it to fund eligible medical bene- fits specified in Section X above. Upon notification of a Participant's death, the Participant's account balance will be transferred into the Vantagepoint Money Market Fund*. The account.balance may be reallocated by the surviving spouse or dependents. * Please read the current prospectus carefully prior to investing. An investment in this fund is neither insured nor guaranteed and there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. Vantagepoint Mutual Funds are distributed by ICMA-RC Services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SIPC. If a Participant's account balance has not been fully utilized upon the death of the eligible Spouse, the account balance may continue to be utilized to pay benefits of eligible dependents, Upon the death of all eligible depend- ents, the balance will be available for medical benefits for the designated beneficiary of the last dependent or spouse to die. Assets remaining upon the death of a designated beneficiary shall be available for medical bene- account will revert to the fits of the beneflclar~y designated beneficiary. If there is no living beneficiary(les), the Plan to be applied as specified in Section VIII. .16 There will be no elective withholding of federal, state, or local taxes for medical benefit payments to the Participant's spouse's or dependent's designated beneficiary(les). If there are no living spouse or dependents at the time of death of the Participant, the account will be available for medical benefits for the designated beneficiary(les) of the Participant. Assets remaining upon the death of all designated beneficiaries shall be available for medical benefits of the beneficiary's beneficiary. If there is no liv- ing beneficiary(les), the account will revert to the Plan to be applied as specified in Section VIII. There will be no elective withho!ding of federal, state, or local taxes for medical benefit payments to the Participant's beneficiary(les) or any beneficiary's beneficiary· Xll. De Minimis Accounts Upon separat~i0n from the service of the Employer prior to a Participant becoming eligible for medical benefits from a VantageCare Retirement Health Savings Plan account, Participant accounts that are considered de min- imis as specified below will be paid to the Participant. ;:".i ~! The de minimis account value shall be $5,000 or less. The de minimis account value shall be $ $5,000) or less. (insert dollar amount between $0 and [~1 The Plan shall not allow de minimis account distributions. Xlll. The Plan will operate according to the following provisions: Employer Responsibilities 1. The EmplOyer Will submit all VantageCare Retirement Health Savirigs'Plan contribution data via electronic submission. 2. Participant status updates and/or changes or personal information updates and/or changes (Participants' termination dates, Participants' benefit eligibility dates, etc.) will be provided via electronic submission. B. Participant account administration fees will be paid through the redemption of Participant account shares, unless agreed upon otherwise in the Administrative Services Agreement, C. Employer plan fees will be paid by the Employer as outlined in the Administrative Services Agreement. D, Assignment of benefits is not permitted. E. Payments to an alternate payee (paYee other than a Participant) are not permitted with the exception of reim- bursement of health insurance premiums to the Employer. R An eligible dependent is the participant's lawful spouse and any other individual Who is a person described in IRC Section 152(a). G, The Employer will be responsible for withholding, reporting and remitting any applicable taxes, as outlined in the VantageCare Retirement Health Savings Plan Employer Manual. XIV. The Employer hereby acknowledges it understands that failure to properly fill out this Employer VantageCare Retirement Health Savings Plan Adoption Agreement may result in the loss of tax exemption of the Trust and/or loss of tax-deferred status for Employer contributions. 17 By: ~ Title: City Hanager Attest:, Accepted: Vantagepoint TranSfer .Agents, LLC Corporate Treasurer 18 VantageCare Retirement Health ' s Plan ©uestions and Answers for Employees ICMA RETIREMENT CORPORATION The Public Sector Exoer~ VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN QUESTIONS AND ANSWERS FOR EMPLOYEES BASICS OF VANTAGECARE RETIREMENT HEALTH SAVINGS 01: 02: 03: 04: What is the VantageCare Retirement Health Savings Plan7 ...................................................................... 1 What are the benefits of the VantageCare Retirement Health Savings Plan? .......................................... 1 How do I get started7 ...................................................................................................................................... Can I opt out of the VantageCare Retirement Health Savings Plan? ........................................................ 2 CONTRIBUTIONS 05: 06: 07: 08: 09: What types of contributions will be made to my RHS Plan? ...................................................................... 2 How do I know what specifics govern my employer's RHS Plan? ............................................................ 2 Are there limits to the amount of contributions that may be made in a given year? ..............................2 How are my RHS contributions coordinated with Section 457 and 401 plans? ........................................ 3 Are contributions made to the account included in "pensionable" compensation? .............................. 3 PLAN INVESTMENTS O10: Where will my RHS assets be invested? ...................................................................................................... 3 MEDICAL BENEFITS 011: 012: 013: 014: 015: 016: At what point will I be eligible for medical benefits? .................................................................................. 3 What medical expense payments will be covered? .................................................................................... 3 Who are my dependents? .............................................................................................................................. 4 Who handles medical benefit claims? ...................................................... . .................................................... 4 What is the Procedure for submitting a claim for medical reimbursement? How long does it take? ..4 What if a claim is denied? .............................................................................................................................. 4 OTHER 017: 018: 019: 020: 021: PLAN DISTRIBUTIONS What happens to my account balance if I leave my job before I am eligible for benefits? .................... 5 · When I leave my job, can I roll my RHS balance into an IRA, another employer's retirement plan or another RHS account? ...................................................................................................................... 5 Can I take the balance under an emergency withdrawal or other circumstance? ....................................5 What happens to the account balance when a participant dies? .............................................................. 5 Whom can I name as beneficiary of my account? ...................................................................................... 6 TAXES 022: How are payments from RHS accounts treated for tax purposes? ............................................................ 6 ADMINISTRATIVE 023: What types of reports will I receive? ............................................................................................................ 8 024: What fees does ICMA-RC charge for the RHS Program? ............................................................................ 8 RESOURCES 025: 'Whom should I contact with questions regarding the RHS Program? ...................................................... 8 BASICS OF VANTAGECARE RETIREMENT HEALTH SAVINGS QI: What is the VantageCare Retirement Health Savings Plan? VantageCare Retirement Health Savings (RHS) Plan is the ICMA Retirement Corporation's employer-sponsored health benefit savings vehi- cle that allows you to accumulate assets to pay for medical expenses for you, your spouse and/or your dependents (e.g., health insurance and pre- scription expenses) in retirement (or other eligibili- ty) on a tax-free basis. Your employer has chosen to offer you this benefit. This booklet, along with the RHS announcement letter from your employer, outlines how the program works and explains the benefits that are available to you under your employer's plan. RHS is similar to your ICMA-RC retirement plan (either a Section 401 qualified plan or a Section 457 plan) in that it allows you to invest dollars in the Vantagepoint Mutual Funds* for financial needs during retirement (or when otherwise eligi- ble). RHS offers a number of benefits, including tax-deferred acc~Jmulation of earnings and, if account assets are used to pay for tax qualified medical benefits for you, your spouse and/or your dependents, the additional benefit of tax-free with- drawals. Vantagepoint Mutual Funds are distributed by ICMA-RC services, LLC, a controlled affiliate of ICMA Retirement Corporation. Member NASD/SIPC. Q2: What are the benefits of the VantageCare Retirement Health Savings Plan? You can enjoy substantial benefits from the RHS Plan. · Accumulation of assets to pay for one of retirement's greatest financial needs - You have the opportunity to prepare to meet a sig- nificant financial outlay facing you in your retirement, whether for insurance premiums and/or out-of-pocket expenses, co-pays, or prescription drugs (as specified by your employer). · Convenience - Once you are eligible to partici- pate (See Q4), you only need to enroll (see Q3) and make decisions regarding investment of RHS funds (see Q10). Contributions are made directly by your employer and/or through con- verting your unused leave (see Q5). Additional contributions - Depending on your employer's plan adoption, you may be able to contribute additional amounts to the plan on a pre-tax and/or after-tax basis (See Q5). Tax-free medical expense reimbursement - Medical expense reimbursements are tax-free when used for qualified medical expenses for you, your spouse and/or your dependents (as allowed under Section 213 of the Internal Revenue Code) covered by the employer's RHS Plan. Tax-deferred accumulation of savings - Assets grow in a tax-deferred account. Flexibility - You may use RHS dollars to pay medical expenses for you, your spouse and dependents. Familiar investment options - RHS allows you to take advantage of the Vantagepoint Mutual Funds you are familiar with from your retire- ment plan, including model portfolio funds and Iow-cost index funds (see Q10). Continuing use by your survivors - Upon your death, your account balance is either trans- ferred to an account to pay medical expenses for your surviving spouse and/or dependents, or passed on to a beneficiary for their medical expenses (See Q20). Q3: 1. How do I get started? Your employer will provide you with enroll- ment material when you are eligible to partici- pate (See Q4). 2. You complete the enrollment form and return it to your employer. This form provides your indicative data (e.g. name and address) and your beneficiary designation. 3. If your employer's plan includes elective con- tributions, you will complete a separate elec- tion form for each type of contribution you will make (See Q5). 4. Your employer will verify your eligibility for participation and transmit the participant data to ICMA-RC. 5. ICMA-RC sets up your account the date of receipt of information from the employer, if the information is received prior to 4:00 p.m. Eastern Time. 6. ICMA-RC sends you a welcome letter the busi- ness day following the establishment of your new account. 7. Your employer will begin sending your contri- butions. Q4: Can I opt out of the VantageCare Retirement Health Savings Plan? Although you may not choose to withdraw from the RHS plan once you are a participant, some employers as part of their plan design have pro- vided their employees with the opportunity to decide affirmatively that they wish to participate. Your employer will provide an election window of up to 60 days during which you may make your election. Newly hired and newly eligible employ- ees may begin participation in the month follow- lng the end of the election window. If you do not elect to participate in the year of your initial eligi- bility, you may make your election in a later year. However, in that case, your participation will not begin until the year following the year of your election. Until you have made that decision, which may not be changed once made, you are not required to participate in a plan which offers you this irrevo- cable election. Of course, you will not receive plan contributions that your employer may make nor receive the tax-free benefits of accumulating a retirement health nest egg. Your election to participate in the RHS plan is made by completing the enrollment form. You do not need to complete the enrollment form until you choose to participate. If your employer has not incorporated the plan feature that allows employees to chose to partici- pate, you are required to participate if you are in a covered group. CONTRIBUTIONS Q5: What types of contributions will be made to my RHS plan? Depending on your employer's RHS plan features, the following contributions will potentially be available in your plan: Employer contribution of a fixed percentage or dollar amount. A vesting schedule may apply to this type of contribution. Your account will be automatically 100% vested when you become benefit-eligible or when you retire, die, or become disabled. These contributions are not subject to FICA or income tax.* · Mandatory contributions of accrued sick and/or vacation leave on a pre-determined schedule. These contributions are required by the employer of all participants. They are not subject to FICA or income tax.* Mandatory contributions of employee com- pensation. These contributions are required by the employer of all participants. They are not subject to FICA or income tax.* Elective pre-tax contributions of salary and/or accrued leave (irrevocable once elected). These contributions are not subject to FICA or income tax.*~ Annual elective contribution of vacation, sick and/or other leave to be earned during the coming year. These contributions are not sub- ject to FICA or income tax.** · Voluntary after~tax contributions** These contributions will be made to all plan participants' accounts without completion of additional contribution forms. Additional information on the specific require- ments of these contributions is available on the Contribution Election Form for that contri- bution type. These forms are available from your employer. Q6: How do I know what specifics govern my employer's RHS plan? The RHS announcement letter provided by your employer contains information on the specific fea- tures of your plan: whether you must participate in the plan, the types of contributions available to you, and the types of medical expenses covered by the program. If you do not have a copy of the RHS announcement letter, please contact your employer. Q7: Are there limits to the amount of contributions that may be made in a given year? Contributions can be made in any combination depending on the employer's plan, and there is no RHS dollar or percentage limit for any of these types, except for after-tax voluntary contributions which may not exceed 25% of total plan contribu- tions. Your employer may provide specific limits for different types of contributions. 2 Q8: How are my RHS contributions coordinated with Section 457 and 401 plans? Contributions to RHS are not coordinated with and do not offset contributions that may be made to Section 457 and 401 plans. However, there may be an impact relative to mandatory and elective pre- tax contributions. Since these contributions are not considered gross compensation for Form W-2 purposes, they may lower the base on which the contributions to a 457 or 401 plan are calculated, depending upon the terms of your employer's 457 or 401 plan. Q9: Are contributions made to the account included in "pensionable" compensation? The definition of compensation covered by the employer's pension plan will need to be examined to determine whether any of the various RHS con- tribution types (employer, sick and vacation leave accrual, mandatory pre-tax, elective pre-tax, and voluntary after-tax) are considered part of com- pensation on which pension benefit calculations are made. PLAN INVESTMENTS QIO: Where will my RHS assets be invested? The investment funds available to RHS partici- pants are ICMA-RC's Vantagepoint Funds,* with the exception of the Vantagepoint Income Preservation Fund. These 18 funds consist of eight actively managed funds, five model portfolio funds, and five index funds. Upon initial enrollment in the RHS Program, your investment allocation is automatically established as the Vantagepoint Money Market Fund.* However, you may change the investment alloca- tion for future contributions at any time through ICMA-RC's VantageLine (toll-free automated serv- ice line), VantageLink (Internet Web site), or an ICMA-RC Investor Services Representative. Additionally, existing balances can be transferred among the Vantagepoint Funds at anytime through VantageLine, VantageLink, or an ICMA-RC Investor Services Representative. If you should die while participating in the RHS Plan, your account balance will automatically be transferred into the Vantagepoint Money Market Fund. Moving the account balance into the Vantagepoint Money Market Fund may provide protection to your spouse/dependents or benefici- ary(les) against a market downturn. This will avoid potential problems arising from a reduction in the value of the account due to a drop in the market. The spouse/dependents or beneficiary(les) may transfer the account balance from the Money Market Account into the investments of their choice at any time. An investment in the Vantagepoint Money Market Fund is neither insured nor guaranteed by the US Government and there can be no assurance that the Fund will be able to main- tain a stable net asset value of $1.00 per share. Please read the current prospectus carefully prior to investing any money. Vantagepoint securities are distributed by ICMA-RC Services, LLC, a controlled broker dealer affiliate of ICMA Retirement Corporation. Member NASD/SIPC. MEDICAL BENEFITS Ql1: At what point will I be eligible for medical benefits? Your employer determines the benefit eligibility criteria for participating employees in its Adoption Agreement, as outlined in your employer's RHS announcement letter. For example, your employer might select "retirement" as the appropriate time for benefit eligibility. Alternatively, a specific age (e.g. 65) could be chosen, or a combination of retirement or separation from service and a specif- ic age. When you satisfy the criteria, you will be eligible for medical benefits. At that time, your employer will notify ICMA-RC of your eligibility and, before beginning to receive benefits, you must complete the VantageCare RHS Plan Employee Benefit Eligibility Form. Q12: What medical expense payments will be covered? When your employer adopted the RHS Plan, the medical benefits that are offered to participating employees were selected. Your employer may allow reimbursement for only one benefit or for any combination of eligible medical costs. The qualifying medical costs chosen by your employer are outlined in the RHS announcement letter from your employer. Information about what consti- tutes a qualifying medical expense can be found in IRS Publication 502, Medical and Dental Expenses (available on the IRS web site at www. irs.gov). Note that your RHS account can also be used to pay for qualifying medical expenses incurred by your spouse and dependents (See Q13). Q13: Who are my dependents? While you are alive, eligible dependents include individuals who meet all the following require- ments: The person is related to you (see below) or lived with you for the entire year as a member of your household and The person is a U.S. citizen or a resident of the U.S., Canada or Mexico for some part of the calendar year in which your tax year began and You provided over half of the person's total support for the calendar year. A person will be considered to be "related to" you if he or she falls in one of the following classifica- tions: · Your son or daughter (or a descendant of either) · Your stepson or stepdaughter · Your brother, sister, stepbrother, or stepsister · .Your mother or father (or an ancestor of either) · Your stepfather or stepmother · Your nephew or niece · Your aunt or uncle · Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-la.w. Your RHS account can provide medical benefits to any person who is your dependent under the pre- ceding definition even if you cannot or do not claim an exemption for the person on your income tax return. See IRS Publication 502, Medical and Dental Expenses, for more informa- tion. Note that there is no age limit on the definition of dependent. As long as the requirements outlined above are met (e.g. you provided at least one-half of the support for the person), the expenses can be covered regardless of age. After your death, an individual that qualified as a dependent on the date of your death will continue to be considered a dependent, and will remain eli- gible for medical benefits until his or her own death. Q14: Who handles medical benefit claims? Medical benefit claims processing and payment will be handled by Zenith Administrators, Inc. Zenith is a third-party claims administrator hired by ICMA-RC to perform administrative services for the RHS program as directed by ICMA-RC. Zenith is well versed in medical benefit claims processing (its 700 employees currently serve 400 client funds), and is familiar with the workings of ICMA- RC's RHS program. All questions regarding claims should be directed to Zenith at 1-800-788-5885. Please request to speak with the ICMA-RC VantageCare RH$ claims representative. Zenith's claims representatives are available from 9:30 a.m. to 5:30 p.m. Eastern Time. Q15: What is the procedure for submit- ting a claim for a medical reim- bursement? How long does it take? After you become benefit-eligible, claims for med- ical expenses that qualify under your employer's RHS Plan (see Q12) are submitted for reimburse- ment on the VantageCare Retirement Health Savings Plan Benefits Reimbursement Request Form. This form is available from your employer, ICMA-RC or from Zenith Administrators. Zenith reviews the claim to make certain that you are eli- gible and that the expense is covered by the plan. Zenith will process the claim, which will be paid, suspended, or denied in writing, within 30 days. Eligible monthly insurance premiums may be set up with recurring reimbursements directly from Zenith Administrators to you or your employer. So long as you have a balance in your account, the payment will be made automatically and you will not need to submit any additional request for the insurance premium reimbursement. Q16: What if a claim is denied? If your claim for medical benefits is denied, you will receive a written notice of the denial from Zenith Administrators, Inc. The notice will include The specific reason(s) for the denial Reference to plan rules upon which the denial was based Description of any additional information that might be required and an explanation of why it is needed 4 · An explanation of the plan's claim review pro- cedure. You may appeal a denied claim. Generally, the appeals process will consist of the following steps: You submit a written request for a review of the denied claim to Zenith Administrators, Inc. Your request must be filed within 60 days of your receipt of the denial notice. You may also review documents regarding administration of your employer's plan, and you may submit issues and comments in writing. You are enti- tied to representation, if you desire, through- out the appeals process. Zenith Administrators, Inc. will review your request within 60 days of receipt. Special cir- cumstances can extend this to 120 days; you will receive a notice of extension. You will receive a written summary of Zenith Administrator, lnc.'s decision regarding your appeal, which will include specific reasons for the decision. If you are dissatisfied with the written deci- sion, you may appeal your claim to your employer. If the matter is still not decided to your satis- faction, you are entitled to pursue your right to legal or equitable relief. OTHER PLAN DISTRIBUTIONS Q17: What happens to my account bal- ance if I leave my job before I am eligible for benefits? If you leave employment prior to becoming eligi- ble for medical benefits, your account balance will continue to accrue tax-deferred earnings until you reach eligibility as established by your employer. (See Qll). At that point, you can begin using the account for medical expense reimbursements. There is one exception to this general rule. You wilt receive an immediate, taxable lump sum of your vested account balance if you separate from service prior to attaining benefit eligibility and your vested account balance is $5,000 or less. Your employer may have established a lower de minimis account value, or your plan may not include a deminimis feature. See the RHS employ- er announcement letter. See Q22 for a discussion of the tax treatment of de minimis benefits. Q18: When I leave my job, can I roll my RHS account balance into an IRA, another emplOyer's retirement plan, or another RHS account? Your RHS account must remain in your employer's RHS Plan. Due to IRS requirements, the program does not allow your account to be rolled into any other type of plan, including an IRA, an employer- sponsored retirement account (such as a 457 or 401 plan) or another RHS account with a different employer when you separate from service. Q19: Can I take the balance under an emergency withdrawal or other circumstance? Unlike Section 457 plans, there are no provisions for withdrawals in the event of a financial hard- ship. However, an RHS participant that is eligible for medical expense reimbursement will be able to use RHS assets in the event of a medical emer- gency or hardship. The only payments that may be made to you other than for medical benefits are de minimis benefits (see Q17). Q20: What happens to the account bal- ance when a participant dies? ICMA-RC must be notified of the death by the fil- ing of the VantageCare Retirement Health Savings Plan Decedent Information Form, available from your employer, ICMA-RC, or Zenith Adminis- trators, Inc. Upon the death of a participant, the RHS account balance will automatically become 100% vested. Remaining account assets will be available to the participant's survivors as follows: Surviving spouse and/or dependent(s): Upon the participant's death, remaining assets will be transferred to an account for continuing tax-free use by the surviving spouse and/or dependents for their own qualifying health expenses, tf there are assets remaining upon the death of the spouse and all dependents, they will continue to be available for medical expense use on a taxable basis by the named beneficiary(les)* of the last spouse or depend- enttodie. This taxable use byanamedbene- ficiary(ies)* will continue until there are no longer any assets, or no named beneficiary can be located. At that time, any remaining assets will revert to the RHS trust to be used as outlined in the employer's RHS plan. 5 No surviving spouse or dependent(s): If the participant is not survived by a spouse or dependents, the account assets will be trans- ferred to an account for medical expenses on a taxable basis by the named beneficiary(les)* of the participant. If assets remain in the account upon the death of the named benefici- ary(ies), they will continue to be used on a tax- able basis for health expenses of the benefici- ary(ies)* of the participant's beneficiary. This taxable use by a named beneficiary(les)* will continue until there are no longer any assets,' or no named beneficiary can be located. At that time, any remaining assets will revert to the RHS trust to be used as outlined in the employer's RHS plan. In the case of medical expense reimburse- ments for a non-spousal or dependent benefi- ciary, no payments will be allowed until the year following the year of the participant's death. This will ensure that no FICA taxes will be due on the distributions. See Q22 for a discussion of the tax treatment of death benefits. Q21: Whom can I name as beneficiary of my account? There is generally no restriction on whom you may name as beneficiary for your RHS account. You are free to name whomever you wish as your beneficiary(les), as long as you name an individ- ual. You may not name an estate or trust as your beneficiary. Keep in mind that your surviving spouse and dependents will automatically have the use of the account for medical expenses after your death (see Q20). You should name someone as your beneficiary who would not already have the account pass to him or her in this situation. Note: If you are a resident of a community prop- erty state (AZ, CA, ID, LA, NV, NM, TX, WA, or WI) and are married, your designation of a beneficiary other than your spouse does not constitute a waiver of your spouse's right to your RHS account assets upon your death. Your designated benefici- ary will have access to the account only if you are not survived by a spouse or other qualifying dependents. Beneficiaries are designated and may be changed on the VantageCare Retirement Health Savings Plan Employee Enrollment/Change Form. The form is available from your employer or from ICMA-RC. After your death, your spouse and dependent(s), will name their beneficiaries on the Decedent Information Form. TAXES Q22: How are payments from RHS accounts treated for tax purposes? RHS benefits paid in the form of medical expense reimbursements will never be taxed to you, your spouse, or dependents. No income tax withhold- idg or reporting is required, and you do not need to report any medical benefits at all on your income tax return. Medical expense reimbursements paid to a non- spouse or non-dependent beneficiary will be tax- able to the recipient. ICMA-RC will file Form 1099-R directly with the beneficiary and the IRS. De minimis benefits (see Q17) are taxable bene- fits. In this instance, you will receive a tax report- ing form, and income tax will be payable. FICA taxes will also be payable, if you are covered by the Social Security system. Zenith Administrators, Inc. will remit the funds to the employer who will withhold all FICA and income taxes (as shown on the table on page 7) for transmittal to the Social Security Administration and IRS. The payment will be included on your Form W-2 from your employer. The chart on the next page outlines the tax rules for RHS payments. Type of RHS Benefit Medical benefits paid to yOu Medical benefits paid to your spouse/dependents Medical benefits- paid to beneficiary (in year following year of death or. later) De Minimis account payout Is the Benefit Income Taxable? No No Yes - to beneficiary receiving the payment Yes - to you InCome Taxes Is Federal Income Tax Withheld? No No No Y~s Is State/Local Income Tax Withheld? No No No Yes, if required by state/local law FICA Is OASDI/HI* Withheld if Applicable? No No No - OASDI/HI taxes are not required to be paid Yes - if you were covered by OASDI and/or HI * OASDI = Social Security and HI = Medicare ADMINISTRATIVE Q23: What types of reports will I receive? You will receive quarterly Summary Plan Statements provided by ICMA-RC, listing informa- tion on contributions, investment earnings, and distributions. The statements will use the same format as the ICMA-RC 401/457 Summary Plan Statements you currently receive. You will also receive a consolidated statement, showing both your 401/457 account activity and your RHS account activity. You will also receive confirmations of benefit pay- ments, address changes, investment allocation changes, and fund-to-fund transfers. Q24: What fees does ICMA-RC charge for the RHS Program? On a quarterly basis, an account fee will be assessed to your account. This fee reduction will be reflected on your quarterly statement. There is a minimum annual fee of $35 and a maximum annual fee of $150. The annual account fee is calculated as follows: Account Assets Fee $1- $7,000 Annual fee of 0.90% of plan assets, assessed quarterly. There is a minimum annual charge of $35 ($8.75 per quarter) PLUS $7,001-$23,000 Annual fee of 0.55% of plan assets, assessed quarterly. Account balances exceeding $23,000 will be charged a maximum annual fee of $150 ($37.50 per quarter). For de minimis benefits (if applicable), ICMA-RC will assess a flat $25 fee in lieu of the quarterly account fee, which will be collected through the extinguishing of shares in your account just prior to the payout. The quarterly account fee will not be charged to the participant's account for the quarter of the de minimis payout. Account fees are subject to change with appropri- ate prior notification. RESOURCES Q25: Whom should I contact with ques- tions regarding the RHS Program? The following table outlines whom you should call with questions about your RHS account. Your employer: · For information on program specifics (benefit eligibility, eligible medical expenses, sever- ance and death benefits, etc.) · To enroll and make contribution election(s) (if applicable) · To establish benefit eligibility Zenith Administrators, Inc. (1-800-788-5885: please ask to speak with the ICMA-RC VantageCare RHS claims representative) · For all claim-related issues once you are eligi- ble to receive benefits · To change personal data if you are eligible for benefits (also inform ICMA-RC) ICMA-RC (1-800-669-7400) · For all account issues not claim-related · With questions regarding your account state- ment · With questions on the posting of your contri- butions · To change personal data (also inform Zenith Administrators if you are eligible for benefits) ICMA RETIREMENT CORPORATION 777 North Capitol Street, NE Washington, DC 20002-4240 1-800-669-7400 Para asistencia en Espa~ol llame al 1-800-669-8216 www. icmarc.org B RC000-049-200210-C751