07-08-1996 Council Packet - Laserfiche WebLink

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CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31, 1995 NOTE 6 - DEFERRED COMPENSATION PLANS The City offers its employees deferred compensation plans created in accordance with Internal Revenue Code § 457. The plans, available to all employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseen emergency. All amounts of compensation deferred under the plans, all property and rights purchased with those amounts and all income attributable to those amounts are solely the property and rights of the City, subject to the claims of the City's general creditors. Participants ’ rights under the plans are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The City has no liability for losses under the plans but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. NOTE 7 - FLEXIBLE BENXFIT PLAN The City offers a flexible benefit plan. The plan is a "cafeteria plan" under § 125 of the Internal Revenue Code. All employees who meet the eligibilit) requirements may participate in the plan. To be eligible an employee must be at least 20 years of age and be an employee who is regularly scheduled to work more than 20 hours per week. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the plan for health care and dependent care benefits. Payments are made from the plan to participating employees upon submitting a request for reimbursement of eligible expenses actually incurred by the panicipant. All assets of the plan are held by the City. The plan is administered by an independent contract administrator for child care and medical expense reimbursements, and by the City for health insurance premiums. The plan is included in the financial statements as an Expendable Trust Fund. All plan property and income anributable to that property is solely the property of the City, subject to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditors of the City in an amount equal to the eligible health care and dependent care expenses incurred by the participants. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. -45- I 1 1 1