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42090.1 <br />TO: Mayor and City Council <br />FROM: Mark E. Bernhardson, City Administrato <br />DATE: April 20, 1990 <br />SUBJECT: Flexible Benefit Plan <br />Attachment: A. DCA Flexible Benefit Outline <br />ISSUE - Presentation of information to Council regarding the <br />basics of flexible benefit plan. <br />INTRODUCTION - Over the past couple years staff has discussed <br />with Council the undertaking of flexible spending accounts in <br />conjunction with the pre-tax provisions allowed by IRS Section <br />125. Under this, it allows an employee to deduct from pre-tax <br />dollars certain amounts for child care, health premiums, health <br />and dental expenses and other types of qualified plans together <br />with coordinating that plan with their deferred compensation. <br />Even though this has been a longterm goal to present to the <br />Council for some time. Section 89, that was a discrimintation <br />test, made certain elements and design of the plan more <br />expensive. This has subsequently been repealed by the Congress. <br />(I would like to chank Councilmembers who pursuaded staff to wait <br />on going through and doing a Section 89 compliance in January of <br />'89 since the repeal made it no longer necessary.) <br />DISCUSSION - Flexible pre-tax benefit programs are provided by a <br />number oT organizations to their employees in both public and <br />private sectors in the metro area. The DCA Stanton group has <br />done it in most municipalities who havwe adopted such programs. <br />Subsequent to indicating that the cost of the plan would be about <br />$1,500 to design it in our January 16, 1990 memo I have done <br />further exploration and the total cost at this point looks to be <br />about $2,250 for plan design and $1,700 for plan communciations <br />and introduction. (We budgeted about $7,500 for both IRS 125 and <br />87 for 1990.) <br />The information is presented to Council at this time so that you <br />may peruse the information to see what questions or issues you <br />have prior to a decision as to whether staff should initiate the <br />work with DCA Stanton. <br />While the City could solicite alternate quotations from other <br />areas, it is not required nor felt that the expense involved <br />would net a substantial savings, particularily since DCA will be <br />working from plans developed for the municipalities. (The only <br />unknown expense at this point is the legal review. DCA’s master <br />documents have been reviewed by the Gray, Plant law firm. These <br />cost factors will be presented at the next meeting.)