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Ce f 4/74 ceainaehe <br />MAYOR <br />Bill Blesener <br />COUNCIL <br />Jim LaValle <br />Rick Montour <br />Barbara Allan <br />John Keis <br />515 Little Canada Road, Little Canada, MN 55117 -1600 ADMINISTRATOR <br />(651) 766 -4029 / FAX: (651) 766 -4048 Joel R. Hanson <br />www. ci.little- canada. nm. us <br />MEMORANDUM <br />TO: Mayor Blesener and Members of the City Council <br />FROM: Kathy Glanzer, City Clerk <br />Shelly Rueckert, Finance Director <br />DATE: September 9, 2005 <br />RE: Pre -Tax Medical and Dependent Care Flexible Spending Accounts <br />As discussed at the August 24th Workshop Meeting, we are proposing that the City expand its <br />Section 125 Plan to include Medical Flexible Spending and Dependent Care Flexible Spending <br />Accounts for City employees. These plans will allow for the reimbursement of qualified <br />medical /dental expenses and dependent care expenses with pre -tax dollars set aside by the <br />employee. <br />The plan operates on a "use it or lose it" basis; therefore the employee must use the pre -tax <br />dollars he /she has set aside within a certain time frame, or the unused dollars revert to the City. <br />The risk to the City is that an employee may be reimbursed for qualified expenses up the annual <br />dollar amount elected prior to those dollars being deducted from paychecks. If the employee <br />resigns with a negative balance in the account, the City cannot collect those dollars. To <br />minimize this risk, we are recommending a $2,500 cap on medical expense accounts. Dependent <br />Care Accounts have an IRS cap of $5,000. The risk is less for Dependent Care Accounts since <br />dollars are typically in and out. <br />With the assistance of Financial Concepts, Inc. (our employee benefits insurance agent), staff has <br />interviewed administration service providers and is recommending Passport Benefit Solutions. <br />Passport is a very experienced administrator of these types of accounts. The cost to the City is as <br />follows: <br />One Time Set Up Fee <br />Includes: <br />Plan Documents <br />Enrollment Materials <br />Enrollment Meeting <br />Account Implementation <br />Banking Setup & Pre -Notes <br />$750 (Waived if sign up in September) <br />