REPORT TO THE CITY COUNCIL FROM: SUMEET MALHI, Director Personnel Services Department BY: PHILLIP CARBAJAL, Human Resources Manager Personnel Services Department - Benefit Administration SUBJECT ..Title Approve the Fourth Amendment to the City of Fresno (City) Flexible Benefits Plan (Plan), to reflect changes in certain provisions of the Internal Revenue Service Code Section 125, Cafeteria Plan - Health Flexible Spending Arrangements to increase the maximum carryover amount and increase the contribution limitation and set minimum carryover limit amount. Also, authorize the City Manager or designee to execute all related Plan amendments. ..Body RECOMMENDATION Staff recommends the City Council approve the Fourth Amendment to the Plan to include the recent modifications of the Code Section 125 Flexible Spending Account to allow an increase in the carryover amount in the health FSA program, increase contribution to statutory amount, and set a minimum carryover limit amount and authorize the City Manager or designee to execute all related Plan amendments. EXECUTIVE SUMMARY As the statutory amount under IRS Code Section 125(i) increases to adjust for cost of living, the City of Fresno's response in this amendment to the current plan will allow unused amounts in the Health Flexible Spending Account remaining at the end of the Plan Year to the subsequent Plan year, to carry overusing the statutory amount under Code Section 125(i). Also, the City of Fresno is setting a minimum carryover limit to counter the premium costs of those accounts that are not re-enrolling. BACKGROUND In 1992 The City of Fresno created a City of Fresno Premium Conversion Plan. That plan was restated and called the City of Fresno Flexible Benefit Plan July 1, 2002. The Flexible spending amounts allowed to be contributed from an employee in plan year 2024-2025 is $3,200 for unreimbursed medical expenses, and $5,000.00 for dependent care expenses, both set at the statutory amount under Code Section 125(i). Currently the plan reads: If any balance remains in the participants Health Care Spending Account for a period of coverage after all reimbursements have been made for the period of coverage, such balance shall not be carried over to reimburse the Participant for Medical Care Expenses incurred during a subsequent year. The Participant shall forfeit all rights with respect to such balance. An amendment set forth on January 1, 2020, set a new carryover rule that permitted the carryover of unused amounts remaining in a health FSA as of the end of a plan year to pay or reimburse a participant for medical care expenses incurred during the following plan year, subject to the carryover limit which was $550. Under this update to the amendment, to be set forth on June 30, 2024, the carryover limit will be set to the statutory amount under Code Section 125(i) each year and apply a minimum carryover limit of $100 for any account that is not re-enrolled in the subsequent plan year. This can help to offset the annual cost maintained on carryover accounts under the plan. ENVIRONMENTAL FINDINGS By the definition provided in the California Environmental Quality Act (CEQA) Guidelines Section 15378, this action does not qualify as a "project" as defined by CEQA. LOCAL PREFERENCE Local preference is not applicable as this is an amendment being sought for an existing Benefits Plan. FISCAL IMPACT All amounts payable under this Plan shall be paid from the general fund account of the City. This change does not affect the monthly premium of $6.35 PEPM that is paid to our Third-Party Administrator HealthComp. Therefore, there will be no negative fiscal impact but possible savings due to the exclusion of monthly premiums paid for accounts under the minimum carryover limit who are not re-enrolling in the subsequent plan year. Attachments: City of Fresno FSA Plan Doc 8.2.2021 City of Fresno Amendment 2020 executed (004) City of Fresno Limits Amendment 6.30.2024