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Item 15 - Flexible Spending AccountI I do AENDA REPORT —11 of i CITY OF POWAY G,�� This report is included on the Consent Calendar.There will be no separate discussion of the report prior to approval by the 1 ='` ' City Council unless members of the Council,staff or public request it to be removed from the Consent Calendar and y discussed separately.If you wish to have this report pulled for discussion,please fill out a slip indicating the report number F c, . ,ti THE co�r�� and give it to the City Clerk prior to the beginning of the City Council meeting. To: Honorable Mayor and Members of •e City Council From: James L. Bowersox, City Man. -�� r � Initiated by: Susan M. Pulone, Director of Administrative Servic Richard J. Howard, Management Analyst') Date: December 8, 1987 Subject: Flexible Spending Plan ABSTRACT Staff is prepared to implement a Flexible Spending Plan in accordance with the Internal Revenue Code, Section 125. BACKGROUND The City Council approved for the implementation of a Flexible Spending Plan, or cafeteria plan, to become effective on the first day of the first pay period in January 1988. The flexible spending plan concept was approved during the course of negotiations with members of the Poway Firefighters Association and the Non-Safety Employees (Teamsters) Union. Members of the Management, Supervisory, Professional and Confidential Employees supported its implementation during their respective salary and benefits discussions. Flexible spending plans have begun to find their way into government over the past eight years. Used extensively in the private sector, this novel approach to em- ployee benefits allows employees the option of choosing from a variety of basic benefits. Among the basic benefits are medical , dental , eye care, and term life insurance. However, as employees' needs change, so may the packages which make up their benefit portfolios. Dependent care and medical expenses not fully reimbursed by the employee' s medical plan are becoming increasingly important to employees. Under flexible spending, these expenses can be paid for through reimbursement accounts. Reimbursement accounts allow you to pre-fund certain health care and dependent care expenses with tax-free dollars. There are two types of reimburse- ment accounts: one for health care expenses and one for dependent care expenses. In order to allow reimbursement accounts tax-free status, the Internal Revenue Service determines which expenses are eligible for reimbursement on a tax-free basis. Generally, expenses that qualify as a tax deduction on IRS Form 1040, Schedule A, are eligible for reimbursement account status. Reimbursement /--- ACTION: Approved staff recommendation and author zed execution of ` Agreement. 1A(ALlyu 4-4 EvelyniMadison, Deputy City Clerk DEC 8 1987 ITEM 15-- 021 1 of 53 I • • Agenda Report Flexible Spending Plan December 8, 1987 -2- accounts require the employee to estimate in advance how much money they are likely to spend in the coming year for noncovered medical and dependent care expenses. Careful planning is important because money left in an account at the end of the plan year is forfeited according to IRS regulations. This is known as the "use it or lose it" rule. Over the course of the year, salary reductions are made from the employee' s biweekly pay, allowing them to have their salary reduced--thus lowering taxes, resulting in a greater net pay. Generally, reimbursable health care expenses include but are not limited to: o Medical plan and dental plan deductibles and co-payments. o Orthodontia o Charges over the "reasonable and customary" limits. o Hearing exams and aids. o Vision care, eye care, eyeglasses, and contact lenses. o Specific weight reduction program. o Other health care expenses such as annual physicals, immunizations, vaccinations, and cosmetic surgery. Reimbursable dependent care expenses include: o A child care center, babysitter, or nurse for a dependent child under 15 years of age. o A nursery school , even though the school provides lunch and educational services o A maid or cook, if services are provided in part to a person who qualifies for dependent care. o A relative who provides dependent care services, as long as the relative is not a spouse' s dependent, or who is under age 19 at the end of the calendar year. Another major element of the Flexible Spending Plan is known as a Premium-Only Plan, or POP plan. POP is the simplist form of a Section 125 plan. Similar to reimbursement accounts, POP allows employees to pay for benefits before income is taxed rather than after income is taxed. Again, the result is lower taxes and more take-home pay. Employees who are presently paying dependent premiums for medical and dental care are doing so after paying federal and state income taxes. POP' s allow employees to pay these premiums before taxes. FINDINGS Presently, City employees receive the option of choosing among three medical , two dental , and one eye care plan. Health and dental premiums are paid in full by the City. Dependent medical and dental premiums are shared equally between the employee and the City. Eye care coverage is fully paid by the City for employees and dependents alike. Members of the Poway Firefighters Association are not eligible for eye care but may elect to purchase it by way of flexible spending through payroll deductions. All employees have the option of utilizing the City' s deferred compensation plan. These benefits will not change with the implemen- tation of a Flexible Spending Plan. 2 of 53 DEC 8 1987 ITEM 15 4 Agenda Report Flexible Spending Plan December 8, 1987 -3- As previously stated, the City is in a position to implement a Flexible Spending Plan, effective the first day of the first pay period in January 1988. Prior to implementation, however, certain requirements must be met. Internal Revenue Code Section 125 specifies that participants in a Flexible Spending Plan may choose from among taxable and nontaxable benefits. Taxable benefits mean cash, property, or other benefits attributable to employer contribu- tions that are currently taxable under the Internal Revenue Code, whereas non- taxable benefits include those which are financed by employer contributions that are not taxable under the Internal Revenue Code. Nontaxable benefits include: o IRC Sec. 79: Group Term Life Insurance up to $50,000. o IRC Sec. 105 and 106: Group Accident or Health Coverage. o IRC Sec. 129: Dependent Care Assistance. For favorable tax treatment, benefits received under a Flexible Benefit Plan must meet the following requirements: o The Plan must be in writing. o All participants must be employees. o The employees must be able to choose among two or more qualified benefits. o Elections (reimbursement accounts) must be irrevocable over the period in which benefit coverage has begun. o The election of nontaxable benefits under the Plan cannot discriminate in favor of key employees or highly compensated employees. o A Flexible Spending Plan must be established by a City Council resolution according to Section 125 of the Internal Revenue Code. APPROACH There are two options for administration of a Flexible Spending Plan. The first option is to administer the Plan in-house utilizing existing resources. The second option is to contract with a third party administrator who will be able to use their resources and implement a turn-key Flexible Spending Plan. Through self administration, several benefits exist. The employees who participate in the Plan will not be required to pay for on-going administrative costs. Also, if questions arise concerning claims, someone from within the organization will be able to answer employee concerns. Another benefit is the initial low cost of implementation. However, there are drawbacks to self administration. First, the City is not and should not be in a position to administer an employee Flexible Spending Plan. As the Plan grows in participants, the strain on existing resources could become heavily burdened, possibly necessitating the need for added personnel to maintain claims and on-going administration of the Plan. Secondly, the City should not be placed in the position of providing tax information or advice to its employees. Third, the City does not administer any other type of employee benefit program. To do so would create confusion and the possibility of collusion. 3 of 53 DEC 8 1987 ITEM 15 S Agenda Report Flexible Spending Plan December 8, 1987 -4- On the other hand, third party administration allows the City to contract with a provider who will prepare all Plan documents, conduct employee orientation sessions, monitor the Plan on a continual basis to determine compliance of discrimination tests, maintain deposits and disbursements, provide annual reports for the City, and furnish employee status reports on each reimbursement account on a monthly basis. Costs for these services vary greatly according to size of the firm, location, and the quality of services provided. The City received proposals from six third-party administrators, four of which were deemed responsive. The four are: Flex Plan Administrators of Palo Alto, California; Alta Health Systems of Santa Ana, California; UniService, Inc of Phoenix, Arizona; and Coast Consulting of San Diego, California. After careful consideration, UniService, Inc. appears most capable of meeting our needs. UniService will provide all plan documents, communication materials, and set-up charges for $750. In addition, the employee administration fee is $2.50/month for each participant. Richard S. Jones and Associates will conduct the employee orientation sessions for UniService, Inc. Currently, Richard S. Jones and Associates is the City' s insurance broker for the Lincoln National Medical and Dental Plans. Jones and Associates has agreed to conduct the sessions at no cost to the City or employee. They will offer employees an additional benefit, uni- versal life insurance, with the premium to be paid through payroll deductions. The amount of each premium is left to the discretion of the employee. By making this coverage available to employees, the City is providing an additional benefit, while simultaneously increasing the options made available to them through the Flexible Spending Plan. RECOMMENDATION It is recommended that the City Council authorize the Director of Administrative Services to enter into an agreement with UniService, Inc. and Richard S. Jones and Associates for the third party administration of the City of Poway' s Flexible Spending Plan (Attachment A) , and take all necessary steps required to establish the Flexible Spending Plan by the effective date of January 11, 1988. The City will fund start-up fees and all associated costs for Plan documents ($750) , while plan participants will pay the $2.50 administrative fee through payroll deductions. JLB:SMP:RJH:eg Attachments: A. Flexible Benefits Account Plan Adoption Agreement B. Summary Plan Description C. Flexible Benefits Account Plan D. Dependent Care Assistance Program 4 of 53 DEC 8 1987 ITEM 15 • FLEXIBLE BENEFITS ACCOUNT PLAN ADOPTION AGREEMENT ATTACHMENT A 5 of 53 DEC 8 1W ITEM 15 III • FLEXIBLE BENEFITS ACCOUNT PLAN ADOPTION AGREEMENT The Employer named below hereby establishes a Cafeteria Plan pursuant to Section 125 of the Internal Revenue Code of 1986 , as amended, by adopting the Plan named below (the Plan) which the Employer has read and accepted with the specifications set forth below. "The Employer" is the City of Poway, a municipal corporation, organized pursuant to the laws of the State of California Business Address : 13325 Civic Center Drive Poway, California 92064 Employer Federal Tax Identification Number: 95-3555845 Plan Name: City of Poway Flexible Benefit Plan Plan Number: 4065 Nature of Business : City Government Date Business Incorporated : December 1980 Effective Date of Plan: January 11 , 1988 6 of 53 DEC 8 1987 ITEM 15 ARTICLE TWO - DEFINITIONS 2.10 "Trustee" : Name: Northern Trust Company of Arizona, N.A. , a national banking association having its principal place of business in Phoenix, Arizona. Address : 4350 East Camelback Road, Building C - 100 Phoenix, Arizona 85018 Telephone: (602 ) 840-8550 2 . 11 "Entry Date" shall mean the first day after the month following an open enrollment period. Such open enrollment period will not be held more than once during any plan year. 2 . 15 "Non-Taxable Benefits" Medical Expense Reimbursement Benefits Group Term Life Insurance Benefits Dependent Care Assistance Benefits Accident, Health and Hospitalization Benefits All policies and documents representing coverage provided by each Non-Taxable Benefit selected shall be attached to this Adoption Agreement and are by this reference made a part of this Agreement. 2 . 20 "Plan Year" shall mean: The twelve (12 ) month period commencing on January 1 and ending December 31. The first Plan Year shall commence on the effective date of this Adoption Agreement and shall end on December 31 , 1988 . DEC8 1987 ITEM 15 7 of 53 • • ARTICLE THREE - ELIGIBILITY AND PARTICIPATION 3 . 01 "Eligibility Requirements" shall be: Each Employee shall be eligible to participate at the time designated below unless the Employee is separated from service before such date. On the first Entry Date on or after he or she has become employed . 3 . 03 Application for Participation. To become a Participant, the Eligible Employee must specify his or her election of Non-taxable Benefits during an open enrollment period after he or she becomes eligible to par- ticipate in the Plan. ARTICLE FOUR - BENEFITS 4 . 01 "Contributions" shall be set as follows : (a) Maximum Contribution. Each Participant shall have available an amount not to execeed $10, 000 per Plan Year, or 50% of compensation, whichever is less , which may be designated as Contributions according to the terms and provisions of the Plan. (b) Minimum Contributions . The minimum amount which may be designated as contributions according to the terms and conditions of the Plan is $175 . 00 per Plan Year. ARTICLE FIVE - FBA EMPLOYER REPRESENTATIVE 5 . 01 "Designation" : The individual listed below shall serve as the FBA Employer Representative until his or her resignation or removal by the Employer and appointment of a successor. NAME: Susan M. Pulone, Director of Administrative Service 8 of 53 DEC 8 1987 ITEM 15 ARTICLE NINE - ADMINISTRATION 9 . 06 "Administration Charges and Fees shall be: (a ) The amount of the Initial Installation Fee be $ 750 . 00 . (b) The amount of the Annual Enrollment Fee per eligible employee shall be zero dollars . (c) The amount of the Monthly Maintenance Fee shall be $ 2 . 50 per month per participant. 9 of 53 DEC 8 1987 ITEM 15 • The Employer and the Administrator have caused this Agreement to be signed by their duly qualified officers on the date set forth below. DATED: Employer Name By Name Title "Employer" UNI SERVICE, INC. By� _v" Nap - Title "Administrator" 10 of 53 DEC 8 1987 ITEM 15 • SUMMARY PLAN DESCRIPTION OF THE FLEXIBLE BENEFITS ACCOUNT PLAN SUMMARY PLAN DESCRIPTION 1. NAME OF PLAN : City of Poway Flexible Benefits Account 2 . PLAN NUMBER : 4065 • 3 . EFFECTIVE DATE OF PLAN : January 11, 1987 4 . SPONSORING EMPLOYER : City of Poway 13325 Civic Center Drive Poway, CA 92064 5 . EMPLOYER' S FEDERAL ID# : 95-3555845 6 . TRUSTEE : Northern Trust Company of Arizona, N.A. , a national banking associ- ation having its principal place of business at: 4350 East Camelback Building C-100 Phoenix, Arizona 85018 Phone (602 ) 840-8550 7. AGENT FOR SERVICE OF LEGAL PROCESS : The Office Manager (or his/her representative) at the FBA Administrative Office: 320 E. McDowell Road Suite 300 Phoenix, AZ 85004 (Service of process may also be made upon the plan Trustee at the address above ) 11 of 53 DEC 8 1987 ITEM 15 • 8 . FBA EMPLOYER REPRE- SENTATIVE Susan M Pulone 9 . PLAN ADMINISTRATOR UniService, Inc. P. O. Box 84 Phoenix, AZ 85001 Telephone ( 602 ) 271-0050 10 . ELIGIBILITY REQUIREMENTS • All employees of the Sponsoring Employer named above who are at least 18 years of age and are eligible on the first entry date on or after he or she has become employed. 11 . PLAN YEAR January 1 to December 31 12 . MINIMUM CONTRIBUTION. The minimum contribution amount is $175 . 00 annually. 13 . MAXIMUM CONTRIBUTION. The maximum contribution amount is $10 , 000 annually, or 50% of your annual compensation, whichever amount is less . 14 . ADMINISTRATION CHARGES . There is an administration charge which is also paid with pretax dollars . The amount of the administration charge is indicated on your Enrollment Form and is part of the total amount which will be deducted according to your election. 15 . BENEFITS AVAILABLE Medical Expense Reimbursement Benefits Group Term Life Insurance Benefits Dependent Care Assistance Benefits Accident, Health and Hospitalization Benefits 12 of 53 DEC 8 1987 ITEM 15 i • SUMMARY PLAN DESCRIPTION OF THE FLEXIBLE BENEFITS ACCOUNT PLAN ATTACHMENT B 13 of 53 DEC 8 1987 ITEM 15 . • SUMMARY PLAN DESCRIPTION 1 . NAME OF PLAN • 2 . PLAN NUMBER • 3 . EFFECTIVE DATE OF PLAN • (Enter Date ) 4 . SPONSORING EMPLOYER • (Name) (Address ) (City/Zip) 5 . EMPLOYER' S FEDERAL ID# QS' 3 5 s-g , 4 6. TRUSTEE Northern Trust Company of Arizona, N.A. , a national banking association having its principal place of business in Phoenix, Arizona 4350 East Camelback Road Building C-100 Phoenix, Arizona 85018 Telephone ( 602 ) 840-8550 7 . AGENT FOR SERVICE OF LEGAL PROCESS The Office Manager ( or his/her representative ) at the FBA Administrative Office: 320 E. McDowell Road Suite 300 Phoenix, AZ 85004 ( Service of process may also be made upon the plan Trustee at the address above ) 8 . FBA EMPLOYER REPRE- SENTATIVE • (Enter Name of Representative ) 9. PLAN ADMINISTRATOR UniService, Inc. P. 0. Box 84 Phoenix, AZ 85001 Telephone ( 602 ) 271 -0050 10. ELIGIBILITY REQUIREMENTS All employees of the Sponsor- ing Employer named above who are at least years of age and have completed years of service with the sponsoring 1 14 of 53 DEC 8 1987 ITEM 15 • Employer are eligible to participate in the Plan. 11 . PLAN YEAR • 12 . MINIMUM CONTRIBUTION. The minimum contribution amount is $ annually, or % of your annual compensation, whichever amount is less. 13 . MAXIMUM CONTRIBUTION. The maximum contribution amount is $ annually, or % of your annual compen- sation, whichever amount is less. 14 . ADMINISTRATION CHARGES. There is an administration charge which is also paid with pretax dollars. The amount of the administration charge is indicated on your Enrollment Form and is part of the total amount which will be deducted according to your election. 15 . BENEFITS AVAILABLE • 2 15 of 53 DEC 8 1987 ITEM 15 • • INTRODUCTION: Your employer is making available to you a plan which will reduce your income taxes and give you the ability to pay for certain benefits with pre-tax dollars. The name of the plan is the Flexible Benefits Account Plan ( "FBA Plan" ) and it is also referred to in general as a "Cafeteria Plan" . The reason for this name is that each employee has a "menu" of benefits from which to choose. The FBA Plan is intended to provide these benefits, using pre-tax dollars, as allowed under Federal Law. Since these deductions are made from your gross income each month, your net taxable income is reduced and you pay less income and social security tax. Because you are paying for benefits to cover expenses that you would normally have, your spendable income is increased. A description of the benefits available under the FBA Plan is listed at the end of this booklet. This booklet is a Summary Plan Description ( SPD ) and is intended to give only a brief description of the Plan. Feel free to consult the FBA Employer Representative for clarification and/or more details. For a more detailed explanation, you can write to the Admini- strator and request a copy of the FBA Plan and Adoption Agree- ment. There will be a charge for any duplicating and postage required. ELIGIBILITY AND PARTICIPATION: Eligibility requirements are determined by your employer. * Participation is optional. * Your participation ceases upon the occurrence of any of the following events: ( 1 ) your death; ( 2 ) the date your employment terminates under the Employer; ( 3 ) the date upon which you fail to meet the eligi- bility requirements of the Plan; ( 4 ) any date upon which the Plan terminates; ( 5 ) the date of your retirement. If your participation ceases, any funds remaining in your Benefit Accounts will remain available for qualified reimbursement of expenses incurred during the Plan year and up to ninety ( 90 ) days after the close of the Plan year. 3 16 of 53 DEC 8 1987 ITEM 15 • ENROLLMENT: An open enrollment period is held each year and all eligible employees have the option to join the FBA Plan at that time. There will be a general meeting to explain the FBA Plan and an opportunity to meet with counselors to discuss what benefits to elect and appropriate amounts to deduct from your payroll check each month. * If you decide not to participate, you must state this on the enrollment form as indicated. If you change your mind you must wait until the next enrollment period to join. * All necessary information for participation is entered on the enrollment form, which the counselor can help you complete. * Each year you will complete a new enrollment form. If you do not complete a new enrollment form each year, you will automatically receive the same benefits you elected to receive in the prior year * New employees can enroll in the FBA Plan after they have met the minimum eligibility requirements estab- lished by the employer. SELECTION OF BENEFITS: * Select the benefits you want for the Plan Year from the Confidential Employee Survey Form. * Enter the amount of annual contributions for each benefit account in the appropriate spaces on the enrollment form. * The amounts you choose should be based on prior ex- penses as well as those anticipated this year. * You may wish to consult a counselor to determine the benefits and deduction amounts that are most appro- priate for your situation.e * Once benefit deductions are established, they cannot be changed until the next year when you complete a new enrollment form. * In certain situations (divorce, birth, adoption, death, change in spouse ' s employment status ) you can revoke or change your participation and/or election of benefits. * You may not carry over any contributions or benefits from one Plan Year to a subsequent Plan Year and you may not use any contributions from one Plan Year to purchase any benefits that will be provided in a subse- quent Plan Year. It is advisable to be conservative on 4 17 of 53 DEC 8 1987 ITEM 15 • • estimating your costs since any contributions not used for a given Plan Year are forfeited. You must "use it or lose it. " DEDUCTIONS FROM YOUR PAYROLL CHECKS: * Each pay period, deductions will be made from your payroll check for the proportionate amount which you choose to withhold and will be paid to your FBA Plan Account. * The advantage of the FBA Plan is that the deductions are from gross income BEFORE taxes. By participating in the FBA Plan, you reduce your taxes and increase your spendable income. * Your accounts are not credited with interest. * Amounts deducted are generally credited to your account by the fifth of the following month. * Because your social security taxes, as well as income taxes are reduced, there will be a corresponding reduction in social security benefits upon retirement . * If your Employer provides disability income insurance as one of the benefits available under the Plan, you should be 'aware that, if you elect this benefit, any disability income payments which you receive under the Plan will be subject to income tax. CLAIMS SUBMISSION: Dependent Care Assistance claims are paid each month if : * You have completed a Dependent Care Assistance Form, * You supply a copy of your receipt for child care costs to the Administrator each month, * The Dependent Care Assistance Form is signed by you and your employer, and * The form was submitted to the Administrator and is on file as evidence of the claim. Other claims need to be submitted to the Administrator as follows: * Submit a fully completed claim form that is signed and has all necessary receipts attached; * Claims must reach the Administrator by the 25th of each month to be eligible for payment by the 15th of the following month; 5 18 of 53 DEC 8 1987 ITEM 15 S * Claims received by the Administrator after the 25th, will be paid on the following cycle (this may involve a month ' s delay ) . * Claims under group health and group life insurance will automatically be paid to the Employer for payment of those benefits. ADDITIONAL CLAIMS INFORMATION: * The maximum amount which you will be paid on a claim is the balance remaining in the account for which you are making a claim. Any claim amount over your current balance will automatically be reimbursed as additional funds are credited to your account. * There is no borrowing permitted from other accounts to cover claims in one account with insufficient funds, nor can you borrow from your account balances. * Only valid claims are eligible and those claims in- curred prior to an individual ' s effective date in the plan are not covered. * Your account balances cannot be carried from one Plan Year to the next. You have ninety ( 90 ) days, after the Plan Year end to file a claim for all expenses incurred in that ydar. It is important to remember that any balances remaining after that time are forfeited. * You cannot make a request for cash withdrawal from your accounts. Payments will be made to you only as a reimbursement for those expenses which are excludible from income under the provisions of the Internal Revenue Code.e * If you terminate employment, you may file claims as usual, but you may not contribute additional amounts to your account balances. You will have ninety ( 90 ) days after the Plan Year end to file a claim for all ex- penses incurred in that plan year. Any balance remain- ing after that time will be forfeited. * Claims denied will be accompanied by a written notice listing the reason( s ) for denial of payment. CLAIMS APPEAL: You have the right to appeal any denied claim for benefits by following these guidelines: * File a written notice with the Administrator; * You must file within one hundred twenty ( 120 ) days of your receipt of notice of claim denial; 6 19 of 53 DEC 8 1987 ITEM 15 • • * You have the right to review the documents involved in the claim and to submit any comments with respect to those documents in writing. * The Administrator must advise you in writing of the final determination after review within sixty ( 60 ) days after your request for review has been received. If an extension of time is necessary to respond, the final determination may be delayed, but in no event for longer than one hundred twenty ( 120 ) days. * The Administrator does not review denials of claims by an insurance company. If your claim is denied by an insurance company, you must appeal directly to the insurance company. FBA ELECTRONIC FUNDS TRANSFER: To insure prompt payment and timely receipt of your money, FBA has established a system of Electronic Funds Transfer to over 14 , 000 financial institutions. This benefit is free to use and eliminates the worry of payments delayed due to the mail system, vacations and other circumstances. FBA ACCOUNTABILITY: For each month in which you receive a payment from your FBA Plan account, you will be given a report on the status of your ac- counts as of the date the check or deposit was credited. This report will give you the balance in each benefit account, how e much you have paid in, how much has been paid out of each benefit account and your estimated tax savings from using the FBA Plan. PLAN CONTINUATION: Your employer has the right to discontinue the FBA Plan at any time. If this occurs, any funds in your accounts may be used to pay benefits through the end of the Plan Year. Future tax law changes may require a modification of the FBA Plan and/or benefits provided. If this occurs, you will be notified of any changes which are made. RIGHTS UNDER ERISA: Participants ' Rights Under ERISA. As a Participant in this Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 ( ERISA) . ERISA provides that all plan Participants shall be entitled to: A. Examine, without charge, at the Administrator ' s office and at other specified locations, such as worksites, all Plan documents, including insurance contracts and copies of all 7 20 of 53 DEC 8 1987 ITEM 15 . • documents filed by the Plan with the U. S. Department of Labor, such as detailed annual reports and Plan descriptions . B. Obtain copies of all Plan documents and other Plan information upon written request to the Administrator . The Administrator may make a reasonable charge for the copies. C. Receive a summary of the Plan ' s annual financial report . The Administrator is required by law to furnish each Participant with a copy of its Summary Annual Report. In addition to creating rights for Plan Participants, ERISA imposes certain duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your Plan, called "fiduciaries" of the Plan have a duty to do so prudently and in the interest of you and other Partici- pants and Beneficiaries. No one, including your Employer, or any other person, may fire, discriminate against, or in any way prevent you from obtaining a welfare benefit or exercising your rights under ERISA. If your claim for a welfare benefit is denied, in whole or in part, you must receive a written explana- tion of the reason for the denial . You have the right to have the Administrator review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights . For instance, if you request materials from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such case, the court may require the Administrator to provide the materials and pay you up to $ 100 per day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Admini- strator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file a suit in a state or federal court . If it should happen that the plan fiduciaries misuse the Plan ' s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U. S . Department of Labor, or you may file suit in a federal court . This court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees. For example, if it finds your claim is frivolous. If you have any questions about your Plan, you should contact the Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest area office of the U. S. Labor-management Services Administration, Department of Labor. 8 21 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN FBA Administration & Claims 320 East McDowell Road Phoenix, AZ 85004 ATTACHMENT C 22 of 53 DEC 8 1987 ITEM 15 III • FLEXIBLE BENEFITS ACCOUNT PLAN Table of Contents ARTICLE ONE ADOPTION AND PURPOSE 1 1 . 01 Name and Adoption 1 1 . 03 Benefits 1 ARTICLE TWO 1 DEFINITIONS 2 . 01 Administrative Charges and Fees 1 2 . 02 Administrator 2 2 . 04 Compensation 2 2 . 06 Employee 2 2 . 07 Employer 2 2 . 08 Employer Contribution 2 2 . 09 FBA Employer Representative 2 2 . 10 Entry Date 2 . 11 ERISA 3 2 . 12 FBA Account 3 2 . 13 Fiduciary 3 2 . 14 Highly Compensated Participant 3 2 . 15 Key Employee 3 2 . 16 Medical Expense 4 2 . 17 Nontaxable Benefits 4 2 . 18 Participant 4 2 . 19 Plan 4 2 . 20 Plan Year 2 . 21 Qualified Benefit 5 2 . 22 Summary Plan Description 5 2 . 23 Trust 5 2 . 24 Trustee 2 . 25 Year of Service 5 ARTICLE THREE 5 ELIGIBILITY AND PARTICIPATION 3 . 01 Eligibility Requirements 5 3 . 02 Notification of Participants 5 3 . 03 Initial Application for Participation 6 3 . 04 Continuous Participation 6 3. 05 Continuous Eligibility 7 3 . 06 Excluded Employees 7 3. 07 Effect of Employee Termination 7 ARTICLE FOUR 7 CONTRIBUTIONS 7 4 . 01 Em to er Contributions 7 4 . 02 Effective Period for Election 8 4 . 03 Procedure for Elections 8 4 . 04 Constructive Receipt 8 4. 05 Application of Contributions 9 4. 06 Cash Benefit 4 . 07 Contributions for Participants 9 4 . 08 Deposit of Employer Contributions 9 4 . 09 Employer Liability for Contributions 9 4 . 10 Non-Interest Bearing Accounts 9 ARTICLE FIVE PROHIBITION AGAINST DISCRIMINATION 10 5 . 01 Highly Compensated Participants 10 5 . 02 Reduction of Benefits to Prevent Discrimination . 10 5 . 03 Key Employees 10 5. 04 Collective Bargaining 5 . 05 Health Related Benefits 10 5 . 06 Highly Compensated Employees 11 i 23 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN ARTICLE SIX BENEFITS 11 6. 01 Medical Expense Reimbursement Benefit 11 6 . 02 Accident, Health and Hospitalization Insurance 12 6. 03 Group-Term Life Insurance Benefit 12 6. 04 Disability Insurance Benefits 6. 05 Dependent Care Assistance Benefit 13 ARTICLE SEVEN 14 FBA EMPLOYER REPRESENTATIVE 14 14 7 . 01 Designation 7 . 02 Duties 14 ARTICLE EIGHT FBA ACCOUNTING 14 14 8 . 01 FBA Accounts 14 8 . 02 Employer Contributions 8 . 03 Benefit Claim for Participants 14 8 . 04 Forfeiture of Unused Amounts 15 ARTICLE NINE CLAIMS PROCESSING 15 9. 01 Benefit Payments 15 9. 02 Premium Payment 15 ARTICLE TEN ADMINISTRATION 15 10 . 01 Named Fiduciaries, Allocation of Responsibility 15 10 . 02 Assignment of Administrative Authority 17 10 . 03 Administrator Powers and Duties 17 10. 04 Discretion of Administrator 10. 05 Records. and Reports 18 10 . 06 Administrative Charges and Fees 10 . 07 Limitation of Liability 18 10 . 08 Claims 10 . 09 Review of Claims 20 ARTICLE ELEVEN TERMINATION 20 0 11 . 01 Termination of Employer Participation 21 11 . 02 Mutual Termination 21 11 . 03 Disposition of Funds Upon Termination 21 ARTICLE TWELVE GENERAL PROVISIONS 21 12 . 01 Governed by this Agreement 2-1 12 . 02 Limitation of Participant Claims 21 12 . 03 Notice 22 12 . 04 Choice of Law 22 12 . 05 Arbitration 12 . 06 Severability 22 12 . 07 Confidential Nature of Records ii 24 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN ARTICLE ONE ADOPTION AND PURPOSE 1 . 01 Name and Adoption. The employer executing the attached FLEXIBLE BENEFITS ACCOUNT PLAN ADOPTION AGREEMENT (the "Adoption Agreement" ) , hereby adopts the FLEXIBLE BENEFITS ACCOUNT PLAN (the "Plan" ) for the exclusive benefit of its Employees who satisfy the terms and conditions set forth herein, to become effec-tive on the date set forth in the Adoption Agree- ment . By its execution, the Employer accepts and agrees to be bound by all the terms and conditions of the Plan. 1 . 02 Purpose and Intent. The purpose of the Plan is to furnish Participants with a choice of receiving certain non- taxable benefits provided by the Employer in lieu of taxable compensation. It is the intention of the Employer that this Plan, its attachments and any amendments, qualify as a "cafeteria plan" as that term is defined in Section 125 (d ) of the Internal Revenue Code and that the Nontaxable Benefits which a Participant elects to receive under this Plan be eligible for exclusion from such Participant ' s gross income under Section 125 ( a ) of the Internal Revenue Code. To the extent applicable, this Plan will serve as an amendment to any existing welfare benefit plan presently maintained by the Employer. 1 . 03 Benefits. The Nontaxable Benefits provided through the Plan are Group-Term Life Insurance; Medical Expense Reim- bursement; Group Accident, Health and Hospitalization Insurance; Disability Insurance; and Dependent Care Assistance. ARTICLE TWO DEFINITIONS 2 . 01 Administrative Charges and Fees. The term "Admini- strative Charges and Fees" shall mean those charges and fees authorized to be charged to the Employer as well as charged against the FBA Account of each Participant, as specifically defined in the Adoption Agreement . 25 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN 2 . 02 Administrator. The term "Administrator" shall mean Uniservice, Inc. 2 . 03 Code. The term "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 2 . 04 Compensation. The term "Compensation" shall mean the total of all amounts, which are paid or accrued by the Employer to a Participant during the Plan Year. Compensation shall include all elective contributions made to this Plan. Compensation shall exclude any Contributions made by the Employer to this Plan but includes any contribution made to any plan of deferred compensation. 2 . 05 Dependent. The term "Dependent" shall mean the spouse of a Participant and any other dependents of the Partici- pant within the meaning of Section 152 of the Code who otherwise meet the rules for exclusion of benefits from income under the applicable Section of the Code governing such benefits. 2 . 06 Employee. The term "Employee" shall mean any person employed by the Employer. 2 . 07 Employer. The term "Employer" shall mean the employer executing the Adoption Agreement attached hereto. 2 . 08 Employer Contribution. The term "Employer Contri- bution" shall mean the amounts paid to the Administrator by the Employer on behalf of a Participant. Such amounts shall not be actually or constructively received by a Participant and shall be made available only for the purchase of benefits as provided herein. 2 . 09 FBA Employer Representative. The term "FBA Employer Representative" shall mean the person or persons desig- nated by the Employer and identified in the Adoption Agreement, to interface between Participants, the Administrator and the Employer. 2 . 10 Entry Date. The term "Entry Date" shall mean the date specified by the Employer in the Adoption Agreement as of 2 26 of 53 DEC 8 1987 ITEM 15 • . FLEXIBLE BENEFITS ACCOUNT PLAN which Eligible Employees may become Participants. 2 . 11 ERISA. The term "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and the regulations promulgated thereunder. 2 . 12 FBA Account. The term "FBA Account" shall mean amounts held by the Trustee in designated Accounts for a Partici- pant, consisting of the Employer Contributions paid to the Administrator on behalf of the Participant to provide a specified Nontaxable Benefit. 2 . 13 Fiduciary. The term "Fiduciary" shall mean any person who exercises any discretionary authority or control with respect to the management of the Plan; or who exercises any authority or control with respect to the management or disposi- tion of its assets; or who renders investment advise for a fee or other compensation, directly or indirectly, with respect to any monies or other property of the Plan, or has any authority or responsibility to do so; or who has any discretionary authority or discretionary responsibility in the administration of the Plan; or who acts to carry out a fiduciary responsibility, when designated by a named Fiduciary pursuant to authority granted by the Plan; provided, however that the foregoing definition shall be subject to any exception granted directly or indirectly by the provisions of ERISA or any regulation promulgated thereunder. 2 . 14 Highly Compensated Participant. The term "Highly Compensated Participant" shall mean any employee who is: ( a ) a five percent ( 5% ) owner of the Employer; (b) a highly compensated employee of the Employer; (c ) an officer of the employer; (d ) a spouse or dependent of the foregoing indivi- duals. 2 . 15 Key Employee. The term "Key Employee" shall mean an Employee who, at any time during the Plan Year or any of the four preceding Plan Years, is - ( a ) an officer of the Employer having an annual compensation greater than one hundred fifty 3 27 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN percent ( 1519% ) of the amount in effect under section 415( c ) ( 1 ) (A) of the Code for any such Plan Year; ( b) one of the ten Employees having annual compen- sation from the Employer of more than the limitation in effect under section 415( c ) ( 1 ) (A) of the Code and owning ( or considered as owning within the meaning of section 318 of the Code ) the largest interests in the Employer; (c ) a five percent ( 5% ) owner of the Employer; or (d ) a one percent ( 1 % ) owner of the Employer having an annual compensation from the Employer of more than $150, 000 . For purposes of this definition, no more than fifty ( 50 ) Employees ( or, if lesser, the greater of three ( 3 ) or ten percent ( 10% ) of the Employees ) shall be treated as officers. If two ( 2 ) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having the larger interest. 2 . 16 Medical Expense. The term "Medical Expense" shall mean amounts incurred for the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affect- ing any structure or function of the body. Such term is expressly intended to include, but without limitation by way of inclusion, expenses incurred for psychiatric care and for care of the eyes, ears and teeth. 2 . 17 Nontaxable Benefits. The term "Nontaxable Bene- fits" shall mean any benefit adopted by the Employer in the Adoption Agreement which is excluded from a Participant ' s gross income under the provisions of the Code, including specifically any group term life insurance which is includable in gross income only because it exceeds the dollar limitation of Section 79 of the Code. 2 . 18 Participant. The term "Participant" shall mean any Employee of the Employer who meets the eligibility require-ments adopted by the Employer and who has elected to participate in this Plan by completion of an FBA Enrollment Form. 2 . 19 Plan. The term "Plan" shall mean the Flexible 4 28 of 53 DEC 8 1987 ITEM 15 • FLEXIBLE BENEFITS ACCOUNT PLAN Benefits Account Plan set forth herein and any amendments there- to. "FBA" shall be an acronym for Flexible Benefits Account Plan. The Plan incorporates by reference the Adoption Agreement and the Flexible Benefits Account Trust Agreement. 2 . 20 Plan Year. The term "Plan Year" shall mean the twelve ( 12 ) month period which comprises the operating period of the Plan and which is specifically defined in the Adoption Agreement. 2 . 21 Qualified Benefit. The term "Qualified Benefit" shall mean any benefit offered under the plan which is not includable in the gross income of the Employee by reason of an express provision of Chapter 1B of the Code. 2 .22 Summary Plan Description. The term "Summary Plan Description" shall mean the document distributed to the Partici- pant which summarizes the Participant ' s Nontaxable Benefits and rights under this Plan. 2 . 23 Trust., The term "Trust" shall mean the Trust Fund created to fund benefits under the Plan as evidenced by a Trust Agreement separate and apart from this document. 2 . 24 Trustee. The term "Trustee" shall mean the entity named as Trustee in the Adoption Agreement or any successor in office who in writing accepts the position of Trustee. 2 . 25 Year of Service. The term "Year of Service" shall mean the twelve ( 12 ) consecutive month period, elapsed since the first date for which an Employee was entitled to payment for the performance of services for the Employer. ARTICLE THREE ELIGIBILITY AND PARTICIPATION 3 . 01 Eligibility Requirements . Each Employee shall be eligible to participate in this Plan upon meeting the eligibility requirements as set forth in the Adoption Agreement . 3 . 02 Notification of Participants. The Employer shall give each Employee written notice of his or her eligibility to 5 29 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN participate in the Plan in sufficient time to enable such Employee to submit an application for participation in the Plan on or before the date on which he or she becomes an Eligible Employee. 3 . 03 Initial Application for Participation. To become a Participant, an Eligible Employee shall sign any application or agreements as may be required by the Administrator and shall specify his or her election of Non-Taxable Benefits within the time set forth in the Adoption Agreement after he or she becomes eligible for participation in the Plan. By signing such applica- tions, the Eligible Employee shall be deemed for all purposes to have agreed to participate and to conform to the requirements of the Plan. If an Eligible Employee elects not to participate in the Plan, he or she shall so indicate on forms supplied by the Administrator. A signed election declining participation shall be effective until the Eligible Employee completes a subsequent form evidencing an election to participate. Such election may be made at any subsequent entry date upon which the Employee is an Eligible Employee. If an Eligible Employee fails to comply with the application procedures set forth in this Section 3 . 03 , he or she shall be advised by the Employer of the consequences and shall be given an additional five business days in which to comply. If , at the end of such five days, the Eligible Employee shall have failed to comply, he or she may become a Participant on any subsequent Entry Date after having completed the necessary acts as specified in this Section 3 . 03; provided, however, that he or she continues to be an Eligible Employee. 3 . 04 Continuous Participation. After an Eligible Employee has completed the requirements for participation as set forth in Section 3 . 03 , such Employee shall become a Participant in the Plan for the Plan Year in which his or her initial elec- tion is effective. In each subsequent Plan Year, the Participant shall have an opportunity to revise the election of benefits made for the prior Plan Year or to decline participation for the next 6 30 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN Plan Year according to the procedures set forth in Article Four. If no such revision or declination is made by the Partici- pant, the Participant shall be deemed to have elected to continue participation under the terms of the election made for the prior Plan Year. 3 . 05 Continuous Eligibility. A Participant shall continue to remain eligible for Nontaxable Benefits as long as sufficient funds remain in his or her FBA Accounts for Nontaxable Benefits selected. Nontaxable Benefits may not be paid by the Plan for an amount in excess of the current balance in a Partici- pant ' s FBA Account after first deducting all administrative charges and fees relating to the Nontaxable Benefits to be paid. 3 . 06 Excluded Employees shall mean the employees desig- nated in the Adoption Agreement who are excluded from participa- tion in the plan, even though they otherwise meet the eligibility requirements. The group of Excluded Employees must fall within the parameters of Code Section 89( h ) . 3 . 07 Effect of Employee Termination. Upon death, disability, retirement or termination of employment of a Partici- pant, his or her FBA Account balance shall be used to provide Nontaxable Benefits to the Participant and his or her dependents until the earlier of ( a ) the balance, if any, of the FBA Accounts is exhausted; or ( b) the completion of the plan year in which such death, disability, retirement, or termination occurred. Although participation in the Plan shall terminate under the conditions set forth in this paragraph, coverage under the individual benefit plans offered under the Plan may continue if and to the extent provided by such plans. ARTICLE FOUR CONTRIBUTIONS 4 . 01 Employer Contributions. Each Participant shall be permitted at his or her sole discretion to convert a portion of his or her compensation ( subject to the limitation in the Adop- tion Agreement ) into his or her FBA Accounts, which amounts shall 7 31 of 53 DEC 8 1987 ITEM 1 5 0 FLEXIBLE BENEFITS ACCOUNT PLAN constitute Employer Contributions to the Trust for the Employee ' s benefit and shall be used to purchase or provide Nontaxable Benefits. 4 . 02 Effective Period for Election. The Participant ' s election shall be effective beginning on the first day of the Plan Year as set forth in the Adoption Agreement following the election and ending on the last day of such Plan Year. The Nontaxable Benefits elected by the Participant shall be provided during the Plan Year. Under no circumstances shall such benefits be provided during any period other than the Plan Year for which the Participant ' s election is made, provided, however, that the Participant shall have ninety ( 90 ) days following the close of the Plan Year in which to submit claims for expenses incurred during such Plan Year. Payment of such claims shall be made pursuant to the terms of Section 10 . 09( f ) . 4 . 03 Procedure for Elections. The Employee election to convert a portion of his or her compensation shall be in writing and shall be made on an FBA Enrollment Form which shall be supplied by the Administrator. Each such election shall be irrevocable as of the beginning of the Plan Year in which such election is effective, subject to the right of the Participant to amend his or her election due to a change during the Plan Year in his or her family status as provided in the Code and applicable regulations. Such amendment shall be made in accordance with procedures established by the Administrator. 4 . 04 Constructive Receipt. The Participant ' s election on the FBA Enrollment Form shall relate to compensation that has not been actually or constructively received by the Participant as of the date of the election. That portion of the Partici- pant ' s compensation which he or she elects to convert into his or her FBA Account shall not become currently available to the Participant subsequent to such election. Any benefit selected by a Participant must be used within the Plan Year for which the election is effective. Any benefits not used within such Plan 8 32 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN Year shall be forfeited by the Participant. 4 . 05 Application of Contributions. Contributions may be used to provide nontaxable benefits to a Participant as further described in this Article. Only those nontaxable benefits elected to be provided by the Employer in the Adoption Agreement ' and selected by a Participant on an FBA Enrollment Form shall be provided to a Participant. 4 . 06 Cash Benefit. The Participant will receive as regular Compensation any amounts which he or she has not elected to convert to Contributions pursuant to this Article Four. 4 . 07 Contributions for Participants. The Employer agrees to pay to the Administrator such Employer Contributions as are required by the Plan pursuant to Section 4 . 01 . The amount of such Employer Contributions shall not be less than that amount set forth in the Adoption Agreement. Monthly Employer Contribu- tions will be remitted by the Employer in sufficient time to be 1 received at the principal office of the Administrator no later than the fifth ( 5th ) day of each month of participation under this Plan. Checks or drafts shall be payable to UniService Flexible Benefits Account Plan. 4 . 08 Deposit of Employer Contributions. The Admin- istrator shall receive all Employer Contributions due and shall deposit them in a special trust fund account or accounts estab- lished in federally insured banks or savings and loan associa- tions. 4 . 09 Employer Liability for Contributions. The Employer shall be liable to make contributions to the extent that the Employer is required to make such Contributions by the express terms and conditions of the Plan. 4 . 10 Non-Interest Bearing Accounts. The Employer and the Administrator agree that no Participant ' s Benefit Fund Account shall be credited with interest nor shall interest inure to the Employer. 9 33 of 53 DEC8 1987 ITEM 15 . • FLEXIBLE BENEFITS ACCOUNT PLAN ARTICLE FIVE PROHIBITION AGAINST DISCRIMINATION 5 . 01 Highly Compensated Participants. This Plan shall not discriminate as to eligibility, contributions or benefits, in favor of Highly Compensated Participants. 5 . 02 Reduction of Benefits to Prevent Discrimination. The Employer may reduce the amounts of Nontaxable Benefits payable to a Highly Compensated Participant ( beginning with the Employees with the greatest nontaxable benefits ) to the extent that the Employer deems necessary to assure that the Plan does not discriminate in favor of Highly Compensated Participants in violation of the Code. Any such reduction of benefits shall be made by the Employer on a reasonable and nondiscretionary basis. Contributions which may not be paid out because of benefit reductions imposed shall be forfeited. 5 . 03 Key Employees. The Qualified Benefits provided to Key Employees under 'the Plan shall not exceed twenty-five percent ( 25% ) of the aggregate of such benefits provided for all Eligible Employees under the Plan. 5 . 04 Collective Bargaining. The provisions of this Article Five do not apply if the Plan is maintained under an agreement which the Secretary of the Treasury finds to be a collective bargaining agreement between employee representatives and the Employer. 5 . 05 Health Related Benefits . If health benefits are elected under the Plan by Participants, then Employer Contribu- tions must include an amount which equals either one hundred percent ( 100% ) of the cost of the available health benefit coverage under the Plan of the majority of the Highly Compensated Participants who are similarly situated ( e.g. same family size ) , or are at least equal to seventy-five percent ( 75% ) of the cost of the most expensive health benefit coverage elected by a similarly situated Participant. All Employer Contributions under the Plan must bear a uniform relationship to the compensation of 10 34 of 53 DEC 8 1987 ITEM 15 • FLEXIBLE BENEFITS ACCOUNT PLAN the Participant, provided that, a Highly Compensated Participant may elect a lower percentage of that Participant ' s compensation than the Plan provides for the Participants who are not Highly Compensated Participants. 5 . 06 Highly Compensated Employees. ( a ) For Plan Years beginning after the later of ( 1 ) December 31 , 1987, or ( 2 ) The earlier of (A) the date which is three months after the date on which the Secretary of the Treasur or his delegate issues such regulations as are necessary to carry out the provisions of Section 89 of the Internal Revenue Code of 1986, or (B ) December 31 , 1987, the Plan shall be available to a group of Employees as qualify under a classification set up by the Employer and which the Secretary finds not to be discriminatory in favor of the Highly Compensated Employees with respect to eligibility to participate. (b) For purposes of this Section 5 . 06, the term "Highly Compensated Employee" shall mean any Employee who, during the year or the preceding year ( 1 ) was at any time a five percent owner, ( 2 ) received compensation from the Employer in excess of $75 , 000, ( 3 ) received compensation from the Employer in excess of $50, 000 and was in the top twenty percent grou of employees with respect to compensation for such year, or ( 4 ) was at any time an officer and received compensation greater than 150 ercent of the amount n effect under section 415 ( c ) ( 1 ) ( A) for such year. The definition of Highly Compensated Employee shall be inter- preted according to the provisions of Section 414( q) of the Code. ARTICLE SIX BENEFITS 6 . 01 Medical Expense Reimbursement Benefit. The 11 35 of 53 DEC 8 1987 ITEM 1 5 FLEXIBLE BENEFITS ACCOUNT PLAN Employer may maintain a self-funded medical reimbursement program designed to qualify as a nontaxable employee benefit under Code section 105 (b) . Such program, if adopted, shall be attached to and become a part of this Plan. Each Participant who desires to receive this benefit shall select the portion of his or her Contributions to be used to provide this Nontaxable Benefit . The Plan shall reimburse the Participant in a dollar amount not to exceed the amount selected by the Participant for medical expenses ( as defined in Section 2 . 16 ) incurred by the Participant and his or her Dependents ( as defined in Section 2 . 05 ) , to the extent such expenses are not otherwise compensated. Medical expenses shall include only those expenses incurred during the Plan Year for which the Participant ' s benefit election is effec- tive and shall include those expenses approved and defined by the Code. 6 . 02 Accident, Health and Hospitalization Insurance Benefits. The Employer may maintain one or more health, dental and vision insurance plans. Each Participant who desire to receive this benefit shall select the insurance plan in which he or she desires to participate, and the cost of premiums for such insurance may be paid from his FBA Account or reimbursed to the Participant. 6 . 03 Group-Term Life Insurance Benefit. The Employer may maintain one or more group-term life insurance plans as that term is defined in Section 79 of the Code and the regulations promulgated thereunder, which Plans shall qualify as non-discrim- inatory group term life insurance eligible for special tax treatment. Each Participant who desires to receive this benefit shall select the amount of life insurance protection to be provided under the group term life insurance plan for such Participant or his or her eligible dependents.. The cost of premiums to provide such protection shall be paid directly from his or her FBA Account . Any Participant, upon selecting this Nontaxable Benefit, shall be provided by the Employer FBA Plan 12 36 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN Benefits Advisor with an estimate of the annual Table I cost of such insurance protection which will be included in his gross income under Section 79 of the Code. The specific terms, condi- tions and limitations of this benefit shall be as outlined in the group term life insurance policy identified in the Adoption Agreement. 6 . 04 Disability Insurance Benefits . The Employer may maintain one or more disability insurance or salary continuation benefit plans which plans shall qualify under Code sections 104 and 106 in order that premiums paid for disability benefits shall be excludible from the gross income of the Participant . Each Participant who desires to receive this benefit shall select the disability insurance or salary continuation benefit plan in which he or she desires to participate, and the cost of premiums for such insurance may be paid directly from his or her FBA Account or reimbursed to the Participant. The terms, conditions and limitations of this , benefit shall be as specifically described in the policy identified in the Adoption Agreement. 6. 05 Dependent Care Assistance Benefit. The Employer may maintain a Dependent Care Assistance Program in a separate written document that is attached and made a part of this Plan. Each Participant who desires to receive this benefit shall select the portion of his or her Contributions to be used to provide this seciton. The maximum benefit which may be provided under this Section may not exceed the earned income of the Participant ( if he or she is not married) or the lesser of the earned income of the Participant or his or her spouse ( if he or she is married ) for the Participant ' s taxable year. The maximum benefit which may be provided under this section for any taxable year of a participant shall not exceed $5 , 000 ( $2, 500 where a separate return is filed by a married individual ) . A claim for this Non- taxable Benefit shall be accompanied by a written statement con- taining information specified in the Dependent Care Assistance Benefit document . 13 37 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN The Administrator shall be entitled to rely absolutely upon any written statements or forms provided by a Participant in com- pliance with the requirements of Section 21 and 129 of the Code. The Administrator shall not be required to make any inves- tigation of the accuracy of such statements. ARTICLE SEVEN FBA EMPLOYER REPRESENTATIVE 7 . 01 Designation. The Employer shall designate in the Adoption Agreement an individual to act as FBA Employer Represen- tative until such individual ' s resignation or removal by the Employer and appointment of a successor. 7 . 02 Duties. The FBA Employer Representative shall : ( a ) verify the eligibility of a Participant to participate in this Plan; (b) distribute The Summary Plan Description to Participants; ( c ) provide information to Participants regard-ing the Nontaxable Benefits provided by the Plan; (d ) act as an interface between the Employer, Administrator and the Participant. ARTICLE EIGHT FBA ACCOUNTING 8 . 01 FBA Accounts. The Administrator shall maintain FBA Accounts, as defined in Section 2 . 12 of the Plan, for each Participant. 8 . 02 Employer Contributions. Employer Contributions will be credited to the appropriate FBA Account of each Partici- pant for whom such Contributions are designated. 8 . 03 Benefit Claim for Participants. As Nontax-able Benefits are paid or Administrative Charges are made, the FBA Account balance of each Participant for whom such Nontaxable Benefit or Administrative Charges are made will be reduced by such amount paid or Administrative Charge. 14 38 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN 8 . 04 Forfeiture of Unused Amounts. Any amounts remaining in an FBA Account of a Participant at the end of a Plan Year which are not used to provide Nontaxable Benefits or pay Administrative Charges with respect to that Plan Year, shall be forfeited by the Participant within ninety ( 90 ) days of the close - of the Plan Year. Amounts so forfeited shall be applied to reduce the Employer ' s future contributions to the Plan. However, claims incurred before the end of the Plan Year may be paid if submitted to the Administrator within ninety ( 90 ) days of the close of the Plan Year. Forfeitures shall be subject to the terms of Section 10 . 09( f ) . ARTICLE NINE CLAIMS PROCESSING 9 . 01 Benefit Payments. Claims for benefit payments must be properly submitted by the Participant to the Administrator on forms provided by the Administrator and received by the Admini- strator on or before the 25th day of each month. Each claim for Nontaxable Benefits other than insurance claims shall be paid on or before the fifteenth ( 15th ) day of the following month. Each claim for Nontaxable Benefits received after the 25th day of each month will be processed in the following claims payment cycle. All claims with respect to a Plan Year must be submitted no later than ninety ( 90 ) days following the end of such Plan Year. Insurance claims shall be made directly to the insurance carrier on its forms. 9. 02 Premium Payment. Premiums paid by the Admin- istrator for insurance will constitute a Nontaxable Benefit claim to be paid from the Participant ' s Accident, Health and Hospitali- zation FBA Account . ARTICLE TEN ADMINISTRATION 10 . 01 Named Fiduciaries, Allocation of Responsibility. 15 39 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN (a ) There are three Named Fiduciaries--the Employer, the Administrator, and the Trustee. Each is severally liable for its responsibilities as specified in this Article Ten and elsewhere in the Plan. (b) Except as provided in the Trust Agreement, the Trustee has exclusive responsibility for the control and manage- ment of the Trust Fund. If an Investment Manager is appointed according to this Plan or the Trust Agreement, the Trustee is released from any obligation or liability for the management, investment, or control of the assets for which the appointment is made. (c ) The Administrator has only the responsi- bilities described in this Plan and those delegated by the Employer and accepted in writing by the Administrator. The Administrator has no responsibility for the control or management of the Trust Fund. (d ) All responsibilities not specifically delegated to another Named Fiduciary remain with the Adminis- trator . The Administrator ' s responsibilities include drafting and designing the Plan and amendments to it and designating all additional Fiduciaries not named in this Plan. (e ) This Plan and the Trust Agreement allocate to each Named Fiduciary the individual responsibilities assigned. Responsibilities are not shared by Named Fiduciaries unless the sharing is provided for specifically in this Plan or the Trust Agreement. ( f ) Whenever one Named Fiduciary is required by the Plan or the Trust Agreement to follow the directions of another Named Fiduciary, the two have not been assigned to share the responsibility. The Named Fiduciary giving directions bears the sole responsibility for those directions, and the respon- sibility of the Named Fiduciary receiving those directions is to follow directions as long as on their face the directions are not improper under applicable law. 16 40 of 53 DEC 8 1987 ITEM 1 5 . . FLEXIBLE BENEFITS ACCOUNT PLAN 10 . 02 Assignment of Administrative Authority. The Employer hereby appoints the Administrator to administer the Plan. The current name and address of the Administrator is set forth in the Adoption Agreement . 10 . 03 Administrator Powers and Duties. The Administrator must administer the Plan by its terms and has all powers necessary to do so. The Administrator is agent for service of legal process unless another person is designated by the Adminis- trator. The Administrator must interpret the Plan. The Adminis- trator ' s duties include, but are not limited to: ( a ) determining the answers to all questions relating to the Employees ' eligibility to become Participants; (b) communicating with Insurers and the Trustee about benefit payments for Participants and their Beneficiaries; (c ) communicating to the Trustee and to the appropriate officer of the Employer, according to the terms of this Plan and the Trust Agreement, any need to acquire a Policy from an Insurer and to disburse funds in payment of Benefits or premiums or other obligations under Policies to accomplish the purposes of this Plan; (d ) creating and publishing Plan rules not incon- sistent with the terms of the Plan. Subject to the appeals procedures in section 10 . 09 an Administrator determination made in good faith is conclusive and binding on all persons. No decision of the Administrator, however, may take away any rights specifically given to a Par- ticipant by this Plan. The Administrator may employ such accountants, counsel, specialists, and other advisory and clerical persons as it deems necessary or desirable in connection with the Plan ' s administration. The Administrator is entitled to rely conclu- sively on any opinions or reports furnished to it by its accoun- tant or counsel. 10 . 04 Discretion of Administrator. The Administrator ' s 17 41 of 53 DEC 8 1987 ITEM 15 S FLEXIBLE BENEFITS ACCOUNT PLAN discretionary power to perform or consent to any act is exclusive if exercised in a consistent manner with respect to all similarly situated Employees and Participants. 10 . 05 Records and Reports. The Employer must supply information to the Administrator sufficient to enable the Admin- ' istrator to fulfill its duties. The Administrator must advise the Trustee of information necessary or desirable to the Trustee ' s administration of the Trust Fund. The Administrator must keep all books of account, records, and other data necessary for proper administration of the Plan. 10 . 06 Administrative Charges and Fees. ( a ) Installation Charges Assessed to Employer. The Administrator will charge each participating Employer on a one time basis, the Plan Installation Charge specified in the Adoption Agreement. This charge shall be based upon the number of Participants in the Plan . In addition, the Administrator will assess the Annual Renewal Fee specified in the Adoption Agree- ment, for the number of Participants in the Plan. The Annual Renewal Fee shall be received at the beginning of each Plan Year or on the date the Employer first adopted the Plan should that date be later. (b) Administrative Charges. The Administrator shall assess the Employer a per capita maintenance charge based upon the number of participating employees, as specified in the Adoption Agreement . ( c ) No Termination Fee. The Employer shall not be liable for any termination fee or charges by the Administrator in the event the Employer terminates its participation in the Plan as provided under Article Eleven of the Plan. 10 . 07 Limitation of Liability. If Permissible by law, the Administrator serves without bond. If the law requires bond, the Administrator must secure the minimum required. Except as otherwise provided in this Plan, the Administrator is not liable 18 42 of 53 DEC 8 1987 ITEM 15 • S FLEXIBLE BENEFITS ACCOUNT PLAN for another Fiduciary' s act or omission. To the extent allowed by law and except as otherwise provided in this Plan, the Admin- istrator is not liable for any action or omission that is not the Administrator ' s own negligence or bad faith. 10 . 08 Claims. (a ) It is necessary to file a claim in order to receive Plan benefits. Subject to section 10 . 09, claims for benefits from this Plan must be made in writing to the Adminis- trator or any person the Administrator designates to receive claims, on such forms as may be provided by the Administrator. Insurance claims shall be made directly to the insurance carrier on its forms, rather than to the Administrator. Dependant Care Assistance claims may be made on an annual, semi-annual or quarterly basis as determined by the Administrator, and shall be paid on a monthly basis by the Administrator as specified in the Dependant Care Assistance Plan document. (b) If a claim is wholly or partially denied, the Administrator must give written notice to the claimant of such denial . An adverse notice must specify each reason for denial . There must be specific reference to provisions of this Plan, the relevant Policy, or related documents on which the denial is based. If additional material or information is necessary for the claimant to perfect the claim, it must be described and there must be an explanation of why that material or information is necessary. Adverse notice must disclose appropriate information about the steps to be taken if the claimant wishes to submit the claim for review. (c ) The full value of a payment according to the provisions of this Plan satisfies that much of the claim and all related claims under this Plan against the Administrator, each Insurer, the Company, and the Trustee--any of whom, as a condi- tion to a payment from it or directed by it, may require the Participant, Beneficiary, or legal representative to execute a receipt and release of the claim in a form determined by the 19 43 of 53 DEC 8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN person requesting the receipt and release. 10 . 09 Review of Claims. ( a ) On proper written request for review from a claimant to the Administrator, there must be a review by the Administrator, or by a person designated by the Administrator to review any denied claim made according to section 10 . 08 . The written request must be received by the Administrator within one hundred twenty-one ( 121 ) days after the claimant ' s receipt of notice that a claim has been denied according to section 10 . 08 . ( b) The claimant or a duly authorized represent- ative may review all Plan documents and other papers that affect the claim and may submit issues and comments in writing. (c ) The Administrator, the Insurer, or other reviewer must advise the claimant in writing of the final deter- mination after review; that written advice must be rendered within sixty ( 60 ) days after the request for review is received, unless special circumstances require an extension of time for processing. If an extension is necessary, the decision must be rendered as soon as possible but no later than 120 days after receipt of the request for review. (d ) Except for a written request for review under paragraph ( a ) , all good-faith determinations by the Administrator are conclusive and binding on all persons, and there is no right of appeal . (e ) The Administrator is not required to review or challenge a claim denied by an Insurer. ( f ) It is hereby understood and agreed that where it is determined by the Administrator upon review of a previously denied claim that such claim shall be paid, the Employer shall be liable for payment of such claim from previous forfeitures under the terms of this Plan. ARTICLE ELEVEN TERMINATION 20 44 of 53 DEC8 1987 ITEM 15 • • FLEXIBLE BENEFITS ACCOUNT PLAN 11 . 01 Termination of Employer Participation. The Employer, at any time, may terminate its participation in this Plan by giving written notice of such termination to the Adminis- trator. Such termination shall be effective sixty ( 60 ) days after receipt of the notice. After termination, the Employer shall have no obligation to the Administrator, except that which accrued during the time of the Employer ' s participation in the Plan. 11 . 02 Mutual Termination. The Plan may be terminated at any time by the mutual consent of the Employer and the Admini- strator upon the execution of a written instrument evidencing such consent. 11 . 03 Disposition of Funds Upon Termination. Upon the termination of the Plan, any and all monies remaining after payment of all Administrative Charges and Fees shall be used for the continuance of one or more benefits of the type provided by this Plan for the benefit of the Participant ' s FBA Account until funds are exhausted or 90 days after the end of the Plan Year, whichever first occurs. In no event shall any funds be used for any purpose other than as provided for in this Plan, nor returned to the Employer nor returned to a Participant except in the form of Nontaxable Benefits. However, if the Plan is terminated, any amounts subsequently forfeited by any Participant shall revert to the Employer to be used for the benefit of all participants in a pro-rata, nondiscriminatory manner. ARTICLE TWELVE GENERAL PROVISIONS 12 . 01 Governed by this Agreement. The rights and duties of all parties, including the Employer, the Participants, other beneficiaries and the Administrator, shall be governed by the provisions of this Plan. 12 . 02 Limitation of Participant Claims. All Nontaxable Benefits provided by this Plan shall be limited to the funds 21 45 of 53 DEC 8 1987 ITEM 15 • FLEXIBLE BENEFITS ACCOUNT PLAN contributed by the Employer to the Administrator on behalf of the Participant after payment of Administrative Charges and Fees, and shall be subject to the determination by the FBA Employer Repre- sentative that the claim constitutes a Nontaxable Benefit . 12 . 03 Notice. Any notice required to be given under the . terms of this Plan shall be deemed to have been duly served if delivered personally to the person notified in writing, or if mailed in a sealed envelope, postage prepaid, to such person at his last known address as shown on the records of the Employer, or if sent by wire to such person at his last known address. 12 . 04 Choice of Law. All questions pertaining to the Plan and its validity, administration and construction, shall be determined in accordance with the laws of the State of Arizona, except to the extent Arizona law is preempted by Federal Statute. Where Arizona law is preempted by federal statute, then such federal statute shall be used to construe the Plan. 12 . 05 Arbitration. Any controversy or claim arising out of or relating to this Plan shall be settled by arbitration in accordance with rules of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitra- tor or arbitrators may be entered in any state or Federal court having jurisdiction. 12 . 06 Severability. If any provision of the Plan, the rules and regulations made pursuant thereto, or any step in the administration of the Plan is held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining portions of the Plan and its rules and regulations unless such illegality or invalidity will prevent the accomplish- ment of the purpose and intent of the Plan. 12 . 07 Confidential Nature of Records. Except to the extent necessary for the proper administration of the Plan, all books, records, papers, reports, documents, or other information obtained with respect to the Plan shall be confidential to the Administrator. Nothing in this Section shall prohibit the 22 46 of 53 DEC 8 1987 ITEM 15 • FLEXIBLE BENEFITS ACCOUNT PLAN preparation of statistical data and summary reports with respect to the operations of the Plan if authorized by the Administrator . THE ATTACHED ADOPTION AGREEMENT IS INCORPORATED BY REFERENCE AND IS HEREBY MADE A PART OF THIS DOCUMENT. 23 47 of 53 DEC 8 1987 ITEM 15 • • DEPENDENT CARE ASSISTANCE PROGRAM UNISERVICE, INC. ATTACHMENT D 48 Of 53 DEC 8 1987 ITEM 15 • • DEPENDENT CARE ASSISTANCE PROGRAM ARTICLE ONE: ADOPTION AND PURPOSE 1 . 01 Adoption by Company. The undersigned and employer ( the "Company" ) hereby adopts this Dependent Care Assis-tance Program (the "Plan" ) effective on the date signed. 1 . 02 Purpose of the Plan . The purpose of this Plan is to reimburse the Company ' s employees for the cost of dependent care assistance expenses which they incur in order to remain gainfully employed pursuant to the provisions of Section 129(d ) ( 1 ) of the Internal Revenue Code. It is the Company ' s intent that the benefits provided under the Plan be eligible for exclusion from the Employees ' income under Section 129( a ) of the Internal Revenue Code. ARTICLE TWO: DEFINITIONS 2 . 01 Benefits . The term "Benefits" shall mean the amounts paid to a Participant pursuant to the Plan as reimburse- ments for Eligible Employment Related Expenses paid or incurred by the Participant. 2 . 02 Code. The term "Code" shall mean the Internal Revenue Code 1986, as amended, and regulations promulgated thereunder . 2 . 03 Dependent . The term "Dependent" shall mean any individual who is a dependent of a Participant within the meaning of Code Section 152( a ) . 2 . 04 Earned Income. The term "Earned Income" shall mean all income derived from wages, salaries, tips, other employee compensation and net earnings from self-employment (within the meaning of Code Section 1402( a ) ) , but such term does not include any amounts paid or incurred by the Employer for Dependent Care Assistance to the Participant. 2 . 05 Eligible Employment Related Expenses. The term "Eligible Employment Related Expenses" shall mean all Employment Related Expenses incurred by a Participant for the care of a qualifying individual which are paid to a person who is not: ( a ) a Dependent of the Participant; ( b) the Participant ' s Spouse; or ( c ) a child of the Participant under the age of nineteen ( 19 ) . 2 . 06 Employee. The term "Employee" shall mean a person who is employed by the Company. 2 . 07 Employment Related Expenses. The term "Employment Related Expenses" shall mean expenses 1 49 of 53 DEC8 1987 ITEM 15 • incurred for Qualifying Services or for the cost of sending a child of the Participant to a Qualifying Day Care Center. 2 . 08 Participant. The term "Participant" shall mean any Employee who has satisfied the eligibility requirements and completed the Dependent Care Assistance Form. 2 . 09 Plan Administrator. The term "Plan Administrator" shall mean UniService, Inc. 2 . 10 Plan Year. The term "Plan Year" shall mean the twelve month period which comprises the operating period of the Plan and is specifically defined in the FBA Plan Adoption Agree- ment. 2 . 11 Qualifying Day Care Center. The term "Qualifying Day Care Center" shall mean ( a) a facility which complies with all applicable laws and regulations of the State and town, city or village in which it is located, (b) provides care for more than six individuals ( other than individuals who reside at the day care center ) and (c ) receives a fee, payment or grant for services for any of the individuals to whom it provides services ( regardless of whether such facility is operated for a profit ) . 2 . 12 Qualifying Individual. The term "Qualifying Individual" shall mean: (a ) a Dependent of a Participant who is under the age of fifteen ( 1 5 ) ; ( b) a Dependent of a Participant who is phy- sically or mentally incapable of caring for herself or himself ; or (c ) the Spouse of a Participant, who is phy- sically or mentally incapable of taking care of herself or him- self . 2 . 13 Qualifying Services. The term "Qualifying Services" shall mean services performed: ( a ) in the home of the Participant; or (b) outside the home of the Participant for ( 1 ) the care of a Dependent of the Participant under the age of fifteen ( 15 ) or ( 2 ) the care of any other Qualifying Individual who spends at least eight ( 8 ) hours a day in the Participant ' s home. 2 . 14 Student. The term "Student" shall mean an indi- vidual who during each of five calendar months during a Plan Year is a full time student at an Educational Institution maintaining a regular facility, curriculum, and regularly enrolled student body. 2 50 of 53 DEC 8 1987 ITEM 15 • ARTICLE THREE: ELIGIBILITY AND BENEFITS Each Employee who is a participant in the FBA Plan sponsored by the Employer shall be eligible to participate in this program. 3 . 01 Eligibility. Each Participant in the Plan shall be eligible to receive a Benefit under the Plan for all Eligible Employment Related Expenses incurred by such Participant. 3 . 02 Claim. No Benefits shall be payable hereunder unless the Participant submits to the Plan Administrator a claim for such Benefits pursuant to the Provisions of the FBA Plan sponsored by the Employer. Upon receipt of such claim, the Plan Administrator shall pay the Participant the Benefit the Participant is entitled to receive under the Plan within the time period specified in the FBA Plan. 3 . 03 Required Information. Each Participant who makes a claim for a Benefit under the Plan shall complete and submit to the Plan Administrator the Dependent Care Assistance Form provided by the Administrator. 3 . 04 Termination. If a Participant ceases to be an Employee: (a ) no Benefits shall be paid for expenses incurred after the date he ceases to be an Employee, and ( b) requests for Benefits may be made for Eligible employment Related Expenses incurred prior to such date if such requests are made before the date that is 90 days' after the end of the Plan Year in which such termination of employment occurs. 3 . 05 FBA Account. All Benefits hereunder shall be provided from the participant ' s Dependent Care Assistance Account under the FBA Plan sponsored by the Employer. 3 . 06 Earned Income Limitation: (a ) A Participant may not receive a Benefit for Eligible Employment Related Expenses incurred by him or her for any one month in which he or she is married in excess of the lesser of : ( 1 ) the Participant ' s Earned Income for such month; ( 2 ) the Earned Income of the Participant ' s Spouse for such month; or ( 3 ) the balance in his Dependent Care Assistance Benefit Account in the FBA Plan adopted by the Employer. (b) For purposes of paragraph ( a ) , a Spouse of a Participant who is not employed during any month in which the Participant incurs Eligible Employment Related Expenses and which Spouse is either incapacitated or a Student shall be deemed to have Earned Income for such month of : ( 1 ) $200, if there is one Qualifying Individual for whom the Participant incurs Eligible Employment Related Expenses. 3 51 of 53 DEC 8 1987 ITEM 15 • • ( 2 ) $400 , if there is more than one Qualifying Individual for whom the Participant incurs Eligible Employment Related Expenses. (c ) In the case of a Participant who is not married at the close of his or her taxable year, the benefits received under this program shall not exceed such Participant ' s earned income. 3 . 07 Dollar Limitation. The maximum dollar amount which may be received by a Participant under this program for a Participant ' s taxable year is $5 , 000 ( $2 , 500 in the case of a separate return filed by a married individual ) . 3 . 08 25% Limitation. In no event shall more than 25% of the Benefits provided by the Plan in any Plan Year be provided to those Participants ( or their Spouses or Dependents ) who own more than 5% of the stock or of the capital or profits interest in the Employer. For purposes of this Section, ( a ) ownership of stock in a corporation shall be determined in accordance with the rules provided in Sections 1563(d ) and (e ) of the Code (without regard to Code Section 1563( e ) ( 3 ) ( C ) ) , and (b) the interest of an employee in a trade or business which is not incorporated shall be determined on the basis of principles similar to that stated in subclause ( a ) . ARTICLE FOUR: PLAN TRUSTEE AND ADMINISTRATOR 4 . 01 Trustee. The Trustee of the FBA Plan sponsored by the Employer and specifically named in the FBA Plan Adoption Agreement shall serve as Trustee for this program. 4 . 02 Administrator. The Plan Administrator as defined in Section 2 . 09, shall have sole responsibility for the adminis- tration of the Plan, including payment of claims and maintenance of records concerning Participant accounts. ARTICLE FIVE: CLAIM REVIEW 5 . 01 Claims Review Procedure. The Administrator shall make all determinations as to the rights of any person to a benefit under this Plan. If a claim for benefits under this Plan is denied in whole or in part, the Participant or Beneficiary of the Participant will be sent a written notice specifying the reason( s ) for denial and the Plan provision( s ) on which such denial is based. A Participant, his or her Beneficiary, or authorized representative may request a review of the denied claim, but such a request must be in writing and submitted to the Administrator within sixty ( 60 ) days after receiving the denial notice. Also, the Participant, Beneficiary or authorized repre- sentative may submit issues and comments in writing and review pertinent documents. The Administrator will perform the review of the denied claim and render its written decision within sixty ( 60 ) days, or within one hundred twenty ( 120 ) days under special 4 52 of 53 DEC 8 1987 ITEM 15 411 4111 circumstances of receiving the request. The written decision will include specific reasons for the decision and specific reference to the Plan provision( s ) on which such decision is based. ARTICLE SIX: GENERAL PROVISIONS 6. 01 Amendment and Termination. The Employer may terminate this Plan at any time. The Employer may amend this Plan at any time upon receiving written notice by the Administra- tor approving said amendment. 6. 02 Allocation of Responsibility for Administration. The Administrator shall have the sole responsibility for the administration of this Plan as is specifically described in this Plan. 6. 03 Records and Reports. The Administrator shall exercise such authority and responsibility as it deems appro- priate in order to comply with the terms of the Plan relating to the records of the Participants and the balances and benefits which are payable under this Plan. The Administrator shall also be responsible for all reporting and disclosure requirements imposed upon the Employer, and for maintaining all of the records of the Plan. 6. 04 Indemnification of the Administrator. The Admin- istrator shall be indemnified by the Employer against any and all liabilities arising by reason of any act or failure to act made in good faith, pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any claim relating thereto. 6 . 05 Statement of Expenses. The Administrator shall furnish to each Participant no later than ninety ( 90 ) days after the close of the Plan Year, a written statement showing the amounts paid or expenses incurred for Dependent Care Assistance to such Participant during the previous calendar year. 6. 06 No Employment Contract. This Plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to inter- fere with the right of the Employer to discharge any Employee at any time regardless of the effect which such discharge shall have upon him as Participant of the Plan. 6. 07 Governing Law. This Plan shall be construed and enforced according to the laws of the State of Arizona, to the extent not preempted by any federal law. 5 53 of 53 DEC8 1987 ITEM 15