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2003-1328-Resolution No. 2003-120 Recorded 10/21/2003DESCH TES COUNTY OFFICIAL UBLANKENSHIP, COUNTY CLERK OS CJ �0�3'���D NANCY REVIE D _ COMMISSIONERS' JOURNAL 10/21/2003 11;33;46 AM �4 LEGAL dOUNSEL IIIIIIIIIIIIIIIIIIIIIIIIIIIIII) 2003-1328 i For Recording Stamp Only BEFORE THE BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON A Resolution Adopting the VantageCare Retirement Health Savings (RHS) Program RESOLUTION NO. 2003-120 WHEREAS, Deschutes County has employees rendering valuable services; and WHEREAS, the establishment of a retiree health savings plan for such employees serves the interests of Deschutes County by enable it to provide reasonable security regarding such employees' health needs during retirement through providing increased flexibility in its personnel management system, and by assisting in the attraction and retention of competent personnel; and WHEREAS, Deschutes County has determined that the establishment of the retiree health savings plan (the "Plan") serves the above objectives; NOW, THEREFORE, BE IT RESOLVED that Deschutes County hereby adopts the Plan in the form of the ICMA Retirement Corporation's VantageCare Retirement Health Savings program. BE IT FURTHER RESOLVED that the assets of the Plan shall be held in trust, with Deschutes County serving as trustee, for the exclusive benefit of Plan participants and their beneficiaries; and the assets of the Plan shall not be diverted to any other purpose prior to the satisfaction of all liabilities of the Plan. Deschutes County has executed the Declaration of Trust of the Deschutes County Integral Part Trust in the form of the model trust made available by the ICMA Retirement Corporation. BE IT FURTHER RESOLVED that the Benefits Coordinator of Deschutes County shall be the coordinator and contact for the Plan, and as such shall receive necessary reports, notices and other pertinent Plan documents. DATED this ?0 `4�) day of October 2003. BOARD OF COUNTY COMMISSIONERS OF DESCHUTES COUNTY, OREGON DENNIS R. LU E, Chair ATTEST: TOM DEWOLF, Commis loner (Ya7,wL q!�glk 0/L 6,10 Recording Secretary MI H EL A D LY, Co missioner VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN Retain Booklet This booklet contains the following documents: ■ Model Integral Part 71ust Document ■ Private Letter Ruling ■ Sample Welfare Benefit Plan ICMA RETIREMENT CORPORATION The Public Sector Expert RETAIN BOOKLET USING THE VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN RETAIN BOOKLET This is one of two booklets containing information to establish your VantageCare Retirement Health Savings (RHS) Plan with the ICMA Retirement Corporation (ICMA-RC). This booklet includes: -Model Integral Part Trust Document -Private Letter Ruling -Sample Welfare Benefit Plan Please read the information and retain it for your files. MODEL INTEGRAL PART TRUST DOCUMENT You will need to execute a trust document; you may execute the model trust document in this retain booklet by inserting your information on pages 3, 4, 6, and 12. If you do not use the ICMA-RC model trust document, your individually designed document must be reviewed and approved by ICMA-RC prior to your joining the RHS program. This will ensure that ICMA-RC can administer all provisions of your plan. The ICMA-RC model trust document has been worded broadly to encompass any employer's RHS pro- gram. In most situations, as with your 457 or 401 plans, the Employer will act as Trustee. In this case, the terms Administrator and Trustee will refer to the Employer. Each reference to the Employer, Administra- tor, or Trustee refers to the Employer acting in the appropriate capacity. The Trust agreement is not an agreement between you and ICMA-RC; it provides for the legal establishment of the RHS Trust and lays out the duties of the Employer and Trustee with respect to the trust. The agreement gives the Employer (acting as Administrator) the ability to designate another entity (i.e. ICMA-RC) to perform administrative services for the RHS plan. The Administrative Services Agreement contained in the return booklet consti- tutes the contract between you and ICMA-RC for these services. The ICMA-RC model trust document may also be used in the situation where the Employer retains the services of an outside third -party trustee. In this case, the term Trustee refers to that third -party trustee. In no case may ICMA-RC be named as trustee for your RHS plan. PRIVATE LETTER RULING ICMA-RC has obtained a private letter ruling from the IRS approving one employer's RHS Plan trust. Your use of ICMA-RC's model trust document will provide you with comfort that the trust for your Plan is also within the IRS' requirements. (This is similar to the comfort provided when you use ICMA-RC's model 457 plan document.) Of course, you may want to talk to your legal counsel about whether or not you should obtain a private letter ruling on your own RHS trust document if you choose not to use the ICMA-RC model document. Note that the plan upon which the IRS private letter ruling was based did not include certain features that have subsequently been added to the RHS program. These features include • the irrevocable election to participate in the program, • the irrevocable election to contribute compensation or accrued leave*, • the irrevocable prospective election to contribute leave to be earned in the coming year*, and • voluntary employee after-tax contributions (Article 7.2 of the Trust). *These contribution types are treated as Employer contributions under Article 7.1 and 7.3 of the Trust. VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN However, ICMA-RC has obtained the opinion of counsel that these features should be allowed as long as the requirements outlined in the Trust and Adoption Agreement are met. Any questions regarding these features of the RHS program can be directed to your ICMA-RC Retirement Plans Specialist. SAMPLE WELFARE BENEFIT PLAN You will need to execute a welfare benefit plan if you do not already have one in place. You may execute the sample welfare benefit plan provided herein or you may execute your own welfare benefit plan. It can be a simple document, but it must be in writing in order for your employees to enjoy tax-free treatment of the benefits they receive from this plan or any other welfare benefit plan you provide. FOR ASSISTANCE Please contact your VantageCare Retirement Health Savings Plan New Business Analyst at 1-800-326-7272. Please note that the information in this booklet and the documents herein take into account only the federal tax rules related to ICMA-RC's VantageCare Retirement Health Savings Plan. Prior to implementing an RHS plan, the employer is responsible for determining that there are no state or local laws that would prohibit it from offering the plan to its employees. The employer must also determine that the options it selects in the VantageCare Retirement Health Savings Plan Adoption Agreement fall within state/local requirements. RETAIN BOOKLET DECLARATION OF TRUST OF THE dv-a, e-5 NAME OF EMPLOYE INTEGRAL PART TRUST VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN DECLARATION OF TRUST OF THE NAME OF EM INTEGRAL PART TRUST Declaration of Trust made as of the day of , 2003 , by and between the til, a Name of Employer State Type of Entity (hereinafter referred to as the "Employer") and � &tZhA br its designee (hereinafter Name of Trustee referred to as the "Trustee"). RECITALS WHEREAS, the Employer is a political subdivision of the State of Qcf4- 0 VLI exempt from federal income tax under the Internal Revenue Code of 1986; and t e WHEREAS, the Employer provides for the security and welfare of its eligible employees (here- inafter referred to as "Participants"), their Spouses, Dependents and Beneficiaries by the maintenance of one or more post-retirement welfare benefit plans, programs or arrangements which provide for life, sickness, medical, disability, severance and other similar benefits through insurance and self-funded reimbursement plans (collectively the "Plan"); and WHEREAS, it is an essential function and integral part of the exempt activities of the Employer to assist Participants, their Spouses, Dependents and Beneficiaries by making contributions to and accu- mulating assets in the trust, a segregated fund, for post-retirement welfare benefits under the Plan; and WHEREAS, the authority to conduct the general operation and administration of the Plan is vested in the Employer or its designee, who has the authority and shall be subject to the duties with respect to the trust specified in this Declaration of Trust; and WHEREAS, the Employer wishes to establish this trust to hold assets and income of the Plan for the exclusive benefit of Plan Participants, their Spouses, Dependents and Beneficiaries; NOW, THEREFORE, the parties hereto do hereby establish this trust, by executing the Declara- tion of Trust of the A 4A Integral Part Trust (hereinafter referred to ame of Emp oye as the "Trust"), and agree that the following constitute the Declaration of Trust (hereinafter referred to as the "Declaration"): REVIE LEGAL COUNSEL RETAIN BOOKLET ARTICLE I Definitions 1.1 Definitions. For the purposes of this Declaration, the following terms shall have the respective meanings set forth below unless otherwise expressly provided. (a) "Account" means the individual recordkeeping account maintained under the Plan to record the interest of a Participant in the Plan in accordance with Section 7.4. (b) "Administrator" means the Employer or the entity designated by the Employer to carry out admin- istrative services as are necessary to implement the Plan. (c) "Beneficiary" means the Spouse and Dependents, or the person or persons designated by the Participant pursuant to the terms of the Plan, who will receive any benefits payable hereunder in the event of the Participant's death. A Beneficiary may also designate a beneficiary(ies) to receive any benefits payable hereunder in the event of the preceding Beneficiary's death, until the satisfac- tion of all liabilities under the Plan to provide benefits. In the case where there is no designated Beneficiary, any amount of contributions, plus accrued earnings thereon, remaining in the Account must, under the terms of the Plan, be returned to the Trust. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (e) "Dependent" means an individual who is a person described in Code Section 152(a). (f) "Investment Fund" means any separate investment option or vehicle selected by the Employer in which all or a portion of the Trust assets may be separately invested as herein provided. The Trustee shall not be required to select any Investment Fund. (g) "Nonforfeitable Interest" means the interest of the Participant or the Participant's Spouse, Depend- ent or Beneficiary (whichever is applicable) in the percentage of Participant's Employer's contribu- tion which has vested pursuant to the vesting schedule specified in the Employer's Plan. A Partici- pant shall, at all times, have a one hundred percent (100%) Nonforfeitable Interest in the Partici- pant's own contributions. (h) "Spouse" means the Participant's lawful spouse as determined under the laws of the state in which the Participant has his primary place of residence. (i) "Trust" means the trust established by this Declaration. (j) "Trustee" means the Employer or the person or persons appointed by the Employer to serve in that capacity. VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE II Establishment of Trust 2.1 The Trust is hereby established as of the date set forth above for the exclusive benefit of Partici- pants, their Spouses, Dependents and Beneficiaries. ARTICLE III Construction 3.1 This T . st and its validity, construction and effect shall be governed by the laws of the State of Plc�v`. —ate 3.2 Pronouns and other similar words used herein in the masculine gender shall be read as the feminine gender where appropriate, and the singular form of words shall be read as the plural where appropriate. 3.3 If any provision of this Trust shall be held illegal or invalid for any reason, such determination shall not affect the remaining provisions, and such provisions shall be construed to effectuate the purpose of this Trust. ARTICLE IV Benefits 4.1 Benefits. This Trust may provide benefits to the Participant, the Participant's Spouse, Dependents and Beneficiary(ies) pursuant to the terms of the Plan. 4.2 Form of Benefits. This Trust may provide benefits by cash payment. This Trust may reimburse the Participant, his Spouse, Dependents or Beneficiary(ies) for insurance premiums or other payments ex- pended for permissible benefits described under the Plan. This trust may reimburse the Employer, or the Administrator for insurance premiums. ARTICLE V General Duties 5.1 It shall be the duty of the Trustee to hold title to assets held in respect of the Plan in the Trustee's name as directed by the Employer or its designees in writing. The Trustee shall not be under any duty to com- pute the amount of contributions to be paid by the Employer or to take any steps to collect such amounts as may be due to be held in trust under the Plan. The Trustee shall not be responsible for the custody, investment,'safekeeping or disposition of any assets comprising the Trust, to the extent such functions are performed by the Employer or the Administrator, or both. 5.2 It shall be the duty of the Employer, subject to the provisions of the Plan, to pay over to the Adminis- trator or other person designated hereunder from time to time the Employer's contributions and Partici- pants' contributions under the Plan and to inform the Trustee in writing as to the identity and value of the assets titled in the Trustee's name hereunder and to keep accurate books and records with respect to the Participants of the Plan. RETAIN BOOKLET ARTICLE VI Investments 6.1 The Employer may appoint one or more investment managers to manage and control all or part of the assets of the Trust and the Employer shall notify the Trustee in writing of any such appointment. 6.2 The Trustee shall not have any discretion or authority with regard to the investment of the Trust and shall act solely as a directed Trustee of the assets of which it holds title. To the extent directed by the Employer (or Participants, their Spouses and Dependents, or Beneficiaries to the extent provided herein) the Trustee is authorized and empowered with the following powers, rights and duties, each of which the Trustee shall exercise in a nondiscretionary manner: (a) To cause stocks, bonds, securities, or other investments to be registered in its name as Trustee or in the name of a nominee, or to take and keep the same unregistered; (b) To employ such agents and legal counsel as it deems advisable or proper in connection with its duties and to pay such agents and legal counsel a reasonable fee. The Trustee shall not be liable for the acts of such agents and counsel or for the acts done in good faith and in reliance upon the advice of such agents and legal counsel, provided it has used reasonable care in selecting such agents and legal counsel; (c) To exercise where applicable and appropriate any rights of ownership in any contracts of insurance in which any part of the Trust may be invested and to pay the premiums thereon; and (d) At the direction of the Employer (or Participants, their Spouses, their Dependents, their Benefi- ciaries, or the investment manager, as the case may be) to sell, write options on, convey or transfer, invest and reinvest any part thereof in each and every kind of property, whether real, personal or mixed, tangible or intangible, whether income or non -income producing and wherever situated, including but not limited to, time deposits (including time deposits in the Trustee or its affiliates, or any successor thereto, if the deposits bear a reasonable rate of interest), shares of common and preferred stock, mortgages, bonds, leases, notes, debentures, equipment or collateral trust certificates, rights, warrants, convertible or exchangeable securi- ties and other corporate, individual or government securities or obligations, annuity, retire- ment or other insurance contracts, mutual funds (including funds for which the Trustee or its affiliates serve as investment advisor, custodian or in a similar or related capacity), or in units of any other common, collective or commingled trust fund. 6.3 Notwithstanding anything to the contrary herein, the assets of the Plan shall be held by the Trustee as title holder only. Persons holding custody or possession of assets titled to the Trust shall include the Employer, the Administrator, the investment manager, and any agents and subagents, but not the Trustee. The Trustee shall not be responsible or liable for any loss or expense which may arise from or result from compliance with any direction from the Employer, the Administrator, the investment manager, or such agents to take title to any assets nor shall the Trustee be responsible or liable for any loss or expense which may result from the Trustee's refusal or failure to comply with any direction to hold title, except if the same shall involve or result from the Trustee's negligence or intentional misconduct. The Trustee may refuse to comply with any direction from the Employer, the Administrator, the investment manager, or such agents in the event that the Trustee, in its sole and absolute discretion, deems such direction illegal. 6.4 The Employer hereby indemnifies and holds the Trustee harmless from any and all actions, claims, demands, liabilities, losses, damages or reasonable expenses of whatsoever kind and nature in connection with or arising out of (i) any action taken or omitted in good faith by the Trustee in accordance with the directions of the Employer or its agents and subagents hereunder, or (ii) any disbursements of any part of the Trust made by the Trustee in accordance with the directions of the Employer, or (iii) any action taken by or omitted in good faith by the Trustee with respect to an investment managed by an investment manager in accordance with any direction of the investment manager or any inaction with respect to any 7 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN such investment in the absence of directions from the investment manager. Notwithstanding anything to the contrary herein, the Employer shall have no responsibility to the Trustee under the foregoing indemni- fication if the Trustee fails negligently, intentionally or recklessly to perform any of the duties undertaken by it under the provisions of this Trust. 6.5 Notwithstanding anything to the contrary herein, the Employer or, if so designated by the Employer, the Administrator and the investment manager or another agent of the Employer, will be responsible for valuing all assets so acquired for all purposes of the Trust and of holding, investing, trading and disposing of the same. The Employer will indemnify and hold the Trustee harmless against any and all claims, actions, demands, liabilities, losses, damages, or expenses of whatsoever kind and nature, which arise from or are related to any use of such valuation by the Trustee or holding, trading, or disposition of such assets. 6.6 The Trustee shall and hereby does indemnify and hold harmless the Employer from any and all ac- tions, claims, demands, liabilities, losses, damages and reasonable expenses of whatsoever kind and nature in connection with or arising out of (a) the Trustee's failure to follow the directions of the Employer, the Administrator, the investment manager, or agents thereof, except as permitted by the last sentence of Section 6.3 above; (b) any disbursements made without the direction of the Employer, the Administrator, the investment manager or agents thereof; and (c) the Trustee's negligence, willful misconduct, or reck- lessness with respect to the Trustee's duties under this Declaration. ARTICLE VII Contributions 7.1 Employer Contributions. The Employer shall contribute to the Trust such amounts as specified in the Plan or by resolution. 7.2 Participant Contributions. If specified in the Plan, each Participant may make voluntary after-tax contributions. Under no circumstances shall Participant Contributions exceed an insubstantial amount. These contributions shall be collected by the Employer and remitted to the Trust for deposit at such time or times as required under the terms of the Plan. 7.3 Accrued Leave. Contributions up to an amount equal to the value of accrued sick leave, vacation leave, or other type of accrued leave, as permitted under the Plan. The Employer's Plan must provide a formula for determining the value of the Participant's contribution of accrued leave . The Employer's Plan must contain a forfeiture provision that will prevent Participants from receiving the accrued leave in cash in lieu of a contribution to the Trust. 7.4 Accounts. Employer contributions, Participant contributions, and contributions of accrued leave , all investment income and realized and unrealized gains and losses, and forfeitures allocable thereto will be deposited into an Account in the name of the Participant for the exclusive benefit of the Participant, his Spouse, Dependents and Beneficiaries. The assets in each Participant's Account may be invested in Investment Funds as directed by the Participant (or, after the Participant's death, by the Spouse, Dependents or Beneficiaries) from among the Investment Funds selected by the Employer. 7.5 Receipt of Contributions. The Employer or, if so designated by the Employer, the Administrator or investment manager or another agent of the Employer, shall receive all contributions paid or delivered to it hereunder and shall hold, invest, reinvest and administer such contributions pursuant to this Declara- tion, without distinction between principal and income. The Trustee shall not be responsible for the calculation or collection of any contribution under the Plan, but shall hold title to property received in respect of the Plan in the Trustee's name as directed by the Employer or its designee pursuant to this Declaration. E1 RETAIN BOOKLET 7.6 No amount in any Account maintained under this Trust shall be subject to transfer, assignment, or alienation, whether voluntary or involuntary, in favor of any creditor, transferee, or assignee of the Em- ployer, the Trustee, any Participant, his Spouse, Dependent, or Beneficiaries. 7.7 Upon the satisfaction of all liabilities under the Plan to provide such benefits, any amount of Employer contributions, plus accrued earnings thereon, remaining in such separate Accounts must, under the terms of the Plan, be returned to the Employer. ARTICLE VI11 Other Plans If the Employer hereafter adopts one or more other plans providing life, sickness, accident, medical, disability, severance, or other benefits and designates the Trust hereby created as part of such other plan, the Employer or, if so designated by the Employer, the Administrator or an investment manager or an- other agent of the Employer shall, subject to the terms of this Declaration, accept and hold hereunder contributions to such other plans. In that event (a) the Employer or, if so designated by the Employer, the Administrator or an investment manager or another agent of the Employer, may commingle for invest- ment purposes the contributions received under such other plan or plans with the contributions previously received by the Trust, but the books and records of the Employer or, if so designated by the Employer, the Administrator or an investment manager or another agent of the Employer, shall at all times show the portion of the Trust Fund allocable to each plan; (b) the term "Plan" as used herein shall be deemed to refer separately to each other plan; and (c) the term "Employer" as used herein shall be deemed to refer to the person or group of persons which have been designated by the terms of such other plans as having the authority to control and manage the operation and administration of such other plan. ARTICLE IX Disbursements and Expenses 9.1 The Employer or its designee shall make such payments from the Trust at such time to such persons and in such amounts as shall be authorized by the provisions of the Plan provided, however, that no payment shall be made, either during the existence of or upon the discontinuance of the Plan (subject to Section 7.7), which would cause any part of the Trust to be used for or diverted to purposes other than the exclusive benefit of the Participants, their Spouses and Dependents, and Beneficiaries pursuant to the provisions of the Plan. 9.2 All payments of benefits under the Plan shall be made exclusively from the assets of the Accounts of the Participants to whom or to whose Spouse, Dependents, or Beneficiaries such payments are to be made, and no person shall be entitled to look to any other source for such payments. 9.3 The Employer, Trustee and Administrator may be reimbursed for expenses reasonably incurred by them in the administration of the Trust. All such expenses, including, without limitation, reasonable fees of accountants and legal counsel to the extent not otherwise reimbursed, shall constitute a charge against and shall be paid from the Trust upon the direction of the Employer. ARTICLE X Accounting 10.1 The Trustee shall not be required to keep accounts of the investments, receipts, disbursements, and other transactions of the Trust, except as necessary to perform its title -holding function hereunder. All accounts, books, and records relating thereto shall be maintained by the Employer or its designee. VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN 10.2 As promptly as possible following the close of each year, the Trustee shall file with the Employer a written account setting forth assets titled to the Trust as reported to the Trustee by the Employer or its designee. ARTICLE XI Miscellaneous Provisions 11.1 Neither the Trustee nor any affiliate thereof shall be required to give any bond or to qualify before, be appointed by, or account to any court of law in the exercise of its powers hereunder. 11.2 No person transferring title or receiving a transfer of title from the Trustee shall be obligated to look to the propriety of the acts of the Trustee in connection therewith. 11.3 The Employer may engage the Trustee as its agent in the performance of any duties required of the Employer under the Plan, but such agency shall not be deemed to increase the responsibility or liability of the Trustee under this Declaration. 11.4 The Employer shall have the right at all reasonable times during the term of this Declaration and for three (3) years after the termination of this Declaration to examine, audit, inspect, review, extract informa- tion from, and copy all books, records, accounts, and other documents of the Trustee relating to this Declaration and the Trustees' performance hereunder. ARTICLE XII Amendment and Termination 12.1 The Employer reserves the right to alter, amend, or (subject to Section 9.1) terminate this Declaration at any time for any reason without the consent of the Trustee or any other person, provided that no amendment affecting the rights, duties, or responsibilities of the Trustee shall be adopted without the execution of the Trustee to the amendment. Any such amendment shall become effective as of the date provided in the amendment, if requiring the Trustee's execution, or on delivery of the amendment to the Trustee, if the Trustee's execution is not required. 12.2 Upon termination of this Declaration and upon the satisfaction of all liabilities under the Plan to provide such benefits, any amount of Employer contributions, plus accrued earnings thereon, remaining in such separate Accounts must, under the terms of the Plan, be returned to the Employer. ARTICLE XIII Successor Trustees 13.1 The Employer reserves the right to discharge the Trustee for any or no reason, at any time by giving ninety (90) days' advance written notice. 13.2 The Trustee reserves the right to resign at any time by giving ninety (90) days' advance written notice to the Employer. 13.3 In the event of discharge or resignation of the Trustee, the Employer may appoint a successor Trus- tee who shall succeed to all rights, duties, and responsibilities of the former Trustee under this Declara- tion, and the terminated Trustee shall be deemed discharged of all duties under this Declaration and responsibilities for the Trust. 10 RETAIN BOOKLET ARTICLE XIV Limited Effect of Plan and Trust Neither the establishment of the Plan and the Trust or any modification thereof, the creation of any fund or account, nor the payment of any benefits, shall be construed as giving to any person covered under the Plan or other person any legal or equitable right against the Trustee, the Administrator, the Employer or any officer or employee thereof, except as may otherwise be expressly provided in the Plan or in this Declaration. ARTICLE XV Protective Clause Neither the Administrator, the Employer, nor the Trustee shall be responsible for the validity of any con- tract of insurance or other arrangement maintained in connection with the Plan, or for the failure on the part of the insurer or provider to make payments provided by such contract, or for the action of any per- son which may delay payment or render a contract void or unenforceable in whole or in part. 11 VANTAGECARE RETIREMENT HEALTH' SAVINGS PLAN IN WITNESS WHEREOF, the Employer and the Trustee have executed this Declaration by their respective duly authorized officers, as of the date first hereinabove mentioned. EMPLOYER: By. Tom e olf, Actin Chair TRUSTEES: By: Tom DeWolf By: By: ichael M. Daly Title: Acting Chair Deschutes County Board of Commissioners Title: Acting Chair Deschutes County Board of Commissioners Title: TitIe: Commissioner 12 Internal Revenue Service Index Number: 115.02-00 D City = Trust = State = Dear RETAIN BOOKLET Department of the Treasury Washington, DC 20224 Contact Person: Telephone Number: In Reference to: CC:DOM:FI&P:2 PLR -116685-99 Date: December 28, 1999 This is in response to a letter dated October 12, 1999, and prior correspondence, requesting a private letter ruling that Trust is an integral part of City. FACTS City is a political subdivision of State. City currently maintains one or more post-retirement welfare benefit plans (collectively, the "Plan") that provide its eligible employees ("Participants") and their beneficiaries ("Beneficiaries") with life, sickness, medical, disability, severance and other similar benefits through insurance and self-funded reimbursement plans. City intends to establish Trust to hold assets and income of the Plan for the exclusive benefit of Participants and their Beneficiaries. Trust's Declaration defines "Beneficiaries" to include a Participant's spouse, any child of the Participant or the Participant's spouse Wino is a minor or a student within -he meaning of section 151(c)(4) of the internal Revenue Cede, anv other minor chi id residing with the Participant, and any other individual who is a person described in section 152(a) of the Code. Death benefits may be provided to any Beneficiary designated by a Participant under the terms of a death benefit program or an insurance contract forming part of 13 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN PLR -116685-99 2 may provide benefits by cash payment, and may reimburse a Participant, City, or Trust's Administrator for insurance premiums or other payments expended for permissible benefits under the Plan. Under Trust's Declaration, City will be the Administrator of Trust. City may appoint one or more investment managers to manage and control all or part of the assets of Trust. Under Trust's Declaration, the Trustee will hold assets only as titleholder. Persons having custody or possession of assets may include City, the Administrator of Trust, the investment manager, and their agents and subagents, but not the Trustee. The Trustee will have no discretion or authority with regard to the investments of Trust and will act solely as a directed Trustee with respect to the assets to which it holds title. The Trustee will not be responsible or liable for any loss or expense that may arise or result from complying with any direction from the City, the Administrator, the investment manager, or such agents to take title to any assets, or from the Trustee's refusal or failure to comply with any direction to hold title, unless it involves or results from the Trustee's negligence or intentional misconduct. The Trustee may refuse to comply with any direction if it deems such direction illegal. City indemnifies and holds the Trustee harmless from any actions, claims, demands, liabilities, losses, damages or reasonable expenses of any kind in connection with or arising out of (i) any action taken or omitted in good faith in accordance with its directions, (ii) any disbursements made in accordance with directions, or (iii) any action taken by or omitted by the Trustee with respect to an investment managed by an investment manager in accordance with any direction of the investment manager or any inaction regarding any investment in the absence of directions from the investment manager. City, however, has no responsibility to the Trustee under the indemnification if the Trustee fails negligently, intentionally, or reckless to perform its duties. City will contribute to Trust such amounts as specified in the Plan or by resolution.. No other person or persons will be Permitted to make any contributions. The Plan must provide a formula for determining the value of a Participant's accrued vacation leave, sick leave, or both, in excess of a threshold number of hours of such leave. City may contribute amounts so determined to Trust. The Plan will contain a forfeiture provision that will prevent Participants and their Beneficiaries from receiving cash in lieu of a contributicn to Trust in their behalf. Contributions, investment income, realized and unrealized gains and losses, and forfeitures :•;'_=_ ze deposited into an account in Trust in the name of the Par-- ic pa - 14 RETAIN BOOKLET PLR -116685-99 3 for the exclusive benefit of the Participant and his or her Beneficiaries. A Participant may direct the investment of amounts in her or his account among investments selected by City. No amount in any account will be subject to transfer, assignment, or alienation, whether voluntary or involuntary, in favor of any creditor, transferee, or assignee of City, the Trustee, Participant or Beneficiary. City or the Administrator, investment manager, or other agent designated by City will receive contributions and will hold, invest, and administer contributions without distinction between principal and income. The Trustee will not be responsible for the calculation or collection of contributions, but will hold title to property received as directed by City or its designee. The Trustee will not be required to keep accounts of the investments, receipts, disbursements, and other transaction of Trust except as necessary to perform its title - holding function. City or its designee will maintain all books and records. City reserves the right to alter, amend, or terminate Trust at any time for any reason without the consent of any person. No amendment affecting the Trustee is effective without the Trustee's consent, and no termination can result in any part of Trust's assets being used for or diverted to purposes other than the exclusive benefit of Participants and Beneficiaries. If City adopts other plans providing life, sickness, accident, medical, disability, severance, or other benefits and designates Trust as part of such plan, City or its agent will hold contributions to such plan in Trust. The contributions may be commingled for investment purposes, but the books and record of Trust must show the portion of Trust allocable to each plan. Upon the satisfaction of all liabilities under the Plan to provide benefits, any amounts remaining in any account must be returned to City. LAW & ANALYSIS Income of an integral part of a state or political subdivision of a state is not taxable absent srecific szatutc v authorization. See Rev. Rul. 87-2, 1987-1 C.B. 18; section 511(a)(2)(B) of the Code, GCM 14407, C.B. XIV -1, 103 (1935), superseded by Rev. Rui. 71-131, 1971-1 C.B. 28. Whether an enterprise is an integral part depends on facts and circumstances such as the state's degree of control over the enterprise and its financial commitment to the enterprise. If an enterprise is an integral part of a state or political subdivision of a state, it will not be treated as a separate entity for federal tax purposes, though it may have been formed as a separate en -1"y 15 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN PLR -116685-99 4 under state law. Section 301.7701-1(a)(3) of the Procedural and Administrative Regulations. City has made a substantial financial commitment to Trust by providing all of its funding. City retains complete control over Trust because it may amend or terminate Trust at any time. City retains control over the daily operation of Trust by its power to appoint or remove -agents who manage daily operation. The Trustee is merely a title holder with no power to manage Trust. CONCLUSION Provided that City is the only person that makes contributions to Trust, and Trust accepts or holds only amounts of money contributed by City, Trust will be an integral part of City, and any income earned on amounts in Trust will not be subject to federal income tax. This ruling is directed only to it. Section 6110(k)(3) of the Code used or cited as precedent. Except as specifically provided expressed on the federal income tax transaction described above. the.taxpayer that requested provides that it may not be otherwise, no opinion is consequences of the In accordance with the terms of a power of attorney on file in this office, a copy of th' letter is being sent to your authorized representative. Sincerely, Assistant Chief Counsel (Financial Institutions & Products) By: William Coppersmith William E. Coppersmith Chief, Branch 2 EN RETAIN BOOKLET SAMPLE RETIREE MEDICAL AND DENTAL EXPENSE REIMBURSEMENT PLAN 17 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN SAMPLE RETIREE MEDICAL AND DENTAL EXPENSE REIMBURSEMENT PLAN Article I Preamble 1.01 Establishment of Plan 1.02 Purpose of Plan Article II Definitions 2.01 "Beneficiary 2.02 "Benefits" 2.03 "Code" 2.04 "Dependent" 2.05 "Eligible Medical or Dental Expenses" 2.06 "Employer" 2.07 "Entry Date" 2.08 "Participant" 2.09 "Plan Administrator" 2.10 "Plan Year" 2.11 "Retiree" 2.12 "Spouse" Article III Eligibility 3.01 General Requirements Article IV Amount of Benefits 4.01 Annual Benefits Provided by the Plan 4.02 Cost of Coverage Article V Payment of Benefits 5.01 Eligibility for Benefits 5.02 Claims for Benefits Article VI Plan Administration 6.01 Allocation of Authority 6.02 Provision for Third -Party Plan Service Providers 6.03 Several Fiduciary Liability 6.04 Compensation of Plan Administrator 6.05 Bonding 6.06 Payment of Administrative Expenses 6.07 Timeliness of Payments 6.08 Annual Statements Article VI Claims Procedure 7.01 Procedure if Benefits are Denied Under the Plan 7.02 Requirement for Written Notice of Claim Denial 7.03 Right to Request Hearing on Benefit Denial 7.04 Disposition of Disputed Claims 7.05 Preservation of Other Remedies Article VIII Amendment or Termination of Plan 8.01 Permanency 8.02 Employer's Right to Amend 8.03 Employer's Right to Terminate 18 RETAIN BOOKLET Article IX General Provisions 9.01 No Employment Rights Conferred 9.02 Payments to Beneficiary 9.03 Nonalienation of Benefits 9.04 Mental or Physical Incompetency 9.05 Inability to Locate Payee 9.06 Requirement of Proper Forms 9.07 Source of Payments 9.08 Tax Effects 9.09 Multiple Functions 9.10 Gender and Number 9.11 Headings 9.12 Applicable Laws 9.13 Severability 19 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN ARTICLE 1 Preamble THIS INSTRUMENT made and published by "Employer") on the day of , 20 , creates the and Dental Expense Reimbursement Plan, as follows: 1.01 Establishment of Plan (hereinafter called Retiree Medical The Employer named above hereby establishes a Retiree Medical and Dental Expense Reimbursement Plan as of the day of , 20 1.02 Purpose of Plan This Plan has been established to reimburse the eligible Retirees of the Employer for medical and dental expenses incurred by them, their Spouses, Dependents, and Beneficiaries pursuant to the Employer's VantageCare Retirement Health Savings (RHS) Plan. ARTICLE 11 Definitions The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context: 2.01 "Beneficiary" means the person or persons designated pursuant to the terms of the Plan, who will receive any Benefits payable hereunder in the event of the Participant's death. A Beneficiary may also designate a beneciary(ies) to receive any benefits payable hereunder in the event of the preceeding Ben- eficiary's death until the satisfaction of all liabilities under the plan to provide benefits. 2.02 "Benefits" means any amounts paid to a Participant or Beneficiary in the Plan as reimbursement for Eligible Medical and Dental Expenses incurred by the Participant or Beneficiary during a Plan Year by him, his Spouse, his Dependents, or his Beneficiary. 2.03 "Code" means the Internal Revenue Code of 1986, as amended. 2.04 "Dependent" means any individual who is a dependent of the Participant within the meaning of Code Sec. 152. 2.05 "Eligible Medical or Dental Expenses" means those expenses designated by the Employer as eligible for reimbursement in the VantageCare Retirement Health Savings Plan Adoption Agreement. 2.06 "Employer" means the unit of state or local government creating this Plan, or any affiliate or succes- sor thereof that likewise adopts this Plan. 2.07 "Entry Date" means the first day the Participant meets the eligibility requirements of Article III as of such Date. 2.08 "Participant" means any Retiree who has met the eligibility requirements set forth in Article III. 2.09 "Plan Administrator" means the Employer or other person appointed by the Employer who has the authority and responsibility to manage and direct the operation and administration of the Plan. 20 RETAIN BOOKLET 2.10 "Plan Year" means the annual accounting period of the Plan, which begins on the day of , 20 , and ends on the day of , 20 , with respect to the first Plan Year, and thereafter as long as this Plan remains in effect, the period that begins on and ends on 2.11 "Retiree" means any individual who, while in the service of the Employer, was considered to be in a legal employer-employee relationship with the Employer for federal withholding tax purposes, and who was part of the classification of employees designated as covered by the Employer's VantageCare Retire- ment Health Savings Plan. 2.12 "Spouse" means the Participant's lawful spouse as determined under the laws of the state in which the Participant has his primary place of residence. All other defined terms in this Plan shall have the meanings specified in the various Articles of the Plan in which they appear. ARTICLE III Eligibility Each Retiree who meets the eligibility requirements outlined in the Employer's VantageCare Retirement Health Savings Plan shall be eligible to participate in this Plan. ARTICLE IV Amount of Benefits 4.01 Annual Benefits Provided by the Plan Each Participant shall be entitled to reimbursement for his documented, Eligible Medical or Dental Ex- penses incurred during the Plan Year in an annual amount not to exceed the account balance of the Partici- pant in the Employer's VantageCare Retirement Health Savings Plan. 4.02 Cost of Coverage The expense of providing the benefits set out in Section 4.01 shall be contributed as outlined in the Em- ployer's VantageCare Retirement Health Savings Plan. ARTICLE V Payment of Benefits 5.01 Eligibility for Benefits (a) Each Participant in the Plan shall be entitled to a benefit hereunder for all Eligible Medical and Dental Expenses incurred by the Participant on or after the Entry Date of his or her participa- tion, (and after the effective date of the Plan) subject to the limitations contained in this Article V, regardless whether the mental or physical condition for which the Participant makes applica- tion for benefits under this Plan was detected, diagnosed, or treated before the Participant became covered by the Plan. (b) In order to be eligible for benefits, the Participant must meet the benefit eligibility criteria outlined in the Employer's VantageCare Retirement Health Savings Plan Adoption Agreement. 21 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN (c) A Participant who becomes totally and permanently disabled (as defined by the Social Security Administration) will become immediately eligible to receive medical benefit payments from the Plan. Pursuant to Section 9.02 and Employer's VantageCare Retirement Health Savings Plan Adoption Agreement, the surviving Spouse and Dependents, or Beneficiary(ies) shall become immediately eligible to receive or to continue receiving medical benefit payments from the Plan upon the death of the Participant. 5.02 Claims for Benefits No benefit shall be paid hereunder unless a Participant, his Spouse,Dependent or Beneficiary has first submitted a written claim for benefits to the Plan Administrator on a form specified by the Plan Adminis- trator, and pursuant to the procedures set out in Article VI, below. Upon receipt of a properly documented claim, the Plan Administrator shall pay the Participant, his Spouse, Dependent or Beneficiary the benefits provided under this Plan as soon as is administratively feasible. ARTICLE VI Plan Administration 6.01 Allocation of Authority The Employer shall control and manage the operation and Administration of the Plan. The Employer shall have the exclusive right to interpret the Plan and to decide all matters arising thereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions. All determinations of the Employer with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Employer shall have the following powers and duties: (a) To decide on questions concerning the Plan and the eligibility of any Employee to participate in the Plan, in accordance with the provisions of the Plan; (b) To determine the amount of benefits that shall be payable to any person in accordance with the provisions of the Plan; to inform the Plan Administrator, as appropriate, of the amount of such Benefits; and to provide a full and fair review to any Participant whose claim for benefits has been denied in whole or in part; and (c) To designate other persons to carry out any duty or power which would otherwise be a fiduci- ary responsibility of the Plan Administrator, under the terms of the Plan. (d) To require any person to furnish such reasonable information as it may request for the purpose of the proper administration of the Plan as a condition to receiving any benefits under the Plan; (e) To make and enforce such rules and regulations and prescribe the use of such forms as he shall deem necessary for the efficient administration of the Plan. 6.02 Provision for Third -Party Plan Service Providers The Plan Administrator, subject to approval of the Employer, may employ the services of such persons as it may deem necessary or desirable in connection with operation of the Plan. The Plan Administrator, the Employer (and any person to whom it may delegate any duty or power in connection with the administra- tion of the Plan), and all persons connected therewith may rely upon all tables, valuations, certificates, reports and opinions furnished by any duly appointed actuary, accountant, (including Employees who are actuaries or accountants), consultant, third party administration service provider, legal counsel, or other specialist, and they shall be fully protected in respect to any action taken or permitted in good faith in reliance thereon. All actions so taken or permitted shall be conclusive and binding as to all persons. 22 RETAIN BOOKLET 6.03 Several Fiduciary Liability To the extent permitted by law, neither the Plan Administrator nor any other person shall incur any liability for any acts or for failure to act except for his own willful misconduct or willful breach of this Plan. 6.04 Compensation of Plan Administrator Unless otherwise agreed to by the Employer, the Plan Administrator shall serve without compensation for services rendered in such capacity, but all reasonable expenses incurred in the performance of his duties shall be paid by the Employer. 6.05 Bonding Unless otherwise determined by the Employer, or unless required by any Federal or State law, the Plan Administrator shall not be required to give any bond or other security in any jurisdiction in connection with the administration of this Plan. 6.06 Payment of Administrative Expenses All reasonable expenses incurred in administering the Plan, including but not limited to administrative fees and expenses owing to any third party administrative service provider, actuary, consultant, account- ant, attorney, specialist, or other person or organization that may be employed by the Plan Administrator in connection with the administration thereof, shall be paid by the Employer, provided, however that each Participant shall bear the monthly cost (if any) charged by a third party administrator for maintenance of his Benefit Account unless otherwise paid by the Employer. 6.07 Timeliness of Payment for Benefits Payment for Benefits shall be made as soon as administratively feasible after the required forms and documentation have been received by the Plan Administrator. 6.08 Annual Statements The Plan Administrator shall furnish each Participant with an annual statement of his medical and dental expense reimbursement account within ninety (90) days after the close of each Plan Year. ARTICLE VII Claims Procedure 7.01 Procedure if Benefits are Denied Under the Plan Any Participant, Spouse, Dependent, or Beneficiary, or his duly authorized representative may file a claim for a plan benefit to which the claimant believes that he is entitled. Such a claim must be in writing on a form provided by the Plan Administrator and delivered to the Plan Administrator, in person or by mail, postage paid. Within thirty (30) days after receipt of such claim, the Plan Administrator shall send to the claimant, by mail, postage prepaid, notice of the granting or denying, in whole or in part, of such claim, unless special circumstances require an extension of time for processing the claim. In no event may the extension exceed ninety (90) days from the end of the initial period. If such extension is necessary, the claimant will be given a written notice to this effect prior to the expiration of the initial 30 -day period. The Plan Administrator shall have full discretion to deny or grant a claim in whole or in part. If notice of the denial of a claim is not furnished in accordance with this Section, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to review pursuant to Sections 7.03 and 7.04. 23 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN 7.02 Requirement for Written Notice of Claim Denial The Plan Administrator shall provide, to every claimant who is denied a claim for benefits, written notice setting forth in a manner calculated to be understood by the claimant: (a) The specific reason or reasons for the denial; (b) Specific reference to pertinent Plan provisions on which the denial is based; (c) A description of any additional material of information necessary for the claimant to perfect the claim and an explanation of why such material is necessary, and (d) An explanation of the Plan's claim review procedure. 7.03 Right to Request Hearing on Benefit Denial Within sixty (60) days after the receipt by the claimant of written notification of the denial (in whole or in part) of his claim, the claimant or his duly authorized representative, upon written application to the Plan Administrator, in person or by certified mail, postage prepaid, may request a review of such denial, may review pertinent documents, and may submit issues and comments in writing. 7.04 Disposition of Disputed Claims Upon its receipt of notice of a request for review, the Plan Administrator shall make a prompt decision on the review. The decision on review shall be written in a manner calculated to be understood by the claim- ant and shall include specific reasons for the decision and specific references to the pertinent plan provi- sions on which the decision is based. The decision on review shall be made not later than sixty (60) days after the Plan Administrator's receipt of a request for a review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered not later than one hundred - twenty (120) days after receipt of a request for review. If an extension is necessary, the claimant shall be given written notice of the extension prior to the expiration of the initial sixty (60) day period. If notice of the decision on the review is not furnished in accordance with this Section, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to legal remedy pursuant to Section 7.05. 7.05 Preservation of Other Remedies After exhaustion of the claims procedures provided under this Plan, nothing shall prevent any person from pursuing any other legal or equitable remedy otherwise available. ARTICLE VIII Amendment or Termination of Plan 8.01 Permanency While the Employer fully expects that this Plan will continue indefinitely, due to unforeseen, future busi- ness contingencies, permanency of the Plan will be subject to the Employer's right to amend or terminate the Plan, as provided in Sections 8.02 and 8.03, below. 8.02 Employer's Right to Amend The Employer reserves the right to amend the Plan at any time and from time -to -time, and retroactively if deemed necessary or appropriate to meet the requirements of the Code, or any similar provisions of subsequent revenue or other laws, or the rules and regulations in effect under any of such laws or to conform with governmental regulations or other policies, to modify or amend in whole or in part any or all of the provisions of the Plan. 24 RETAIN BOOKLET 8.03 Employer's Right to Terminate The Employer reserves the right to discontinue or terminate the Plan at any time without prejudice. ARTICLE IX General Provisions 9.01 No Employment Rights Conferred Neither this Plan nor any action taken with respect to it shall confer upon any person the right to be con- tinued in the employment of the Employer. 9.02 Payments After Death of Participant Any benefits otherwise payable to a Participant following the date of death of such Participant shall be paid as outlined in the Employer's VantageCare Retirement Health Savings Plan Adoption Agreement. 9.03 Nonalienation of Benefits No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assign- ment, pledge, encumbrance or charge, and any attempt to do so shall be void. No benefit under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person. If any person entitled to benefits under the Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit under the Plan, or if any attempt is made to subject any such benefit to the debts, contracts, liabilities, engagements or torts of the person entitled to any such benefit, except as specifically provided in the Plan, then such benefit shall cease and terminate in the discretion of the Plan Administrator, and he may hold or apply the same or any part thereof to the benefit of any dependent or beneficiary of such person, in such manner and proportion as he may deem proper. 9.04 Mental or Physical Incompetency If the Plan Administrator determines that any person entitled to payments under the Plan is incompetent by reason of physical or mental disability, he may cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of amounts so paid. Payments made pursuant to this Section shall completely discharge the Plan Adminis- trator and the Employer. 9.05 Inability to Locate Payee If the Plan Administrator is unable to make payment to any Participant or other person to whom a pay- ment is due under the Plan because he cannot ascertain the identity or whereabouts of such Participant or other person after reasonable efforts have been made to identify or locate such person (including a notice of the payment so due mailed to the last known address of such Participant or other person as shown on the records of the Employer), such payment and all subsequent payments otherwise due to such Partici- pant or other person shall be escheated under the laws of the State of the last known address of the Participant or other persons eligible for benefits. 9.06 Requirement of Proper Forms All communications in connection with the Plan made by a Participant shall become effective only when duly executed on forms provided by and filed with the Plan Administrator. 25 VANTAGECARE RETIREMENT HEALTH SAVINGS PLAN 9.07 Source of Payments The Employer shall be the sole source of benefits under the Plan. No Employee or Beneficiary shall have any right to, or interest in, any assets of the Employer upon termination of employment or otherwise, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such Employee or Beneficiary. 9.08 Tax Effects Neither the Employer nor the Plan Administrator makes any warranty or other representation as to whether any payments received by a Participant, his Spouse, Dependents, or Beneficiary(ies) hereunder will be treated as includible in gross income for federal or state income tax purposes. 9.09 Multiple Functions Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 9.10 Gender and Number Masculine pronouns include the feminine as well as the neuter gender, and the singular shall include the plural, unless indicated otherwise by the context. 9.11 Headings The Article and Section headings contained herein are for convenience of reference only, and shall not be construed as defining or limiting the matter contained thereunder. 9.12 Applicable Laws The provisions of the Plan shall be construed, administered and enforced according to the laws of the State of 9.13 Severability Should any part of this Plan subsequently be invalidated by a court of competent jurisdiction, the remain- der thereof shall be given effect to the maximum extent possible. IN WITNESS WHEREOF, we have executed this Plan Agreement the date and year first written above. (Employer) By: ATTEST Secretary ICMA RETIREMENT CORPORATION 777 North Capitol Street, NE Washington, DC 20002 1-800-326-7272 www.icmarc.org BKT000-006-200212-765