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<br /> . CITY OF ARDEN HILLS <br /> MEKlRANDUM <br /> ~: NovelIIber 05, 1993 <br /> TO: Mayor and city Council <br /> FRCH: Dorothy A. Person, City Mministrator 0f <br /> SUBJ:EX:T : section 125 <br /> As you know, the city has reviewed Section 125 plans. Potential third <br /> party providers of this service and the various pre-tax deductions have <br /> been reviewed to the employee I s needs. <br /> It is recommended that the City contract provide a Section 125 plan of <br /> pre-tax deductions which include insurance premiums, child/dependent <br /> care ($5,000 a year maximum), and out-of-pocket medical (to a $2, 000 a <br /> year maximum) . <br /> The savings to employees results in a reduced taxes payable to IRS. It <br /> is anticipated that the average number of employees t.aJd..m part in child <br /> care and out-of-pocket medical and insurance premium deductions will be <br /> . met. <br /> DCA, Inc. is the third party administrator re=mnended by staff. DCA is <br /> service oriented, very conscious of the IRS rules and statutes that <br /> apply, has gcxx:1 recammendations, and is local (at IMC). DCA would be <br /> responsible f= servicing the contact, preparing IRS documents and <br /> reports and reporting to the City. <br /> The savings to the City is through reduction in our FICA due to the pre- <br /> tax deductions. DCA will charge a $100 per month flat rate fee for this <br /> service. The savings received in the ares of FICA are expected to be <br /> enough to =ver our fee to DCA. The real savings are with the <br /> employees. <br /> nus type of program under the national health reform plan and other <br /> programs may be affected. However, at this time, it is unknown as to <br /> what changes are yet to come or what date any changes would be <br /> effective. It does appear, based on published reports, that the reform <br /> would not become effective for six (6) years or more. <br /> It is recommended that the Council approve a Section 125 plan for City <br /> employees effective 1-01-94. This plan would include insurance premiums <br /> paid by the employee, out-of-pocket medical up to $2,000 a year, and <br /> child care expenses up to $5,000 per year. DCA, Inc. is recommended as <br /> the third party plan administrator. <br /> . DP/sl <br />