Exhibit 10.7
PROASSURANCE GROUP
EMPLOYEE BENEFIT PLAN
.
.
.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
ARTICLE II
PARTICIPATION
SECTION 2.01 ELIGIBILITY.............................................. 3
SECTION 2.02 EFFECTIVE DATE OF PARTICIPATION.......................... 4
SECTION 2.03 APPLICATION TO PARTICIPATE............................... 4
SECTION 2.04 TERMINATION OF PARTICIPATION............................. 4
SECTION 2.05 CHANGE OF EMPLOYMENT STATUS.............................. 4
SECTION 2.06 TERMINATION OF EMPLOYMENT................................ 5
SECTION 2.07 DEATH.................................................... 5
ARTICLE III
CONTRIBUTIONS TO THE PLAN
SECTION 3.01 SALARY REDIRECTION....................................... 6
SECTION 3.02 APPLICATION OF CONTRIBUTIONS............................. 6
SECTION 3.03 PERIODIC CONTRIBUTIONS................................... 6
ARTICLE IV
BENEFITS
SECTION 4.01 BENEFITS................................................. 7
SECTION 4.02 HEALTH CARE REIMBURSEMENT PROGRAM........................ 7
SECTION 4.03 DEPENDENT CARE ASSISTANCE PROGRAM........................ 7
SECTION 4.04 HEALTH INSURANCE BENEFIT................................. 7
SECTION 4.05 GROUP LIFE INSURANCE BENEFIT............................. 8
SECTION 4.06 DISABILITY INSURANCE BENEFIT............................. 8
SECTION 4.07 EXECUTIVE SUPPLEMENTAL LIFE INSURANCE BENEFIT............ 8
SECTION 4.08 NONDISCRIMINATION REQUIREMENTS........................... 8
i
ARTICLE V
PARTICIPANT ELECTIONS FOR CAFETERIA BENEFITS
SECTION 5.01 INITIAL ELECTIONS........................................ 9
SECTION 5.02 SUBSEQUENT ANNUAL ELECTIONS.............................. 9
SECTION 5.03 FAILURE TO ELECT......................................... 10
SECTION 5.04 CHANGE OF ELECTIONS...................................... 10
ARTICLE VI
HEALTH CARE REIMBURSEMENT PROGRAM
SECTION 6.01 ESTABLISHMENT OF PROGRAM................................. 13
SECTION 6.02 DEFINITIONS.............................................. 13
SECTION 6.03 FORFEITURES.............................................. 14
SECTION 6.04 LIMITATION ON ALLOCATIONS................................ 14
SECTION 6.05 NONDISCRIMINATION REQUIREMENTS........................... 14
SECTION 6.06 COORDINATION WITH CAFETERIA PLAN......................... 15
SECTION 6.07 HEALTH CARE REIMBURSEMENT CLAIMS......................... 15
ARTICLE VII
DEPENDENT CARE ASSISTANCE PROGRAM
SECTION 7.01 ESTABLISHMENT OF PROGRAM................................. 16
SECTION 7.02 DEFINITIONS.............................................. 16
SECTION 7.03 DEPENDENT CARE ASSISTANCE ACCOUNTS....................... 17
SECTION 7.04 INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS.......... 18
SECTION 7.05 DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS.......... 18
SECTION 7.06 ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT........ 18
SECTION 7.07 STATEMENT OF BENEFITS.................................... 18
SECTION 7.08 FORFEITURES.............................................. 18
SECTION 7.09 LIMITATION ON PAYMENTS................................... 18
SECTION 7.10 NONDISCRIMINATION REQUIREMENTS........................... 18
SECTION 7.11 COORDINATION WITH CAFETERIA PLAN......................... 19
SECTION 7.12 DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS................. 19
ii
ARTICLE VIII
EXECUTIVE SUPPLEMENTAL LIFE INSURANCE PROGRAM
SECTION 8.01 ESTABLISHMENT OF PLAN.................................... 20
SECTION 8.02 PARTICIPATION & TERMINATION.............................. 20
SECTION 8.03 COORDINATION WITH CAFETERIA PLAN......................... 21
ARTICLE IX
ERISA PROVISIONS
SECTION 9.01 CLAIM FOR BENEFITS....................................... 21
SECTION 9.02 APPLICATION OF BENEFIT PLAN SURPLUS...................... 23
SECTION 9.03 NAMED FIDUCIARY.......................................... 24
SECTION 9.04 GENERAL FIDUCIARY RESPONSIBILITIES....................... 24
SECTION 9.05 NONASSIGNABILITY OF RIGHTS............................... 24
ARTICLE X
ADMINISTRATION
SECTION 10.01 PLAN ADMINISTRATION...................................... 24
SECTION 10.02 EXAMINATION OF RECORDS................................... 25
SECTION 10.03 PAYMENT OF EXPENSES...................................... 25
SECTION 10.04 INSURANCE CONTROL CLAUSE................................. 25
SECTION 10.05 INDEMNIFICATION OF ADMINISTRATOR......................... 25
ARTICLE XI
AMENDMENT OR TERMINATION OF PLAN
SECTION 11.01 AMENDMENT................................................ 26
SECTION 11.02 TERMINATION.............................................. 26
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 PLAN INTERPRETATION...................................... 26
SECTION 12.02 GENDER AND NUMBER........................................ 26
SECTION 12.03 WRITTEN DOCUMENT......................................... 27
SECTION 12.04 EXCLUSIVE BENEFIT........................................ 27
SECTION 12.05 PARTICIPANT'S RIGHTS..................................... 27
SECTION 12.06 ACTION BY THE EMPLOYER................................... 27
iii
SECTION 12.07 EMPLOYER'S PROTECTIVE CLAUSES............................ 27
SECTION 12.08 NO GUARANTEE OF TAX CONSEQUENCES......................... 28
SECTION 12.09 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS.............. 28
SECTION 12.10 FUNDING.................................................. 28
SECTION 12.11 GOVERNING LAW............................................ 28
SECTION 12.12 SEVERABILITY............................................. 28
SECTION 12.13 CAPTIONS................................................. 29
SECTION 12.14 CONTINUATION OF COVERAGE................................. 29
SECTION 12.15 FAMILY AND MEDICAL LEAVE ACT............................. 29
SECTION 12.16 HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT...... 29
SECTION 12.17 UNIFORM SERVICES EMPLOYMENT AND
REEMPLOYMENT RIGHTS ACT.................................. 29
iv
PROASSURANCE GROUP
EMPLOYEE BENEFIT PLAN
INTRODUCTION
Effective January 1, 1995, Mutual Assurance, Inc. established the
Mutual Assurance, Inc. and Affiliated Companies Employee Benefit Plan (the
"Plan") for the benefit of its and its Affiliated Companies' eligible employees
and their dependents. At the time of its initial establishment, the Plan had
three components: group medical insurance, long term disability insurance, and a
cafeteria program under Code Section 125. Effective January 1, 2002, the name of
the Plan was changed to the ProAssurance Corporation Employee Benefit Plan, and
the Plan was expanded to include a fourth component - group life and accidental
death and dismemberment insurance. Effective October 1, 2003, the Plan was
restated and amended in its entirety. Pursuant to the restated Plan,
ProAssurance Group Services Corporation became the sponsor of the Plan and the
name of the Plan was changed to the ProAssurance Group Employee Benefit Plan.
The restated Plan also contains provisions adding a fifth component to the Plan
- - executive supplemental life insurance - which such addition is effective May
1, 2003.
The purpose of the Plan is to recognize the contribution made to
the Employers who have adopted the Plan by its Employees. The Plan's purpose is
to reward them by providing benefits for those Employees who shall qualify
hereunder and their dependents and beneficiaries.
ARTICLE I
DEFINITIONS
SECTION 1.01 "Administrator" means the individual(s) or corporation
appointed by the Employer to carry out the administration of the Plan. The
Employer shall be empowered to appoint and remove the Administrator from time to
time as it deems necessary for the proper administration of the Plan. In the
event the Administrator has not been appointed, or resigns from a prior
appointment, the Employer shall be deemed to be the Administrator.
SECTION 1.02 "Affiliated Employer" means the Employer and any
corporation which is a member of a controlled group of corporations (as defined
in Code Section 414(b)) which includes the Employer; any trade or business
(whether or not incorporated) which is under common control (as defined in Code
Section 414(c)) with the Employer; any organization (whether or not
incorporated) which is a member of an affiliated service group (as defined in
Code Section 414(m)) which includes the Employer; and any other entity required
to be aggregated with the Employer pursuant to Treasury regulations under Code
Section 414(o).
SECTION 1.03 "Benefit" includes "Plan Benefits" and "Cafeteria
Benefits." "Plan Benefit" means any of the benefits provided to Eligible
Employees by the Employer at no cost to the Employee as outlined in Section
4.01(b). "Cafeteria Benefit" means any of the optional contributory benefit
choices available to a Participant as outlined in Section 4.01(a).
SECTION 1.04 "Cafeteria Plan" means the component of this Plan which
provides for a cafeteria program under Section 125 of the Code.
1
SECTION 1.05 "Cafeteria Plan Benefit Dollars" means the amount
available to Participants, pursuant to Article III, to purchase Cafeteria
Benefits. Each dollar contributed through Salary Redirection to this Plan shall
be converted into one Cafeteria Plan Benefit Dollar.
SECTION 1.06 "Code" means the Internal Revenue Code of 1986, as
amended or replaced from time to time.
SECTION 1.07 "Compensation" means the amounts received by the
Participant from the Employer during a Plan Year.
SECTION 1.08 "Dependent" means any individual who qualifies as a
dependent under an Insurance Contract or under Code Section 152 (as modified by
Code Section 105(b)).
SECTION 1.09 "Effective Date" means January 1, 1995.
SECTION 1.10 "Election Period" means the period immediately preceding
the beginning of each Plan Year established by the Administrator, such period to
be applied on a uniform and nondiscriminatory basis for all Employees and
Participants. However, an Employee's initial Election Period shall be determined
pursuant to Section 5.01.
SECTION 1.11 "Eligible Employee" means any Employee who has satisfied
the provisions of Section 2.01.
An individual shall not be an "Eligible Employee" if such
individual is not reported on the payroll records of the Employer as a common
law employee. In particular, it is expressly intended that individuals not
treated as common law employees by the Employer on its payroll records are not
"Eligible Employees" and are excluded from Plan participation even if a court or
administrative agency determines that such individuals are common law employees
and not independent contractors.
However, any Employee who is a "part-time" Employee shall not be
eligible to participate in this Plan. A "part-time" Employee is any Employee who
works, or is expected to work on a regular basis, less than 30 hours a week.
SECTION 1.12 "Employee" means any person who is employed by the
Employer. The term Employee shall include leased employees within the meaning of
Code Section 414(n)(2).
SECTION 1.13 "Employer" means ProAssurance Group Services Corporation
and any successor which shall maintain this Plan; and any predecessor which has
maintained this Plan.
SECTION 1.14 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
SECTION 1.15 "Insurance Contract" means any contract issued by an
Insurer underwriting a Benefit.
SECTION 1.16 "Insurance Premium Payment Program" means the plan of
benefits contained in Section 4.01 of this Plan, which provides for the payment
of Premium Expenses.
SECTION 1.17 "Insurer" means any insurance company that underwrites a
Benefit under this Plan.
2
SECTION 1.18 "Key Employee" means an Employee described in Code
Section 416(i)(1) and the Treasury regulations thereunder.
SECTION 1.19 "Participant" means any Eligible Employee who elects to
become a Participant pursuant to Section 2.03 and has not for any reason become
ineligible to participate further in the Plan.
SECTION 1.20 "Plan" means this instrument, including all amendments
thereto.
SECTION 1.21 "Plan Year" means the 12-month period beginning January 1
and ending December 31. The Plan Year shall be the coverage period for the
Benefits provided for under this Plan. In the event a Participant commences
participation during a Plan Year, then the initial coverage period shall be that
portion of the Plan Year commencing on such Participant's date of entry and
ending on the last day of such Plan Year.
SECTION 1.22 "Premium Expenses" or "Premiums" mean the Participant's
cost for the Cafeteria Benefits described in Section 4.01(a)(3) .
SECTION 1.23 "Premium Reimbursement Account" means the account
established for a Participant pursuant to this Plan to which part of his
Cafeteria Plan Benefit Dollars may be allocated and from which Premiums of the
Participant may be paid or reimbursed. If more than one type of insured
Cafeteria Benefit is elected, sub-accounts shall be established for each type of
insured Cafeteria Benefit.
SECTION 1.24 "Salary Redirection" means the contributions made by the
Employer on behalf of Participants pursuant to Section 3.01. These contributions
shall be converted to Cafeteria Plan Benefit Dollars and allocated to the funds
or accounts established under the Plan pursuant to the Participants' elections
made under Article V.
SECTION 1.25 "Salary Redirection Agreement" means an agreement between
the Participant and the Employer under which the Participant agrees to reduce
his Compensation or to forego all or part of the increases in such Compensation
and to have such amounts contributed by the Employer to the Plan on the
Participant's behalf. The Salary Redirection Agreement shall apply only to
Compensation that has not been actually or constructively received by the
Participant as of the date of the agreement (after taking this Plan and Code
Section 125 into account) and, subsequently does not become currently available
to the Participant.
SECTION 1.26 "Spouse" means the legally married husband or wife of a
Participant, unless legally separated by court decree.
ARTICLE II
PARTICIPATION
SECTION 2.01 ELIGIBILITY
Except as otherwise provided herein, any Eligible Employee shall
be eligible to participate hereunder on his date of employment (or the Effective
Date of the Plan, if later). Notwithstanding the foregoing, an Eligible Employee
shall be eligible to participate hereunder with respect to insured Benefits as
of the date he is eligible under the relevant Insurance
3
Contract. However, any Eligible Employee who was a Participant in the Plan on
the effective date of this amendment shall continue to be eligible to
participate in the Plan.
SECTION 2.02 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of
the first day of the month coinciding with or next following the date on which
he met the eligibility requirements of Section 2.01.
SECTION 2.03 APPLICATION TO PARTICIPATE
An Employee who is eligible to participate in this Plan shall,
during the applicable Election Period, complete an application to participate
and election of Cafeteria Benefits form which the Administrator shall furnish to
the Employee. The Cafeteria Benefits election made on such form shall be
irrevocable until the end of the applicable Plan Year unless the Participant is
entitled to change his Benefit elections pursuant to Section 5.04 hereof.
An Eligible Employee shall also be required to execute a Salary
Redirection Agreement during the Election Period for the Plan Year during which
he wishes to participate in this Plan. Any such Salary Redirection Agreement
shall be effective for the first pay period beginning on or after the Employee's
effective date of participation pursuant to Section 2.02.
SECTION 2.04 TERMINATION OF PARTICIPATION
Except with respect to benefits under Article VIII, a Participant
shall no longer participate in this Plan upon the occurrence of any of the
following events:
(a) His termination of employment, subject to the provisions of
Section 2.06;
(b) The end of the Plan Year during which he became a limited
Participant because of a change in employment status pursuant to
Section 2.05;
(c) His death, subject to the provisions of Section 2.07; or
(d) The termination of this Plan, subject to the provisions of
Section 11.02.
SECTION 2.05 CHANGE OF EMPLOYMENT STATUS
If a Participant ceases to be eligible to participate because of
a change in employment status or classification (other than through termination
of employment), the Participant shall become a limited Participant in this Plan
for the remainder of the Plan Year in which such change of employment status
occurs. As a limited Participant, no further Salary Redirection may be made on
behalf of the Participant, and, except as otherwise provided herein, all further
Benefit elections shall cease, subject to the limited Participant's right to
continue coverage under any Insurance Contracts. However, any balances in the
limited Participant's Dependent Care Assistance Account may be used during such
Plan Year to reimburse the limited Participant for any allowable
Employment-Related Dependent Care incurred during the Plan Year. Subject to the
provisions of Section 2.06, if the limited Participant later becomes an Eligible
Employee, then the limited Participant may again become a full Participant in
this Plan, provided he otherwise satisfies the participation requirements set
forth in this Article II as if he were a new Employee and made an election in
accordance with
4
Section 5.01. Notwithstanding the foregoing, a Participant's rights to benefits
under Article VIII shall be determined in accordance with that Article.
SECTION 2.06 TERMINATION OF EMPLOYMENT
If a Participant's employment with the Employer is terminated for
any reason other than death, his participation in the Plan shall be governed in
accordance with the following:
(a) With regard to Benefits which are insured, the Participant's
participation in the Plan shall cease, subject to the Participant's
right to continue coverage under any Insurance Contract for which
premiums have already been paid.
(b) With regard to the Dependent Care Assistance Program, the
Participant's participation in the Plan shall cease and no further
Salary Redirection contributions shall be made. However, such
Participant may submit claims for employment related Dependent Care
Expense reimbursements for 60 days after termination, based on the
level of his Dependent Care Assistance Account as of his date of
termination.
(c) With regard to the Health Care Reimbursement Plan, the
Participant's participation in the Plan shall cease and no further
Salary Redirection contributions shall be made. However, such
Participant may submit claims for expenses incurred prior to date of
termination of employment up to 30 days after his termination date.
(d) In the event a Participant terminates his participation in
the Health Care Reimbursement Program during the Plan Year, if Salary
Redirections are made other than on a pro rata basis, upon termination
the Participant shall be entitled to a reimbursement for any Salary
Redirection previously paid for coverage or benefits relating to the
period after the date of the Participant's separation from service
regardless of the Participant's claims or reimbursements as of such
date.
(e) This Section shall be applied and administered consistent
with such further rights a Participant and his Dependents may be
entitled to pursuant to Code Section 4980B and Section 12.14 of the
Plan.
(f) Notwithstanding the foregoing, a Participant's right to
benefits under Article VIII shall be determined in accordance with the
provisions of that Article.
SECTION 2.07 DEATH
If a Participant dies, his participation in the Plan shall cease.
However, such Participant's beneficiaries, or the representative of his estate,
may submit claims for expenses or benefits for the remainder of the Plan Year or
until the Cafeteria Plan Benefit Dollars allocated to each specific Cafeteria
Benefit are exhausted. A Participant may designate a specific beneficiary for
this purpose. If no such beneficiary is specified, the Administrator may
designate the Participant's Spouse, one of his Dependents or a representative of
his estate.
5
ARTICLE III
CONTRIBUTIONS TO THE PLAN
SECTION 3.01 SALARY REDIRECTION
Benefits under the Plan shall be financed by Salary Redirections
sufficient to support Cafeteria Benefits that a Participant has elected
hereunder and to pay the Participant's Premium Expenses. The salary
administration program of the Employer shall be revised to allow each
Participant to agree to reduce his pay during a Plan Year by an amount
determined necessary to purchase the elected Cafeteria Benefit. The amount of
such Salary Redirection shall be specified in the Salary Redirection Agreement
and shall be applicable for a Plan Year. Notwithstanding the above, for new
Participants, the Salary Redirection Agreement shall only be applicable from the
first day of the pay period following the Employee's entry date up to and
including the last day of the Plan Year. However, in no event shall a
Participant's Salary Redirection per Plan Year exceed the sum of (a) the amount
specified in Section 6.04, (b) the amount specified in Section 7.09, plus (c)
the amount of the required contribution for the Health Insurance Benefit which
is described in Section 4.40. These contributions shall be converted to
Cafeteria Plan Benefit Dollars and allocated to the funds or accounts
established under the Plan pursuant to the Participants' elections made under
Article V.
Any Salary Redirection shall be determined prior to the beginning
of a Plan Year (subject to initial elections pursuant to Section 5.01) and prior
to the end of the Election Period and shall be irrevocable for such Plan Year.
However, a Participant may revoke a Benefit election or a Salary Redirection
Agreement after the Plan Year has commenced and make a new election with respect
to the remainder of the Plan Year, if both the revocation and the new election
are on account of and consistent with a change in status and such other
permitted events as determined under Article V of the Plan and consistent with
the rules and regulations of the Department of the Treasury. Salary Redirection
amounts shall be contributed on a pro rata basis for each pay period during the
Plan Year. All individual Salary Redirection Agreements are deemed to be part of
this Plan and incorporated by reference hereunder.
SECTION 3.02 APPLICATION OF CONTRIBUTIONS
As soon as reasonably practical after each payroll period, the
Employer shall apply the Salary Redirection to provide the Cafeteria Benefits
elected by the affected Participants. Any contribution made or withheld for the
Health Care Reimbursement Fund or Dependent Care Assistance Account shall be
credited to such fund or account. Amounts designated for the Participant's
Premium Expense Reimbursement Account shall likewise be credited to such account
for the purpose of paying Premium Expenses.
SECTION 3.03 PERIODIC CONTRIBUTIONS
Notwithstanding the requirement provided above and in other
Articles of this Plan that Salary Redirections be contributed to the Plan by the
Employer on behalf of an Employee on a level and pro rata basis for each payroll
period, the Employer and Administrator may implement a procedure in which Salary
Redirections are contributed throughout the Plan Year on a periodic basis that
is not pro rata for each payroll period. However, with regard to the Health Care
Reimbursement Program, the payment schedule for the required contributions may
not be based on the rate or amount of reimbursements during the Plan Year. In
the event Salary Redirections are not made on a pro rata basis, upon termination
of participation, a Participant may be entitled to a refund of such Salary
Redirections pursuant to Section 2.06.
6
ARTICLE IV
BENEFITS
SECTION 4.01 BENEFITS
(a) Each Participant may elect to have the amount of his
Cafeteria Plan Benefit Dollars applied to any one or more of the
following optional Cafeteria Benefits (to the extent the Participant
is eligible for such benefit):
(1) Health Care Reimbursement Program
(2) Dependent Care Assistance Program
(3) Insurance Premium Payment Program - Health Insurance
Benefit
(b) Each Participant may be eligible for the following Plan
Benefits in accordance with terms of this Plan and the Insurance
Contract pursuant to which such Plan Benefit is provided:
(1) Group Life Insurance Benefit
(2) Disability Insurance Benefit
(3) Executive Supplemental Life Insurance Benefit
SECTION 4.02 HEALTH CARE REIMBURSEMENT PROGRAM
Each Participant may elect coverage under the Health Care
Reimbursement Program option, in which case Article VI shall apply.
SECTION 4.03 DEPENDENT CARE ASSISTANCE PROGRAM
Each Participant may elect coverage under the Dependent Care
Assistance Program option, in which case Article VII shall apply.
SECTION 4.04 HEALTH INSURANCE BENEFIT
(a) Each Participant may elect to be covered under a health and
hospitalization Insurance Contract for the Participant, his or her
spouse, and his or her Dependents.
(b) The Employer may select suitable health, hospitalization, and
dental Insurance Contracts for use in providing this health insurance
benefit, which policies will provide uniform benefits for all
Participants electing this Benefit.
(c) The rights and conditions with respect to the benefits
payable from such health and hospitalization Insurance Contract shall
be determined therefrom, and such Insurance Contract shall be
incorporated herein by reference.
7
SECTION 4.05 GROUP LIFE INSURANCE BENEFIT
(a) Each Participant will be covered under the Group Life
Insurance Benefit if eligible therefor.
(b) The Employer may select suitable Life Insurance Contracts for
use in providing this Group Life Insurance Benefit.
(c) The rights and conditions with respect to the Benefits
payable from such Group Life Insurance Contract shall be determined
therefrom, and such Group Life Insurance Contract shall be
incorporated herein by reference.
SECTION 4.06 DISABILITY INSURANCE BENEFIT
(a) Each Participant will be covered under the Employer's Group
Disability Insurance Contract if eligible therefor.
(b) The Employer may select suitable Disability Insurance
Contracts for use in providing this disability Benefit. The Disability
Insurance Contract(s) may provide for long-term or short-term
coverage.
(c) The rights and conditions with respect to the Benefits
payable from such Disability Insurance Contract shall be determined
therefrom, and such Disability Insurance Contract shall be
incorporated herein by reference.
SECTION 4.07 EXECUTIVE SUPPLEMENTAL LIFE INSURANCE BENEFIT
(a) The Employer has elected to purchase business-owned life
insurance on behalf of certain Participants.
(b) The rights, conditions and benefits with respect to the
Executive Supplemental Life Insurance Benefit are set forth in Article
VIII.
SECTION 4.08 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Plan to provide Cafeteria Benefits
to a classification of employees which the Secretary of the Treasury
finds not to be discriminatory in favor of the group in whose favor
discrimination may not occur under Code Section 125.
(b) It is the intent of this Plan not to provide "qualified
Benefits" as defined under Code Section 125 to Key Employees in
amounts that exceed 25% of the aggregate of such Cafeteria Benefits
provided for all Eligible Employees under the Plan. For purposes of
the preceding sentence, "qualified benefits" shall not include
benefits which (without regard to this paragraph) are includible in
gross income.
(c) If the Administrator deems it necessary to avoid
discrimination or possible taxation to Key Employees or a group of
employees in whose favor discrimination may not occur in violation of
Code Section 125, it may, but shall not be required to, reject any
election or reduce contributions or non-taxable Cafeteria Benefits in
order to assure compliance with this Section. Any act taken by the
Administrator under this Section shall be carried out in a uniform and
nondiscriminatory manner. If the Administrator decides
8
to reject any election or reduce contributions or non-taxable
Cafeteria Benefits, it shall be done in the following manner. First,
the non-taxable Cafeteria Benefits of the affected Participant (either
an employee who is highly compensated or a Key Employee, whichever is
applicable) who has the highest amount of non-taxable Cafeteria
Benefits for the Plan Year shall have his non-taxable benefits reduced
until the discrimination tests set forth in this Section are satisfied
or until the amount of his non-taxable Cafeteria Benefits equals the
non-taxable Cafeteria Benefits of the affected Participant who has the
second highest amount of non-taxable Cafeteria Benefits . This process
shall continue until the nondiscrimination tests set forth in this
Section are satisfied. With respect to any affected Participant who
has had Cafeteria Benefits reduced pursuant to this Section, the
reduction shall be made proportionately among Health Care
Reimbursement Program Benefits and Dependent Care Assistance Program
Benefits, and once all these Cafeteria Benefits are expended,
proportionately among insured Cafeteria Benefits. Contributions which
are not utilized to provide Cafeteria Benefits to any Participant by
virtue of any administrative act under this paragraph shall be
forfeited and deposited into the benefit plan surplus.
ARTICLE V
PARTICIPANT ELECTIONS FOR CAFETERIA BENEFITS
SECTION 5.01 INITIAL ELECTIONS
An Employee who meets the eligibility requirements of Section
2.01 on the first day of, or during, a Plan Year may elect to participate in the
component of this Plan which provides Cafeteria Benefits for all or the
remainder of such Plan Year, provided he elects to do so before his effective
date of participation pursuant to Section 2.02. However, if such Employee does
not complete an application to participate and benefit election form and deliver
it to the Administrator before such date, his Election Period shall extend 30
calendar days after such date, or for such further period as the Administrator
shall determine and apply on a uniform and nondiscriminatory basis. However, any
election during the extended 30-day election period pursuant to this Section
5.01 shall not be effective until the first pay period following the later of
such Participant's effective date of participation pursuant to Section 2.02 or
the date of the receipt of the election form by the Administrator, and shall be
limited to the Cafeteria Benefit expenses incurred for the balance of the Plan
Year for which the election is made. Notwithstanding the foregoing, in the case
of insured Benefits, a new Participant will automatically be enrolled for such
Benefits unless the Participant elects not to be covered.
SECTION 5.02 SUBSEQUENT ANNUAL ELECTIONS
During the Election Period prior to each subsequent Plan Year,
each Participant shall be given the opportunity to elect, on an election of
benefits form to be provided by the Administrator, which Benefit options he
wishes to select and purchase with his Cafeteria Plan Benefit Dollars. Any such
election shall be effective for any Cafeteria Benefit expenses incurred during
the Plan Year which follows the end of the Election Period. With regard to
subsequent annual elections, the following options shall apply:
(a) A Participant or Employee who failed to initially elect to
participate may elect different or new Cafeteria Benefits under the
Plan during the Election Period;
9
(b) A Participant may terminate his participation in the Plan by
notifying the Administrator in writing during the Election Period that
he does not want to participate in the Plan for the next Plan Year;
(c) An Employee who elects not to participate for the Plan Year
following the Election Period will have to wait until the next
Election Period before again electing to participate in the Plan,
except as provided for in Section 5.04.
SECTION 5.03 FAILURE TO ELECT
Any Participant who fails to complete a new benefit election form
pursuant to Section 5.02 by the end of the applicable Election Period shall be
treated in the following manner:
(a) With regard to Cafeteria Benefits available under the Plan
for which no Premium Expenses apply, such Participant shall be deemed
to have elected not to participate in the Plan for the upcoming Plan
Year. No further Salary Redirections shall therefore be authorized or
made for the subsequent Plan Year for such Cafeteria Benefits.
(b) With regard to Cafeteria Benefits available under the Plan
for which Premium Expenses apply, such Participant shall be deemed to
have made the same Cafeteria Benefit elections as are then in effect
for the current Plan Year. The Participant shall also be deemed to
have elected Salary Redirection in an amount necessary to purchase
such Cafeteria Benefit options.
SECTION 5.04 CHANGE OF ELECTIONS
(a) Any Participant may change a Cafeteria Benefit election after
the Plan Year (to which such election relates) has commenced and make
new elections with respect to the remainder of such Plan Year if,
under the facts and circumstances, the changes are necessitated by and
are consistent with a change in status which is acceptable under rules
and regulations adopted by the Department of the Treasury, the
provisions of which are incorporated by reference. Notwithstanding
anything herein to the contrary, if the rules and regulations
conflict, then such rules and regulations shall control.
In general, a change in election is not consistent if the
change in status is the Participant's divorce, annulment or legal
separation from a spouse, the death of a spouse or dependent, or a
dependent ceasing to satisfy the eligibility requirements for
coverage, and the Participant's election under the Plan is to cancel
accident or health insurance coverage for any individual other than
the one involved in such event. In addition, if the Participant,
spouse or dependent gains or loses eligibility for coverage, then a
Participant's election under the Plan to cease or decrease coverage
for that individual under the Plan corresponds with that change in
status only if coverage for that individual becomes applicable or is
increased under the family member plan.
Regardless of the consistency requirement, if the
individual, the individual's spouse, or dependent becomes eligible for
continuation coverage under the Employer's group health plan as
provided in Code Section 4980B or any similar state law, then the
individual may elect to increase payments under this Plan in order to
pay
10
for the continuation coverage. However, this does not apply for COBRA
eligibility due to divorce, annulment or legal separation.
Any new election shall be effective at such time as the
Administrator shall prescribe, but not earlier than the first pay
period beginning after the election form is completed and returned to
the Administrator. For the purposes of this subsection, a change in
status shall only include the following events or other events
permitted by Treasury regulations:
(1) Legal Marital Status: events that change a Participant's
legal marital status, including marriage, divorce, death of a
spouse, legal separation or annulment;
(2) Number of Dependents: Events that change a Participant's
number of dependents, including birth, adoption, placement for
adoption, or death of a dependent;
(3) Employment Status: Any of the following events that
change the employment status of the Participant, spouse, or
dependent: termination or commencement of employment, a strike or
lockout, commencement or return from an unpaid leave of absence,
or a change in worksite. In addition, if the eligibility
conditions of this Plan or other employee benefit plan of the
Employer of the Participant, spouse, or dependent depend on the
employment status of that individual and there is a change in
that individual's employment status with the consequence that the
individual becomes (or ceases to be) eligible under the Plan,
then that change constitutes a change in employment under this
subsection;
(4) Dependent satisfies or ceases to satisfy the eligibility
requirements: An event that causes the Participant's dependent to
satisfy or cease to satisfy the requirements for coverage due to
attainment of age, student status, or any similar circumstance;
and
(5) Residency: A change in the place of residence of the
Participant, spouse or dependent.
For the Dependent Care Assistance Program, a dependent
becoming or ceasing to be a "Qualifying Dependent" as defined under
Code Section 21(b) shall also qualify as a change in status.
(b) Notwithstanding subsection (a), a Participant may change an
election for accident or health coverage during a Plan Year and make a
new election that corresponds with the special enrollment rights
provided in Code Section 9801(f). Such change shall take place on a
prospective basis.
(c) Notwithstanding subsection (a), in the event of a judgment,
decree, or order ("order") resulting from a divorce, legal separation,
annulment, or change in legal custody (including a qualified medical
child support order defined in ERISA Section 609) which requires
accident or health coverage for a Participant's child (including a
foster child who is a dependent of the Participant):
11
(1) The Plan may change an election to provide coverage for
the child if the order requires coverage under the Participant's
plan; or
(2) The Participant shall be permitted to change an election
to cancel coverage for the child if the order requires the former
spouse to provide coverage for such child, under that
individual's plan and such coverage is actually provided.
(d) Notwithstanding subsection (a), a Participant may change
elections to cancel accident or health coverage for the Participant or
the Participant's spouse or dependent if the Participant or the
Participant's spouse or dependent is enrolled in the accident or
health coverage of the Employer and becomes entitled to coverage
(i.e., enrolled) under Part A or Part B of the Title XVIII of the
Social Security Act (Medicare) or Title XIX of the Social Security Act
(Medicaid), other than coverage consisting solely of benefits under
Section 1928 of the Social Security Act (the program for distribution
of pediatric vaccines). If the Participant or the Participant's spouse
or dependent who has been entitled to Medicaid or Medicare coverage
loses eligibility, that individual may prospectively elect coverage
under the Plan if a benefit package option under the Plan provides
similar coverage.
(e) If the cost of a Cafeteria Benefit provided under the Plan
increases or decreases during a Plan Year, then the Plan shall
automatically increase or decrease, as the case may be, the Salary
Redirections of all affected Participants for such Cafeteria Benefit.
Alternatively, if the cost of a benefit package option increases
significantly, the Administrator shall permit the affected
Participants to either make corresponding changes in their payments or
revoke their elections and, in lieu thereof, receive on a prospective
basis coverage under another benefit package option with similar
coverage, or drop coverage prospectively if there is no benefit
package option with similar coverage.
A cost increase or decrease refers to an increase or
decrease in the amount of elective contributions under the Plan,
whether resulting from an action taken by the Participants or an
action taken by the Employer.
If the coverage under a Cafeteria Benefit is significantly
curtailed or ceases during a Plan Year, affected Participants may
revoke their elections of such cafeteria Benefit and, in lieu thereof,
elect to receive on a prospective basis coverage under another plan
with similar coverage, or drop coverage prospectively if no similar
coverage is offered.
If, during the period of coverage, a new benefit package
option or other coverage option is added, an existing benefit package
option is significantly improved, or an existing benefit package
option or other coverage option is eliminated, then the affected
Participants may elect the newly-added option, or elect another option
if an option has been eliminated prospectively and make corresponding
election changes with respect to other benefit package options
providing similar coverage. In addition, those Eligible Employees who
are not participating in the Plan may opt to become Participants and
elect the new or newly improved benefit package option.
A Participant may make a prospective election change to add
group health coverage for the Participant, the Participant's spouse or
dependent if such
12
individual loses group health coverage sponsored by a governmental or
educational institution, including a state children's health insurance
program under the Social Security Act, the Indian Health Service or a
health program offered by an Indian tribal government, a state health
benefits risk pool, or a foreign government group health plan.
A Participant may make a prospective election change that is
on account of and corresponds with a change made under the Plan of a
spouse's, former spouse's or dependent's employer if (1) the cafeteria
plan or other benefits plan of the spouse's, former spouse's or
dependent's employer permits its participants to make a change; or (2)
the Plan permits participants to make an election for a period of
coverage that is different from the period of coverage under the
cafeteria plan of a spouse's, former spouse's or dependent's employer.
A Participant may make a prospective election change that is
on account of and corresponds with a change by the Participant in the
dependent care provider. The availability of dependent care services
from a new childcare provider is similar to a new benefit package
option becoming available. A cost change is allowable in the Dependent
Care Assistance Program only if the cost change is imposed by a
dependent care provider who is not related to the Participant, as
defined in Code Section 152(a)(1) through (8).
A Participant shall not be permitted to change an election
to the Health Care Reimbursement Plan as a result of a cost or
coverage change under this subsection.
ARTICLE VI
HEALTH CARE REIMBURSEMENT PROGRAM
SECTION 6.01 ESTABLISHMENT OF PROGRAM
This Health Care Reimbursement Program is intended to qualify as
a medical reimbursement plan under Code Section 105 and shall be interpreted in
a manner consistent with such Code Section and the Treasury regulations
thereunder. Participants who elect to participate in this Health Care
Reimbursement Program may submit claims for the reimbursement of Medical
Expenses. All amounts reimbursed under this Health Care Reimbursement Program
shall be periodically paid from amounts allocated to the Health Care
Reimbursement Fund. Periodic payments reimbursing Participants from the Health
Care Reimbursement Fund shall in no event occur less frequently than monthly.
SECTION 6.02 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan, the
terms below have the following meaning:
(a) "Health Care Reimbursement Fund" means the fund established
for Participants pursuant to this Plan to which part of their
Cafeteria Plan Benefit Dollars may be allocated and from which all
allowable Medical Expenses may be reimbursed.
(b) "Health Care Reimbursement Program" means the plan of
benefits contained in this Article, which provides for the
reimbursement of eligible Medical Expenses incurred by a Participant
or his Dependents.
13
(c) "Highly Compensated Participant" means, for the purposes of
this Article and determining discrimination under Code Section 105(h),
a participant who is:
(1) one of the 5 highest paid officers;
(2) a shareholder who owns (or is considered to own applying
the rules of Code Section 318) more than 10 percent in value of
the stock of the Employer; or
(3) among the highest paid 25 percent of all Employees
(other than exclusions permitted by Code Section 105(h)(3)(B) for
those individuals who are not Participants).
(d) "Medical Expenses" means any expense for medical care within
the meaning of the term "medical care" or "medical expense" as defined
in Code Section 213 and the rulings and Treasury regulations
thereunder, and not otherwise used by the Participant as a deduction
in determining his tax liability under the Code. However, a
Participant may not be reimbursed for the cost of other health
coverage such as premiums paid under plans maintained by the employer
of the Participant's spouse or individual policies maintained by the
Participant or his spouse or Dependent. Furthermore, a Participant may
not be reimbursed for "qualified long-term care services" as defined
in Code Section 7702B(c). Effective October 1, 2003, Medical Expenses
will include medicines and drugs purchased without a physician's
prescription.
(e) The definitions of Article I are hereby incorporated by
reference to the extent necessary to interpret and apply the
provisions of this Health Care Reimbursement Program.
SECTION 6.03 FORFEITURES
The amount in the Health Care Reimbursement Fund as of the end of
any Plan Year (and after the processing of all claims for such Plan Year
pursuant to Section 6.07 hereof) shall be forfeited and credited to the benefit
plan surplus. In such event, the Participant shall have no further claim to such
amount for any reason, subject to Section 9.02.
SECTION 6.04 LIMITATION ON ALLOCATIONS
Notwithstanding any provision contained in this Health Care
Reimbursement Program to the contrary, no more than $5,000 may be allocated to
the Health Care Reimbursement Fund by a Participant in or on account of any Plan
Year.
SECTION 6.05 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Health Care Reimbursement Program
not to discriminate in violation of the Code and the Treasury
regulations thereunder.
(b) If the Administrator deems it necessary to avoid
discrimination under this Health Care Reimbursement Program, it may,
but shall not be required to, reject any elections or reduce
contributions or Benefits in order to assure compliance with this
Section. Any act taken by the Administrator under this Section shall
be carried out in a uniform and nondiscriminatory manner. If the
Administrator decides to reject any
14
elections or reduce contributions or Benefits, it shall be done in the
following manner. First, the Benefits designated for the Health Care
Reimbursement Fund by the member of the group in whose favor
discrimination may not occur pursuant to Code Section 105 that elected
to contribute the highest amount to the fund for the Plan Year shall
be reduced until the nondiscrimination tests set forth in this Section
or the Code are satisfied, or until the amount designated for the fund
equals the amount designated for the fund by the next member of the
group in whose favor discrimination may not occur pursuant to Code
Section 105 who has elected the second highest contribution to the
Health Care Reimbursement Fund for the Plan Year. This process shall
continue until the nondiscrimination tests set forth in this Section
or the Code are satisfied. Contributions which are not utilized to
provide Benefits to any Participant by virtue of any administrative
act under this paragraph shall be forfeited and credited to the
benefit plan surplus.
SECTION 6.06 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive
Cafeteria Benefits under this Health Care Reimbursement Program. The enrollment
under the Cafeteria Plan shall constitute enrollment under this Health Care
Reimbursement Program. In addition, other matters concerning contributions,
elections and the like shall be governed by the general provisions of the
Cafeteria Plan.
SECTION 6.07 HEALTH CARE REIMBURSEMENT CLAIMS
(a) All Medical Expenses incurred by a Participant shall be
reimbursed during the Plan Year subject to Section 2.06, even though
the submission of such a claim occurs after his participation
hereunder ceases; but provided that the Medical Expenses were incurred
during the applicable Plan Year. Medical Expenses are treated as
having been incurred when the Participant is provided with the medical
care that gives rise to the Medical Expenses, not when the Participant
is formally billed or charged for, or pays for the medical care.
(b) The Administrator shall direct the reimbursement to each
eligible Participant for all allowable Medical Expenses, up to a
maximum of the amount designated by the Participant for the Health
Care Reimbursement Fund for the Plan Year (prorated in the event of
termination of employment). Reimbursements shall be made available to
the Participant throughout the year without regard to the level of
Cafeteria Plan Benefit Dollars which have been allocated to the fund
at any given point in time. Furthermore, a Participant shall be
entitled to reimbursements only for amounts in excess of any payments
or other reimbursements under any health care plan covering the
Participant and/or his Spouse or Dependents.
(c) Claims for the reimbursement of Medical Expenses incurred in
any Plan Year shall be paid as soon after a claim has been filed as is
administratively practicable; provided however, that if a Participant
fails to submit a claim within the 60 day period immediately following
the end of the Plan Year or 60 days after termination of employment,
those Medical Expense claims shall not be considered for reimbursement
by the Administrator.
(d) Reimbursement payments under this Plan shall be made directly
to the Participant. However, in the Administrator's discretion,
payments may be made directly
15
to the service provider. The application for payment or reimbursement
shall be made to the Administrator on an acceptable form within a
reasonable time of incurring the debt or paying for the service. The
application shall include a written statement from an independent
third party stating that the Medical Expense has been incurred and the
amount of such expense. Furthermore, the Participant shall provide a
written statement that the Medical Expense has not been reimbursed or
is not reimbursable under any other health plan coverage and, if
reimbursed from the Health Care Reimbursement Fund, such amount will
not be claimed as a tax deduction. The Administrator shall retain a
file of all such applications.
ARTICLE VII
DEPENDENT CARE ASSISTANCE PROGRAM
SECTION 7.01 ESTABLISHMENT OF PROGRAM
This Dependent Care Assistance Program is intended to qualify as
a program under Code Section 129 and shall be interpreted in a manner consistent
with such Code Section. Participants who elect to participate in this program
may submit claims for the reimbursement of Employment-Related Dependent Care
Expenses. All amounts reimbursed under this Dependent Care Assistance Program
shall be paid from amounts allocated to the Participant's Dependent Care
Assistance Account.
SECTION 7.02 DEFINITIONS
For the purposes of this Article and the Cafeteria Plan the terms
below shall have the following meaning:
(a) "Dependent Care Assistance Account" means the account
established for a Participant pursuant to this Article to which part
of his Cafeteria Plan Benefit Dollars may be allocated and from which
Employment-Related Dependent Care Expenses of the Participant may be
reimbursed.
(b) "Dependent Care Assistance Program" means the program of
benefits contained in this Article, which provides for the
reimbursement of eligible expenses for the care of the Qualifying
Dependents of Participants.
(c) "Earned Income" means earned income as defined under Code
Section 32(c)(2), but excluding such amounts paid or incurred by the
Employer for dependent care assistance to the Participant.
(d) "Employment-Related Dependent Care Expenses" means the
amounts paid for expenses of a Participant for those services which if
paid by the Participant would be considered employment related
expenses under Code Section 21(b)(2). Generally, they shall include
expenses for household services or for the care of a Qualifying
Dependent, to the extent that such expenses are incurred to enable the
Participant to be gainfully employed for any period for which there
are one or more Qualifying Dependents with respect to such
Participant. Employment-Related Dependent Care Expenses are treated as
having been incurred when the Participant's Qualifying Dependents are
provided with the dependent care that gives rise to the
Employment-Related Dependent Care Expenses, not when the Participant
is formally billed or charged for, or pays for the dependent care. The
determination of whether an
16
amount qualifies as an Employment-Related Dependent Care Expense shall
be made subject to the following rules:
(1) If such amounts are paid for expenses incurred outside
the Participant's household, they shall constitute
Employment-Related Dependent Care Expenses only if incurred for a
Qualifying Dependent as defined in Section 7.02(e)(1) (or deemed
to be, as described in Section 7.2(e)(1) pursuant to Section
7.02(e)(3)), or for a Qualifying Dependent as defined in Section
7.02(e)(2) (or deemed to be, as described in Section 7.2(e)(2)
pursuant to Section 7.02(e)(3)) who regularly spends at least 8
hours per day in the Participant's household;
(2) If the expense is incurred outside the Participant's
home at a facility that provides care for a fee, payment, or
grant for more than 6 individuals who do not regularly reside at
the facility, the facility must comply with all applicable state
and local laws and regulations, including licensing requirements,
if any; and
(3) Employment-Related Dependent Care Expenses of a
Participant shall not include amounts paid or incurred to a child
of such Participant who is under the age of 19 or to an
individual who is a dependent of such Participant or such
Participant's Spouse.
(e) "Qualifying Dependent" means, for Dependent Care Assistance
Program purposes,
(1) a Dependent of a Participant who is under the age of 13,
with respect to whom the Participant is entitled to an exemption
under Code Section 151(c);
(2) a Dependent or the Spouse of a Participant who is
physically or mentally incapable of caring for himself or
herself; or
(3) a child that is deemed to be a Qualifying Dependent
described in paragraph (1) or (2) above, whichever is
appropriate, pursuant to Code Section 21(e)(5).
(f) The definitions of Article I are hereby incorporated by
reference to the extent necessary to interpret and apply the
provisions of this Dependent Care Assistance Program.
SECTION 7.03 DEPENDENT CARE ASSISTANCE ACCOUNTS
The Administrator shall establish a Dependent Care Assistance
Account for each Participant who elects to apply Cafeteria Plan Benefit Dollars
to Dependent Care Assistance Program benefits.
17
SECTION 7.04 INCREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be
increased each pay period by the portion of Cafeteria Plan Benefit Dollars that
he has elected to apply toward his Dependent Care Assistance Account pursuant to
elections made under Article V hereof.
SECTION 7.05 DECREASES IN DEPENDENT CARE ASSISTANCE ACCOUNTS
A Participant's Dependent Care Assistance Account shall be
reduced by the amount of any Employment-Related Dependent Care Expense
reimbursements paid or incurred on behalf of a Participant pursuant to Section
7.12 hereof.
SECTION 7.06 ALLOWABLE DEPENDENT CARE ASSISTANCE REIMBURSEMENT
Subject to limitations contained in Section 7.09 of this Program,
and to the extent of the amount contained in the Participant's Dependent Care
Assistance Account, a Participant who incurs Employment-Related Dependent Care
Expenses shall be entitled to receive from the Employer full reimbursement for
the entire amount of such expenses incurred during the Plan Year or portion
thereof during which he is a Participant.
SECTION 7.07 STATEMENT OF BENEFITS
Information about the benefits paid from your accounts in the
Plan is shown on each paycheck that you receive.
SECTION 7.08 FORFEITURES
The amount in a Participant's Dependent Care Assistance Account
as of the end of any Plan Year (and after the processing of all claims for such
Plan Year pursuant to Section 7.12 hereof) shall be forfeited and credited to
the benefit plan surplus. In such event, the Participant shall have no further
claim to such amount for any reason.
SECTION 7.09 LIMITATION ON PAYMENTS
Notwithstanding any provision contained in this Article to the
contrary, amounts paid from a Participant's Dependent Care Assistance Account in
or on account of any taxable year of the Participant shall not exceed the lesser
of the Earned Income limitation described in Code Section 129(b) or $5,000
($2,500 if a separate tax return is filed by a Participant who is married as
determined under the rules of paragraphs (3) and (4) of Code Section 21(e)).
SECTION 7.10 NONDISCRIMINATION REQUIREMENTS
(a) It is the intent of this Dependent Care Assistance Program
that contributions or benefits not discriminate in favor of the group
of employees in whose favor discrimination may not occur under Code
Section 129(d).
(b) It is the intent of this Dependent Care Assistance Program
that not more than 25 percent of the amounts paid by the Employer for
dependent care assistance during the Plan Year will be provided for
the class of individuals who are shareholders or owners (or their
Spouses or Dependents), each of whom (on any day of the Plan Year)
18
owns more than 5 percent of the stock or of the capital or profits
interest in the Employer.
(c) If the Administrator deems it necessary to avoid
discrimination or possible taxation to a group of employees in whose
favor discrimination may not occur in violation of Code Section 129 it
may, but shall not be required to, reject any elections or reduce
contributions or non-taxable benefits in order to assure compliance
with this Section. Any act taken by the Administrator under this
Section shall be carried out in a uniform and nondiscriminatory
manner. If the Administrator decides to reject any elections or reduce
contributions or Benefits, it shall be done in the following manner.
First, the Benefits designated for the Dependent Care Assistance
Account by the affected Participant that elected to contribute the
highest amount to such account for the Plan Year shall be reduced
until the nondiscrimination tests set forth in this Section are
satisfied, or until the amount designated for the account equals the
amount designated for the account of the affected Participant who has
elected the second highest contribution to the Dependent Care
Assistance Account for the Plan Year. This process shall continue
until the nondiscrimination tests set forth in this Section are
satisfied. Contributions which are not utilized to provide Benefits to
any Participant by virtue of any administrative act under this
paragraph shall be forfeited.
SECTION 7.11 COORDINATION WITH CAFETERIA PLAN
All Participants under the Cafeteria Plan are eligible to receive
Benefits under this Dependent Care Assistance Program. The enrollment and
termination of participation under the Cafeteria Plan shall constitute
enrollment and termination of participation under this Dependent Care Assistance
Program. In addition, other matters concerning contributions, elections and the
like shall be governed by the general provisions of the Cafeteria Plan.
SECTION 7.12 DEPENDENT CARE ASSISTANCE PROGRAM CLAIMS
The Administrator shall direct the payment of all such Dependent
Care Assistance claims to the Participant upon the presentation to the
Administrator of documentation of such expenses in a form satisfactory to the
Administrator. However, in the Administrator's discretion, payments may be made
directly to the service provider. In its discretion in administering the Plan,
the Administrator may utilize forms and require documentation of costs as may be
necessary to verify the claims submitted. At a minimum, the form shall include a
statement from an independent third party as proof that the expense has been
incurred and the amount of such expense. In addition, the Administrator may
require that each Participant who desires to receive reimbursement under this
Program for Employment-Related Dependent Care Expenses submit a statement which
may contain some or all of the following information:
(a) The Dependent or Dependents for whom the services were
performed;
(b) The nature of the services performed for the Participant, the
cost of which he wishes reimbursement;
(c) The relationship, if any, of the person performing the
services to the Participant;
19
(d) If the services are being performed by a child of the
Participant, the age of the child;
(e) A statement as to where the services were performed;
(f) If any of the services were performed outside the home, a
statement as to whether the Dependent for whom such services were
performed spends at least 8 hours a day in the Participant's
household;
(g) If the services were being performed in a day care center, a
statement:
(1) that the day care center complies with all applicable
laws and regulations of the state of residence,
(2) that the day care center provides care for more than 6
individuals (other than individuals residing at the center), and
(3) of the amount of fee paid to the provider.
(h) If the Participant is married, a statement containing the
following:
(1) the Spouse's salary or wages if he or she is employed,
or
(2) if the Participant's Spouse is not employed, that
(i) he or she is incapacitated, or
(ii) he or she is a full-time student attending an
educational institution and the months during the year which
he or she attended such institution.
(i) If a Participant fails to submit a claim within the 60 day
period immediately following the end of the Plan Year or within the 60
day period immediately following termination of employment, those
claims shall not be considered for reimbursement by the Administrator.
ARTICLE VIII
EXECUTIVE SUPPLEMENTAL LIFE INSURANCE PROGRAM
SECTION 8.01 ESTABLISHMENT OF PLAN
This Executive Supplemental Life Insurance Program has been
established by the Employer to attract, reward and retain certain highly
qualified Employees. The basis of this program is a business-owned life
insurance contract purchased and maintained by the Employer. The terms and
conditions of such contract are incorporated herein. The Employer reserves the
right to terminate this program at any time.
SECTION 8.02 PARTICIPATION & TERMINATION
(a) Participation in the Plan shall be limited to those Employees
of the Employer or of an Affiliated Employer selected by the Employer,
in its sole discretion, to participate in the Plan.
20
(b) A Participant's rights under this Plan shall cease and his or
her participation in the Plan shall terminate upon the election of
company to terminate the Executive Supplemental Life Insurance Program
or the Plan. Participation does not terminate upon termination of
employment.
SECTION 8.03 COORDINATION WITH CAFETERIA PLAN
Participants under the Cafeteria Plan are not eligible to receive
Benefits under this Executive Supplemental Life Insurance Program unless
selected by the Administrator. Enrollment under the Cafeteria Plan shall not
constitute enrollment under this Executive Supplemental Life Insurance Plan. In
addition, other matters concerning contributions, elections and the like shall
not be governed by the general provisions of the Cafeteria Plan and shall
instead be governed by this Article and the insurance contract incorporated
herein by reference.
ARTICLE IX
ERISA PROVISIONS
SECTION 9.01 CLAIM FOR BENEFITS
(a) Any claim for Benefits underwritten by an Insurance Contract
shall be made to the Insurer. If the Insurer denies any claim, the
Participant or beneficiary shall follow the Insurer's claims review
procedure. Any other claim for Benefits shall be made to the
Administrator. If the Administrator denies a claim, the Administrator
may provide notice to the Participant or beneficiary, in writing,
within 90 days after the claim is filed unless special circumstances
require an extension of time for processing the claim. If the
Administrator does not notify the Participant of the denial of the
claim within the 90 day period specified above, then the claim shall
be deemed denied. The notice of a denial of a claim shall be written
in a manner calculated to be understood by the claimant and shall set
forth:
(1) specific references to the pertinent Plan provisions on
which the denial is based;
(2) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation as to why such information is necessary; and
(3) an explanation of the Plan's claim procedure.
(b) Within 60 days after receipt of the above material, the
claimant shall have a reasonable opportunity to appeal the claim
denial to the Administrator for a full and fair review. The claimant
or his duly authorized representative may:
(1) request a review upon written notice to the
Administrator;
(2) review pertinent documents; and
(3) submit issues and comments in writing.
(c) A decision on the review by the Administrator will be made
not later than 60 days after receipt of a request for review, unless
special circumstances require an
21
extension of time for processing (such as the need to hold a hearing),
in which event a decision should be rendered as soon as possible, but
in no event later than 120 days after such receipt. The decision of
the Administrator shall be written and shall include specific reasons
for the decision, written in a manner calculated to be understood by
the claimant, with specific references to the pertinent Plan
provisions on which the decision is based.
(d) Any balance remaining in the Participants' Health Care
Reimbursement Fund or Dependent Care Assistance Account as of the end
of each Plan Year shall be forfeited and deposited in the benefit plan
surplus of the Employer pursuant to Section 6.03 or Section 7.08,
whichever is applicable, unless the Participant had made a claim for
such Plan Year, in writing, which has been denied or is pending; in
which event the amount of the claim shall be held in his account until
the claim appeal procedures set forth above have been satisfied or the
claim is paid. If any such claim is denied on appeal, the amount held
beyond the end of the Plan Year shall be forfeited and credited to the
benefit plan surplus.
(e) Notwithstanding the foregoing, in the case of a claim for
medical expenses under the Health Care Reimbursement Plan, the
following timetable for claims and rules below apply:
Notification of whether claim is accepted or denied 30 days
Extension due to matters beyond the control of the Plan 15 days
Insufficient information on the Claim:
Notification of 15 days
Response by Participant 45 days
Review of claim denial 60 days
The Plan Administrator will provide written or electronic
notification of any claim denial. The notice will state:
(1) The specific reason or reasons for the denial.
(2) Reference to the specific Plan provisions on which the
denial was based.
(3) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary.
(4) A description of the Plan's review procedures and the
time limits applicable to such procedures. This will include a
statement of the right to bring a civil action under section 502
of ERISA following a denial on review.
(5) A statement that the claimant is entitled to receive,
upon request and free of charge, reasonable access to, and copies
of, all documents, records, and other information relevant to the
Claim.
22
(6) If the denial was based on an internal rule, guideline,
protocol, or other similar criterion, the specific rule,
guideline, protocol, or criterion will be provided free of
charge. If this is not practical, a statement will be included
that such a rule, guideline, protocol, or criterion was relied
upon in making the denial and a copy will be provided free of
charge to the claimant upon request.
When the Participant receives a denial, the Participant shall
have 180 days following receipt of the notification in which to appeal the
decision. The Participant may submit written comments, documents, records, and
other information relating to the Claim. If the Participant requests, the
Participant shall be provided, free of charge, reasonable access to, and copies
of, all documents, records, and other information relevant to the Claim.
The period of time within which a denial on review is required to
be made will begin at the time an appeal is filed in accordance with the
procedures of the Plan. This timing is without regard to whether all the
necessary information accompanies the filing.
A document, record, or other information shall be considered
relevant to a Claim if it:
(1) was relied upon in making the claim determination;
(2) was submitted, considered, or generated in the course of
making the claim determination, without regard to whether it was
relied upon in making the claim determination;
(3) demonstrated compliance with the administrative
processes and safeguards designed to ensure and to verify that
claim determinations are made in accordance with Plan documents
and Plan provisions have been applied consistently with respect
to all claimants; or
(4) constituted a statement of policy or guidance with
respect to the Plan concerning the denied claim.
The review will take into account all comments, documents,
records, and other information submitted by the claimant relating to the Claim,
without regard to whether such information was submitted or considered in the
initial claim determination. The review will not afford deference to the initial
denial and will be conducted by a fiduciary of the Plan who is neither the
individual who made the adverse determination nor a subordinate of that
individual.
SECTION 9.02 APPLICATION OF BENEFIT PLAN SURPLUS
Any forfeited amounts credited to the benefit plan surplus by
virtue of the failure of a Participant to incur a qualified expense or seek
reimbursement in a timely manner may, but need not be, separately accounted for
after the close of the Plan Year (or after such further time specified herein
for the filing of claims) in which such forfeitures arose. In no event shall
such amounts be carried over to reimburse a Participant for expenses incurred
during a subsequent Plan Year for the same or any other Benefit available under
the Plan; nor shall amounts forfeited by a particular Participant be made
available to such Participant in any other form or
23
manner, except as permitted by Treasury regulations. Amounts in the benefit plan
surplus shall first be used to defray any administrative costs and experience
losses and thereafter be retained by the Employer.
SECTION 9.03 NAMED FIDUCIARY
The Administrator shall be the named fiduciary pursuant to ERISA
Section 402 and shall be responsible for the management and control of the
operation and administration of the Plan.
SECTION 9.04 GENERAL FIDUCIARY RESPONSIBILITIES
The Administrator and any other fiduciary under ERISA shall
discharge their duties with respect to this Plan solely in the interest of the
Participants and their beneficiaries and
(a) for the exclusive purpose of providing Benefits to
Participants and their beneficiaries and defraying reasonable expenses
of administering the Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and
(c) in accordance with the documents and instruments governing
the Plan insofar as such documents and instruments are consistent with
ERISA.
SECTION 9.05 NONASSIGNABILITY OF RIGHTS
The right of any Participant to receive any reimbursement under
the Plan shall not be alienable by the Participant by assignment or any other
method, and shall not be subject to the rights of creditors, and any attempt to
cause such right to be so subjected shall not be recognized, except to such
extent as may be required by law.
ARTICLE X
ADMINISTRATION
SECTION 10.01 PLAN ADMINISTRATION
The operation of the Plan shall be under the supervision of the
Administrator. It shall be a principal duty of the Administrator to see that the
Plan is carried out in accordance with its terms, and for the exclusive benefit
of Employees entitled to participate in the Plan. The Administrator shall have
full power to administer the Plan in all of its details, subject, however, to
the pertinent provisions of the Code. The Administrator's powers shall include,
but shall not be limited to the following authority, in addition to all other
powers provided by this Plan:
(a) To make and enforce such rules and regulations as the
Administrator deems necessary or proper for the efficient
administration of the Plan;
(b) To interpret the Plan, the Administrator's interpretations
thereof in good faith to be final and conclusive on all persons
claiming benefits by operation of the Plan;
24
(c) To decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan and to receive
benefits provided by operation of the Plan;
(d) To reject elections or to limit contributions or Benefits for
certain highly compensated participants if it deems such to be
desirable in order to avoid discrimination under the Plan in violation
of applicable provisions of the Code;
(e) To provide Employees with a reasonable notification of their
benefits available by operation of the Plan;
(f) To approve reimbursement requests and to authorize the
payment of benefits; and
(g) To appoint such agents, counsel, accountants, consultants,
and actuaries as may be required to assist in administering the Plan.
Any procedure, discretionary act, interpretation or construction
taken by the Administrator shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent
with the intent that the Plan shall continue to comply with the terms of
Code Section 125 and the Treasury regulations thereunder.
SECTION 10.02 EXAMINATION OF RECORDS
The Administrator shall make available to each Participant,
Eligible Employee and any other Employee of the Employer such records as pertain
to their interest under the Plan for examination at reasonable times during
normal business hours.
SECTION 10.03 PAYMENT OF EXPENSES
Any reasonable administrative expenses shall be paid by the
Employer unless the Employer determines that administrative costs shall be borne
by the Participants under the Plan or by any Trust Fund which may be established
hereunder. The Administrator may impose reasonable conditions for payments,
provided that such conditions shall not discriminate in favor of highly
compensated employees.
SECTION 10.04 INSURANCE CONTROL CLAUSE
In the event of a conflict between the terms of this Plan and the
terms of an Insurance Contract of an independent third party Insurer whose
product is then being used in conjunction with this Plan, the terms of the
Insurance Contract shall control as to those Participants receiving coverage
under such Insurance Contract. For this purpose, the Insurance Contract shall
control in defining the persons eligible for insurance, the dates of their
eligibility, the conditions which must be satisfied to become insured, if any,
the benefits Participants are entitled to and the circumstances under which
insurance terminates.
SECTION 10.05 INDEMNIFICATION OF ADMINISTRATOR
The Employer agrees to indemnify and to defend to the fullest
extent permitted by law any Employee serving as the Administrator or as a member
of a committee designated as Administrator (including any Employee or former
Employee who previously served as
25
Administrator or as a member of such committee) against all liabilities,
damages, costs and expenses (including attorney's fees and amounts paid in
settlement of any claims approved by the Employer) occasioned by any act or
omission to act in connection with the Plan, if such act or omission is in good
faith.
ARTICLE XI
AMENDMENT OR TERMINATION OF PLAN
SECTION 11.01 AMENDMENT
The Employer, at any time or from time to time, may amend any or
all of the provisions of the Plan without the consent of any Employee or
Participant. No amendment shall have the effect of modifying any benefit
election of any Participant in effect at the time of such amendment, unless such
amendment is made to comply with Federal, state or local laws, statutes or
regulations.
SECTION 11.02 TERMINATION
The Employer is establishing this Plan with the intent that it
will be maintained for an indefinite period of time. Notwithstanding the
foregoing, the Employer reserves the right to terminate this Plan, in whole or
in part, at any time. In the event the Plan is terminated, no further
contributions shall be made. Benefits under any Insurance Contract shall be paid
in accordance with the terms of the Contract.
No further additions shall be made to the Health Care
Reimbursement Fund or Dependent Care Assistance Account, but all payments from
such fund shall continue to be made according to the elections in effect until
the end of the Plan Year in which the Plan termination occurs (and for a
reasonable period of time thereafter, if required for the filing of claims). Any
amounts remaining in any such fund or account as of the end of the Plan Year in
which Plan termination occurs shall be forfeited and deposited in the benefit
plan surplus after the expiration of the filing period.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 PLAN INTERPRETATION
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. This Plan shall be read in its entirety and
not severed except as provided in Section 12.12.
SECTION 12.02 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
26
SECTION 12.03 WRITTEN DOCUMENT
This Plan, in conjunction with any separate written document
which may be required by law, is intended to satisfy the written Plan
requirement of Code Section 125 and any Treasury regulations thereunder relating
to cafeteria plans.
SECTION 12.04 EXCLUSIVE BENEFIT
This Plan shall be maintained for the exclusive benefit of the
Employees who participate in the Plan.
SECTION 12.05 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute an employment
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 interfere with the right of the
Employer to discharge any Participant or Employee at any time regardless of the
effect which such discharge shall have upon him as a Participant of this Plan.
SECTION 12.06 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
SECTION 12.07 EMPLOYER'S PROTECTIVE CLAUSES
(a) Upon the failure of either the Participant or the Employer to
obtain the insurance contemplated by this Plan (whether as a result of
negligence, gross neglect or otherwise), the Participant's Benefits
shall be limited to the insurance premium(s), if any, that remained
unpaid for the period in question and the actual insurance proceeds,
if any, received by the Employer or the Participant as a result of the
Participant's claim.
(b) The Employer's liability to the Participant shall only extend
to and shall be limited to any payment actually received by the
Employer from the Insurer. In the event that the full insurance
Benefit contemplated is not promptly received by the Employer within a
reasonable time after submission of a claim, then the Employer shall
notify the Participant of such facts and the Employer shall no longer
have any legal obligation whatsoever (except to execute any document
called for by a settlement reached by the Participant). The
Participant shall be free to settle, compromise or refuse to pursue
the claim as the Participant, in his sole discretion, shall see fit.
(c) The Employer shall not be responsible for the validity of any
Insurance Contract issued hereunder or for the failure on the part of
the Insurer to make payments provided for under any Insurance
Contract. Once insurance is applied for or obtained, the Employer
shall not be liable for any loss which may result from the failure to
pay Premiums to the extent Premium notices are not received by the
Employer.
27
SECTION 12.08 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Administrator nor the Employer makes any commitment
or guarantee that any amounts paid to or for the benefit of a Participant under
the Plan will be excludable from the Participant's gross income for federal or
state income tax purposes, or that any other federal or state tax treatment will
apply to or be available to any Participant. It shall be the obligation of each
Participant to determine whether each payment under the Plan is excludable from
the Participant's gross income for federal and state income tax purposes, and to
notify the Employer if the Participant has reason to believe that any such
payment is not so excludable. Notwithstanding the foregoing, the rights of
Participants under this Plan shall be legally enforceable.
SECTION 12.09 INDEMNIFICATION OF EMPLOYER BY PARTICIPANTS
If any Participant receives one or more payments or
reimbursements under the Plan that are not for a permitted Benefit, such
Participant shall indemnify and reimburse the Employer for any liability it may
incur for failure to withhold federal or state income tax or Social Security tax
from such payments or reimbursements. However, such indemnification and
reimbursement shall not exceed the amount of additional federal and state income
tax (plus any penalties) that the Participant would have owed if the payments or
reimbursements had been made to the Participant as regular cash compensation,
plus the Participant's share of any Social Security tax that would have been
paid on such compensation, less any such additional income and Social Security
tax actually paid by the Participant.
SECTION 12.10 FUNDING
Unless otherwise required by law, contributions to the Plan need
not be placed in trust or dedicated to a specific Benefit, but may instead be
considered general assets of the Employer. Furthermore, and unless otherwise
required by law, nothing herein shall be construed to require the Employer or
the Administrator to maintain any fund or segregate any amount for the benefit
of any Participant, and no Participant or other person shall have any claim
against, right to, or security or other interest in, any fund, account or asset
of the Employer from which any payment under the Plan may be made.
SECTION 12.11 GOVERNING LAW
This Plan is governed by the Code and the Treasury regulations
issued thereunder (as they might be amended from time to time). In no event
shall the Employer guarantee the favorable tax treatment sought by this Plan. To
the extent not preempted by Federal law, the provisions of this Plan shall be
construed, enforced and administered according to the laws of the State of
Alabama.
SECTION 12.12 SEVERABILITY
If any provision of the Plan is held invalid or unenforceable,
its invalidity or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such provision had not
been included herein.
28
SECTION 12.13 CAPTIONS
The captions contained herein are inserted only as a matter of
convenience and for reference, and in no way define, limit, enlarge or describe
the scope or intent of the Plan, nor in any way shall affect the Plan or the
construction of any provision thereof.
SECTION 12.14 CONTINUATION OF COVERAGE
Notwithstanding anything in the Plan to the contrary, in the
event any benefit under this Plan subject to the continuation coverage
requirement of Code Section 4980B becomes unavailable, each Participant will be
entitled to continuation coverage as prescribed in Code Section 4980B.
SECTION 12.15 FAMILY AND MEDICAL LEAVE ACT
Notwithstanding anything in the Plan to the contrary, in the
event any Benefit under this Plan becomes subject to the requirements of the
Family and Medical Leave Act and regulations thereunder, this Plan shall be
operated in accordance with Regulation 1.125-3.
SECTION 12.16 HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
Notwithstanding anything in this Plan to the contrary, this Plan
shall be operated in accordance with HIPAA and regulations thereunder.
SECTION 12.17 UNIFORM SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service shall be provided in accordance with USERRA and the regulations
thereunder.
29
IN WITNESS WHEREOF, this Plan document is hereby executed this
__________ day of ________________________, 2003.
ProAssurance Group Services Corporation
By
-------------------------------------
EMPLOYER
30
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned Secretary of ProAssurance Group Services
Corporation (the Corporation) hereby certifies that the following resolutions
were duly adopted by the board of directors of the Corporation on
______________________, and that such resolutions have not been modified or
rescinded as of the date hereof:
RESOLVED, that the form of amended Cafeteria Plan including a
Dependent Care Assistance Program and Health Care Reimbursement Plan effective
October 1, 2003, presented to this meeting is hereby approved and adopted and
that the proper officers of the Corporation are hereby authorized and directed
to execute and deliver to the Administrator of the Plan one or more counterparts
of the Plan.
RESOLVED, that the Administrator shall be instructed to take such
actions that are deemed necessary and proper in order to implement the Plan, and
to set up adequate accounting and administrative procedures to provide benefits
under the Plan.
RESOLVED, that the proper officers of the Corporation shall act
as soon as possible to notify the employees of the Corporation of the adoption
of the Cafeteria Plan by delivering to each employee a copy of the summary
description of the Plan in the form of the Summary Plan Description presented to
this meeting, which form is hereby approved.
The undersigned further certifies that attached hereto as
Exhibits A and B, respectively, are true copies of ProAssurance Corporation
Employee Benefit Plan as amended and restated and the Summary Plan Description
approved and adopted in the foregoing resolutions.
----------------------------------------
Secretary
Date:
----------------------------------