TO: HONORABLE MAYOR AND CITY COUNCIL

FROM: CITY MANAGER

DATE: OCTOBER 21, 2003

SUBJECT: AMENDMENT TO THE SECTION 125 CAFETERIA PLAN (FLEXIBLE SPENDING ACCOUNT (FSA))

RECOMMENDATION

Adopt Resolution No. 2003- to amend the City of Rancho Palos Verdes Section 125 Cafeteria Plan Flexible Spending Account (FSA) in order to comply with the new IRS Ruling that certain qualified over-the-counter drugs may now be reimbursed under our FSA.

BACKGROUND

On September 3, 2003, the IRS announced that over-the-counter (OTC) drugs may now be reimbursed under our FSA. Conexis (FlexPro) who administers our FSA must amend our Plan Description to comply with the IRS ruling to include over-the-counter drugs in our plan definition of "Eligible Medical Expenses".

CONCLUSON

The City’s Plan Description must be amended by Resolution of the City Council to allow certain qualified over-the-counter drugs to be covered under the FSA. Adopting this amendment will provide a tax-deferred savings to our employees on necessary medications that were not covered prior to the IRS ruling.

FISCAL IMPACT

None

Respectively Submitted:

Les Evans

City Manager

Attachments: Resolution No 2003- ; Exhibit A, Amendment to the City of Rancho Palos Verdes Flexible Benefits Plan