COUNTY OF SANTA CRUZ
Flexible Spending Program
DEPENDENT CARE REIMBURSEMENT PROGRAM
SECTION I ESTABLISHMENT AND INTENT OF PLAN
1.1 Establishment of Plan. The County of Santa Cruz has determined
that it is in the best interest of employees to adopt a plan which will
enable Eligible Employees to provide for care of qualified dependents in a
flexible and cost effective fashion in accordance with Sections 125 and 129
of the Internal Revenue Code. The County hereby establishes this flexible
benefit plan for dependent care assistance.
1.2 Intent. The purpose of this Plan is to reimburse Eligible Employ-
ees of the County for the cost of dependent care assistance incurred by
them in exchange for a reduction in the amount of salary that would other-
wise be payable by the County to such employees, but without such reim-
bursement being included in the employees' gross income for federal income,
Social Security and, where permissible, state and local income tax purpos-
es. It is the intent of the County that this Plan qualifies as a "cafete-
ria plan" within the meaning of Section 125 of the Code, and that any Bene-
fits paid under the Plan be eligible for exclusion from gross income to the
maximum extent possible under Section 129 of the Code. The County pro-
vides, and may continue to provide, other employee benefits to some or all
of its employees. The Benefits provided under this "D-Care Plan" shall be
in addition to and not in lieu of such other benefits, and such other bene-
fits shall not constitute a part of this Plan. This Plan shall be inter-
preted, whenever possible, to comply with the terms of Sections 125 and 129
of the Code.
SECTION II DEFINITIONS
2.01 Benefits. "Benefits" means reimbursement under this Plan of Eli-
gible Expenses incurred by Participants.
2.02 Code. "Code" means the Internal Revenue Code of 1986, as now in
effect and as it may be amended thereafter, and includes any regulations or
rulings issued thereunder.
2.03 County. "County" means the County of Santa Cruz.
2.04 Dependent. The "Dependents" of a Participant for each Plan Year
mean the Participant's spouse and any person for which the Participant can
claim as an exemption as a dependent on the Participant's federal income
tax return for that Plan Year.
2.05 Dependent Care Recipient. A "Dependent Care Recipient" means a
Dependent who resides with the Participant in a home which the Participant
(and the Participant's spouse, if married) maintain, and who is:
(a) under age 13 when the care is provided; or
(b) the Participant's spouse who is physically or mentally not able to
care for himself or herself; or
(c) a Dependent who is physically or mentally not able to care for
himself or herself.
2.06 Earned Income. "Earned Income" means all income derived from
wages, salaries, tips, commissions, self-employment (as defined in Code
section 32(c)(2)(A(ii)) and other employment compensation(such as disabili-
ty benefits ) but such term does not include any amounts which are: (a)
received as Benefits under the Plan or any other dependent care assistance
program under Code section 129; (b) received as pension or annuity; or (c)
received as unemployment or workers' compensation. In the case of a spouse
who during at least five months of each of the calendar years covered by
the Plan Year is a full-time student at an Educational Institution or a
spouse who during any month is incapable of self-care, such spouse shall be
deemed for each of such months to be gainfully employed and to have earned
income in that month of (i) $200, if the Participant incurs Eligible Ex-
penses during the Plan year for only one Dependent Care Recipient, and (ii)
$400, if the Participant incurs Eligible Expenses during the Plan Year for
two or more Dependent Care Recipients.
2.07 Educational Institution. "Educational Institution" means any
educational institution which maintains a regular faculty and curriculum
and normally has a regularly enrolled body of pupils or students in atten-
dance at the place where its educational activities are regularly carried
2.08 Eligible Employee. An "eligible employee" is an employee of the
County who is eligible to participate in the plan under Section 3.01.
2.09 Effective Date. "Effective Date" means the first day of Pay Peri-
od 1 of 1995, and the beginning date of the 1995 Plan Year, and the first
day of Pay Period 1 of each subsequent Plan Year thereafter.
2.10 Eligible Expenses. "Eligible Expenses" means all expenses for
Qualified Dependent Care Services incurred by a Participant or his or her
spouse which are paid to a Qualified Caregiver or Qualified Dependent Care
2.11 Enrollment Period. "Enrollment Period" means: (1) for existing
Eligible Employees, the two pay periods immediately preceding the beginning
of the Plan Year (e.g., pay periods 25 and 26); or (2) the first full pay
period of employment for Eligible Employees hired after the annual enroll-
2.12 Qualified Caregiver. A "Qualified Caregiver" is a person perform-
ing Qualified Dependent Care Services who is not: (a) a Dependent; (b) a
spouse of the Participant; or (c) a child of the Participant who is under
the age of 19 as of the close of the Plan Year in which the Qualified De-
pendent Care Service was provided.
2.13 Qualified Dependent Care Center. A "Qualified Dependent Care
Center" is a licensed dependent care center that provides dependent care
for more than six individuals and operates in compliance with all applica-
ble state and local laws.
2.14 Qualifying Dependent Care Services. "Qualifying Dependent Care
Services" means services which are performed to enable a Participant (and
spouse, if applicable) to remain gainfully employed, which are related the
care of one or more Dependent Care Recipients, and which are performed
either within or outside the home of the Participant. Such Qualifying
Dependent Care Services must be performed within the Plan Year and after
the Participant as filed an election in order to receive Benefits under the
procedures described in Section IV.
2.15 Participant. A "Participant" is any Eligible Employee who is a
Participant in the plan under Sections III and IV.
2.16 Pay Period. "Pay Period" means that period consisting of two
consecutive weeks, commencing 12:01 a.m. on Saturday and ending the second
Friday thereafter at midnight (12:00 a.m.). Each succeeding Pay Period
runs in bi-weekly cycles from the following pay period: 12:01 a.m. on Sat-
urday, December 19, 1992 through midnight (12:00 a.m.) on Friday, January
2.17 Plan. The "Plan" is the County of Santa Cruz Dependent Care Reim-
bursement Program, as it may be amended from time to time.
2.18 Plan Year. "Plan Year" means those County pay periods which con-
stitute each tax year, commencing with Pay Period 01 and ending with Pay
Period 26 of 1995, and similar periods each year thereafter.
SECTION III ELIGIBILITY AND PARTICIPATION
3.01 Eligibility. All employees of the County in budgeted full-time
or budgeted part-time positions shall be eligible to participate in this
Plan, but not before the Effective Date.
3.02 Duration. An Eligible Employee will become a Participant provided
the Eligible Employee has executed and delivered to the County an election
form to participate in accordance with Section IV. Participation will
commence the beginning of the first pay period after receipt by the County
of the properly executed election form. An Eligible Employee will continue
to be a Participant until the earlier of:
(a) the date the individual is not longer an Eligible Employee; or
(b) the Participant no longer has an election in effect, as provided
for in Section IV; or
(c) the individual's participation ceases pursuant to Section 4.03; or
(d) upon revocation of the Plan; or
(e) upon exclusion from the Plan pursuant to Section 5.04.
SECTION IV ELECTIONS TO PARTICIPATE
4.01 Annual Elections. An Eligible Employee hired prior to or during
the annual enrollment period may affirmatively elect to receive dependent
care assistance Benefits by executing and filing an election form with the
County during the annual enrollment period for the next Plan Year. An
Eligible Employee hired after the annual enrollment period may affirmative-
ly elect to receive dependent care assistance Benefits for the remainder of
the Plan Year by executing and filing an election form with the County
during the first full pay period of employment. Election forms, which may
be obtained from the County, shall specify the exact amount of the Partici-
pant's salary to be paid in Benefits instead of cash compensation during
the Plan Year period covered by the election. Any Eligible Employee who
fails to file a completed election form with the County during the period
for enrollment shall be deemed to have elected to receive cash benefits
under the Plan for the Plan Year for which the election could have been
4.02 Duration of Elections. Once effective, any election to partici-
pate in the Plan shall remain in effect until the end of the Plan Year for
which the election was made, unless a change in made pursuant to Sections
4.03, 404, and 4.05, immediately below.
4.03 Failure to Make Salary Reduction Contributions. Should a Partici-
pant fail to make salary reduction contributions for any reason during a
Plan Year, participation in the Plan automatically ceases effective the end
of the pay period in which the Participant fails to make salary reduction
contributions. Such a former Participant may not make a new election for
the remainder of such Plan Year.
Notwithstanding the above, should a Participant fail to make salary
reduction contributions during a Plan Year as a result of a leave of ab-
sence without pay which is granted under the requirements of the Federal
Family and Medical Leave Act of 1993, participation in the Plan shall not
cease for the remainder of such Plan Year provided the Participant returns
from the leave prior to the end of such Plan Year and provided that the
benefits payable under the Plan shall be limited to the total value of the
Participant's salary reduction contribution made during such Plan Year.
4.04 Revocation of Election on Termination of Service. The election of
any Participant who terminates or is discharged from a budgeted position
with the County will be automatically revoked as of the effective date of
such termination or discharge. However, claims for reimbursement for Eligi-
ble Expenses for Qualified Dependent Care Services provided prior to the
termination or discharge can continue to be submitted to the County in
accordance with Section VI.
4.05 Mid-Year Changes in Elections. Participants may change their
election for the remainder of any Plan Year for which an election has been
made or deemed made only if such change in election is on account of, and
consistent with, a Life Event. A "Life Event" is one of the events in the
life of a Participant identified immediately below.
A. A Participant may revoke an election, or reduce or increase salary
reduction contributions for the remainder of any Plan Year for the
following life events, provided such revocation or change is
consistent with the life event:
(1) divorce of the Participant; or
(2) death of the Participant's spouse or a Dependent Care
B. A Participant make revoke an election for the remainder of the
Plan Year for the following life events, provided such revocation
is consistent with the life event:
(1) termination of employment of the Participant's spouse; or
(2) a change in the employment of the Participant's spouse from
full-time to part-time.
C. An Eligible Employee who elected not to participate in the Plan
for a Plan Year may elect to participate for the remainder of the
Plan Year when one of the following life events occurs, provid-
ed such election is consistent with the life event:
(1) birth of a child of the Eligible Employee; or
(2) the legal adoption of a child by an Eligible Employee; or
(3) marriage of an Eligible Employee.
D. A Participant may increase the amount of salary reduction contri-
butions for the remainder of a Plan Year for the following life
events, provided the change is consistent with the life event:
(1) birth of a child of the Participant or the legal adoption of
a dependent child by the Participant; or
(2) marriage of the Participant.
In the event that Plan contributions and the corresponding Plan Benefits
for the balance of the Plan Year are terminated as a result of such a
change in an election, any Plan contributions made for the portion of the
Plan Year extending beyond such election revocation date will be refunded
to the Participant.
SECTION V BENEFITS
5.01 General Benefits. From the effective date of the Plan and for so
long as this Plan is continued, every Participant in the Plan shall be
eligible to elect to reduce his/her salary and receive instead Benefits for
all Eligible Expenses incurred by such Participant for Qualified Dependent
Care Services which are provided during the Plan Year and after the date on
which the Participant has filed an election to receive such benefits under
the procedures described in Section IV. The maximum amount of such Bene-
fits payable in response to any claim filed under the Claims Procedures
described in Section VI shall not exceed the Participant's salary reduction
contributions with respect to such Benefits, minus all previous reimburse-
ments of Eligible Dependent Care Expenses paid during the preceding portion
of the Plan Year. No Benefits shall be paid hereunder for Qualified Depen-
dent Care Services provided after the date on which any Participant ceases
to be an employee.
5.02 Maximum Annual Benefits. A Participant who is married at the
close of a Plan Year may not receive Benefits for Eligible Expenses in-
curred by him/her for the Plan Year in excess of the least of:
(a) his/her Earned Income for such Plan Year; or
(b) $5,000 (or $2,500 in the case of a married Participant filing a
separate federal income tax from his/her spouse); or
(c) the Earned Income of his/her spouse for such Plan Year.
A Participant who is not married at the close of a Plan Year may not
receive Benefits for Eligible Expenses incurred for the Plan Year in exceed
of the lesser of:
(a) $5,000; or
(b) Earned Income for the Plan Year.
Notwithstanding any of the above, the maximum Benefits paid under this
Plan must also be reduced by the amount of any tax-exempt dependent care
assistance benefits received by the Participant or the Participant's spouse
from any other employer during the Plan Year.
5.03 Cash Alternative. Any Eligible Employee who has not elected under
the procedures described in Section IV (Elections) to receive Benefits will
be assumed to have elected cash benefits, and his/her salary will not be
reduced to cover payment of Benefits under this Plan.
5.04 Nondiscriminatory Benefits. The Plan is intended not to discrimi-
nate in favor of highly compensated individuals as to eligibility to par-
ticipate, contributions and/or Benefits, and to comply in this respect with
the requirements of the Code. If the operation of the Plan in any Plan
Year would result in such discrimination, then the County may select and
exclude from coverage under the Plan such highly compensated Participants
and/or reduce contributions and/or Benefits under the Plan by such highly
compensated Participants, all as shall be necessary to assure that, in the
judgment of the County, the Plan does not discriminate.
5.05 Maximum Overall Contributions. No Participant shall be entitled
to reduce compensation by more than the aggregate maximum amount of Bene-
fits specified in Sections 5.02 and 5.04 above.
5.06 Forfeiture of Unused Benefits. A Participant shall receive no
reimbursement for Benefits elected, but unused, during a Plan Year for any
SECTION VI CLAIM PROCEDURES
6.01 Claims for Benefits. Each Participant who desires to receive
reimbursement under the Plan for Eligible Expenses incurred for Qualified
Dependent Care Services shall submit to the Payroll Unit of the Auditor's
Office of the County, at the time indicated in Section 6.03, a specified
claim form provided by the County together with necessary receipts for
expenses for Eligible Expenses. Each Participant who desires to receive
reimbursement under the Plan shall certify or provide factual information,
as specified by the County, which is necessary to verify that: the Partici-
pant meets the tests under the Code for a dependent care assistance plan;
Eligible Expense requirements are met; Maximum Annual Benefit requirements
are met; and that the Participants will include on their income tax returns
the name, address, and (except when tax exempt) the taxpayer identification
number of the provider of Qualified Dependent Care Services.
6.02 Time Limits. No Benefits will be paid in a Plan Year for services
provided or received after termination of participation in that Plan Year.
No Benefits will be paid for a Plan Year unless the Participant applies for
such reimbursement by the January 31st following the end of that Plan Year.
SECTION VII PAYMENT OF BENEFITS
7.01 Source of Benefit Payments. The sole source of payments of Bene-
fits under this Plan shall be the unfunded accounts established for each
Participant pursuant to his/her election under Section IV to receive such
Benefits. The County shall pay to each Participant the Benefits which is is
entitled to receive under this Plan, and his/her reimbursement account
under the Plan shall be debited accordingly.
The aggregate reimbursements made as of any point during the Plan Year
shall not exceed the Participant's total Plan contributions for Benefits
made to that point during the Plan Year.
7.02 Forfeitability of Unpaid Benefits. Any balance remaining in the
Participant's reimbursement account after the last Eligible Expense has
been drawn down for a given Plan Year shall be forfeited to the County by
the Participant, and the account balance reduced to zero.
7.03 Annual Statement. The County shall forward to each Participant
receiving Benefits during any Plan Year a statement that shall show the
total Plan contributions for Benefits during the Plan Year. Such statement
shall appear on the Participant's W-2 form, and shall be furnished to the
Participant by the January 31st following the end of such Plan Year.
The County may also, as determined by the County, provide a statement of
total benefits received during any Plan Year by the February 28th following
the end of the Plan Year.
SECTION VIII PROCEDURES FOR RESOLUTION OF DISPUTES
8.01 Authority of County. The County shall have the exclusive power
and authority to interpret the provisions of this Plan and to resolve any
disputes arising under the Plan. Any dispute related to the interpretation
or administration of the Plan shall be resolved in accordance with the
procedures set forth in this Section VIII.
8.02 Filing a Protest. If an Eligible Employee or Participant has any
disagreement with a determination of the County regarding the interpreta-
tion or administration of the terms and conditions of the Plan, they may
file a protest with the County stating their objection to the determination
and setting forth facts sufficient to apprise the County of the basis for
their objection. A protest will be considered only if it is in writing and
delivered in person or by first class mail to the Employee Relations Divi-
sion of the County Personnel Department.
8.03 Appeal. If a protest is wholly or partially denied, notice of the
decision shall be furnished by the County to the Participant or Eligible
Employee within 90 days after actual receipt of the protest by the County.
If special circumstances require an extension of time for processing the
protest, written notice of the extension shall be furnished to the Partici-
pant prior to the end of the 90-day period. The extension notice shall
indicate the special circumstances requiring an extension of the time and
the date by which the County expects to render the final decision. The
following information must be provided in a written notice to the Partici-
pant or Eligible Employee whose protest shall been denied:
(a) specific reason(s) for the denial;
(b) specific reference to a pertinent Plan provision on which the
denial is based;
(c) a description of any additional material or information necessary
for the Participant or Eligible Employee to perfect the protest
and an explanation of why such material or information is neces-
(d) appropriate information as to the steps to be taken if the Partic-
ipant or Eligible Employee wishes to submit his or her protest for
(e) that the Participant or Eligible Employee or his or her duly
authorized representative has a reasonable opportunity to appeal
the denial of a protest, including but not limited to:
(1) requesting a review upon written application to the Plan;
(2) reviewing pertinent documents;
(3) submitting issues and comments in writing.
SECTION IX EMPLOYER CONTRIBUTIONS
All contributions to the Plan shall be designated and deemed to be Coun-
ty contributions. These County contributions are made pursuant to elec-
tions made or deemed made under Section IV which shall have the effect of
salary reduction agreements between the Participants and the County. A
separate fund or trust may, but need not, be established by the County as
necessary to hold any contribution to be later transferred to Participants
as Benefits hereunder.
SECTION X AMENDMENT OR TERMINATION
10.01 Amendments. The County reserves the right to make from time to
time any amendment or amendments to this Plan, provided, however, that the
County may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with the law.
10.02 Termination of Plan. The County may terminate the Plan at any
time. Upon termination of the Plan, the rights of all Participants affect-
ed hereby shall become payable as the County may direct.
SECTION XI MISCELLANEOUS
11.01 No Guarantee of Employment. Nothing contained in this Plan shall
be construed as a right of any Eligible Employee or Participant to be con-
tinued in the employment of the County, or as a limitation on the right of
the County to discharge any of its employees, with or without cause.
11.02 No Rights to County Assets. No Participant or a Participant's
Dependent shall have any right to on interests in, any assets of the County
upon termination of employment or otherwise, except as provided from time
to time under this Plan, and then only to the extent of the Benefits pay-
able under this Plan.
11.03 Assignment and Alienation of Benefits. Benefits provided under
this Plan shall not be such to assignment or alienation.
11.04 No Personal Liability. Nothing contained herein shall impose on
any officer or employees of the County any personal liability for any Bene-
fits due a Participant or Dependent pursuant to this Plan.
11.05 Not an Employee Contract. This Plan shall not be deemed to con-
stitute a contract between the County and any Eligible Employee or Partici-
pant or to be a consideration or any inducement for the employment of any
Participant or Eligible Employee. This Plan shall not be deemed to give
any Participant or Eligible Employee the right to be retained in the ser-
vice of the County or to interfere with the right of the County to dis-
charge any Participant or Eligible Employee at any time regardless of the
effect which such discharge shall have upon such person as a Participant in
this Plan. This Plan shall not be deemed to give the County the right to
require any Participant or Eligible Employee to remain in the employ of the
County or to restrict any such person's right to terminate employment at
11.06 Severability. If any provision of this Plan shall be held in-
valid for any reason, such illegality or invalidity shall not affect the
remaining parts of this Plan, and this Plan shall be construed and enforced
as if such illegal or invalid provisions had never been included.
11.07 Construction. The terms of the Plan shall be construed under the
laws of the State of California except to the extent such laws are preempt-
ed by federal law.
11.08 Non-Coordination with Health Care Reimbursement Plan. All Par-
ticipants in this Plan may be eligible to receive benefits under the sepa-
rate Health Care Reimbursement Plan of the County. The enrollment and
termination of participation under the Health Care Reimbursement Program
shall not constitute enrollment and termination of participation under this
11.09 Gender and Number. In the construction of this Plan, reference
to any gender shall include the masculine, feminine and neuter genders, the
plural shall include the singular and the singular the plural, whenever
11.10 Additional Procedures. Any rules or procedures that may be nec-
essary for the proper administration or functioning of this Plan may be
promulgated and adopted by the County.
SECTION XII ENTIRE PLAN
This documents sets forth the entire Plan. Except as provided in this
Plan, no other employee benefit plan which is, or may hereafter be, main-
tained by the County shall constitute a part of this Plan.
TO RECORD THE ADOPTION OF THIS PLAN, the County has caused this
document to be executed by its duly authorized Board of Supervisors
this 8th day of November 1994.