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					                                 City of Chico
                                    Flexible Benefit Plan
      Plan Year:       July 1, 2011 through December 31, 2011
              (Please note that this will be a 6-month Plan Year)


What does this packet include?
  •    Flex Plan Enrollment Form
  •    Flex Plan Newsletter (Q&A)
  •    Summary of Material Modifications (SMM)
  •    If you are a new employee, your material includes a Summary Plan Description (SPD).


What is the maximum that I may elect?
  •    Medical Expense Flexible Spending Account (FSA):                                  $3,500 ($130 min.)
  •    Dependent Care Flexible Spending Account (FSA):                                   $2,500 (1) (2) ($130 min.)
        (1)   The maximum tax exclusion permitted for a full 12-month Plan Year is $5,000 per individual taxpayer or
              married couple filing a joint tax return. The maximum amount permitted could be reduced under the
              following circumstances: (1) If you are married and file a separate tax return, the maximum you may elect is
              $2,500; (2) If your spouse earns less than $5,000, you may not elect more than your spouse earns during
              the Plan Year; (3) If your spouse is a full-time student or incapable of self-care, the maximum you may elect
              is $3,000 for one child in day care or $5,000 if you have two or more children in day care.
        (2)   The maximum Dependent Care FSA election has been reduced to $2,500 for the short Plan Year.



Over-The-Counter (OTC) Drugs are no longer reimbursable
without a doctor’s prescription!
  •    Effective January 1, 2011, a “prescription” will be required for you to be reimbursed
       from your Medical Expenses FSA for over-the-counter (OTC) “drugs & medicines”.

  •    What does this mean for Medical FSA participants? Simply put, it means that you
       may not be reimbursed tax-free for any “OTC drug or medicine” (meaning a drug or
       medicine that you can legally purchase at a retailer without a prescription) unless you
       have a prescription (yes, we agree this is very confusing). However, OTC medical
       supplies and implements (non-drugs) are still reimbursable without a prescription.
       Believe it or not, there are approximately 27,000 medical items that you can still be
       reimbursed for without a prescription!

  •    Are there any OTC drugs or medicines that are exempt from this new law?
       Currently, insulin is the only drug or medicine exempted from this new law.
•   What do you mean by a “prescription”? It means a real prescription dispensed by
    a “physician”. A physician is defined as a doctor of medicine, osteopathy, dental
    surgery, dental medicine, optometry or a Chiropractor. Generally, a practitioner of
    alternative medicine will not qualify under this definition.

•   Will a simple recommendation from a physician qualify as a “prescription? No.
    Following are two examples to help clarify what is required:

    Example #1: Jack lives on a hill in California. On January 5, 2011, Jack gets a
    headache. Jack goes to his physician, Dr. Jill (his future wife), who recommends that
    he take two aspirin and call her in the morning. Jack purchases a large bottle of
    aspirin for $8.00. On January 6, 2011, Jack submits a claim for the aspirin to his
    administrator. The administrator must deny the claim because Jack did not have a
    legal prescription.

    Example #2: Same facts, except that Dr. Jill writes Jack a prescription for aspirin.
    Jack then goes to the pharmacy and presents the prescription to the pharmacist. The
    pharmacist then fills the prescription and dispenses the aspirin to Jack. As with any
    prescription, Jack receives a “pharmacy receipt” with his aspirin. Jack then submits
    the pharmacy receipt along with a claim form to his administrator. The administrator
    pays the claim because Jack had a prescription.

•   What supporting documentation is required for an OTC drug or medicine to be
    reimbursed under an FSA after January 1, 2011? No one is 100% sure as we are
    still awaiting more guidance from the IRS. What we know for sure is a “Pharmacy
    Receipt” with an Rx number will be acceptable. A Pharmacy Receipt is traditionally
    provided anytime a prescription drug is filled at a pharmacy (a Pharmacy Receipt is
    not the same thing as the cash-register receipt that you receive when you pay). To get
    a Pharmacy Receipt, just present your doctor’s prescription for the OTC item at the
    pharmacy counter and ask them to fill it as a prescription. The pharmacy attendant
    should know what to do from there.

    As a possible alternative, a store (“cash register”) receipt that identifies the
    medicine/drug purchased, the cost and the date purchased may be acceptable
    provided you include a copy of the doctor’s prescription with your receipt (must be
    legible) when you submit your claim for reimbursement. Pending additional guidance,
    this approach will be accepted. Please note however that this alternate approach may
    be disallowed at any time by the IRS. For this reason, you should get in the habit of
    obtaining a Pharmacy Receipt.

•   Do I have to get a new prescription every time I make a purchase? This is
    determined by your prescription. If your prescription is written for a one-time
    purchase, then you may only use it once. Conversely, if your prescription is written for
    a long-term or permanent condition, you can use it for as long as it is written.

•   Do I have to include a copy of the prescription every time I submit a claim to
    CBA? Yes. There is no way for CBA to keep track of thousands of prescriptions “on
    file” for participants. If this doesn’t work for you, we recommend that you accumulate
    your OTC drug & medicine expenses throughout the year and then submit a claim for
    multiple purchases at the end of the year.
  •   Following is a sample list of the types of OTC expenses that WILL require a
      prescription after January 1, 2011:

               •   Acid Relievers               •   Digestive Aids
               •   Allergy & Sinus Remedies     •   Feminine Anti-Fungal Remedies
               •   Antibiotics                  •   Hemorrhoidal Remedies
               •   Anti-Gas Remedies            •   Laxatives
               •   Anti-Itch Remedies           •   Motion Sickness Remedies
               •   Anti-parasitic Treatments    •   Pain Relief Medication
               •   Baby Rash Ointments/Creams   •   Respiratory Treatments
               •   Cold Sore Remedies           •   Sleep Aids & Sedatives
               •   Cough, Cold & Flu Remedies   •   Stomach/Intestinal Remedies

  •   Following is a sample list of the types of OTC expenses that WILL NOT require a
      prescription after January 1, 2011:

               • Band Aids & bandages           •   Diagnostic Tests & Monitors
               • Birth Control                  •   First Aid Supplies
               • Braces & Supports              •   Insulin & Diabetic Supplies
               • Catheters                      •   Ostomy (e.g. colostomy) Products
               • Contact Lens Supplies &        •   Reading Glasses
                 Solutions
               • Denture Adhesives              • Wheelchairs, Walkers, Canes

  •   How much will this affect my election for the coming plan year? That depends on
      how you use your FSA account. If you use your account primarily for OTC drugs and
      medicines, the new law may significantly impact the amount you should elect. On the
      other hand, if you rarely use your FSA account to purchase OTC drugs and medicines,
      this new law should not impact your election at all. Nationwide, only 7% of FSA
      purchases are for OTC drugs and medicines. This means that 93% of all purchases
      are not affected by the new law. Still, you are the best judge of how this new law will
      impact your election.

  •   Our current plan year ends on June 30, 2011. Will I be able to purchase OTC
      drugs without a prescription until the end of my current Plan Year? No. The new
      law is effective for all purchases made after December 31, 2010.

  •   Are Medical FSA accounts still worth having after this change? Absolutely!
      Remember that only 7% of all Medical FSA reimbursements are for OTC drugs and
      medicines. This means about 93% of all reimbursements are not impacted by this
      new law. Plus, while it may not be as convenient, you can still be reimbursed for OTC
      drugs and medicines with a prescription.


Limited Use Medical FSA
  •   If you elect to enroll in the HSA (Health Savings Account), you may not enroll in the full
      Medical FSA. However, you may elect to enroll in the “Limited Use Medical FSA”.
  •   The Limited Use Medical FSA works exactly like the full Medical FSA except that you
      may only be reimbursed for dental & vision expenses. As an example, let’s say you
      enroll in the HSA. Let’s also say you plan to have laser eye surgery for your spouse
      ($2,000), purchase prescription glasses for yourself ($250), plus you have to make
      $100 monthly orthodontic payments for your child’s braces throughout the year
      ($1,200). Using this example you could elect $3,450 for the Limited Use Medical FSA.
  •   Why not use your HSA to pay for these expenses? There are quite a few reasons why
      electing the Limited Use Medical FSA can be a great benefit. First, your entire Limited
      Use Medical FSA election is available to you as of the first day of the year (whereas
      you have to save up the money in your HSA). Second, your Limited Use Medical FSA
      election is 100% tax-free (just like the full Medical FSA). Third, by using the Limited
      Use Medical FSA for your dental & vision expenses, you won’t deplete the funds in
      your HSA.
  •   You can use the Limited Use Medical FSA to pay for all your out of pocket charges for
      expenses that are covered under a dental or vision insurance plan. This means
      expenses such as dental/vision copayments and coinsurance may be reimbursed
      through your Limited Use Medical FSA. In addition, you can use your Limited Use
      Medical FSA to pay for many expenses that are not covered by many dental and
      vision insurance plans. For example, you can use your Limited Use Medical FSA to
      pay for extra teeth cleanings that your dental plan doesn’t cover. You can also use
      your Limited Use Medical FSA to pay for your net cost for composite (white) filings, or
      a tooth implant, or adult orthodontia, or even a full mouth reconstruction (TMJD). As
      for vision expenses, you can use your Limited Use Medical FSA to pay for the extra
      cost of designer frames, or an extra pair of glasses, or an extra supply of disposable
      contacts, and of course laser eye surgery.
  •   In order to be reimbursed under your Limited Use Medical FSA, the dental or vision
      expense must be “medically necessary”. But don’t let this scare you, “medically
      necessary” simply means the expense must provide some actual medical benefit. In
      other words, it cannot be 100% cosmetic. As an example, laser eye surgery improves
      your vision, so it is always “medically necessary”. Orthodontia for adults always
      improves your teeth alignment, so this is always “medically necessary”. A second pair
      of designer prescription glasses helps your vision, so it is always “medically
      necessary”, even if you purchase 5 pairs of prescription sunglasses! The bottom line
      is there are very few dental and vision expenses that are 100% cosmetic. What are a
      few? Well….teeth whitening is the most common while veneers are also sometimes
      purely cosmetic.
  •   The maximum annual election for the Limited Use Medical FSA is the same as the full
      Medical FSA.
  •   Just remember, a Limited Use Medical FSA election may only be used to reimburse
      dental and vision expenses that you and your family incur during the plan year.


Who Administrates the Flex Plan?
  •   Custom Benefit Administrators (CBA) is the Third-Party Administrator (TPA) for the
      Flexible Benefit Plan. CBA is located in Rocklin, California.


Can I be reimbursed for my family’s expenses?
  •   YES! You may save taxes on all qualified expenses incurred by you, your spouse and
      your children. Generally, you may NOT be reimbursed for expenses incurred by a
      domestic partner unless your domestic partner is your federal tax dependent. Refer
      to your SPD for details.
How do I enroll in the Spending Accounts?
  •   To enroll, complete the enclosed Enrollment Form and return it to your employer prior
      to your enrollment deadline.
  •   PLEASE NOTE – If you check the “Yes” box under the question “Will you participate in
      a Health Savings Account (HSA) during the Plan Year?” on your Enrollment Form, and
      you make a Medical FSA election, reimbursements will automatically be limited to
      dental and vision related expenses. Be sure to take this into consideration when
      making your election for the Medical FSA.


How do I file a claim for the Spending Accounts?
  •   After you enroll, CBA will send you a FLEX plan welcome packet (called the “Next
      Steps” packet). The welcome packet includes an election confirmation, claim form and
      lots of great information about your accounts, including how to make a claim and
      access information via the Internet. If CBA has your email address on file, the
      welcome packet will be emailed to you. If not, CBA will mail the welcome packet to
      your address on record.
  •   You may send claims to CBA by regular mail, fax, e-mail, or you may use CBA’s online
      claim filing feature. Please be aware that e-mailing information over the Internet may
      not be secure.
  •   To be eligible for reimbursement, a medical or day care service must be “incurred”
      (performed) while you are an active participant between July 1, 2011 * and December
      31, 2011 *. The date you pay for a service is generally not important (except when
      purchasing Over-The-Counter [OTC] drugs & medicines).
         *   You may NEVER be reimbursed for services “incurred” (meaning the date the service was
             actually provided) prior to the date you enroll (meaning the later of the date you become eligible
             to participate or the date you enroll online/sign your Enrollment Form). In addition, if you lose
             your eligibility to participate during the Plan Year (e.g. you terminate employment), then you
             may not be reimbursed for expenses incurred after the date you lose eligibility unless you are
             offered and elect to extend your Medical FSA coverage under COBRA.
  •   If you are an active participant on the last day of the plan year, you have until March
      31, 2012 in which to submit claims (services must be rendered by the last day of the
      plan year).


When will I be reimbursed?
  •   Reimbursements are paid every Wednesday and Friday (except holidays).
  •   The claims “cut-off” is noon on the previous business day (Tuesday and Thursday).
      This means the entire claim (the claim form AND your supporting documentation) must
      be received. If any portion of your claim is missing, it is not considered “received”.
  •   You may choose to be reimbursed for claims by check or Direct Deposit. Direct
      Deposit is recommended as it is fast, convenient and reliable. If you choose Direct
      Deposit, CBA can email you a confirmation notice every time you are paid a
      reimbursement. To enroll, simply complete the “Direct Deposit Authorization” on your
      Enrollment Form. That’s it! If you are already enrolled in Direct Deposit with CBA, you
      do not need to provide this information again.
What happens if my employment terminates or if I retire?
  •   If you terminate employment or otherwise lose your eligibility to participate in the Plan,
      no benefits will be payable for services rendered after the following dates (Refer to
      your SPD for information about COBRA for the Medical FSA):
         Medical Expense FSA - The day on which the employee lost their eligibility to
         participate.
         Limited Use Medical Expense FSA - The day on which the employee lost their
         eligibility to participate.
         Dependent Care FSA - The last day of the plan year during which the employee
         was eligible to participate.

  •   If you lose your eligibility to participate in the Medical FSA, CBA must RECEIVE your
      claims for reimbursement no later than 90 days after the date your eligibility ended
      (e.g. your termination date).


How do I contact CBA (Custom Benefit Administrators)?
  •   Web Site:                   www.cbadministrators.com
  •   Telephone Hours:            8:30 AM to 4:30 pm (PST)
  •   Telephone Numbers:          (916) 303-7090 / Long distance (800) 574-5448
  •   E-Mail Address:             customerservice@cbadministrators.com
  •   FAX Numbers:                (916) 303-7083 / Long distance (800) 584-4591
  •   Mailing Address:            CBA, P.O. Box 2170, Rocklin, CA 95677
Flexible Benefit Plan Enrollment Form                                                                   JULY 1, 2011 PLAN YEAR
                                                                                                                    Administered by CBA


EMPLOYER:   City of Chico                                                      PLAN YEAR ENDING:      December 31, 2011
1   Employee Information - Please print clearly
    FIRST NAME                                      LAST NAME                                                 SOCIAL SECURITY NUMBER




    MAILING ADDRESS                                                           CITY                               STATE           ZIP CODE




    DATE OF BIRTH           DAYTIME PHONE NUMBER                      E-MAIL ADDRESS (optional)




2   Make Your Elections - Enter your election for each account.

    Medical FSA                                                            Dependent Care FSA
       I elect to participate in the Medical FSA. The amount I                 I elect to participate in the Dependent Care FSA. The amount I
       elect for the PLAN YEAR is (maximum $3,500 min $130):                   elect for the PLAN YEAR is (maximum $2,500 * min $130):


            $                                  / Plan Year                            $                                    / Plan Year

       Your annual election will be deducted from your pay in equal              Your annual election will be deducted from your pay in equal
                 installments throughout the plan year.                                    installments throughout the plan year.
                                                                                          * $2,500 max due to Short Plan Year of 6 months

3   Will you participate in a Health Savings Account (HSA) during the Plan Year?                        If yes, check box below.


                   YES.    If checked, the Medical FSA may only reimburse you for DENTAL and VISION related expenses.

    Direct Deposit Authorization – Complete the banking information if you wish to establish direct deposit with CBA (or change your
4   current direct deposit banking information on file with CBA).
    By completing the banking information below, I hereby authorize CBA to deposit all reimbursements directly into my personal bank account at
    the financial institution named below. I understand that I may cancel this authorization at any time by notifying CBA in writing. I further
    understand that I am responsible to notify CBA if, for any reason, my bank account information changes. If I do not sign up for Direct Deposit,
    I understand all reimbursements will be paid to me by check.

        Check this box if you are already signed up for and wish to continue Direct Deposit with CBA during the new Plan Year.
        If you do NOT check this box, your direct deposit will be cancelled and you will be reimbursed via check.


                                                                                                             Checking              Savings
                      Name of DEPOSITORY (Name of Financial Institution)


    Bank Routing Number                                                Account Number


5   By signing below, you are agreeing to the terms and conditions printed on the back of this form.

    I, the undersigned employee, hereby certify that I have read and agree to all the “Terms & Conditions for Participation in the Flexible Benefit
    Plan” printed on the back of this Election Form. I hereby authorize my employer to deduct the amounts listed above from my compensation.

    EMPLOYEE SIGNATURE:                                                                           DATE:             /        /

6   To be completed by Employer
    AUTHORIZED EMPLOYER SIGNATURE                                              BENEFITS EFFECTIVE DATE (May not          DATE OF         DATE OF 1ST
                                                                               precede the date employee signed form)    HIRE            DEDUCTION
    _____________________________________________________________
                                                                                                                                             REVISED 1/1/2011

                    P.O. Box 2170, Rocklin, CA 95677 ■ Fax (916) 303-7083 ■ Phone (916) 303-7090
Flexible Benefit Plan Enrollment Form                                              JULY 1, 2011 PLAN YEAR
                                                                                             Administered by CBA


  Terms & Conditions for Participation in the Flexible Benefit Plan
    I fully understand and agree that:
       •   I may never be reimbursed for expenses “incurred” (the date services are actually performed) prior to
           the later of, the date I am eligible to participate or the date I complete the enrollment form.
       •   Once made, my elections are “irrevocable” during the plan year unless I experience a “qualifying and
           related change in status”. I understand that I must refer to my SPD for details.
       •   If I am an active employee as of the last day of the plan year, I will forfeit any remaining balance left
           in my reimbursement account(s) unless CBA “receives” my claim for qualified expenses by the last
           day of my “run-out period”.
       •   If I terminate employment, or otherwise lose my eligibility to participate in the reimbursement
           accounts during the plan year, I may be required to submit claims for reimbursement shortly after
           losing my eligibility (refer to your SPD for the filing deadline if you terminate participation during the
           plan year). If I do not submit my claim for reimbursement by the deadline, I understand and agree
           that I will forfeit any remaining balance left in my reimbursement account(s).
       •   I may only receive reimbursements for qualified expenses incurred (date services are performed)
           during the plan year and while I am an active employee (unless coverage is extended under
           COBRA).
       •   I may be reimbursed for expenses incurred by myself, my spouse, my dependent children, and any
           other individual who qualifies as my federal tax dependent.
       •   I may not be reimbursed for expenses incurred by my domestic partner and/or their dependent
           children, unless my domestic partner and/or their children also qualify as my federal tax
           dependent(s).
       •   I may never seek reimbursement before an expense is “incurred” (performed).
       •   By participating in my flexible benefit (cafeteria) plan, I may reduce my Social Security tax
           contribution, and therefore, could potentially reduce my future social security benefits.
       •   My employer may modify or revoke my elections at any time if required to maintain the Plan in
           compliance with all applicable provisions of the Internal Revenue Code (IRC).
       •   This agreement is subject to the terms and conditions of the Plan and revokes any prior agreement I
           may have completed.
       •   I must make a new election each year for my FSA accounts. My FSA elections will not automatically
           roll-over.
       •   My health insurance premium and HSA contributions will automatically be deducted from my pay
           before-tax to the extent permitted by law (insurance benefits and HSA contributions may only be paid
           for with before-tax dollars). I will automatically save all taxes on my health insurance premium
           contributions and all federal taxes on my HSA contributions.
       •   I am responsible to determine if the tax benefits provided by the Dependent Care FSA are superior to
           the federal tax credit.
       •   I am responsible to reimburse my employer for any benefits received, taxes, penalties or interest that
           may be imposed if I knowingly violate the terms of the Plan.
       •   I have received a Summary Plan Description (SPD) for the Flexible Benefit Plan.




              P.O. Box 2170, Rocklin, CA 95677 ■ Fax (916) 303-7083 ■ Phone (916) 303-7090
                                                                                         Custom Benefit Administrators




                                         City of Chico
  7/1/11 – 12/31/11                                      Benefit Plan Newsletter
    Read All About It!
                                        of expenses with before-tax (tax-    these plans are referred to as
 Pg. 2   Medical Expense FSA
                                        free) dollars. The expenses          “cafeteria” plans.
         Over-The-Counter (OTC)         permitted in your Flex Plan are
 Pg. 3   Items & Supplies
                                        explained in this outline. If you    While your Flexible Benefit Plan
 Pg. 5   Dependent Care FSA             choose to participate, you will      provides you with great tax
                                        lower your taxes. When you           savings there are some important
   Custom Benefit Administrators
                                        lower your taxes you will have       rules. Two of the most important
           P.O. Box 2170
         Rocklin, CA 95677              more money to spend!                 are: (1) before-tax elections can
   916.303.7090 Customer Service                                             not be changed during a plan
       800.574.5448 Toll Free
                                        Your Flex Plan provides several      year except under very limited
         916.303.7083 Fax
    www.cbadministrators.com            ways to save taxes. First, you pay   circumstances; and, (2) FSA
                                        no taxes on your out-of-pocket       reimbursements are based solely
                                        cost for health insurance. In        on the date services are rendered
This outline provides general
                                        addition, your Flex Plan offers      without regard to when you pay
information about your Flexible
                                        two Flexible Spending Accounts       for a service.
Benefit Plan (Flex Plan), also
                                        (FSAs). FSAs provide you with
known as a “Cafeteria Plan”.                                                 Another important rule is that
                                        a great way to save taxes on most
Participating in the Flex Plan can                                           you may save taxes on expenses
                                        out-of-pocket medical expenses
save you thousands of dollars in                                             for a domestic partner only “IF”
                                        incurred by you, your spouse or
taxes every year. Quite simply,                                              your partner qualifies as your
                                        your Dependent children (this is
if you don’t participate in your                                             federal tax dependent.
                                        called a Medical Expense FSA)
Flex Plan you could be
                                        and day care expenses (this is
voluntarily over-paying taxes!                                               While you are restricted from
                                        called a Dependent Care FSA).
                                                                             making changes during the year,
The primary benefit of a Flex           You may choose to participate in
                                                                             you can make new elections prior
Plan is the elimination of taxes        one or all of the accounts offered
                                                                             to the beginning of each future
on money you are already                in your Flex Plan. This ability to
                                                                             plan year during your annual
spending. How? Under Federal            select in which accounts you
                                                                             “open enrollment” period.
law, your employer can offer you        want to participate is the reason
the option to pay for certain types



                                      SAVE! SAVE! SAVE! SAVE! SAVE!


   . . . . . . . . . . . . . . . . . . . . . . . .                                                            1
                                                                            CBA Medical Flexible Spending Account
What is a Medical                    pocket medical, dental                   Account). However, if your
Expense FSA?                         & vision related                         Flexible Benefit Plan includes a
A Medical Expense FSA (or            expenses. Services                       special “Limited Use” FSA (it is
“Health FSA”) allows you to set      must be “incurred”                       called “Limited Use” because it
aside tax-free dollars that will     (provided) before                        will only reimburse you for dental
                reimburse you for    you may be                               and vision category expenses),
                 out-of-pocket       reimbursed. In addition, the             you may elect to participate in the
                 medical, dental &   service must be rendered while           Limited Use FSA and make HSA
                vision expenses      you are an active participant            contributions at the same time.
              “incurred” during      during the plan year.
                                                                              Can I claim out more
the plan year. “Incurred” means
the service must be performed
                                     Is documentation                         than I have contributed?
                                     required to be                           Yes. Your Medical Expense FSA
during the plan year. The patient
                                     reimbursed?                              is “pre-funded”, meaning your
can be you or any Federal Tax
                                     Yes. Supporting documentation is         annual election is available for
“Dependent”.
                                     always required (except for certain      reimbursement at any time during
How does a Medical                   expenses paid for with a qualified       the plan year, regardless of the
                                     debit card). Supporting                  amount you have contributed!
Expense FSA work?
                                     documentation must be provided           Great tax savings and the ability to
First, you elect the amount you
                                     by your insurance carrier, health        claim your entire election at any
want available for the plan year
                                     service provider or retailer (for        time are the reasons Medical
(up to the Plan maximum
                                     Over-The-Counter [OTC] items)            FSA’s are so popular.
established by your employer).
Your election is then deducted       and must include the name of the
(tax-free) from your pay in equal    service provider, the date of              Following is a sample of
installments throughout the plan     service, a description of the              permitted expenses:
year.                                service, patient’s name (patient             ♦ Acupuncture
                                     name is not required for OTC                 ♦ Allergy treatments
There are a variety of ways to be    purchases) and your cost for the             ♦ Chiropractic
reimbursed for qualified expenses.                                                ♦ Contact lenses & supplies
                                     service. A claim form will be
                                                                                  ♦ Counseling (no marriage/ family)
Refer to the section entitled “How   provided after you enroll.                   ♦ Dental (no teeth whitening)
do I file a claim for the Spending                                                ♦ Doctor office visits & exams
Accounts?” in the summary            What if I don't claim my                     ♦ Glasses (prescription)
document at the front of your        entire election?                             ♦ Hearing aids
material. CBA will also send you     Choose your annual election                  ♦ Hospital services & surgery
detailed claim filing information    wisely as you will forfeit any               ♦ Insulin & Insulin supplies
after you enroll.                    unclaimed benefits after the end of          ♦ Insurance co-pays & deductibles
                                                                                  ♦ Laboratory fees
                                     the plan year. This rule is called
If you have insurance coverage for                                                ♦ Laser eye surgery
                                     "use it or lose it". To avoid the
an expense, your insurance carrier                                                ♦ Medical mileage
                                     risk of forfeiting money, limit the          ♦ Orthodontia (child & adult)
must process your claim before
                                     amount you elect to known                    ♦ Over-The-Counter medical items &
you submit for reimbursement
                                     expenses.                                      supplies (see next page for
from your Medical Expense FSA.                                                      restrictions)
                                     Can I participate in an                      ♦ Prescriptions (medically
What are “qualified                                                                 necessary)
                                     FSA and HSA at the                           ♦ Psychiatric care
medical expenses”?
Qualified medical expenses
                                     same time?                                   ♦ Sterilization
                                     No. If you participate in an FSA,            ♦ Vaccines (including Flu Shots)
include most “medically
                                     you will be ineligible to contribute         ♦ Vision exams
necessary” (non-cosmetic) out-of-                                                 ♦ Well-child services
                                     to an HSA (Health Savings

   . . . . . . . . . . . . . . . . . . . . . . . .                                                      2
                                                                                      CBA Medical Flexible Spending Account

Over-The-Counter Drugs, Medicines & Medical Supplies
Saving taxes on your Over-The-Counter (OTC) drugs, medicine, and medical supply purchases is a great way to
maximize the benefits of your Medical FSA. However, getting reimbursed for your OTC purchases is not a
“free-for-all”. There are important rules and restrictions that you are responsible to understand and abide by.
First, as of January 1, 2011, OTC drugs & medicines will require a prescription from a physician to be
reimbursed through your Medical FSA. This new rule only applies to “drugs & medicines”; medical items and
supplies can still be purchased without a prescription. Of the 42,000 OTC products on the approved list in
2010, 27,000 will still be available for purchase without a prescription in 2011.
Second, the amount of any one item that you purchase must be reasonable. In addition, the maximum dollar
amount you can spend on OTC items that DO NOT require a prescription is $250 per day.
Third, your store receipt must include the name or a clear description of the product (e.g. “band aids”). Your
receipt must also include the date of purchase and the name of retailer. Sales tax and shipping charges may
qualify if the charges are reasonable and incurred exclusively for the purchase of qualified items.
Following is a sample list of items divided into three categories: (1) eligible; (2) needs a prescription or letter
from a physician; and, (3) not eligible under any circumstances. The sample list is intended to help you
understand what is and is not reimbursable. There are tens of thousands of OTC products that may be
reimbursed through your Medical FSA.
            THE FOLLOWING LIST IS EFFECTIVE AFTER DECEMBER 31, 2010
NO Prescription Required                      WILL Require a Prescription                 Items that Require a Letter from
After January 1, 2011                         After January 1, 2011                       your doctor:
Band Aids                                     Acne Medications                            Foot Spa
Birth Control                                 Anti-Diarrhea Medications                   Herbs
Blood Pressure Monitor                        Anti-Inflammatory Treatments                Herbal Remedies
Braces & Supports                             Anti-Itch Treatments                        Massages
Canes                                         Antifungal Treatments                       Minerals
Catheters                                     Antiseptics & Topical Antibiotics           Multivitamins
Colostomy Products                            Allergy Medications                         Supplements
Contact Lens Supplies & Solution              Arthritis Pain Reliever                     Vitamins
Contraceptives                                Asthma Medications
Defibrillators                                Bunion/Blister Treatments                          Not Eligible Under ANY
Denture Adhesives                             Cold & Flu Medications                                  Circumstance
Ear Wax Removal Treatment                     Cold Sore & Fever Blister Medications              Aromatherapy products
First Aid Kits                                Corn & Callus Removal Medications               Baby bottles, cups, oil, wipes
Glucose Meters                                Cough & Cold Medications                                   Cosmetics
Home Screening Tests (Cancer, Cholesterol,    Diaper Rash Ointment                                Cotton swabs or pads
     Fertility, Hepatitis C, HIV, Prostate,                                                             Dental floss
                                              Digestion/Gas Aids
     Thyroid)                                                                                 Deodorants & antiperspirants
                                              Ear Drops
                                                                                                          Diapers
Hot & Cold Packs                              Eye Drops                                                 Facial care
Hydrogen Peroxide, Iodine                     Hemorrhoid Relief                                       Feminine care
Insulin & Diabetic Supplies                   Laxatives                                                 Fragrances
Liquid Adhesive                               Lice Control                                            Hair re-growth
Medicated Bandages                            Nasal Sprays, Drops & Strips                  Low “carb”/low calorie/dietary foods
Nicotine Gum or Patches                       Motion Sickness Tablets                            Oral care (e.g. Sonicare)
Pregnancy Tests                               Oral Pain Remedies                                Shampoo and conditioner
Reading Glasses                               Pain Relievers                                             Skin care
Rubbing Alcohol                                                                                          Spa salts
                                              Sinus Medications
Sleeping/Snoring Appliances                                                                       Sun tanning products
                                              Sleeping Medicines
Vapor rub                                                                                             Tooth brushes
                                              Throat Pain Remedies
Wheelchairs & Walkers                         Wart Removal Medications


    . . . . . . . . . . . . . . . . . . . . . . . .                                                                   3
                                                                                        CBA Medical Flexible Spending Account

  How Much Will Your Family Spend on Medical Services?
Use this worksheet to help calculate how much your entire family will spend on medical services during the course of the plan year.
Only include services/expenses that will be rendered (provided) during the plan year. IRS Publication 502
(http://www.irs.gov/pub/irs-pdf/p502.pdf) offers a lot of helpful information as to what qualifies as a medical expense. However, be
advised that Publication 502 should only be used as a helpful guide and not as an authoritative source of what can be reimbursed under
your Medical FSA. Many expenses listed in publication 502 may not be reimbursed under your Medical FSA (such as premiums). In
addition, your Medical FSA reimburses you based on the date a service is rendered, without regard to the date you pay for a service.


        Office Visits & Co-Payments                                                            Do NOT include
         Medical office visits              $
                                                                                              expenses for the
         Acupuncture office visits          $
         Chiropractic office visits         $                                                following services:
         Counseling (no marriage or family)$
                                                                                                 “Boutique” Medical
         Homeopathic office visits          $                                                     Access Fees (“Membership”
        Prescription Drugs (Legal)                                                                 fees paid to have access to a
                                                                                                   particular doctor)
         Allergy treatments                 $
         Birth control pills                $                                                    Capital expenses (including
                                                                                                   operating & maintenance
         Other prescription drugs           $                                                      costs)
        Vision and Related Eye Care Expenses                                                     Cosmetic services
         Eye exams                          $
                                                                                                 Electrolysis
         Contact lenses                     $
                                                                                                 Expenses for your general
         Prescription eyeglasses            $                                                     health
         Prescription sunglasses            $
                                                                                                 Expenses paid by another
         Laser Eye surgery                  $                                                     plan
        Dental and Related Expenses
                                                                                                 Health club membership
         Deductibles                        $                                                     dues
         Examinations                       $                                                    Insurance premiums
         Teeth cleaning                     $
                                                                                                 Massage & massage
         Crowns, caps, bridges, root canals $                                                     therapy (unless “prescribed to
         Orthodontia                        $                                                      treat a medical condition)

        Over-the-Counter Medical Supplies                                                        Marriage & family
         Band Aids, First Aid Kits, etc.    $                                                     counseling

        Other Expenses                                                                           Vitamins, supplements &
                                                                                                  herbal remedies (unless
         In vitro fertilization             $                                                      “prescribed” by a physician)
         Insulin and insulin supplies       $                                                    OTC Drugs & Medicines
         Psychiatric care                   $                                                      (unless you can get a prescription
                                                                                                   for the item after Jan. 1, 2011)
         Medical mileage                    $
                                            $
                                            $
                                            $

        TOTAL                                             $


      . . . . . . . . . . . . . . . . . . . . . . . .                                                                             4
                                                                 CBA Dependent Care Flexible Spending Account
What is a Dependent                   After you enroll, CBA will send        account balance. The excess
Care FSA?                             you instructions for submitting        portion of your claim will then be
                                      claims and for using the online        reimbursed automatically as you
The Dependent Care FSA allows
                                      system.                                continue to make payroll
you to save taxes on up to $5,000
                                      As you incur expenses, you             contributions.
of "qualified" day care expenses
        every year. The annual        simply complete a claim form,
            tax savings can add up    attach third party documentation       What if the amount of
               to more than           and send to CBA. CBA will              my day care expense
                 $2,000!              review and process your tax-free
                                      reimbursements. If your day care       changes during the
               The maximum            provider does not provide a            year?
             amount you may           statement of charges, they can         In most cases, if you experience a
        elect is reduced for          verify your expense by simply          change of status or the cost for
couples that file separate returns,   signing your completed claim           care changes during the plan year
when one spouse is a student or       form. Third party documentation        you may be permitted to adjust
when a spouse earns little or no      must include the name, address         your election. However, there are
income.                               and tax ID number (or SSN) of          significant restrictions.
                                      the day care provider, as well as      Therefore, you need to choose
How does a Dependent                  the dates of service and name of       your election wisely because you
Care FSA work?                        your child(ren).                       will not be permitted to change
                                                                             your election simply because you
The first step is to determine        At no time can you be
                                                                             elect too much, make a mistake,
your election for the entire plan     reimbursed more than you have
                                                                             or even if you just decide to
year. Do NOT elect more than          actually contributed to your
                                                                             change to a lesser expensive
your actual expenses. Your            Dependent Care account. If you
                                                                             provider. In any event, you must
annual election is then deducted      submit a claim for more than the
                                                                             notify your employer within 30
(tax-free) from your pay in equal     amount in your account, you will
                                                                             days of the event that is causing
installments throughout the plan      be reimbursed up to your
                                                                             the change.
year.
                                                                             For more information call CBA,
                                                                             review your SPD, or visit
                                                                             www.cbadministrators.com.



 Qualified Day Care Expenses Include:
 − Care for children under age 13 OR for a disabled adult dependent that lives with you.
 − Care provided while parents are working or looking for work.
 − Care that has been incurred (services provided) during the plan year.
 − Care paid to a provider who is neither a dependent NOR your child under age 19.
 − Actual day care expenses (separate fees for services such as transportation, meals, classes, lessons, trips
   or supplies are not reimbursable unless the charges are included as part of your base fee - not itemized).
 − Day camps, including day camps that focus on specific activities, such as sports & arts (overnight
   camps are excluded even if the camp apportions the day camp and & over night charges).
 − Reportable (“above the table”) day care expenses.
 − Educational (tuition) charges for kindergarten and over are NOT eligible for reimbursement.


   . . . . . . . . . . . . . . . . . . . . . . . .                                                       5
                                                               CBA Dependent Care Flexible Spending Account
Can I still claim day                                                      $60,000 and you spend $5,000
care expenses for the                 Which is better, the FSA             for the care of one child, your
                                                                           credit will be $600 (20% of
child care credit?                    or the federal tax                   $3,000). Conversely, if you use
You may not claim a credit on         credit?                              the FSA, you could expect to
the same dollars that you receive     Generally, the FSA is much           save as much as $2,000 in taxes
tax-free through your FSA.            better but it depends on a           on the same $5,000 expense.
However, you may be able to           combination of your income,          This is why most families choose
claim the credit on qualified         whether you have one or two          to participate in the Dependent
expenses that exceed the amount       children in care, and how much       Care FSA.
you elect in your FSA.                you pay for care. The credit is
                                      calculated as a percentage of
                                      your day care expense. The           Do I have to file an
How much will I save by
                                      percentage that you receive          additional form with my
participating in the
                                      depends on your Adjusted Gross       federal tax return?
FSA?                                  Income (AGI). Use the
When you participate in the                                                You must file a Form 2441 with
                                      following chart to locate your       your federal tax return. Form
Dependent Care FSA, you pay           percentage. To determine the
NO Federal income tax, NO CA                                               2441 is simply an informational
                                      value of your credit, multiply       form on which you report the
income tax, NO Social Security        your percentage by the LESSER
tax, NO Medicare tax and NO                                                amount and who you have paid
                                      of the amount you pay for day        for day care. Refer to IRS
CA State Disability Insurance         care or $3,000 if you have one
(SDI) on up to $5,000 of                                                   Publication 503, “Child and
                                      child in care or $6,000 if you       Dependent Care Expenses" for
expenses every year! The              have two or more children in
maximum is reduced for married                                             detailed information. Publication
                                      care.                                503 is available at
couples that file a separate return                                        http://www.irs.gov/pub/irs-
($2,500), if your spouse is a full-   For example, if your AGI is          pdf/p503.pdf
time student and if one spouse
makes less than $5,000. It                 Federal Tax Credit
doesn’t matter if you have one                                                       Am I eligible to
or more children in care. For            Adjusted Gross       Applicable
                                             Income           Percentage             participate if I am
most families this results in a
savings of 25% to 45%! Your                $0 – 15,000           35%                 not the
tax savings will depend on the
                                         $15,001 – 17,000        34%                 “Custodial
                                         $17,001 – 19,000        33%
amount you pay for childcare                                                         Parent”?
                                         $19,001 – 21,000        32%
and your combined highest                $21,001 – 23,000        31%                 NO!!! Only the
(“marginal”) tax bracket.                $23,001 – 25,000        30%                 “Custodial Parent” is
In addition, your FSA saves              $25,001 – 27,000        29%                 eligible to participate in
you taxes each and every                 $27,001 – 29,000        28%                 the Dependent Care
payday. The tax credit does              $29,001 – 31,000        27%                 FSA. In the case of
not help until you file your tax         $31,001 – 33,000        26%                 divorce, the Custodial
                                         $33,001 – 35,000        25%                 Parent is the parent with
return.
                                         $35,001 – 37,000        24%                 whom the child lives for
For more information visit               $37,001 – 39,000        23%                 MORE THAN 50% of
www.cbadministrators.com or              $39,001 – 41,000        22%                 the year. Only one
contact CBA Customer Service             $41,001 – 43,000        21%                 parent can qualify as the
at (800) 574-5448.                       $43,001 or more         20%
                                                                                     Custodial Parent.




   . . . . . . . . . . . . . . . . . . . . . . . .                                                       6
        Summary of Material Modification (SMM)
                         to the
          City of Chico Flexible Benefit Plan
The following Material changes to your Flexible Benefit Plan (“Plan”) will take effect on July
1, 2011. This SMM serves to notify you of this change. You should attach this SMM to
your current Summary Plan Description for the Plan.

MATERIAL CHANGES:
  •   Commencing July 1, 2011, the Flexible Benefit Plan Year will change to a calendar
      Plan Year (from the previous July 1 through June 30 period). The Plan Year
      commencing July 1, 2011 will be a transitional (or “short”) Plan Year ending
      December 31, 2011.
  •   Effective July 1, 2011, the Entry Date for newly eligible employees to commence
      participation in the Plan will change from “date of hire” to “the first day of the month
      following date of hire”.
  •   Effective July 1, 2010, your employer will make an annual contribution to qualified
      HSA’s. The amount and timing of the employer contribution will be communicated to
      eligible employees during your annual benefits enrollment period.


  There are no other material changes for the Plan Year commencing July 1, 2011.

				
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