COUNTY OF SANTA CRUZ

H-CARE: HEALTH CARE REIMBURSEMENT PLAN

ARTICLE I

ESTABLISHMENT AND INTENT OF PLAN

1.1. Establishment of Plan. The County of Santa Cruz is hereby es-

tablishing a cafeteria plan for its eligible employees. This plan known as

the H-Care: Health Care Reimbursement Plan shall be effective December 13,

1997, and shall continue yearly hereafter until terminated in accordance

with Article Seven. The plan is designed to provide eligible employees a

means of making employee health care contributions in a manner permitted by

the Internal Revenue Service.

1.2 Legal Intent. Under this Plan, eligible employees will have the

choice between cash compensation and a nontaxable benefit in the form of

health care coverage where there is an employee contribution due. Thus,

this Plan will constitute a "cafeteria plan" within the meaning of the

Internal Revenue Service Code Section 125.

ARTICLE II

DEFINITIONS

2.1. Definitions. For purposes of the Plan, the terms below have the

following meanings:

(a) "Code" means the Internal Revenue Code of 1986, as amended

from time to time.

(b) "County" means the County of Santa Cruz.

coverage under a Group Medical Plan available to employees through the

County of Santa Cruz due to his/her relationship to the Employee.

(d) "Effective Date" means December 14, 1997 and the first day

of Pay Period 1 of each subsequent Plan Year thereafter.

(e) "Election" means a written statement signed by the employee

on a form prescribed by the Personnel Director and submitted to the Employ-

ee Insurance Section of the Personnel Department stating the employee wish-

es to enroll in the Plan.

(f) "Employee" means an individual employed by the County in a

"budgeted position" who performs a combination of duties requiring not

less than 20 hours of work each week, and who is either enrolled or eligi-

ble for enrollment in a PERS Medical Plan or another group medical plan

available through employment with the County of Santa Cruz.

HEALTH CARE REIMBURSEMENT PLAN

(g) "Enrollment Period" means: (1) for existing -Employees, the

two pay periods immediately preceding the beginning of the Plan Year; or

(2) the first-full-pay period of employment for Employees hired after the

annual enrollment period.

(h) "Group Medical Plan" means any of the group medical plans

available through employment with the County of Santa Cruz.

(i) "Participant" means an eligible Employee who has elected to

participate in the Plan.

(j) "Plan" means the County of Santa Cruz Health Care Reimburse-

ment Plan, adopted herein and as amended from time to time.

(k) "Plan Year" means those County pay periods which constitute

each tax year, commencing with Pay Period 01 and ending with Pay Period 26

of 1995, and each year thereafter.

(l) "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 Saturday,

December 23, 2001, through midnight (12:00 a.m) on Friday, January 5, 2001.

(m) "PERS Medical Plans" means the medical plans provided to

County employees and eligible dependents through the Public Employees Medi-

cal and Hospital Care Act as authorized by Resolutions of the Board of

Supervisors of the County of Santa Cruz.

2.2. Notice. All notices and/or other documents including elections

under this plan are required to be delivered in person or by U. S. mail and

must be actually received by the Personnel Department/Employee Insurance

Section of the County prior to the dates prescribed by this plan.

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.1. Initial Eligibility. An Employee hired prior to or during the

2000 annual enrollment period shall be eligible to participate in the Plan

beginning on December 23, 2000. An employee hired subsequent to the annual

enrollment period shall be eligible to participate in the Plan the first

day of the first full pay period after the individual becomes an Employee

and enrolled in a group medical plan available through their employment

with the County of Santa Cruz.

3.2. Failure to Make Contributions. Should an Employee fail to make

required contribution payments for medical coverage in a Group Medical Plan

for any reason, participation in the Plan ceases and the Employee will not

be permitted to elect to participate in the Plan for the remainder of the

Plan Year.

3.3. Duration. An Employee will become a Participant in the Plan

provided that the Employee has executed and delivered to the County an

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HEALTH CARE REIMBURSEMENT PLAN

election to participate in accordance with Article IV. The Employee will

continue to be a Participant until the earlier of:

(a) the date the individual no longer is an Employee, or

(b) the Participant no longer has an election in effect, as

provided in Article IV, or

3.4. Eligibility Upon Rehire. Rehired Employees shall be treated as

new Employees under the Plan, provided, however, that an individual who

terminates employment and is reemployed during the same Plan Year shall not

be eligible to become a Participant until the beginning of the Plan Year

following reemployment.

ARTICLE IV

ELECTIONS TO PARTICIPATE

4.1. Initial Salary Conversion Election. There will be an enrollment

period during which an eligible Employee can elect to convert a portion of

the Employee's wages to pay for health care coverage for the Employee and

any Dependents of the Employee enrolled in a Group Medical Plan. The Coun-

ty will provide the Employee with an election form which must be returned

to the County no later than the date set forth in the election form. Any

election by such an Employee shall be effective and continue until the last

day of the Plan Year to which it relates and will not be revocable except

as provided in Sections 4.5 and 4.6. The execution and delivery by an eli-

gible Employee of an election form shall result in a salary conversion of

an amount necessary to provide medical coverage for the Employee and any

Dependents enrolled in a Group Medical Plan as selected by the Employee.

The Employee will forfeit any unused amounts at the end of the Plan Year.

4.2. Effective Date of Initial Election. For Employees who became

eligible prior to the beginning date of the Plan Year, their election shall

apply to the Plan Year immediately following the date of the election. For

Employees who become eligible after the beginning of the Plan Year, their

election shall apply for the remainder of the Plan Year to which it re-

lates.

4.3. Election for Enrollment in Subsequent Years. Prior to the be-

ginning of each Plan Year, there will be a designated enrollment period

selected by the County during which all eligible Employees will have an

opportunity to elect new or different coverage and corresponding contribu-

tion levels for the subsequent Plan Year.

4.4. Failure to Elect. If an Employee fails to return the election

form prior to the date designated on the form, the Employee will not be

eligible to participate in the subsequent Plan Year. However, the Employee

will be permitted to make an election prior to each succeeding Plan Year

during the periods designated by the County as the Employee desires.

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HEALTH CARE REIMBURSEMENT PLAN

4.5. Revocation/Elections During Plan Year. Requests to increase or

decrease contributions will be permitted only if the requested election

and/or revocation is made on account of and consistent with any of the

following changes in the Employee's employment or family status. Such

changes will be reflected in the contributions due after the written elec-

tion is received in the Personnel Department, Employee Insurance Section.

(a) (1) An Employee who is a Participant may increase the Em-

ployee's contribution if the Employee marries and enrolls the spouse of the

Employee in a Group Medical Plan within a time period ending thirty-one

calendar days after the marriage and proof of marriage is provided within

such time.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if he/she marries and enrolls his/

her spouse in a Group Medical Plan within a time period ending thirty-one

calendar days after their marriage and proof of marriage is provided within

such time.

(b) (1) An Employee who is a Participant may increase the Em-

ployee's Contribution if he or she enrolls a new stepchild in a Group Medi-

cal Plan within a period ending thirty-one calendar days from the date of

marriage to the stepchild's parent and proof of marriage and relationship

of the child to the spouse is provided within such time.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if he/she enrolls a new stepchild

in a Group Medical Plan within a period ending thirty-one calendar days

from the date of marriage to the stepchild's parent and proof of marriage

and relationship of the child to the spouse is provided within such time.

ployee's contribution if he or she enrolls his or her newborn child in a

Group Medical Plan within a period ending thirty-one calendar days after

the birth of the child and a birth certificate is submitted within such

time.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if he/she enrolls his or her new-

born child in a Group Medical Plan within a period ending thirty-one calen-

dar days after the birth of the child and a birth certificate is submitted

within such time.

(d) (1) An Employee who is a Participant may increase the Em-

ployee's contribution upon adoption of a child if the Employee enrolls the

child in a Group Medical Plan within thirty-one calendar days from the

adoption or placement for adoption and proof of this placement is submitted

to the County within thirty-one calendar days.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if he/she enrolls in a Group Medi-

cal Plan an adopted child within thirty-one calendar days from the adoption

or placement for adoption and proof of this adoption or placement is sub-

mitted to the County within thirty-one calendar days.

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HEALTH CARE REIMBURSEMENT PLAN

(e) (1) An Employee who is a Participant may increase the Em-

ployee's contribution if the Employee enrolls his or her spouse in a Group

Medical Plan within 31 days of the spouse's loss of coverage under another

group medical plan and proof of loss of coverage is submitted to the County

within such time.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if he/she enrolls his/her spouse in

a Group Medical Plan within 31 days of the spouse's loss of coverage under

another group medical plan and proof of loss of coverage is submitted to

the County within such time.

(f) (1) An Employee who is a Participant may increase the Em-

ployee's contribution if the Employee's spouse, who is also a County Em-

ployee, terminates employment with the County and is thereafter enrolled as

a Dependent of the Employee in a Group Medical Plan without a break in

coverage.

(2) An Employee who is not a Participant in the Plan can

enroll in the Plan during the Plan Year if the Employee's spouse, who is

also a County employee, terminates employment with the County and is there-

after enrolled as a Dependent of the Employee in a Group Medical Plan with-

out a break in coverage.

(g) An Employee who is a Participant may decrease the Employee's

contribution upon the death of a Dependent who was enrolled in a Group

Medical Plan on the date of death provided that the death of the Dependent

decreases the Employee's contribution to the Group Medical Plan.

(h) An Employee who is a Participant may decrease the Employee's

contribution upon the dissolution of his or her marriage to his or her

spouse who was enrolled in a Group Medical Plan on the date of the dissolu-

tion and the dissolution decreases the Employee's contribution to the Group

Medical Plan.

(i) An Employee who is a Participant may decrease the Employee's

contribution at the time a Dependent, who is a child of the Employee, be-

comes ineligible for coverage in a Group Medical Plan provided that the

Dependent's ineligibility decreases the Employee's contribution to the

Group Medical Plan.

(j) An Employee who is a Participant and whose spouse is en-

rolled in a Group Medical Plan as a Dependent may decrease the Employee's

contribution upon enrollment of the spouse in another Group Medical Plan

as an Employee if the spouse's enrollment decreases the Employee's contri-

bution to the Group Medical Plan.

(k) (1) An Employee who is a Participant and takes a leave of

absence for any reason, including Federal Family and Medical Leave Act of

1993, without pay for two full pay periods or longer may revoke participa-

tion in the Plan, provided the Employee makes the election by the end of

the first pay period of the leave of absence without pay.

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HEALTH CARE REIMBURSEMENT PLAN

(2) Employees who meet the election requirements under K(1)

above may elect to re-enroll in the Plan upon return from the leave of

absence without pay, provided the election is made within the first full

pay period after return from the leave and that the election is not other-

wise prohibited under the Plan.

(l) An Employee who is a Participant may decrease the Employee's

contribution at the time a Dependent who is enrolled in a Group Medical

Plan becomes eligible for coverage under another group medical plan not

available through the County.

(m) An Employee who is a Participant may increase or decrease

the Employee's contribution if the Employee changes membership between

bargaining units during the Plan Year and the employee's required contribu-

tion amount for dependent coverage changes as a result.

(n) An Employee who is a Participant may revoke an election if

the Employee's employment classification is changed during the Plan Year to

a classification where no Employee contribution is required for coverage

under a Group Medical Plan.

(o) An Employee who is a Participant may increase or decrease

the Employee's contribution if the Employee changes to a classification

during the Plan Year where a greater or lesser contribution is required to

provide medical coverage.

4.6. Conditions for Mid Plan Year Revocations/Elections.No Employee

may change a previous election under this Plan unless the Employee Elects

to make the change within the time frames stated above. All notices and/or

other documents including Elections required to be submitted under this

Plan must be delivered in person or by U. S. mail and must be actually

received by the Personnel Department/Employee Insurance Section of the

County prior to the time prescribed.

4.7. Amount of Salary Conversion. An Employee who elects to partici-

pate in the Plan must, subject to Section 4.3, elect to contribute the

amount necessary to pay for the full amount of the Employee contribution

due for the medical coverage chosen by the Employee. The amount of the

required contribution shall be automatically increased or decreased to take

into account any changes in the cost of the coverage elected by the Partic-

ipant during the Plan Year.

4.8. County's Adjustment of Salary Conversion. The County maintains

the right to adjust the amount of any election made under this Plan, if

necessary, to ensure that the Plan complies with the requirements of law.

ARTICLE V

PLAN BENEFITS

5.1. Benefits Under Plan. Any amount designated by a Participant in

a salary conversion election may be used solely for the purpose of contrib-

uting to the cost of the Employee's contribution for health care coverage

where there is an Employee contribution due under a Group Medical Plan.

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HEALTH CARE REIMBURSEMENT PLAN

5.2. No Coordination with Child and Dependent Care Reimbursement. The

enrollment and termination of participation under the Child and Dependent

Care Reimbursement Program of the County shall in no way effect enrollment

or termination of participation under this Plan.

ARTICLE VI

PROCEDURES FOR RESOLUTION OF DISPUTES

6.1. Authority of County. The County shall have the exclusive power

and authority to interpret the provisions of the Plan and to resolve any

disputes arising under the Plan. Any dispute relating to the interpreta-

tion or administration of the Plan shall be resolved in accordance with the

procedures set forth in this Article VI.

6.2. Filing a Complaint. If a Participant has any disagreement with

a determination of the County relating to the interpretation or administra-

tion of the terms and conditions of the Plan, the Participant may file a

complaint with the County Personnel Director, 701 Ocean Street, Santa Cruz,

California 95060, stating his or her objection to the determination and

setting forth facts sufficient to apprise the County of the basis for the

Participant's objection within 10 days from the event or events giving rise

to the complaint. A complaint will be considered only if it is in writing

and delivered in person or by first class mail to the address above.

6.3. Denial of Complaint. If a complaint is wholly or partially

denied, notice of the decision shall be furnished by the County Personnel

Director to the Participant within 90 days after actual receipt of the

complaint by the County. The Personnel Director may extend the time for

responding to written complaints when necessary to fully review the com-

plaint. Such extensions shall be furnished to the Participant 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 decision. The following information will be

provided in a written notice to the Participant whose complaint has been

denied:

(a) specific reason(s) for the denial;

(b) specific reference to pertinent Plan provisions on which the

denial is based;

necessary for the Participant to perfect the complaint and an explanation

of why such material or information is necessary;

(d) appropriate information as to the steps to be taken if the

Participant wishes to re-submit his or her complaint for review; and

(e) that the Participant or his or her duly authorized represen-

tative has a reasonable opportunity to appeal the denial of a complaint,

including but not limited to:

(1) requesting a review upon written application to the

County Administrative Officer;

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HEALTH CARE REIMBURSEMENT PLAN

(2) reviewing pertinent documents;

(3) submitting issues and comments in writing.

The County Administrative Officer's decision on the appeal must be made not

later than 60 days after the receipt of the request for review, unless

special circumstances require an extension of time for processing, in which

case the Participant shall be notified of the extension and a decision

shall be rendered as soon as possible, and shall include the date by which

the County Administrative Officer expects to render a final decision. The

decision on the appeal will be in writing and will include specific reasons

for the decision, and will contain specific references to the particular

Plan provisions upon which the decision is based. The decision of the

County Administrative Officer on the request for appeal shall be final.

ARTICLE VII

AMENDMENT AND TERMINATION

7.1. 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.

7.2. Termination of Plan. The County may terminate the Plan at any

time. Upon termination of the Plan, the rights of all Participants af-

fected thereby shall become payable as the County may direct.

ARTICLE VIII

MISCELLANEOUS

8.1. Non-guarantee of Employment. Nothing contained in this Plan

shall be construed as a contract of employment between the County and any

Employee, or as a right of any Employee to be continued in the employment

of the County, or as a limitation of the right of the County to discharge

any of its Employees, with or without cause.

8.2. Non-discrimination in Exercise of Authority. Any discretionary

action by the County will be exercised in a non-discriminatory manner to

ensure all employees similarly situated will receive substantially the same

treatment.

8.3. Rights to County Assets. No Employee or Dependent shall have

any right to or interest 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 payable under this Plan

to or for the benefit of such Employee or Dependent.

8.4. Non-alienation of Benefits. Benefits payable under the Plan

shall not be subject in any manner to anticipation, alienation, sale,

transfer, assignment, pledge, encumbrance, charge, garnishment, execution,

or levy of any kind, either voluntary or involuntary prior to being actual-

ly received by the person entitled to the benefit under the terms of the

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Plan; and any attempt to do so shall be void. The County shall not in any

manner be liable for, or subject to, the debts, contracts, liabilities,

engagements or torts of any person entitled to benefits hereunder.

8.5. Divestment of Benefits. Subject only to the specific provi-

sions of the Plan, nothing shall be deemed to divest a Participant of a

right to the benefit to which the Participant becomes entitled in accor-

dance with the provisions of the Plan.

TO RECORD THE ADOPTION OF THE PLAN, the County has caused this agreement to

be executed by its duly authorized representative of the Board of Supervi-

sors this 18th day of November 1997.

Approved as to legal

sufficiency and form:

________________________________

County Counsel

By: __________________________

Personnel Director

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