EXHIBIT A CITY OF TEMPE POST EMPLOYMENT HEALTH PLAN POLICY The City of Tempe adopted changes to their post employment (retiree) health plan effective July 1, 2009. All benefits eligible employees with at least 10 years of service will continue to be able to maintain coverage under a City health care plan upon retirement, so long as the employee begins receiving a retirement benefit from the applicable retirement plan (Arizona State Retirement System or Public Safety Pension Retirement System) immediately upon terminating employment with the City. Surviving spouses or domestic partners and dependents of such employees are able to maintain coverage under a City health care plan upon the death of the employee/tetitee for their lifetime (but for dependents not beyond the month the dependent ceases to meet eligibility criteria for dependent status under the applicable health care plan), For all purposes under this policy, 10 years of service means continuous, full-time equivalent service, based on 40 hours per week of work as full-time equivalent. If an employee terminates employment for any reason prior to attaining 10 years of service and then subsequently returns to employment for the City, such employee's years of service will be determined in accordance with the City of Tempe Employee Rules and Regulations. ‘Two major changes to the City’s retiree health plan apply to all employees, as follows: 1. Effective July 1, 2009, retirees will pay a premium for health care coverage that is determined separately from the premium for active employees, For fiscal year 2009- 2010 (July 1, 2009 to June 30, 2010), the City will subsidize the retiree premium amount to the extent this initial premium increase is attributable to the change to an unblended retiree premium, Any retiree premium increase attributable to annual inflation in health care costs will be subject to the new rules for the City’s subsidy of retiree health care premiums as described below. 2. All City employees and retirees will be divided into three groups as of July 1, 2009, The amount of retiree health care premiums that the City subsidizes will differ based on whether the employee or retiree is in Group 1, Group 2 or Group 3. a. Group 1 consists of retirees and public safety employees participating in the DROP program as of June 30, 2009. A retiree is a former employee who is receiving retirement benefits from the applicable retirement plan (Arizona State Retirement System or Public Safety Pension Retirement System), or former clected official receiving City retiree health benefits as of June 30, 2009. b. Group 2 consists of all full-time or part-time employees eligible for health benefits from the City who have at least 10 years of service with the City as of June 30, 2009, and elected officials who have served at least two full terms (8 years) in office as of June 30, 2009. c. Group 3 consists of all full-time or part-time employees eligible for health benefits from the City who have less than 10 years of service with the City as ofTune 30, 2009, elected officials with less than two full terms (8 years) in office as of June 30, 2009 and those who are hired or elected after such date. GROUP 1 For Group 1 employees/retirees, the amount of the City’s subsidy of retiree health care premiums depends on whether or not the retiree is eligible for Medicare. A. Currently, the City subsidizes 100% of the premium cost for retiree coverage and 70% of any premium cost for dependent coverage based on the target plan of the basic level PPO option Effective July 1, 2010, the City’s subsidy of retiree health care premiums is capped at the dollar amount of the current subsidy plus a 6% increase each year for retirees who are not yet eligible for Medicare. Such retirees must pay the amount of any premium increase greater than 6% each year. This policy applies to the total premium amount for the coverage selected by the retiree, including premium amounts for dependent coverage. B. Effective January 1, 2010, retirees who are eligible for Medicare are required to enroll in a City procured and sponsored post-Medicare health plan, such as a fully insured Medicare supplemental plan or Medicare Advantage plan, and the City will subsidize 100% of the premium cost for retiree coverage and 70% of the premium for dependent coverage under the Medicare supplemental plan. GROUP 2 For Group 2 employees, the amount of the City’s subsidy of retiree health care premiums depends on whether or not the retiree is eligible for Medicare. A. Currently, the City subsidizes 100% of the premium cost for retiree coverage and 70% of any premium cost for dependent coverage based on the target plan of the basic level PPO option This subsidy will apply to any Group 2 employees who are covered by a City health care plan after retirement until June 30, 2010. Effective July 1, 2010, the City’s subsidy of retiree health care premiums is capped at the dollar amount of the current subsidy plus a 4% increase each year for retirees who are not yet eligible for Medicare. Such retirees must pay the amount of any premium increase greater than 4% each year. This policy applies to the total premium amount for the coverage selected by the retiree, including premium amounts for dependent coverage. B. Effective January 1, 2010, retirees who are eligible for Medicare are required to enroll in a City procured and sponsored post-Medicare health plan, such as a fully insured Medicare supplemental plan or Medicare Advantage plan, and the City will subsidize $350 per month of the total retiree health care premium amount (or the actual premium amount, if less) for the Medicare supplemental plan coverage. GROUP 3 For Group 3 employees, the City establishes a health reimbursement arrangement (HRA) in accordance with IRS rules set forth in Notice 2002-45 and subsequent IRS guidance on HRAs. Group 3 employees receive no additional subsidy of retiree health care premium amounts from the City,A. HRA Eligibility 1. Only Group 3 employees will participate in the HRA. 2. No employer contributions will be made to an HRA account until a Group 3 employee completes 10 years of service. Once 10 years of service is attained, a Group 3 employee will also become vested in the employee's HRA account balance. B, City Contributions, 1. Once the Group 3 employee completes 10 years of continuous, full-time equivalent service, that month the City shall contribute a lump sum amount equal to $14,000 to an HRA account for such employee 2. For each month of employment thereafter, the City shall contribute an amount equal to $175 into the employee’s HRA account. The City shall make the last monthly contribution for an employee for the month in which the employee terminates ‘employment. 3. Employee contributions are not permitted to be made to an HRA at any time. C. Access to HRA Account. 1. Group 3 employees may request distribution of his/her HRA account balance at any time following termination of employment, regardless of age 2. An employee may request a distribution for any out-of-pocket expense for medical care, as defined in Internal Revenue Code section 213(d), including premiums for health insurance and/or Medicare. The expense must not be reimbursed by health insurance or any other type of reimbursement plan. The plan administrator may require that the employee provide documentation to substantiate the medical care expense before it is reimbursed. 3. Upon the employce’s death, his/her surviving spouse or domestic partner and/or dependents may continue to be reimbursed for medical care expenses from the employee's HRA account until funds are exhausted or there is no surviving spouse or domestic partner and/or dependents. For this purpose, dependents include only tax- qualified dependents, as defined in Internal Revenue Code section 152 for purposes of tax exclusion under Internal Revenue Code section 105(b). 4. If there is a remaining HRA account balance after the death of the employee and there is no surviving spouse or domestic partner or dependents, the account balance shall be forfeited. D. Funding Vehicle. City contributions to HRA accounts will be directly made to and held in an imevocable trust (or equivalent arrangement) in which such plan assets are dedicated (o providing benefits to retirees and beneficiaries in accordance with the HRA and are legally protected from creditors of the employer and plan administrator, in a manner that satisfies requirements for OPEB (other postemployment benefits) 3FE contributions under Governmental Accounting Standards Board (GASB) Statements No. 43 and No. 45. The specific funding vehicle will be determined by the City. Investment of Funds. 1. Each Group 3 employee shall direct the investment of his/her HRA account balance among investment options approved by the City. 2. Investment expenses shall be deducted from each employee’s HRA account balance. 3. Each employee shall receive a statement of his/her HRA account balance for each calendar quarter after an initial contribution is made to the HRA account for such employee. Plan Administration. 1. The City shall utilize a third-party provider or providers to furnish administrative, investment and recordkeeping services for the HRA. 2. On-going expenses for HRA administration shall be charged against individual account balances in an equitable manner.