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Item 4CCITY OF SOUTHLAKE MEMORANDUM August 11, 2010 TO: Shana Yelverton, City Manager FROM: Stacey Black, Director of Human Resources SUBJECT: Approve Resolution No.10 -045, Naming a Successor Trustee for the City of Southlake Insurance Trust Action Requested: City Council approval of Resolution No. 10 -045, naming a successor trustee for the City of Southlake Insurance Trust. Background Information: Texas Insurance Code Section 222.002 requires an annual tax on insurers who receive gross premiums for health, life and accident insurance. These taxes would be included in the premiums paid to the City's insurance providers. However, under the provisions of the Texas Insurance Code, municipalities may be exempt if the insurance is provided through "a single non - profit trust established to provide coverage primarily for employees . . ." On August 21, 2007, City Council approved Resolution No. 07 -046, establishing the City of Southlake Insurance Trust, authorizing the Trust Agreement, and appointing Director of Finance Sharen Jackson and the previous Director of Human Resources Kevin Hugman as Trustees. On August 4, 2009, City Council approved Resolution No. 09 -045 amending the City of Southlake Insurance Trust Agreement to comply with additional guidance from the Texas Comptroller of Public Accounts to further restrict the usage of the Insurance Trust. The restrictions prohibit the Insurance Trust from activities such as acquiring real estate, investing in realty or personal property, and paying for liability insurance, professional services, judgments or litigation. The establishment of the Insurance Trust saves the City approximately $52,000 in premium taxes annually. The previous Director of Human Resources Kevin Hugman is no longer employed by the City of Southlake and has resigned his status as a Trustee. Upon resignation of a Trustee, the Trust requires the City appoint a successor Trustee who shall have the same powers and duties as the previous Trustee. It is recommended that City Council appoint the current Director of Human Resources, Stacey Black, as a Successor Trustee. Shana Yelverton, City Manager August 11, 2010 Page 2 Financial Considerations: Continuation of the Trust saves the insurance premium taxes to the City, which are estimated at $52,000 annually. Citizen Input/ Board Review: N/A Legal Review: The City Attorney has reviewed Resolution No. 10 -045. Alternatives: Changes as may be desired by City Council. Supporting Documents: Resolution No. 10 -045, Naming a Successor Trustee for the City of Southlake Insurance Trust Resolution No.09 -045 and Trust Agreement Staff Recommendation: City Council approve Resolution No. 10 -045, Naming a Successor Trustee for the City of Southlake Insurance Trust. City of Southlake, Texas RESOLUTION NO. 10 -045 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, NAMING A SUCCESSOR TRUSTEE FOR THE CITY OF SOUTHLAKE INSURANCE TRUST. WHEREAS, the City has heretofore established an Insurance Trust, the sole purpose of which is to pay premiums for group insurance benefits of employees and retirees of the City and their eligible dependents; and WHEREAS, the establishment of such Trust is allowed by Chapter 222, Texas Insurance Code and was approved by City Council under Resolution No. 07 -046 and revised under Resolution No. 09 -045; and WHEREAS, a Trustee under the Trust has resigned; and WHEREAS, the Trust requires that, upon the resignation or removal of a Trustee, the City shall appoint a successor trustee; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, THAT: Section 1: The City hereby appoints Stacey Black as Successor Trustee who shall have the same powers and duties as those conferred upon the Trustees in the Trust. Section 2: This resolution shall become effective after its passage and adoption by the City Council. PASSED AND APPROVED THIS THE DAY OF , 2010. John Terrell, Mayor ATTEST: Lori Payne, City Secretary 8/10/2010 City of Southlake, Texas RESOLUTION NO. 09 -045 OFFICIAL RECORD A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, AMENDING THE CITY OF SOUTHLAKE INSURANCE TRUST. WHEREAS, the City has heretofore established an Insurance Trust, the sole purpose of which is to pay premiums for group insurance benefits of employees and retirees of the City and their eligible dependents; and WHEREAS, the establishment of such Trust is allowed by Chapter 222, Texas Insurance Code and was approved by City Council under Resolution No. 07 -046; and WHEREAS, the Texas Comptroller of Public Accounts has issued recent guidance which requires amendment to the City of Southlake Insurance Trust Agreement; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, THAT: Section 1: The City of Southlake Insurance Trust is hereby amended and the attached Trust Agreement is hereby approved. Section 2: This resolution shall become effective after its passage and adoption by the City Council. PASSED AND APPROVED THIS THE ash DAY OF Ru w5t , 2009. ki (:: ��A � - - John Terrell, ayor .tit65p4:'Ff 989! ATTEST: T IP 0 t t! Lori Payne, City ecretary rte• . a 8/5/2009 TRUST AGREEMENT THIS TRUST AGREEMENT (the "Agreement ") is made and entered into as of S C 2009 by and between the City of Southlake, Texas (the "City ") and the perso s executing this agreement as trustees (the "Trustees "). Premises WHEREAS, the City has heretofore adopted one or more insured employee welfare benefit plans which are set forth in Exhibit A attached hereto (the "Plan ") the sole purpose of which is to provide health, medical and /or life benefits solely for the current or retired employees of the City and their eligible dependents covered by the Plan; WHEREAS, the City is the Plan Administrator appointed to administer the Plan and the claims thereunder; WHEREAS, the insurance policy or policies described on Exhibit A attached hereto and made a part hereof for all purposes, and any policy or policies that in the future may be replace these policies (individually and collectively, the "Policy "), as and when issued in the name of the Trustees, will constitute a trust fund (the "Trust Fund ") to be held for the benefit of the employees and their eligible dependents under and in accordance with the Plan; WHEREAS, the City desires the Trustees to hold and administer the Trust Fund under the trust created by this Agreement (the "Trust "), and the Trustees are willing to hold and administer such Trust Fund, pursuant to the terms of this Agreement; and WHEREAS, the City intends and desires to establish the Trust as a "single nonprofit trust" within the meaning of Section 222.002(c)(5) of the Texas Insurance Code; and NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein, the City and the Trustee agree as follows: ARTICLE I -- Contributions 1.1 Receipt of Contributions The Trustees shall receive any contributions paid to them in cash or in the form of such other property as they may from time to time deem acceptable and which shall have been delivered to them. All contributions so received, together with the income therefrom and any other increment thereon shall be held, invested, reinvested and administered by the Trustees pursuant to the terms of this Agreement without distinction between principal and income. The Trustees shall not be responsible for the calculation or collection of any contribution under the Plan, but shall be responsible only for property received by them pursuant to this Agreement. 1.2 Premiums Premiums to keep the Policy in force shall be paid by the City or by its NAHuman Resources\Benefits & Insurance \Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 1 of 8 employees or by a combination thereof unless the Trustees are directed to pay all or a portion of such premiums from the Trust Fund. ARTICLE li — Payments from Trust Fund 2.1 Payments Directed by Plan Administrator The Trustees shall from time to time at the Plan Administrator's direction make payments out of the Trust Fund to the persons or entities to whom such monies are to be paid in such amounts and for such purposes as may be specified in the Plan Administrator's directions. To the extent permitted by law, the Trustees shall be under no liability for any payment made pursuant to the direction of the Plan Administrator. Any direction of the Plan Administrator shall constitute a certification that the distribution or payment so directed is one which the Plan Administrator is authorized to direct. 2.2 Impossibility of Diversion It shall be impossible at any time for any part of the Trust Fund to be used for, or diverted to, purposes other than to provide the benefits contemplated under the Plan for the exclusive benefit of covered employees and their dependents, except that any taxes and administration expenses for which the Trust is liable may be made from the Trust Fund if such payment would be consistent with the purpose of the Trust as a "single nonprofit trust" within the meaning of Section 222.002(c)(5) of the Texas Insurance Code, and otherwise, such amounts shall be paid by the City. ARTICLE III — Powers of Trustees 3.1 Powers The Trustees are nondiscretionary Trustees who do not have discretion or authority with respect to the investment or administration of the Trust Fund. The Trustees will act solely as directed trustees of the Policy and any other funds contributed to the Trust Fund; provided, however, that the contribution of any other such funds shall be consistent with the purpose of the Trust as described above in the PREMISES section of this Agreement. The Plan Administrator shall have sole authority to direct the Trustees with respect to the exercise of their powers under this Agreement. Subject to the foregoing provisions of this section, the Trustees, in addition to all powers and authorities under common law, statutory authority, and other provisions of this Agreement, shall have the following powers and authorities: (a) To purchase, or subscribe for, any securities (other than real estate or personal property) and to retain the same in trust; provided, however, that the Trustees are prohibited from selling or purchasing stock options; (b) To sell, exchange, convey, transfer, grant options to purchase, or otherwise dispose of any securities or other property held by the Trustees, by private contract or at public auction, and any sale may be made for cash or upon credit, or partly for cash and partly upon credit. No person dealing with the Trustees shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition; N: \Human Resources\Benefits & Insurance\Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 2 of 8 (c) To vote upon any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other similar rights, and to make any payments incidental thereto; to oppose, or to consent to, or otherwise participate in, corporate reorganizations or other changes affecting corporate securities, and to delegate discretionary powers, and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stock, bonds, securities or other property held as part of the Trust Fund; (d) To cause any securities or other property held as part of the Trust Fund to be registered in the Trustees' own name or in the name of one or more of the Trustees' nominees, and to hold any investments in bearer form, but the books and records of the Trustees shall at all times show that all such investments are part of the Trust Fund; (e) To borrow or raise money for the purposes of the Trust in such amount, and upon such terms and conditions, as the Trustees shall deem advisable; and for any sum so borrowed, to issue a promissory note as Trustee, and to secure the repayment thereof by pledging all, or any part, of the Trust Fund; and no person lending money to the Trustees shall be bound to see to the application of the money lent or to inquire into the validity, expediency, or propriety of any borrowing; (f) To keep such portion of the Trust Fund in cash or cash balances as may be in the best interests of the trust created hereby, without liability for interest thereon; (g) To accept and retain for such time as they may deem advisable any securities or other property received or acquired by them as Trustee hereunder, whether or not such securities or other property would normally be purchased as investments hereunder; (h) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (i) To invest funds of the Trust Fund in night deposits or savings accounts bearing a reasonable rate of interest in a Trustee's bank; Q) To invest in Treasury Bills and other forms of United States government obligations; (k) To deposit monies in federally insured savings accounts or certificates of deposit in banks or savings and loan associations; and NAHuman Resources\Benefits & Insurance\Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 3 of 8 (1) To do all such acts, take all such proceedings, and exercise all such rights and privileges, although not specifically mentioned herein, as the Trustees may deem necessary to administer the Trust Fund, and to carry out the purposes of this Trust. 3.2 More Than One Trustee If there shall be more than one trustee under this Agreement, they shall act by a majority of their number, but may authorize any one or more of them to sign papers and instruments on their behalf. 3.3 Fees and Expenses The Trustees may be paid such reasonable compensation as shall from time to time be agreed upon in writing by the City and the Trustees. An individual serving as Trustee who already receives compensation as an employee from the City shall not receive compensation from this Trust except for reimbursement of expenses properly and actually incurred. In addition, the Trustees shall be reimbursed for any reasonable expenses, including reasonable counsel and accounting fees, incurred by the Trustees in the administration of the Trust Fund. Such compensation and expenses shall be paid from the Trust Fund. ARTICLE IV — Trustees' Duties 4.1 General The Trustees shall discharge their duties under this Agreement solely in the interest of the employees covered under the Plan and their dependents and for the exclusive purpose of providing benefits to such persons and defraying reasonable expenses of administering the Trust, with the care, skill, prudence and diligence under the prevailing circumstances that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, and by diversifying the investments of the Trust so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so, all in accordance with the provisions of this Agreement insofar as they are consistent with the provisions of applicable law, as this Agreement and such law may be from time to time amended; but the duties and obligations of the Trustees as such shall be limited to those expressly imposed upon it by this Agreement notwithstanding any reference herein to the Plan, or the provisions thereof. 4.2 Indemnification The City agrees, to the extent permitted by law, to indemnify and hold the Trustees harmless from and against any liability that the Trustee may incur in the administration of the Trust Fund, unless arising from the Trustees' own willful breach of the provisions of this Agreement or of a duty imposed by law. The Trustees shall not be required to give any bond or any other security for the faithful performance of its duties under this Agreement, except such as may be required by a law which prohibits the waiver thereof. 4.3 Accounts and Records The Trustees shall keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions hereunder, and all such accounts and other records relating thereto shall be open to inspection and N: \Human Resources\Benefits & Insurance \Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 4 of 8 audit at all reasonable times by any person designated by the Plan Administrator. 4.4 Limitation on Trustee's Liability The Plan Administrator shall administer the Plan as provided therein, and the Trustees shall not be responsible in any respect for administering the Plan nor shall the Trustees be responsible for the adequacy of contributions to the Trust Fund to meet or discharge any payments or liabilities under the Plan. The Trustees shall be entitled conclusively to rely upon any notice, instruction, direction or other communication of the Plan Administrator. ARTICLE V — Resignation, Removal and Succession of Trustees 5.1 Resignation The Trustees may resign at any time by giving 30 days' notice in writing to the City. In addition, if a Trustee ceases to be employed by the City, he or she shall be deemed to have resigned as Trustee, effective on the date that his or her employment relationship with the City terminates. 5.2 Removal The City may remove the Trustees at any time upon 30 days' notice in writing to the Trustee. 5.3 Successor Trustee Upon the resignation or removal of a Trustee, the City shall appoint a successor trustee who shall have the same powers and duties as those conferred upon the Trustees hereunder. Upon acceptance of such appointment by the successor trustee, the Trustees shall assign, transfer, and pay over to such successor trustee the funds and properties then constituting the Trust Fund. The Trustees are authorized, however, to reserve such reasonable sum of money, as it may deem advisable, for payment of their fees and expenses in connection with the settlement of its account or otherwise, and any balance of such reserve remaining after the payment of such fees and expenses shall be paid over to the successor trustee. 5.4 Powers Pending Appointment of Successor Trustee or Incapacity of Trustee If a vacancy in the office of Trustee exists or a Trustee is incapacitated and unable to perform his or her duties, the remaining Trustee may exercise all of the powers bestowed on the Trustees collectively until a successor is appointed or the incapacity no longer exists. 5.5 Waiver of Notice In the event of any resignation or removal of a Trustee, the Trustee and the City may in writing waive any notice of resignation or removal as may otherwise be provided hereunder. ARTICLE VI — Amendment and Termination of Agreement 6.1 Amendment Any or all of the provisions of this Agreement may be amended at any time and from time to time, in whole or in part, by an instrument in writing. No such amendment shall authorize or permit any part of the Trust Fund (other than such part as is required to pay taxes and administration expenses) to be used for or N: \Human Resources \Benefits & Insurance\Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 5 of 8 diverted to purposes other than for the exclusive benefit of the employees and their dependents; no such amendment shall cause or permit any portion of the Trust Fund to revert to or become the property of the City; and no such amendment which affects the rights or duties of the Trustees may be made without the Trustees' written consent. 6.2 Termination This Agreement may be terminated at any time by the City, and upon such termination, the Trust Fund shall be paid out and /or transferred by the Trustees as and when directed by the Plan Administrator or the City, in accordance with the provisions of Article II hereof and the terms of the Plan. 6.3 Duration This Agreement shall terminate automatically twenty (20) years after the day and year first above written, unless the City and Trustees agree in writing to extend the term of the Agreement. ARTICLE VII -- General 7.1 Limited Effect of Plan and Trust Neither the establishment of the Plan nor the Trust nor any modification thereof, nor the creation of any fund or account, nor the payment of any welfare benefits, shall be construed as giving to any person covered under the Plan or other person any legal or equitable right against the Trustee, the City, or any officer or employee thereof, except as may otherwise be provided in the Plan or in the Trust. Under no circumstances shall the term of employment of any employee be modified or in any way affected by the Plan or this Trust. 7.2 Protective Clause Neither the City nor the Trustee shall be responsible for the validity of any contract of insurance issued in connection with the Plan or Trust or for the failure on the part of the insurer to make payments provided by such contract, or for the action of any person which may delay payment or render a contract null and void or unenforceable in whole or in part. 7.3 Construction of Trust This Trust shall be construed and enforced according to the laws of the State of Texas. If any provision of this Trust shall be held illegal or invalid for any reason, such determination shall not affect the remaining provisions of the Trust. 7.4 Gender and Number Wherever any words are used herein in the masculine, feminine or neuter, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply. 7.5 Headings The headings and sub - headings of this Trust have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof. NAHuman Resources\Benefits & Insurance \Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 6 of 8 IN WITNESS WHEREOF, this Agreement has been executed the day and year first above written. CITY OF SOUTHLAKE, TEXAS 1400 MAIN STREET SOUTHLAKE, TEXAS 76092 C A of . • 0 ATTES ° ,. 4 5 •• ,�..: me rvy , City Secretary = v' ' c' e ° • o TRUSTEE ., °� TRUSTEE I,Bt 111111110 / r B y . - 11�� 0 N: \Human Resources \Benefits & Insurance \Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 7 of 8 EXHIBIT A 1. Medical Insurance a. Health Maintenance Organization (HMO) b. Preferred Provider Organization (PPO) 2. Dental Insurance a. Dental Health Maintenance Organization (DMHO) b. Dental Preferred Provider Organization (DPPO) 3. Group Life Insurance a. Basic Life Insurance b. Supplemental Life Insurance c. Spouse and Child(ren) Life Insurance 4. Long Term Disability 5. Accidental Death and Dismemberment N. \Human Resources\Benefits & Insurance\Insurance \Single Nonprofit Trust 2009 -08 -04 clean.docPage 8 of 8