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.
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John Terrell, ayor
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Lori Payne, City ecretary
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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
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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;
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(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
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(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
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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
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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.
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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
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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
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