Option C: Defined Contribution Sample Clauses

Option C: Defined Contribution. When an employee becomes eligible for a service retirement, the City will contribute to his or her Retiree Health account an amount that is projected to yield $8,500 per year for the employee’s projected lifetime. This projection will be based on the employee’s life expectancy at the time of retirement eligibility in accordance with the general mortality tables for men and women, and will assume that a 6% rate of return will be earned on this lump sum once deposited into the employee’s Retiree Health trust fund account (to be established). An employee need not retire when this lump sum contribution is made; he or she may continue to work while the amount of money remains in his or her individual account. Under the IRS rules applicable to tax-favored health reimbursement accounts, distributions from a retiree’s account may only be made to pay or reimburse the retiree for qualified medical expenses incurred by the retiree, his or her spouse (as defined under federal law), or his or her tax dependents. Upon the retiree’s death, any remaining funds may only be distributed to the retiree’s surviving spouse or dependents to reimburse substantiated qualified medical expenses incurred by the retiree, his or her spouse, or his or her dependents. Qualified medical expenses include direct payment or reimbursement of premiums for health insurance, long-term care insurance, charges or co-pays for prescription medications, and certain other medical expenses not covered by health insurance. If the retiree dies without a surviving spouse or eligible dependents, or the retiree’s spouse or other dependents have all died; any funds remaining in the retiree’s account will be reallocated back to the trust.