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benefits which are being offered under the Plan. You may also need to authorize us to set some <br />of your earnings aside in order to pay for a portion of the benefits you have elected. <br />However, if you are already covered under any of the insured benefits, you will <br />automatically participate in this Plan to the extent of your premiums unless during the "election <br />period" you elect not to participate in this Plan. <br />11 <br />OPERATION <br />1. How Does This Plan Operate? <br />Before the start of each Plan Year, you will be able to elect to have some of your <br />upcoming pay contributed to the Plan. These amounts will be placed in special funds or <br />accounts which must be set up for you in order to pay for the benefits you have chosen. The <br />portion of your pay that is paid to the Plan is not subject to Federal income or Social Security <br />taxes. In other words, this allows you to use tax -free dollars to pay for certain kinds of benefits <br />and expenses which you normally pay for with out -of- pocket, taxable dollars. Also, we will make <br />additional City contributions to the Plan that you may use to increase the amounts used to pay <br />benefits. However, if you receive a reimbursement for an expense under the Plan, you cannot <br />claim a Federal income tax credit or deduction on your return. <br />III <br />CONTRIBUTIONS <br />1. How Much of My Pay May The City Redirect? <br />Each year, for the premium payment benefits provided under this Plan we will <br />automatically contribute on your behalf enough of your compensation to pay for the coverage <br />provided. In addition, you may elect to pay for the benefits that you elect under the Plan after <br />application of The City Contribution. These amounts will be deducted from your pay over the <br />course of the year. <br />2. How Much Will The City Contribute Each Year? <br />We may contribute a discretionary amount which we will determine prior to the <br />beginning of each Plan Year. This contribution will be made on a pro rata basis during the year. <br />If you elect not to participate, The City will not contribute to the Plan on your behalf. <br />3. What Happens to Contributions Made to the Plan? <br />Before each Plan Year begins, you will select the non - insured benefits you want and <br />how much of the contributions should go toward each benefit. It is very important that you make <br />these choices carefully based on what you expect to spend on each covered benefit or expense <br />during the Plan Year. Later, they will be used to pay for the expenses as they arise during the <br />Plan Year. <br />2 <br />