Benefits Compliance Question

Question: Can a City provide council members who opt out of an offer of health insurance with cash in lieu?

Answer: Likely no. The biggest concern with cash in lieu is that it will push a council member’s compensation beyond the maximum compensation allowable by law. Government Code section 36516 authorizes a city to provide its council members with maximum compensation of between $950 and $3,200 per month, depending upon the size of the city’s population. While there is an exception to the compensation limit under Government Code section 36516(d) for retirement, health, welfare, and federal social security benefits, the exception does not apply to cash in lieu. There may also be other cafeteria plan restrictions on offering council members cash in lieu.