(1) A city selecting an option under section 2422 has a planning period of:

  (a) One year after the selection of the option in section 2422(a).

  (b) Eighteen months after the selection of the option in section 2422(b) or (c).

  (2) During the planning period the affected local governing entities shall develop and adopt a plan setting forth the arrangements, agreements, and contracts necessary to establish a local health department pursuant to the exercised option and prescribing a timetable for the indicated transition. The transition plan shall provide that a city shall assume full financial liability for the local cost of services or programs provided by the city or transferred to the city by another local governing entity by virtue of the exercise of the option in section 2422(a). The plan shall include contracts providing that an employee transferred under the plan shall not lose any benefit or right as a result of the transfer. Upon completion of the transition period, a city exercising that option is solely responsible for the local cost of all required services under this part.

  (3) By the end of the planning period, the developed plan shall be submitted to the department for approval. If a plan is not submitted or approved, the department shall develop a transition plan during the 6 months after the end of the planning period and, upon completion, the plan shall be an approved plan under this section.

  (4) Subject to federal law and regulations, disposition of federal funds shall be made in accordance with the approved plan and option exercised.