Frequently Asked Questions about the Retirement Medical Benefits Plan
Q. What is Senate Enrolled Act 501?
A. SEA 501 (2007) allows the creation of retirement medical benefits accounts for elected officials and state government employees. These accounts will help individuals fund health insurance and medical costs after retirement.
Q. How will these accounts be funded?
A. The state will fund this health reimbursement arrangement (HRA) based on a participant's age on the last day of the calendar year. This credit will be made annually before June 30 to all employees who have been continuously employed by the state between December 31 and the actual date of the credit.
| Credit Amount | |
|---|---|
| Age | Amount |
| Less than 30 | $500 |
| 30 - 39 | $800 |
| 40 - 49 | $1,100 |
| 50 or older | $1,400 |
Example: John Doe is an employee of the state on December 31, 2007, and he is forty-five (45) years old as of this date. He continues his employment with the state and on June 30, 2008, the state credits each employee's HRA with an amount based upon the employee's age as of December 31, 2007. Therefore, John Doe's account would be credited with $1,100 for fiscal year July 1, 2007 to July 1, 2008.
Q. Will the state make additional contributions to my HRA?
A. The state may make a supplemental contribution to the HRA for an employee participant who meets all the following conditions or an elected official who meets B and C only:
- On the participant's last day of service with the state, the participant is eligible for and has applied to receive a normal, unreduced retirement benefit from the public employees' retirement fund of which the participant is a member.
- The participant was an employee or elected officer on July 1, 2007; and after June 30, 2007, and before July 1, 2017, terminates service with the state.
- By the participant's last day of service, the participant has completed ten (10) years of service as an elected official or fifteen (15) years of service with the state as an employee.
Q. How much will this additional contribution be?
A. The amount of the supplement is one thousand dollars ($1,000) times the participant's years of service with the state (rounded down to the nearest whole year).
Q. Who will administer my HRA?
A. The HRA will be administered by a third party administrator.
This administrator will reimburse a retired participant for payments made on premiums for individual or group health insurance policies paid by the participant. Benefits are provided only to the extent that there are funds available within each retired participant's HRA.
Q. How do I obtain a reimbursable health insurance policy?
A. The funds in an HRA account can only be used for fully insured health insurance policy premiums. The retired participant must select on their own (we suggest with the assistance of an insurance professional) the insurance provider, the type of coverage, the cost of the coverage, and the policy inclusions and exclusions.
Q. When can I use the funds in my HRA?
A. You may use the funds in your HRA only when you retire.
Q. What if I leave state employment before I retire?
A. Funds deposited in a HRA will revert back to the state at termination from employment for reasons other than normal unreduced retirement.
Q. I'm ready to retire now. When will the HRAs be available?
A. Supplemental contributions for those who retire and are qualified to receive this new benefit are expected to be funded into the retiree's HRA within 60 days of the last day of service.
Q. If I go ahead and retire now, will I still get an HRA benefit?
A. Yes, if you are otherwise qualified for the benefit and retire after June 30, 2007.
Q. I heard I can convert unused vacation leave to a special account for medical expenses. How will that work?
A. Retirement medical benefits accounts under Internal Revenue Code Section 401(h) are to be established (subject to IRS approval) that will require retiring state employees to convert up to 30 days of any unused accrued vacation leave to a monetary contribution on a pretax basis. The Accounts can be used for sickness, accident, hospitalization, and medical expenses of the employee, spouse and dependents after the employee's retirement. State employees who are terminating employment but not retiring will continue to have up to 30 days unused vacation leave converted into cash payments.
Q. Can the state match contributions to my Retirement Medical Benefits Account?
A. Yes, the state match may not exceed two (2) times the amount of the employee's contribution.
Q. When will the new Retirement Medical Benefits Accounts be available?
A. Until the IRS approval is received, the current practice regarding unused vacation days will remain in effect. Approval from the IRS is not anticipated until 2008.
Q. Can I retire now and convert my unused vacation time to a Retirement Medical Benefits Account later?
A. No. The program is only available following approval by the IRS and its subsequent implementation.
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