Time to Check Your HRA Balance
The IFO contract gives every faculty member who qualifies for health insurance benefits the opportunity to receive an annual, tax-free contribution of $800 to an individual Health Reimbursement Account (HRA) which can be immediately used to reimburse medical, dental and vision expenses not covered by insurance. If you have a balance of less than $700 in your HRA account on December 31st of each year, MnSCU makes a new $800 contribution to your account the following January. If you keep a balance of $700 or more in your HRA account as of December 31st, the $800 contribution for the next calendar year goes into your Health Care Savings Plan (HCSP) account with the State of Minnesota, instead of your HRA account. Contributions to your HCSP account are also tax free and can reimburse uninsured medical, dental, and vision expenses, as well as insurance premiums, but HCSP funds can’t be used until you leave employment with the State.
The HCSP offers participants investment options for their accounts. Some folks build up the HCSP account, as part of a retirement savings plan, by maintaining at least a $700 balance in the HRA account. If you would rather have the 2016 contribution go to your HRA account, where it will be immediately available to reimburse qualifying expenses, you must spend down the account to less than $700 through claims submitted to 121Benefits no later than December 31, 2015.
HRA Reimbursement for Dependents Who Aren’t on Your Insurance
You can use your HRA account to reimburse qualifying expenses incurred on behalf of one of your dependents, even if that person is not enrolled as a dependent on your employee health or dental insurance. For example, if your spouse has their own employer-provided insurance, you can still get reimbursed for the cost of their new glasses or any other qualifying expense. However, beginning in 2017, doing so will require an additional bit of paperwork on the part of employees. Under a federal regulation which was effective in 2015, employers can only provide HRA benefits to persons covered by a comprehensive health insurance plan. When 121Benefits brought this regulation to MnSCU’s attention this fall, the initial response was a fear that our HRA plan was illegal and a proposal to eliminate the plan as we know it and replace it with something else. The IFO directed administrators to regulatory guidance which allows employers to offer an HRA which covers dependents not enrolled in the employer’s health insurance program, so long as the employee seeking reimbursement for such a dependent’s expenses formally states that the dependent has comprehensive health insurance coverage from another source. Starting early next year, if you wish to receive reimbursement for a qualifying expense incurred by a dependent who is not enrolled under your employee health insurance, you will have to complete a form stating that the person in question has comprehensive health insurance from a different source. Watch for information from 121Benefits regarding how that process will work.
Changes Proposed to TRA
At its November meeting, the Board of Trustees of the Teachers Retirement Association approved a set of proposals for legislative action during the upcoming session. If enacted, these recommendations will result in the biggest changes to our defined benefit pension plan, since the dramatic overhaul of 2010, in the wake of the Great Recession. As in 2010, the proposals are aimed at improving TRS’s funding status. That status has declined recently, primarily for two reasons. Last year, a new mortality analysis by TRA’s actuaries disclosed that retirees and their beneficiaries are living longer than had previously been predicted, with the result that the fund was paying more retirement benefits than anticipated. In addition, the TRA Trustees have drawn criticism for some time regarding their operating assumption that the fund’s investments will earn 8% over time. At their October 2016 meeting, the Trustees voted to lower that presumed return on investment to 7.5%, while further studying that assumption over the next three to five years. In a to making it more expensive for members to “buy back” years of service under various circumstances, that action has the effect of reducing TRS’s projected financial health.
In response, the Trustees are asking the legislature to increase employer contributions by 2%, from 7.5% to 9.5%, and to reduce retirees’ cost-of-living increases from 2% to 1% per year for the next ten years, while allowing it to rebound to 1.5% for 2027 and subsequent years. During the meeting, several of the Trustees noted that the proposal is intended to hold currently-employed teachers harmless, in order not to reduce much-needed incentives for folks to enter and stay in the profession. Despite that unimpeachable concern, one can anticipate that the prospect of an increased employer contribution will draw a good deal of fire at the legislature and generate proposals to shift some of the new funding burden to active employees. The IFO legislative team will be closely monitoring developments.
On August 2, 2016, the IFO and MnSCU signed a Letter of Understanding (LOU) to clarify the order in which faculty will receive contractual step increases that are provided in Article 11 of the 2015-2017 IFO-MnSCU Collective Bargaining Agreement (contract).
The Letter of Understanding amends those sections of Article 11 that provide for step increases to include language which indicates the order in which each step advancement will occur, and to make it clear that faculty will be moved to the minimum step placement for their rank, prior to receiving career steps, returning steps, salary equity steps and 2 steps for giving early notice of retirement.
Full text of LOU (PDF)