5.3. ERMUSR 05-10-2007//
Elk River
Municip al Utilitie s
13069 Orono Parkway
F.lk River, MN 55330
May 1, 2007
To: Elk River Municipal Utilities commission
Jerry Takle
Jim Tralle
Jerry Gumphrey
From: Theresa Slominski
Subject: Health Care Savings Plan update
phone: 763.441.2020
Fax: 763.441.8099
At the last commission meeting, staff was asked to seek out alternatives to the HCSP
presented, to see if there is a comparable product out there that doesn't have mandatory
participation as a requirement. A review of alternative products is attached, and,
unfortunately, there is not a truly comparable product available. The alternatives most
closely resembling the HCSP product are HSAs and VEBAs but they are both tied to a
high deductible health insurance plan. Annuities are an option, but they do not represent
the same tax savings since they are taxable upon distribution, regardless of the use of the
funds distributed.
This information was brought forward to the task group, and after review, it was
determined that the HCSP is still the best product for setting aside funds to use for health
care costs after retirement. It was noted that for the employees that said no, it was most
likely not because they are against the contribution rates now, but that they are concerned
about down the road if employees want to set up groups with higher contribution rates. It
was also noted that there would still need to be dialogue before any additional groups
would be set up in the future.
The policy manual language drafted and presented last commission meeting is included
again. Staff recommends adopting the HCSP as presented.
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Section 16 of our employee hand book currently states:
"...Employees accrue sick leave at a rate of one day per month of employment to a
maximum of 120 days. An employee, upon resignation, termination or retirement, will be
paid for unused sick leave to a maximum of 40% of 100 days (40 days) at his or her then
prevailing wage. At the end of any calendar year, an employee who has over 120 days
accrued will be paid for 40% of any amount over 120 days to bring the balance back to
120 days.
The resigning, terminating or retiring employee may elect, in lieu of being paid cash for
the previously defined unused sick leave, to have SO% of the unused sick leave to a
maximum of SO% of 100 days (SO days) placed in a fund which will be used for payment
of medical insurance by the Utility. This medical insurance may be one of the employee's
choosing, or the group policy in effect for the Utilities at that time. It can be used for
either single or family coverage. If the employee dies before the fund is expended, the
remainder shall be paid to the employee's designated beneficiary. "
Staff is recommending the above language be deleted and the following language be
inserted in a new section.
Elk River Municipal Utility employees are eligible to participate in the Minnesota Post
Employment Health Care Savings Plan (HCSP) established under Minnesota Statutes,
section 352.98 (Minn. Supp. 2001) and as outlined in the Minnesota State Retireme~zt
System's Trust and Plan Documents. All funds collected by the employer on the behalf of
the employee will be deposited into the employee's post employment health care savings
plan account. Participation is outlined below:
1) Employees have agreed to contribute 1 % ofgross wages to the Post
Employment Health Care Savings Plan. These funds will be deposited after
each pay period.
2) Employees who have accrued over 960 hours of sick time will have SO% of
those hours converted to cash and deposited in their post employment health
care savings account. The conversion will take place once a year at the end
of December.
3) Employees, upon resignation, termination, or retirement, will have SO% of
unused sick leave, up to a maximum of 100 days, converted into cash and
deposited into their post employment health care savings account.