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5.3. ERMUSR 11-17-2009~j Elk River =~= Municipal Utilities 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 November 10, 2009 To: Elk River Municipal Utilities Commission John Dietz Jerry Gumphrey Daryl Thompson From: Troy Adams Subject: Review and Consider Health Care Savings Plan Policy Revision Phone: 763.441.2020 Fax: 763.441.8099 In April 2007, the commission voted to adopt a Health Care Savings Plan (HCSP) administered by the Minnesota State Retirement System (MSRS). This HCSP allows employees to contribute to a tax free savings plan for future use paying medical expenses. The current allocation is 1 of gross wages. This plan does require participation by all employees of a participating company. The saving plan is employee funded. The only cost incurred by the Utilities is related to payroll and recordkeeping. Attached is the letter from the commission packet from April 2007. Also attached is a current brochure for the I~CSP. Employees have requested researching the possibility of changing the amount employees contribute. A MSRS representative was brought in to ERMU answer staff questions. After much staff discussion, a proposed plan change was put to a vote of the employees. Essentially the proposed change plan would involve splitting into two groups, field staff and office staff. Also, the proposed change to the plan would create three years-of-service tiers for the field staff group. These three years-of-service tiers would have different employee contribution requirements increasing in amount with increased years-of-service. There was not enough interest from office staff to ixicrease the contribution amount from the minimum 1 % gross wages. Attached is a copy of the ballot. There is no proposed change to the current policy provision for severance payout of sick time to the HCSP and accrued sick time payout of sick time to the HCSP. Attached is the current HCSP policy. The result of the vote was not unanimous, but consistent with the 2007 vote. Of 35 employees, 30 voted to split into two groups. That is an 85.7% vote in favor of splitting. The second part to the vote pertained specifically to the groups if split. Of the 24 Field staff, 22 voted in favor of implementing a three tiered contribution structure. This is 91.7% in favor. Of the 11 Office staff, 8 voted in favor of remaining at the minimum 1 % contribution. This is a 72.7% share. In general, the employees support the proposed changes to the HCSP. As noted in the Apri12007 commission packet letter, anytime our employees are interested in investing in their future we should encourage them. Staff recommends adopting the proposed changes to the HCSP. J Elk River -~ Municipal Utilities 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 Apri13, 2007 To: Elk River Municipal Utilities Commission Jerry Takle Jerry Gumphrey Jim Tralle From: Bryan Adams Subject: Health Care Savings Plan Phone: 763.441.2020 Fax: 763.441.8099 A number of years ago (4 or 5), our employees were researching a Health Care Savings Plan (HCSP) administered by the Minnesota State Retirement System. At that time, it was a new program with little history. All employees needed to participate. Unanimous consensus was not achieved so the research stopped. There is again a large interest by our employees to utilize the state administrated HCSP program. In short, the HCSP program allows employees to set aside tax free wages in a savings plan to be used to pay health insurance and out of pocket medical bills after retirement. Money taken out of this plan is also tax free. The attached brochure explains this program in detail. This plan now has four to five years of history and has a larger participant group. There is no cost to the employer except for the additional accounting to keep track of the payroll deduction. Anytime our employees want to be responsible and address their future medical needs, we should encourage them. The employee insurance task group reviewed this HCSP plan. The issue still remains, that all employees must participate in this plan. The survey below was voted on by all employees and it passed 29 yes's and 5 no's, not unanimous, but 85%. The task group met to discuss possible implementation of a Health Care Savings Plan to benefit the employees of ERMU. The task group determined that we should take a vote and, if we receive a 75% majority (27 out of 35) of yes votes, we should present a recommendation to the ERMU commission. The contribution rates were discussed and include the following three items: Sick pay balance when leave employment to a maximum of 50% of 100 days 50% of sick pay accumulation over 960 hours per year (instead of a cash payout of 40%) 1 % Gross Wages Are you interested in participating in a Health Care Savings Plan at the above contribution rates? Yes 0 No 0 Comments 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 Retirement 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 % of gross 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. Active EYnployees CSP Health Care Savings Plan Our Tax-Free Solution 7 What is the Health Care Savings Plan (HCSP)? i-;CSP is ar•. employer-sponsored program ~:ha~ allows vc.~ ro invest nonzv in a t~Y-free account while you are zmployed'oy a Minnesota public _mciover. Once ~;ou have employment, you may access ;-his money For ~~e_~_r!bursemenc o. eli ible heald~ care expenses for you. your spouse and.egal depend.:nts =~, you. t<nov out-ot poclczt medical expenses, including :nedical insu_ance ~;remiums, ~_an uic[dy _~.dd up to ~ho~~sands of dollars. Using the tax-Free dot[ars aa_um~lated ,ri your HCSP account to reimburse these costs can provide a significant saviag~ ;r 70~- ind your Family. HCSP zr a tax free account, which means contributions and eligible reimbursements are not reportable on state or federal income tax returns. Fees The annual administrative fee is 0.67 percent of your account balance. This Eee is prorated and deducted monthly by MSRS From your account balance. For example, if you have an account value of $10,000, MSRS will deduct $~. l2 per month from your account. The maximum annual fee is $140 or $ L t.67 per month. Fees are subject to change. How are contributions made to HCSP? The type and amount of contributions to HCSP are determined as Follows: • If you are covered by a bargaining unit, contributions to the Plan must be agreed to by both the bargaining unit and employer and written into the collective bargaining agreement or Memorandum of Understanding (I~tOU). • IEyou are not covered by a bargaining unit, contribution amounts must be agreed to by your employer and included in a written personnel policy. You cannot choose to contribute more money to your HCSP account on an individual basis. Only negotiated and agreed upon contributions are allowed. C C TI Health Car: Savie~g; Pi.u; J 1 Our Taz-Free Solurion 7 What are. eligible health care expenses? F~ligible expenses are those which are. deductible for federal income tax purposes. Some. of the mire commpn expenses reimbursed b}, HC5P include: • Premiums for medical, dental and long-term care insurance 1bledicare Part B and D premiums. • Insurance deductibles and co=pays • I'rescription drug co-.pays • Many over-.the-counter drugs: lye care expenses • Haring aids:and batteries .For m~xe examples oEeligible health care ,~penscs; visitwwwtnsrsstate.mn.us, Fr~r a Uomplete list ofeligible-expenses, ceter to IRS Publication. 502 which can be 1'uund arwww irs.gov. Accessingyour account online 1q ft~ 1YISRSprocesses yorr• first corrtnbution, yorr mill receive a letter:uith your Personallrlenti, fzcation Number ~ pjl~l). Use your PIN to lug on to the plltn website at wruw.msrs.state.mn.us. Thefirst time yorr log on, you will be promp1e~ to change your PIN. The website allowsyourr to monitor your inves~~tPerfo»nance, change your investment allocation arrd transfer rnaney betrveerr inrestnrent options. 'Why is participation in this plan mandatory? Can I opt out? 1RJ i tiles require that ail employees patticic~are ~:~~ iiC'.Sf ~dopt_d by their ~mpluyer er bargaining ani[- ?-lowever you can ~ ~_ eta ri~~~he Plan ifycu: • Ire a foreign national • rave comprehensive health insurance co~~erag° pry vided fer life that !s ai I~asr i0 percent paid for by a^ employe? • Are ;eligible for T'RICARL tJnc: you opt aut, you may riot participarc ar artv_ime r.:hc `ut~~re. Contact MSRS for more informat=on_ How are contributions invested? [-ICSP coneributions are invested in your choice of seven investment options. See "HCSP Investment Options" below for a list of the available investment options. Contributions are automatically invested in the Nloney tUtarlcet Account unless you elect one or more of the other investment options. You can change how future contributions are invested, or transfer all or a portion of your existing balance among any of the investment options'. There are three uvays to manage your investment selections: "~~,.. • Online at ~ ~ a<.r.~. • ~ sate :x:~.rhu • By phone using the Automated Voice Response (AVRI System • Contact an MSRS Representative at °.i~ ~-?~"~ ~ %;~1 or toll-free at 1-01)t}-~~_-77 `You may not transfer- balances directly from the Fixed Interest Acco~snt to the Money Nlarizet Account. you can invest your HCSP contributions in any combination of seven investment options. For additional investment information, go to wunamsrs.state:mn.us and select "Health Care (HCSP), " then `7nvesh~:ent Options' To renieu~ a prospectzrs, t=rsrt :v:uwsbistat~ nrnars. The prospects is located zmder the Pzzblicatiozzs liuk. Please cozuider the investment objectives, risks, and charges end expenses of the. inveshnez:t options carefully before investing. ~ Money Market Account Maintains principal value and earns interest that is competitive with rates available in short-term money market funds chat invest only in securities backed by the U.S. government. Shares of the Account are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. ©Fitied Interest Account Designed to maintain principal value and to provide competitive interest rates by investing primarily in stable value instruments such as insurance company investment contracts, bank investment contracts and security backed contracts. ©Rond Market Account Generates returns from interest income and capital appreciation by investing in government issues, high-quality U.S. corporate bonds and mortgage securities that have intermediate to .long-term maturities. a { ; ~~' ~ ~ , '-' "*~~ How HCSP say=es you money $ere's an example of how contributing a severance.payment to your HCSi' could save you money. Ler'ssajr you are eligib~c for $5000 in severance. If this was paid to you in cash, you.°o~uld only- receive ab4ur X3,000 after deducting tedertl, scare 3nek F.[CA(Social,Securityand:L4edicarc; taxes.. [t,vour sevetanc~ is directed it~co I-`[CSI', clie e~ttire ;p5',00(J would be available fqr teimbursemeet of health care-expenses.,. efFectively saving-you $?,U00. Q Income Share Account Earns returns from capital appreciation and income from dividends and interest by investing in a mix of stocks, bonds and cash. The Account's stock segment is managed passively to the Russell 3000 Index, a broad market index chat captures the returns of a wide range of publicly traded U.S. stocks. Q Common Stock Index Account Generates returns by passively investing in domestic stocks of the Russell 3000 Index, a broad market index that captures the returns of a wide range of publicly traded U.S. stocks. Q Growth Share Account Generates .returns by actively investing in stock of U.S. companies as measured by the Russell :1000. ~ International Account Earns returns by investing in the stock of foreign companies, with the majority of the Account typically invested in the Eve largest international markets: United Kingdom, Japart, Germaziy, France and Canada. How and when can I access the money in my account? You can be reimbursed for eligible expenses using money from your count if you: • Leave employment • Retire • Are collecting a disability benefit from one of the public pension plans • Are on a medica[ leave of six months or longer • Arc on a leave of absence oEone year or longer You pay your eligible expenses out-of-pocket and then submit a Reimbursement Claim form and documentation of the expense to MSRS. You will be !reimbursed for your eligible out-of-pocket costs either by check or through direct deposit to your bank account. What if I die with money remaining in my account? If there is a balance remaining in your account upon your death, it is automatically transferred to your spouse and/or legal dependents to use for tax-free reimbursement of eligible medical expenses. If you do not have a spouse or legal dependents, or your spouse dies before you., your designated beneficiaries can use the remaining balance in your HCSP for reimbursement of eligible health care expenses. Reimbursements to a designated beneficiary are subject to state and federal income taxes. We encourage you to periodically review your HCSP beneficiary designation. Even if you have a spouse or other legal dependents, it's still a good idea to have a beneficiary designation on your account. To obtain a Beneficiary Designation form, go to ~wvsumsrsstate.nan.us or call MSRS. How can I monitor and manage my account? There are several ways to manage your account: • Review quarterly statements • Visit ~~WVW.mSCS.SLBLe.Illn.nS • Call the Automated Uoice Response (AVR) System • Contact MSRS at 6~3-296-2761 or toll-free ar a-,8~~~ 67-57'7 to speak with a Plan Representative } =" •R, r' ~. \' ~.. /, _~ ;>; ~~ f ~~ 1 ~~~~ Health Cate Savings PI:Li Our Tu-Free Solntion 7 Success of HCSP The Minnesota State Retirement Sysrem (MSRSJ administers HCSP For the benefit of governmental employees throughout 1Vlinnesota. Since its inception in July 2001, the Plan has gained popularity and grown in size. Minnesota State Statutes Chapter 372.98 authorizes N[SRS to offer this program to governmental employers in Minnesota. iv[SRS Representatives are registered representatives of ING [nvesanen, Advisors, LLC Member SIPC). i\./~~. 1 Our Tax-Free Solution 7 ~ 60 Empire Drive, Suite 300 St. Paul, Minnesota 51103-3000 C09-0522-010 6/09 Elk River Municipal Utilities Health Care Savings Plan (HCSP) Policy Proposed Revisions 10/28/2009 Definitions: Regular Field Worker as defined by the ERMU Employee Handbook is "an employee whose regular assigned position involves performing a significant portion of his or her work outside of the Utilities' physical facilities." This would include the following job positions: Water Superintendent, Water Operator, Technical Services Superintendent, Lead Electrical Technician, Electrical Technician, Security Technician, Plant Operator / Mechanic, Locator /Mapping Technician, Locator, Electric Line Superintendent, Line Foreperson, Lead Lineperson, Lineperson, and Maintenance Person. Non-Regular Field Workers would be those ERMU employees not classified as Regular Field Workers. This would include the following job positions: Director of Operations, Financial Director /Office Manager, Assistant Office Manager, Purchasing Specialist, Accounts Payable /Payroll Specialist, Credit & Collections Specialist, Billing Specialist, Customer Service Representative, Accountant. Question 1 - Do you support the split of the HCSP into two groups, Regular Field Workers and Non-Regular Field Workers? Circle one of the following: Yes or No Question 2a (For Regular Field Workers Only) -Would you support applying the percent allocations to the HCSP for a Regular Field Workers group as follows: • Fewer than 10 years of employment with ERMU = 1 % Employee Contribution • Fewer than 20 years and greater than 10 years of employment with ERMU = 2% Employee Contribution • 20 years and greater years employment with ERMU = 3% Employee Contribution Circle one of the following: Yes or No Question 2b (For Non-Regular Field Workers Only) -Would you support not increasing the percent allocation and apply the percent allocation of 1% employee contribution to the HCSP currently used for all employees for aNon-Regular Field Workers group. Circle one of the following: Yes or No Utilities' ~111n~o~~)~, lI'tici~~.l.te 7Ii C~1e'tlli)Il~si)L:1 l~O~t ~111~10~"ill~.llt Htialtl, Care ~a~~in~Js Plan HC:3P1 established raider l~tcnn.:~tat. ~ ~~?.9S and as outlined irl tht ti~innesota ~tatr_' ketirernent ~;s~sten-1"s Ttlist and Plan Documents. X11 fiuzds collected .b`, the °m_~ti-er_on the iichalf_ot_the f:rn~c,~~e< «ill bw d~o~iteci into_ the ?alr,lo~z~::_., _~)st _1T1 lt)~'1TLlC1_t health cal' :~a~:111vS~?lan_aC[.o!lilt._ G_;1leral artl~_I.~at10n_Tllles are outlined bclo~~. for a comnlet~; ~~uide re~Tarciin~i bzr~rits. use and eli~Tibilit~~ see the r~lan's ~i(1~Li1C11=11CS. t. Enl~Q~'eZS %ire_ rectur;..d tci contrii~utz._l°_o o(' their ~TroSS_.~ti_a(7es tto_ the Post ;r.t~a~nienl_Healtl~ Care_Sa~~insrs f?l~n..'l~lles~ ilncis.t~~i:li_b~ dex~itecl after eac~_~~e:.iod_ -- - - - - - - - - 2. 1/m.Llove~s ti^ho i~a~_~.~cccuzc~ o~et`9<()_1)c~ul_:~_~t_si~k tir_ie Mill ha~~__~0°~0 of ~hc?se hgur~ cun~:zrte~l to c~151z_ and dzt~c~sitect n._th~ir_Post En1~lo~~1~1~nt Healtf~ C'arz.~a-~-"111 s siCCOlillt__ Z hr f.:'L?fl~_~L'SlC?iZ«~III t3.)L"~ ~?~~lCe C)riC~ 1 ~'~~tr wit the end of December. ~. Eir ).~lo~~e~s~>.1.~~_r, r~~~i~=nati~rl~tzcn_ti~_ition. u~ retilenlznt._c~~i:l ha~_e.SU~_;~ tti' utlused sick tea~~e. a to a r ar-iniun~ c~F i()0 da~-s, com~erte_d into_easll_and deposited intq_thzi~_Post_En~_~o~-IYlctlt Hzaltli t~ar~ ~a~•il~~.~accourit._ 32