Frequently Asked Questions

Below are the most frequently asked questions (FAQs) about the Defined Contribution plan reform. FAQs may be added or revised. Please check back regularly. 

  1. Making Your Election  - Updated 2/14/2012
  2. Understanding the Graded Premium Subsidy Plan - Updated 1/24/2012
  3. Understanding the Personal Healthcare Fund  - Updated 2/13/2012
  4. Understanding the Lump Sum Credit  - Updated 2/24/2012
  5. Understanding the 2 Percent Match  - Updated 1/6/2012
  6. Former and Retired DC Participants, DB-DC Transfers from 1997, and Employees on Leave of Absence/Layoff  - Updated 12/21/2011
  7. Health Reimbursement Accounts (for New Hires and Rehires with fewer than 10 years of service)  - Updated 12/29/2011

 

1 - Making Your Election

  1. How long do I have before I must decide?.
  2. Can I change my mind?
  3. What if I miss the deadline?
  4. What if I don't make a choice?
  5. What if I'm hired by the state after January 1, 2012?
  6. I work for a noncentral agency (NCA). Does this affect me?
  7. Do conservation officers and covered employees retain their early eligibility for insurance benefits?
  8. If I take elect Option 2, the Personal Healthcare Fund, and take the 2 percent, can I purchase health insurance from the state when I retire?
  9. What about the dental, vision and drug insurance benefits?
  10. I'm a survivor of a former DC employee who is eligible for the insurance premium subsidy, but I haven't claimed the subsidy yet. Do I need to do anything?
  11. I'm a survivor of a former DC employee receiving the subsidy now. Does this affect me?
  12. Does my vesting status in the DC plan make a difference?
  13. How can I get help making this decision?
  14. I want the default option (Option 1: Graded Premium Subsidy). Why should I bother going online to make an election?
  15. I plan to make my election by the March 2 deadline. Why do I keep getting reminders from ORS?
  16. If there's a lawsuit pending against the reform changes, do I still need to make an election?

2 - Understanding the Graded Premium Subsidy Plan

  1. Why would I want to stay in the Graded Premium Subsidy Plan?
  2. How do I know how much the graded premium subsidy will be?
  3. If I stay in the Graded Premium Subsidy Plan and then lose my job, what happens?
  4. If I stay in the Graded Premium Subsidy Plan and then become disabled, what happens?
  5. If I stay in the Graded Premium Subsidy Plan and then die, what happens?
  6. If I stay in the Graded Premium Subsidy Plan and then go on Medicare when I reach 65, can my spouse and dependents stay in the plan?
  7. My spouse and I are both state employees and participants in the DC plan. If I elect the Graded Premium Subsidy and my spouse elects the Personal Healthcare Fund, then when we both retire, could I choose to cover my spouse as a dependent under my insurance?

3 - Understanding the Personal Healthcare Fund

  1. Why would I want to elect the Personal Healthcare Fund?
  2. What are the vesting requirements for the Personal Healthcare Fund?
  3. If I elect the Personal Healthcare Fund and then lose my job after April 1, what happens?
  4. If I elect the Personal Healthcare Fund and then become disabled, do I get any insurance coverage?
  5. If I elect the Personal Healthcare Fund and then die, do my dependents get any insurance coverage?
  6. I am in the DC plan and my spouse is in the DB plan. If I elect the Personal Healthcare Fund, can my spouse cover me under their DB health insurance when he/she retires?
  7. I am in the DC plan and my spouse is in the DB plan. I'm considering selecting the Personal Healthcare Fund. If my spouse names me as 50% survivor to his/her pension, will I be eligible for his/her insurance subsidy when they die, or will I only get a 50% subsidy?

4 - Understanding the Lump Sum Credit

  1. How much will my lump sum credit be?
  2. How do I know how many years of service I have?
  3. What kind of tax deferred account does the lump sum go into? Can I designate which account? Does it have to be a state account?
  4. Would contribution limits apply to my lump sum credit?
  5. Can I split the lump sum into different accounts to avoid contribution limits?
  6. How does the state decide the value of the lump sum?
  7. How do I find out how much it's worth as of 3/31/2012?
  8. Is the lump sum calculation based on full years of service, or does it include partial years?
  9. I've been a state employee for less than a year. If I elect the Personal Healthcare Fund, what would my lump sum credit be?
  10. Does the lump sum credit earn interest? How much?
  11. How will my lump sum be paid?
  12. Will the lump sum be taxed?
  13. Will the lump sum be restricted for health care expenses or healthcare premiums?
  14. When will I get the lump sum?
  15. If I die before I terminate employment, will my survivor get the lump sum?

5 - Understanding the 2 Percent Match

  1. How does the 2 percent matching contribution work?
  2. Do I have to contribute 2 percent?
  3. When will the 2 percent come out of my pay?
  4. Do I choose the investment account the 2 percent and the match goes into?
  5. Can I get the 2 percent match if I'm not giving the 3 percent?
  6. Would the 2 percent be on top of what I already contribute to my 401(k)?
  7. I'm already contributing 5 percent into my 401(k). Do I need to contribute an additional 2 percent to get the state match?
  8. So, I could potentially get 3 percent and an additional 2 percent match, for a total of 5 percent match to my 401(k) or 457?
  9. Can I split my 2 percent match between my 401(k) and 457 accounts?
  10. Can I put the 2 percent into my 401(k) and have the state put the 2 percent match into my 457?
  11. Will the 2 percent match go into a new 401(k) or 457?
  12. What if I put in just 1 percent?
  13. What if I put in, say, $50 a pay period?
  14. I contribute 1 percent now with a 1 percent state match. It is split between two investment options (half in one fund, half in another fund). I plan to put the 1 percent into healthcare. Where will it go?
  15. Is the 2 percent a Health Savings Account (HSA)?
  16. Is the 2 percent a Flexible Spending Account (FSA)?
  17. If I chose Option 2-Personal Healthcare Fund, and have all this money set aside for my healthcare costs, can I still buy into the state health plans?
  18. How would I pay the premiums if I elected Option 2-Personal Healthcare Fund, and then enrolled in the state health plan?
  19. When can I access the money we (the state and I) put into my 401(k) or 457 for healthcare?
  20. If I put the 2 percent into my 401(k) to get the state match, are there special vesting rules?

6 - Former and Retired DC Participants, DB-DC Transfers from 1997, and Employees on Leave of Absence/Layoff

  1. What is a former qualified participant (FQP)?
  2. I'm a former qualified participant (FQP) in the DC plan with 10 years of service. I'm not working for the state and don't intend to return to state employment. How does this affect me?
  3. I'm a former qualified participant (FQP) in the DC plan with 10 or more years of service. What happens if I come back to work for the state?
  4. I'm a former qualified participant (FQP) in the DC plan with fewer than 10 years of service. What happens if I come back to work for the state?
  5. I'm a retired DC participant. Do these changes affect me? Do I need to do anything?
  6. I transferred from DB to DC back in 1997. Does this affect me?
  7. I'm in DC plan and I'm on layoff status. How does this affect me?
  8. I'm in DC and I'm on an approved leave of absence. How does this affect me?
  9. I'm a retired DB member who was rehired by the state and am currently in the DC plan. How does this affect me?

7 - Health Reimbursement Accounts (for New Hires and Rehires with fewer than 10 years of service)

  1. What is a Health Reimbursement Account?
  2. Is an HRA the same as a Health Savings Account? What's the difference?
  3. Does my HRA credit earn any interest? If so, how much?
  4. What are the eligibility requirements for the HRA?
  5. I'm planning on taking a state job in January 2012. Will my 2 percent go into the HRA, along with the other money I get when I retire?
  6. Can I designate a beneficiary for my HRA?
  7. If I die as an active employee, do my dependents receive the HRA amount?
  8. What happens if I die as an active employee before I reach eligibility requirements?

 

1 - Making Your Election

1. How long do I have before I must decide?
 

You must make your election in miAccount before 5:00 p.m. Eastern Standard Time, Friday, March 2, 2012.

Published on 12/16/2011
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2. Can I change my mind?
 

Yes. If you change your mind, you can rescind your election by going to miAccount and selecting the rescind option. Requests to rescind an election must be submitted in miAccount before the 5:00 p.m. Eastern Standard Time, Friday, March 2, 2012 deadline. After that, your election cannot be changed.

Updated on 1/13/2012
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3. What if I miss the deadline?
 

There are no extensions. If you do not make any election in miAccount by 5:00 p.m. Eastern Standard Time, Friday, March 2, 2012, you will remain in the Graded Premium Subsidy Plan.

Published on 12/16/2011
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4. What if I don't make a choice?
 

If you do not make any election in miAccount by 5:00 p.m., Eastern Standard Time, Friday, March 2, 2012, you will remain in the Graded Premium Subsidy Plan.

Published on 12/16/2011
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5. What if I'm hired by the state after January 1, 2012?
 

If you are hired by the state on or after January 1, 2012, you would be placed in the Personal Healthcare Fund and you would receive the following:

  • Up to 2 percent matching employer contribution into a 401(k) account if you contribute 2 percent of your pay.
  • A credit into a health reimbursement account (HRA) at termination if you have at least 10 years of service at termination.
    • The credit will be $2,000 if you are at least 60 years old.
    • The credit will be $1,000 if you are under 60 years old.

If you worked for the state previously, see the rules for rehired employees in the Former State Employees section of these FAQs.

Published on 12/16/2011
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6. I work for a noncentral agency (NCA). Does this affect me?
 

Possibly. If you work for the Business Enterprise System or the Mackinac Island State Park, you will need to make your selection in miAccount by 5:00 p.m. Friday, March 2, 2012.

If you work for any other noncentral agency, you are not affected by this legislation because your agency does not participate in the state's Defined Contribution Plan. You do not need to do anything.

Updated on 12/22/2011
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7. Do conservation officers and covered employees retain their early eligibility for insurance benefits?
 

For conservation officers or covered employees (responsible for the care and supervision of prisoners) who are DC participants: if you select the Option 1: Graded Premium Subsidy, you would retain your early eligibility for insurance benefits. Visit https://stateofmi.voya.com/einfo/pdfs/forms/michigan/640001/benefit_guide.pdf to see the age and service requirements for covered employees and conservation officers.

If you're a conservation officer or a covered employee and you select Option 2: Personal Healthcare Fund, you would not be eligible for any retiree health insurance benefits, so early eligibility requirements would not apply. You would, however, be eligible to receive your full lump sum amount if you retire at 60 years of age with 10 years of service, or 55 years of age with 30 years of service. If you have 10 years of service but do not meet the age requirements when you terminate employment, you will receive 50 percent of your lump sum amount.
 

Published on 1/10/2012
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8. If I take elect Option 2, the Personal Healthcare Fund, and take the 2 percent, can I purchase health insurance from the state when I retire?
 

If you are currently working for the state as of December 31, 2011, and you select the Personal Healthcare Fund, you can enroll in the state's retiree health plan at retirement when you are eligible with 60 years of age and 10 years of service, or 55 years of age with 30 years of service. You must enroll immediately upon termination and you will be responsible for the total cost of the plan. If you disenroll from the plan, you will not be able to re-enroll.

Go to http://www.michigan.gov/documents/orsstatedc/R0749G-InsRatesDC_332231_7.pdf to get a sense of what the current rates are.

If you are hired by the state on or after January 1, 2012 you will be placed into the Personal Healthcare Fund. You will not be eligible to enroll in the state's retiree health plan at retirement.

Published on 12/16/2011
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9. What about the dental, vision and drug insurance benefits?
 

Your future eligibility for dental, vision, and drug insurance benefits will follow the same rules as the health insurance plan you elect when you retire. Go to http://www.michigan.gov/documents/orsstatedc/R0749G-InsRatesDC_332231_7.pdf to view the current DC retiree health insurance plan options.

Published on 12/16/2011
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10. I'm a survivor of a former DC employee who is eligible for the insurance premium subsidy, but I haven't claimed the subsidy yet. Do I need to do anything?
 

No, you don't need to do anything. You remain eligible for the graded premium subsidy.

Published on 12/16/2011
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11. I'm a survivor of a former DC employee receiving the subsidy now. Does this affect me?
 

No. Your survivor benefits remain unchanged.

Published on 12/16/2011
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12. Does my vesting status in the DC plan make a difference?
 

You must make the election whether you are vested for the healthcare subsidy (the equivalent of 10 years of full-time service with the state) or not.

Also note that at your vesting in the state's 2 percent contribution to your Personal Healthcare Fund is as follows: 50% vested after two years of the equivalent of full time service; 75% after three years, and 100% after four years. You are immediately 100 percent vested in your own contributions to the plan.

Published on 12/16/2011
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13. How can I get help making this decision?
 

Neither ORS nor ING can advise you on this decision because everyone's financial circumstances and career plans differ. ORS does provide several online tools to help you figure out which option is best for you:

Furthermore, ING has scheduled more than 50 webinars to help you understand the election choices. Log on using your computer and dial the toll-free number provided to learn more. Check out http://www.michigan.gov/mdcs#Employees to view the schedule.

ING also provides information on retirement planning and calculators that show how investment earnings can grow over time. Go to http://stateofmi.voya.com to learn more. For further assistance, or for a free consultation with one of their Investment Advisors who can explain the choice you are making in the context of your overall retirement planning, contact ING at 800-748-6128.

Updated on 1/19/2012
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14. I want the default option (Option 1: Graded Premium Subsidy). Why should I bother going online to make an election?
 

This is an important decision that will affect your retirement future. By going on line to make your election, you'll be able to print out a confirmation of your choice that you can keep for your records. Plus, ORS will be sending a series of reminder communications to DC plan participants who have not made their election. If you make your election, you won't receive these reminders.

Published on 1/24/2012
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15. I plan to make my election by the March 2 deadline. Why do I keep getting reminders from ORS?
 

You can't predict what might happen on the last day that might affect your ability to make your election. Do so now, and you won't receive any further reminders from us!

Published on 1/24/2012
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16. If there's a lawsuit pending against the reform changes, do I still need to make an election?
 

Yes. A coalition of state employee unions filed suit on February 13th in Ingham Circuit Court questioning the constitutionality of the changes to employee benefits created by PA 264 of 2011. The lawsuit will not be resolved before the statutory deadline for choosing your retirement healthcare plan (March 2, 2012). ORS must implement Public Act 264 of 2011 as written. State employees in the Defined Contribution plan who do not make an election by 5:00 p.m., Friday, March 2nd will retain the Graded Premium Subsidy where they accrue credit towards insurance premiums in retirement.

Published on 2/14/2012
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2 - Understanding the Graded Premium Subsidy Plan

1. Why would I want to stay in the Graded Premium Subsidy Plan?
 

The Graded Premium Subsidy Plan is a good choice for some people, depending on their career and retirement plans, health and longevity expectations, and other personal factors. We can't give advice, but can only give you tools that will help you project the costs and benefits. Check out this reform information page to learn more.

Published on 12/16/2011
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2. How do I know how much the graded premium subsidy will be?
 

To estimate how much your graded premium subsidy will be, use the current insurance rate sheet found at http://www.michigan.gov/documents/orsstatedc/R0749G-InsRatesDC_332231_7.pdf. Figure how long you plan to stay employed by the state and take into account that the graded premium insurance subsidy is currently set at 30 percent with 10 years of service with an additional 3 percent credited for each year of service thereafter up to the maximum subsidy that is in place for active employees. The subsidy is subject to change even after you have retired.

Updated 1/24/2012
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3. If I stay in the Graded Premium Subsidy Plan and then lose my job, what happens?
 

If and when you meet the age and service requirements (age 60 with 10 years of service or age 55 with 30 years of service) then you would be eligible for the graded premium subsidy.

Published on 12/16/2011
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4. If I stay in the Graded Premium Subsidy Plan and then become disabled, what happens?
 

If you stay in the Graded Premium Subsidy Plan, the benefits for duty and non-duty disability do not change. The state will pay the maximum health premium subsidy allowed by statute. The same maximum subsidies apply to your dental and vision premium.

Published on 12/16/2011
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5. If I stay in the Graded Premium Subsidy Plan and then die, what happens?
 

If you die while a participant in the Graded Premium Subsidy Plan, your dependents remain eligible for the health insurance premium subsidy. The rules are different if you were to die before terminating employment or after, so refer to the Guide to Benefits for Defined Contribution Retirement Plan Participants for details.

Published on 12/16/2011
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6. If I stay in the Graded Premium Subsidy Plan and then go on Medicare when I reach 65, can my spouse and dependents stay in the plan?
 

Yes, and you'll stay in the plan, too. When you become eligible for Medicare, your state subsidy percentage remains the same. The amount you pay each month will be recalculated to reflect your new Medicare Advantage premium amount. Medicare will become your primary insurance provider, and your spouse and eligible dependents would still be covered under the provider you identify for them. Go to http://www.michigan.gov/documents/orsstatedc/R0749G-InsRatesDC_332231_7.pdf to see the current rates, providers and coverage details negotiated for state of Michigan retirees and their dependents by the Employee Benefits Division.

Updated on 12/29/2011
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7. My spouse and I are both state employees and participants in the DC plan. If I elect the Graded Premium Subsidy and my spouse elects the Personal Healthcare Fund, then when we both retire, could I choose to cover my spouse as a dependent under my insurance?
 

The law currently allows spouses to be covered under a retiree's insurance. If this is true when you retire, you could cover your spouse.

Published on 12/28/2011
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3 - Understanding the Personal Healthcare Fund

1. Why would I want to elect the Personal Healthcare Fund?
 

The Personal Healthcare Fund is a good choice for some people, depending on their career and retirement plans, health and longevity expectations, and other personal factors. We can't give advice, but can only give you tools that will help you project the costs and benefits. Check out this reform information page to learn more.

Published on 12/16/2011
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2. What are the vesting requirements for the Personal Healthcare Fund?
 

There are different vesting requirements for the two components of the Personal Healthcare Fund. Please note the following:

You are immediately vested in your contributions to your healthcare savings 401(k) or 457 account. The vesting for the state's matching contribution is 50 percent at the equivalent of 2 years of full time service, 75 percent at 3 years of service, and 100 percent at 4 years of service.

If you were hired before January 1, 2012, you must have at least 10 years of service when you terminate employment in order to qualify for the lump sum contribution. Vesting for the lump sum contribution provided by the state at termination of employment is as follows: 100 percent vesting if you are 60 years of age with 10 years of service or 55 years of age with 30 years of service. If you have 10 years of service but do not meet age requirements, you would be 50 percent vested. If you do not have 10 years of service when you terminate employment, you will not be eligible for any lump sum contribution.

If you are hired on or after January 1, 2012, you need to have 10 years of service in order to be eligible for the state's lump sum contribution to your HRA. The contribution is $2,000 if you are at least 60 years old at termination, or $1,000 if you are less than 60 years old.

 

Updated on 1/13/2012
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3. If I elect the Personal Healthcare Fund and then lose my job after April 1, what happens?
 

Depending on your age and years of service at the time you leave state employment (see vesting requirements above), you would receive the contributions that have been made in your 401(k) and 457 accounts thus far plus a lump sum contribution into the 401(k) or 457 plan.

Published on 12/16/2011
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4. If I elect the Personal Healthcare Fund and then become disabled, do I get any insurance coverage?
 

If you elect the Personal Healthcare Fund and then become totally incapacitated for duty, you may be approved for a duty disability (no minimum service required), or a non-duty disability (10 years of service required). If so, the state will pay the maximum premium subsidy allowed by statute for your health, dental, vision and prescription coverage. (By statute, the state can only pay the maximum subsidy that is in place for active employees and that subsidy is subject to change.) However, you will lose all rights to the 2 percent employer matching contributions and earnings on those contributions in your 401 (k) or 457 account, as well as the lump sum amount that you would have received at termination. You will retain full ownership of your own 2 percent contributions and the earnings on those contributions in your 401(k) or 457 account.

Updated on 2/13/2012
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5. If I elect the Personal Healthcare Fund and then die, do my dependents get any insurance coverage?
  If you elect the Personal Healthcare Fund and then, while an active employee, die because of a duty-related death (caused by an injury or illness resulting from your job activities), the state will pay a supplemental benefit to your spouse and the maximum health premium subsidy allowed by statute for health, dental, vision, and prescription coverage for your spouse and health benefit dependents. (By statute, the state can only pay the maximum subsidy that is in place for active employees and that subsidy is subject to change.) There is no vesting required for this benefit.

If you elect the Personal Healthcare Fund and then, while an active employee, die because of non-duty related death (caused by an injury or illness that is not related to your work) the state will pay a supplemental benefit to your spouse and the maximum health premium subsidy allowed by statute for health, dental, vision, and prescription coverage for your spouse and health benefit dependents, as noted above. You must have at least 10 years of service for your survivors to be eligible for this benefit.

Your spouse's insurance subsidy may continue until his or her death; your health benefit dependents' insurance subsidy may continue until their eligibility ends (through marriage, age, or other event). However, your spouse and health benefit dependents will lose all rights to the 2 percent employer matching contributions and earnings on those contributions in your 401(k) or 457 account, as well as the lump sum amount that you would have received at termination. They retain full ownership of your 2 percent contributions and the earnings on those contributions in your 401(k) or 457 account."

If you elect the Personal Healthcare Fund and die after terminating employment, your beneficiaries will not be eligible for any state subsidized insurance benefits. Your beneficiaries would receive any amount left in your 401(k) or 457 account.
Updated on 2/13/2012
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6. I am in the DC plan and my spouse is in the DB plan. If I elect the Personal Healthcare Fund, can my spouse cover me under their DB health insurance when he/she retires?
 

The law currently allows spouses to be covered under a retiree's insurance. If this is true when your spouse retires, they could cover you.

Updated on 1/24/2012
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7. I am in the DC plan and my spouse is in the DB plan. I'm considering selecting the Personal Healthcare Fund. If my spouse names me as 50% survivor to his/her pension, will I be eligible for his/her insurance subsidy when they die, or will I only get a 50% subsidy?
 

According to current law, if a DB member selects the 50%, 75% or 100% Survivor Pension when they retire, their beneficiaries would retain the full insurance coverage offered by the state if they meet eligibility requirements; learn more at http://www.michigan.gov/orsstatedb/0,4654,7-208-30607_48436_48440---,00.html. If this is true when your spouse retires, and you are the designated beneficiary, you could qualify for insurance coverage. If your spouse selects the Straight Life option, his/her survivors would not be eligible for any insurance subsidy.

Published on 1/24/2012
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4 - Understanding the Lump Sum Credit

1. How much will my lump sum credit be?
 

If you elect the Personal Healthcare Fund, you may receive a lump sum credit to a 401(k) account if you have at least 10 years of service when you terminate employment. The amount of the credit will be calculated based on the value of the retiree health benefits and your years of service as of March 31, 2012, along with an annual interest credit.

  • If you have are 60 years old and have 10 years of service, or you are 55 years old with at least 30 years of service, you will receive 100 percent of the calculated amount when you terminate employment.
  • If you aren't yet old enough when you terminate, but you have at least 10 years of service, you will receive 50 percent of the calculated amount when you terminate employment.

If you do not have 10 years of service when you terminate employment, you will not be eligible for any lump sum credit.

Updated on 1/11/2012
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2. How do I know how many years of service I have?
 

To find your years of service, log into MI HR Self-Service. Under Employee Self-Service, click on Employment, then click on Leave Balances. Under Plan Name, look for DEF CONTRIB SERV HOURS 40. Your DC service hours will appear as Available Hours. Divide this number by 2080 (the equivalent of one year of service) and round down to whole years. For example – 27592 divided by 2080 equals 13.2653. It rounds down to 13 years. Remember, only full years count toward your lump sum healthcare credit.

Note that you cannot be credited with more than one year of service in any given year, and you cannot earn more than 80 hours of service credit in a pay period. If you are working less than full-time, your total hours will be divided by 2080 hours to determine your equated years of service.

If you worked in an unclassified position in the Legislative Service Bureau, House of Representatives, or House Fiscal Agency prior to September 30, 2007, and your normal schedule was less than 80 hours in a bi-weekly pay period, your actual service total may be slightly higher than what you calculate using the method described. Please contact your HR office if this information is integral to you making a decision on the reform.

If you are an employee of the House of Representatives or the Senate, you must contact your HR office for your total Years of Service.

Updated on 1/13/2012
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3. What kind of tax deferred account does the lump sum go into? Can I designate which account? Does it have to be a state account?
 

The lump sum credit will go into your account in the state's 401(k) or 457 plan at termination.

Updated on 1/13/2012
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4. Would contribution limits apply to my lump sum credit?
 

Yes, IRS contribution limits would apply to the lump sum credit you would receive at termination, if you met age and service requirements. These limits are adjusted annually, so visit www.irs.gov for the most current information. If your lump sum contribution exceeds the IRS limits for both your 401(k) or 457, the state will establish a separate tax-deferred account to accommodate the credit.

Published on 12/16/2011
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5. Can I split the lump sum into different accounts to avoid contribution limits?
 

Your lump sum will not likely impact your personal contribution limits (2012 annual limits are $17,000 for the 401(k) plan and $17,000 for the 457 plan). However, the lump sum is considered an employer contribution and there is a limit on total contributions: employer + employee contributions to the 401(k) plan cannot exceed $50,000 annually, and employer + employee contributions to the 457 plan cannot exceed $17,000 annually.

It is our intention to pay the entire lump sum credit to one tax-deferred account. If the amount of your lump sum exceeds the total contribution limits set forth by the IRS, ORS will distribute your lump sum amount toward the following limits, in the order stated:

  1. Your 401(k) for the current year limit.
  2. Your 401(k) for the prior year limit, if applicable.
  3. Your 457 for the current year limit.
  4. A Health Reimbursement Account.

All of the above accounts are subject to IRS catch-up provisions, if applicable.

Updated on 2/23/2012
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6. How does the state decide the value of the lump sum?
 

The lump sum is an actuarial calculation calculated based on the value of the retiree health benefits and your years of service as of March 31, 2012. Interest will be credited each full year you continue working.

The actuarial calculation for the initial lump sum is as follows:

Deferred Life Annuity Factor x 1,000 (average monthly premium for retiree health care ) x 3 percent x years of service (YOS) as of March 31, 2012 = initial Lump Sum (LS)

The initial lump sum amount will never go down. It may increase as interest is added each year, can increase with the accrual of compounded interest based on the Medical Consumer Price Index (MCPI), at a rate not to exceed 4 percent per year for each year you continue working past March 31, 2012.

Updated on 1/11/2012
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7. How do I find out how much it's worth as of 3/31/2012?
 

Use the Personal Healthcare Fund calculator to estimate the current value of your lump sum contribution.

Updated on 1/3/2012
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8. Is the lump sum calculation based on full years of service, or does it include partial years?
 

The calculation is based on full years of service completed. For example, if you have 12.8 years as of March 31, 2012, your lump sum will be calculated with 12 years of service.

Published on 12/16/2011
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9. I've been a state employee for less than a year. If I elect the Personal Healthcare Fund, what would my lump sum credit be?
 

Employees with less than a year of service as of April 1, 2012 will receive the minimum amount calculated for the initial lump sum credit, $2000. This amount will receive an interest credit for each year you continue working. Although the interest will vary depending on the Medical Consumer Price Index, it is capped at 4 percent per year. Use the Personal Healthcare Fund calculator to determine the current and estimated value of the lump sum contribution.

If you have are 60 years old and have 10 years of service, or you are 55 years old with at least 30 years of service, you will receive 100 percent of the calculated amount when you terminate employment.

If you aren't yet old enough when you terminate, but you have at least 10 years of service, you will receive 50 percent of the calculated amount when you terminate employment.

If you do not have 10 years of service when you terminate employment, you will not be eligible for any lump sum credit.

Updated on 2/24/2012
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10. Does the lump sum credit earn interest? How much?
 

The lump sum contribution receives an interest credit for each year you continue working. Although the interest will vary depending on the Medical Consumer Price Index, it is capped at 4 percent per year. Use the Personal Healthcare Fund calculator to determine the current and estimated value of the lump sum contribution.

Updated on 1/3/2012
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11. How will my lump sum be paid?
 

Assuming you meet the vesting requirements explained above, your lump sum contribution will be deposited into your 401(k) account when you terminate state employment.

Published on 12/16/2011
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12. Will the lump sum be taxed?
 

Since the lump sum is an employer contribution being credited to a tax deferred account, it will not generally be subject to state, federal, and, if applicable, city tax until you withdraw the funds. However, FICA paid by both employee and employer is due on employer contributions to your 457. FICA is not due on employer contributions to your 401(k).

Updated on 2/23/2012
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13. Will the lump sum be restricted for health care expenses or healthcare premiums?
 

The lump sum credit is intended for, but not always restricted to, healthcare expenses. If you were hired on or before December 31, 2011, and you met eligibility requirements, your credit would be deposited into a 401(k) and it would not be restricted to healthcare expenses. If you are hired on or after January 1, 2012, then your lump sum credit would be deposited into a Health Reimbursement Account (assuming you met eligibility requirements) and it would be restricted to healthcare expenses, per IRS regulations.

Published on 12/16/2011
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14. When will I get the lump sum?
 

The lump sum will be deposited into your 401(k) or 457 account when you terminate employment, if you meet age and service requirements. Your access to the fund falls under IRS restrictions for accessing 401(k) or 457 plans funds. For more information, see the ING Key Features document.

Published on 12/16/2011
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15. If I die before I terminate employment, will my survivor get the lump sum?
 

No. If you elect the Personal Healthcare Fund and then, while an active employee, die because of a duty-related death (caused by an injury or illness resulting from your job activities), the state will pay a supplemental benefit to your spouse and the maximum health premium subsidy allowed by statute for health, dental, vision, and prescription coverage for your spouse and health benefit dependents. (By statute, the state can only pay the maximum subsidy that is in place for active employees and that subsidy is subject to change.) There is no vesting required for this benefit.

If you elect the Personal Healthcare Fund and then, while an active employee, die because of non-duty related death (caused by an injury or illness that is not related to your work) the state will pay a supplemental benefit to your spouse and the maximum health premium subsidy allowed by statute for health, dental, vision, and prescription coverage for your spouse and health benefit dependents, as noted above. You must have at least 10 years of service for your survivors to be eligible for this benefit.

Your spouse's insurance subsidy may continue until his or her death; your health benefit dependents' insurance subsidy may continue until their eligibility ends (through marriage, age, or other event). However, your spouse and health benefit dependents will lose all rights to the 2 percent employer matching contributions and earnings on those contributions in your 401(k) or 457 account, as well as the lump sum amount that you would have received at termination. They retain full ownership of your 2 percent contributions and the earnings on those contributions in your 401(k) or 457 account.
 

Published on 2/13/2011
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5 - Understanding the 2 Percent Match

1. How does the 2 percent matching contribution work?
 

If you elect Option 2-Personal Healthcare Fund, you would be eligible for an employer match of up to 2 percent of pay to your 401(k) account. This is in addition to the 3 percent match that the state already offers.

You will be automatically enrolled in the 2 percent matching program as of April 1, 2012 and you'll notice the deduction in your pay sometime after April 1, 2012.

If you are already contributing the full 3 percent to your retirement 401(k), the new 2 percent contribution will be applied to your Personal Healthcare Fund and will qualify you for the additional 2 percent state match. You will then be getting a 5 percent match from the state (3 percent into your retirement and 2 percent into your Personal Healthcare Fund).

If you are already contributing 5 percent or more into your 401(k) retirement account, the first 3 percent will be used to meet the state's match for your 401(k) and the next 2 percent will be used to meet the state's match for your Personal Healthcare Fund. You won't need to contribute any more to get the full match and you won't see new deductions from your pay. Any contributions you make on top of the 5 percent will go into your retirement account.

However, if you are contributing less than the full 3 percent into your 401(k) retirement account, the 2 percent that will be automatically deducted from your pay as of April 1, 2012 will be used to first meet that 3 percent contribution to qualify you for the state's 3 percent match for your retirement 401(k). Any remaining contributed funds will be applied to the match for your Personal Healthcare Fund.

The 2 percent contribution is automatic, but the 3 percent is not. You'll need to contact ING at 1-800-748-6128 to increase your contribution to your retirement 401(k) to meet the 3 percent requirement so that you can receive that 3 percent matching benefit as well as the 2 percent state match to your Personal Healthcare Fund.

Updated on 12/29/2011
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2. Do I have to contribute 2 percent?
 

You will be automatically enrolled in the 2 percent matching program as of April 1, 2012. To opt out or reduce the amount of your contribution, and thus reduce the amount of your match, log in to your ING account and change your contributions. But remember that you won't get the state match if you don't contribute first. The state will match up to a 2 percent contribution, so consider contributing as much as you can to get the maximum state match.

Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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3. When will the 2 percent come out of my pay?
 

You will be automatically enrolled in an additional 2 percent contribution sometime after April 1, 2012, if you do not already contribute enough to get the full match. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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4. Do I choose the investment option the 2 percent and the match goes into?
 

The 2 percent will be distributed among the existing investment options you have selected. If you haven't selected investment options, it will go into the Target Date Fund appropriate for your time horizon based on your birth date and an assumed retirement age of 65. If you have questions regarding investment options for your Personal Healthcare Fund contributions, contact ING at 800-748-6128.

Published on 12/16/2011
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5. Can I get the 2 percent match if I'm not giving the 3 percent?
 

The first 3 percent contribution you make will go into the retirement plan bucket. The next 2 percent contribution will go into the health plan bucket. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

But really, why would you pass up getting the state match on your salary (3 percent and 2 percent). That's like leaving money on the table! Most plan participants will want to contribute at least 5 percent to get both the retirement and the healthcare savings matching contributions. Retirement-smart employees contribute even more.

Updated on 12/29/2011
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6. Would the 2 percent be on top of what I already contribute to my 401(k)?
 

Yes. Each contributed dollar can only be eligible for one type of state match. If you are already contributing 3 percent to qualify for the state match for your retirement 401(k), then you would need to contribute up to an additional 2 percent to qualify for the state match for your Personal Healthcare Fund. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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7. I'm already contributing 5 percent into my 401(k). Do I need to contribute an additional 2 percent to get the state match?
 

No. The 2 percent match will start with any contributions you make above the 3 percent. If you're already contributing 5 percent, you don't need to contribute anything more to qualify for the additional 2 percent match. However, to better prepare for a secure retirement, you should consider higher contributions.

Published on 12/16/2011
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8. So, I could potentially get 3 percent and an additional 2 percent match, for a total of 5 percent match to my 401(k)?
 

That is correct.

Published on 12/16/2011
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9. Can I split my 2 percent match between my 401(k) and 457 account?
 

No. The 2 percent match will go into you're 401(k) account.

Published on 12/16/2011
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10. Can I put the 2 percent into my 401(k) and have the state put the 2 percent match into my 457 plan?
 

Your contributions can go into either your 401(k) or 457 account, but the state match will go into the 401(k) account only.

Published on 12/16/2011
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11. Will the 2 percent match go into a new 401(k) or 457?
 

The 2 percent will go into your 401(k) account.

Published on 12/16/2011
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12. What if I put in just 1 percent?
 

The state will match your contribution up to 2 percent. So if you contribute 1 percent, the state will match that with another 1 percent. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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13. What if I put in, say, $50 a pay period?
 

Your contribution has to be expressed in the form of a percent of pay in order to qualify for the state match. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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14. I contribute 1 percent now with a 1 percent state match. It is split between two investment options (half in one fund, half in another fund). I plan to put the 1 percent into healthcare. Where will it go?
 

It will be split among your existing designations. Contact ING at 800-758-6128 or visit http://stateofmi.voya.com for more information on your options for designation. Read question 5.1 above to get a full understanding of how the 2 percent matching program works.

Updated on 12/29/2011
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15. Is the 2 percent a Health Savings Account (HSA)?
 

No. Your 2 percent contribution and the state match are not a "Health Savings Account" as recognized by the IRS. According to the IRS, an HSA is a tax-advantaged medical savings account available to taxpayers who are enrolled in a high-deductible health plan.

Published on 12/16/2011
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16. Is the 2 percent a Flexible Spending Account (FSA)?
 

No. Your 2 percent contribution and the state match are not a "Flexible Spending Account" (FSA) as recognized by the IRS. Retirees are not eligible to participate in an FSA, however, active employees are, if their employer provides one. Contact MI HR at 877-766-6447 or access the MI HR Gateway for information on the state's FSA plan for active employees.

Published on 12/16/2011
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17. If I chose Option 2-Personal Healthcare Fund, and have all this money set aside for my healthcare costs, can I still buy into the state health plans?
 

If you are currently working for the state as of December 31, 2011, and you select the Personal Healthcare Fund, you can enroll in the state's retiree health plan at retirement when you are eligible with 60 years of age and 10 years of service, or 55 years of age with 30 years of service. You must enroll immediately upon termination and you will be responsible for the total cost of the plan. If you disenroll from the plan, you will not be able to re-enroll.

Go to http://www.michigan.gov/documents/orsstatedc/R0749G-InsRatesDC_332231_7.pdf to get a sense of what the current rates are.

Updated on 1/6/2012
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18. How would I pay the premiums if I elected Option 2-Personal Healthcare Fund, and then enrolled in the state health plan?
 

You would enroll and pay the premiums through ORS. When you retire, we'll give you details about how the premiums can be paid

Published on 12/16/2011
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19. When can I access the money we (the state and I) put into my 401(k) or 457 for healthcare?
 

The IRS rules for withdrawals from a 401(k) plan are different from the rules for a 457 plan. ING provides a comparison of the rules at https://stateofmi.voya.com/einfo/pdfs/forms/michigan/key_features.pdf.

Additional details can be found in ING's Payout Guide at https://stateofmi.voya.com/einfo/pdfs/forms/michigan/640001/payout_guide.pdf.

Published on 12/16/2011
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20. If I put the 2 percent into my 401(k) to get the state match, are there special vesting rules?
 

The same vesting rules apply to the 2 percent as to the 3 percent state match. You are 100 percent vested in your contributions to your 401(k) or 457 account. Your vesting in the state's contributions is as follows: 50 percent vested after the equivalent of 2 years of full-time service, 75 percent vested after 3 years, and 100 percent vested after 4 years.

Published on 12/16/2011
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6 - Former and Retired DC Participants, DB-DC Transfers from 1997, and Employees on Leave of Absence/Layoff

1. What is a former qualified participant (FQP)?
 

A former qualified participant (FQP) is a DC member who previously worked with the state as a qualified participant of the DC plan, but is not currently employed by the state (inactive).

Published on 12/16/2011
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2. I'm a former qualified participant (FQP) in the DC plan with 10 years of service. I'm not working for the state and don't intend to return to state employment. How does this affect me?
 

As a former qualified participant in the DC plan with 10 years of service, if you do not return to state employment you will remain in the Graded Premium Subsidy Plan.

Published on 12/16/2011
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3. I'm a former qualified participant (FQP) in the DC plan with 10 or more years of service. What happens if I come back to work for the state?
 

If you are a DC participant with 10 or more years of service as of December 31, 2011 and are reemployed by the state on or after January 1, 2012, and before January 1, 2014, you will be able to elect either Option 1 or Option 2 upon your retirement. You would have 60 days from your first pay date to make your choice; if you do not make a choice you will be placed in Option 1-Graded Premium Subsidy Plan.

If you are a DC participant with 10 or more years of service as of December 31, 2011 and you are reemployed by the state on or after January 1, 2014, you will be treated as if you chose Option 2-Personal Healthcare Fund.

Published on 12/16/2011
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4. I'm a former qualified participant (FQP) in the DC plan with fewer than 10 years of service. What happens if I come back to work for the state?
 

Since you were not vested for healthcare when you left state service, if you are reemployed by the state on or after January 1, 2012, you would be eligible for up to a 2 percent matching employer contribution into a 401(k) account if you contribute 2 percent of pay and a credit into a Health Reimbursement Account (HRA) at termination if you have at least 10 years of service at termination. The credit will be $2,000 if you are at least 60 years old or $1,000 if you are less than 60 years old.

Published on 12/16/2011
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5. I'm a retired DC participant. Do these changes affect me? Do I need to do anything?
 

You do not need to do anything. If you are a retired DC plan participant who currently receives the health insurance premium subsidy, you are not affected by these changes.

If you are a retired DC plan participant who is eligible for but not yet receiving the health insurance premium subsidy, your eligibility for the graded premium subsidy does not change. It will be available to you if/when you choose to apply for it.

Published on 12/16/2011
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6. I transferred from DB to DC back in 1997. Does this affect me?
 

No. You are not affected by these changes. You remain eligible for the full healthcare premium subsidy as if you had not switched to the DC plan. This legislation does not affect you and you will not be able to make an election.

Published on 12/16/2011
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7. I'm in DC plan and I'm on layoff status. How does this affect me?
 

It depends on how long you are on layoff status and whether or not you make an election by March 2, 2012. If you are on layoff status for less than one year as of 12/31/2011, you are still considered an active employee and you will need to choose either Option 1-Graded Premium Subsidy or Option 2-Personal Healthcare Fund. If you fail to make an election by March 2, 2012, and you return to work within the 1 year layoff window, you would be put in to the Graded Premium Subsidy Plan. After one year of layoff status, your employer-employee relationship with the state is severed. If you meet age and service requirements (age 60 with 10 years of service or age 55 with 30 years of service), you would be eligible for the graded premium insurance subsidy.

If you return to work for the state after your 1 year layoff status has expired, you would be put in the Graded Premium Subsidy Plan. Your eligibility for the plan benefits would be determined by your years of service as of the date you return to state employment. For more details, see questions 3 and 4 above.

Published on 12/16/2011
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8. I'm in DC and I'm on an approved leave of absence. How does this affect me?
 

Employees on an approved leave of absence are considered "active" employees and, as such, you would need to make an election by 5:00 p.m. Eastern Standard Time Friday, March 2, 2012. If you don't make any election by the deadline you would remain in Option 1-Graded Premium Subsidy Plan.

Published on 12/16/2011
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9. I'm a retired DB member who was rehired by the state and am currently in the DC plan. How does this affect me?
 

If you are a retired DB member who was rehired by the state, your retirement benefits and retiree health insurance are locked in. This legislation does not affect you and you do not need to take any action.

Published on 12/21/2011
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7 - Health Reimbursement Accounts (for New Hires and Rehires with fewer than 10 years of service)

1. What is a Health Reimbursement Account?
 

Health Reimbursement Accounts (HRA), also called Health Reimbursement Arrangements, are IRS-sanctioned programs that allow an employer to set aside funds to reimburse qualified medical expenses paid by participating employees in retirement. HRAs are funded and wholly owned by the employer. You cannot contribute to the HRA and they do not earn interest. Some advantages to an HRA include: HRA contributions are not included in your gross income; reimbursements for qualified medical expenses are tax free; and unused funds may be carried forward for reimbursement in future years. To learn more, go to http://www.irs.gov/pub/irs-pdf/p969.pdf.

Published on 12/16/2011
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2. Is an HRA the same as a Health Savings Account? What's the difference?
 

They are different. An HSA (Health Savings Account) is a medical savings account for individuals who are enrolled in a High Deductible Health Plan. The state does not offer an HSA. Health Reimbursement Accounts are IRS-sanctioned programs that allow an employer to set aside funds to reimburse qualified medical expenses paid by participating employees in retirement. See the question above for more details on the HRA.

Published on 12/16/2011
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3. Does my HRA credit earn any interest? If so, how much?
 

No. An HRA is not an individually owned bank account, but is fully owned and funded by the employer, in this case, the state. Therefore, it does not earn any interest once it is credited to your HRA upon termination. Your HRA will be set up at termination with a deposit based on the required 10 years of service and your age ($2,000 if you're at least 60 years old or $1,000 if you're not).

Published on 12/16/2011
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4. What are the eligibility requirements for the HRA?
 

The HRA would be credited at termination if you have at least 10 years of service. The credit will be $2,000 if you are at least 60 years old, or $1,000 if you are less than 60 years old.

Published on 12/16/2011
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5. I'm planning on taking a state job in January 2012. Will my 2 percent go into the HRA?
 

No. For new hires, or those returning with fewer than 10 years of service, the 2 percent contribution and match will be placed into a 401(k) account. This is separate from the credit to the HRA, which is a different account.

Updated on 12/29/2011
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6. Can I designate a beneficiary for my HRA?
 

No, but if you die after you retire, your eligible dependents would get the HRA funds with the same spending restrictions.

Published on 12/16/2011
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7. If I die as an active employee, do my dependents receive the HRA amount?
 

If you die as an active employee, with at least 10 years of service at the time of your death, it would constitute a termination of employment and the amount would be credited to the HRA ($2,000 if you were over 60 years of age, $1,000 if younger than 60 years of age).If you die before you have 10 years of service, the HRA would not be payable.

Published on 12/16/2011
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8. What happens if I die as an active employee before I reach eligibility requirements?
 

If you die before you are vested with 10 years of service, the HRA would not be credited but the state's 2 percent matching healthcare contributions to your 401(k) account would be issued to your beneficiary if you met vesting requirements for those funds (50% vested with the equivalent of 2 years of full time service, 75% vested with 3 years of service, and 100 percent vested after 4 years of service). Your 2 percent contributions to those funds would be issued to your beneficiary.

Published on 12/16/2011
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