Since 2001 the MMA Labor Agreement has provided a Health Care Savings Plan (HCSP). This tax-free savings plan is available to eligible supervisors at the time of separation from state employment. Article 16, Section 10 of the agreement defines who is eligible for this tax-free benefit:
- supervisors who separate from state service with 20 or more years of continuous state service and who are eligible to receive severance pay;
- supervisors retiring from state service with less than 20 years of continuous state service and who are eligible to receive severance pay;
- supervisors with 20 or more years of continuous state service who are laid off.
Supervisors who do not meet the above criteria for HCSP or whose severance and vacation leave payout totals less than $500 receive such payments in cash.
There are a few exceptions where supervisors may opt out or waive participation in the HCSP. These exceptions are limited to some supervisors who have the federal government’s Tri-Care coverage, who are foreign nationals or Native Americans . An exemption would also include a supervisor who has a comprehensive “ lifetime” health care coverage through a former employer (or coverage under a spouse’s plan) that is subsidized by the previous employer by at least 70%. Supervisors who believe they may fall into these exceptions are encouraged to contact MSRS to discuss.
For eligible supervisors, the HCSP provides a tax-free payout of 100% of the supervisor’s severance pay and 100% of the supervisor’s vacation leave (up to the 260-hour maximum) into the supervisor’s HCSP account administered by the Minnesota State Retirement Systems (MSRS).
Monies placed into the HCSP account are held in trust for the supervisor to invest until the money is withdrawn to pay the supervisor's medical expenses on a tax-free basis. The supervisor may also use this money for his/her spouse’s and legal dependent’s medical expenses. If the supervisor dies, before the account has been exhausted, the supervisor's spouse or legal dependents continue to use the account for reimbursement and the reimbursement remains tax free. If the supervisor has no spouse or dependents, the designated beneficiary will continue to submit claims for health care expenses. However, at this point the reimbursements become taxable income.
The supervisor has seven HCSP investment choices ranging from a fixed interest account to an international investment account.
For further information, please see the MSRS website www.msrs.state.mn.us.
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