The Medical Expense Reimbursement Program of the HPAE Retiree Medical Trust

Questions & Answers

HPAE has established a medical reimbursement program to help retirees pay for their medical costs. The program is funded by employer contributions made on behalf of employees and/or by employee contributions through payroll deductions. Each local union negotiates the amount and source of contributions. The purpose of this Q&A is to answer important questions about the program, the operation of the Trust, the eligibility of employees for benefits, and how employees receive benefits.

A.  ELIGIBILITY AND BENEFITS
B.  TAX ADVANTAGES OF THE PROGRAM
C.  OPERATION OF PLAN
 

A.      ELIGIBILITY AND BENEFITS

            1)         What kind of benefits will be available to me under the program?  The program will reimburse you toward the cost of post-retirement medical expenses.  This includes insurance premiums, out of pocket costs, deductibles, co-pays, etc. Medical expenses are broadly defined: it includes insurance for medical and or hospital expenses, dental or vision care, hearing aid and prescription drug expenses and long term care.  The program’s benefits can be paid to a wide variety of health care plans, e.g., traditional insurance company for individual coverage, to your spouse’s employer plan for group coverage, etc.

            2)         When will benefits commence?  Benefits commence after retirement. The minimum age for retirement is 55 years old.  

            3)         How will I receive the benefits of the program if my employer makes contributions on my behalf?  If you retire within the first five years of the program’s existence in your local, any contributions made to the program on your behalf by your employer will be put in an individual, “Employee Account.” Upon retirement, you will be able to receive reimbursements for post-retirement medical expenses up to the amount of the money in that account. For example, if you retire in 2010 and your employer has contributed $3000 into the program on your behalf, then you will have $3000 available for reimbursement of post-retirement medical expenses, plus any interest earnings. 

After the medical reimbursement program has been in existence for five years, if you retire at age 55 or older, you will receive a monthly benefit from the HPAE Retiree Medical Trust. The monthly benefit will be determined by the Trustees.  For example, if your monthly benefit is $250, then you can be reimbursed for post-retirement medical expenses up to $250 a month. Any money not used in a month will be available for reimbursements of future medical costs.

4)         How will I receive the benefits of the program if I make contributions through payroll deductions?    You will be able to receive reimbursements for post-retirement medical expenses up to the amount of the money that you have contributed to your Employee Account, plus any interest. For example, if you retire in 2016 at the age of 61 and you have contributed $4000 into the program, then you will have $4000 available for reimbursement of post-retirement medical expenses, plus any interest earnings. 

            5)         How do I get reimbursed for medical expenses?  After you retire, you will submit bills or receipts for medical costs to the Trust office. The Trust administrators will process each request for reimbursement and then send you a check to cover the cost. You will be reimbursed up to the amount that you have in your Employee Account. For example, if you have $12,450 in your Employee Account, then you can receive up to $12,450 in reimbursements. Once your Employee Account has $0, then you can no longer receive reimbursements for medical costs.

            6)         How do I become eligible?  Eligibility for the benefit requires:  a) retirement from employment with a participating employer; and b) attainment of age 55. 

            7)         What if I leave my current hospital, where I am represented by HPAE, to go to work at another hospital whose employees are represented by HPAE?  If the other HPAE local participates in the program, then you can continue to make contributions to the Retiree Medical Trust and thus you will have more money available for post-retirement medical expenses.

            8)         What if I leave my current hospital, where I am represented by HPAE, to go to work at a non-union hospital or leave the health care field entirely? What happens to my benefits?  Any contributions that you made to the program will continue to accrue interest and, when you reach age 55, you will be able to take reimbursements from your Employee Account, based on the money that you contributed plus interest.

            9)         Are there survivor benefits?  Yes, the program includes benefits to surviving spouses and domestic partners.  The benefit level is 100% of the deceased retiree’s benefit in their Employee Account.  If there is no surviving spouse or domestic partner, surviving dependents may receive the surviving spouse benefits so long as they are within the age limits for dependents.

B.      TAX ADVANTAGES OF THE PROGRAM

            1)         May an individual employee elect whether or not to participate (like a cafeteria or 401k plan)?  No, if your local union negotiates an employee contribution, then all employees who are participating in the program must contribute. The tax advantages of the program depend on the absence of individual election.

            2)         What are the tax advantages of the program?  You will obtain three separate tax breaks:

            a)         Your contribution is in pre-tax dollars, i.e., it will not count as taxable wages;

            b)         The Trust itself will accrue earnings on a non-taxable basis; and

            c)         Your benefits will not be taxed when you receive them.

This means that the portion of your salary contributed to the program will never be taxed (unlike pension benefits which are taxed upon receipt), and you will receive it after retirement for medical coverage.

            3)         How is this program different from a 401K or 403B plan that allows me to save money for my retirement?  An employee-only contribution to the HPAE medical reimbursement program is very similar to a 401K or 403B. In fact, it could be called a “Healthcare 403B” in that you are putting money aside for your health care needs in retirement while you are still working. There are two important differences, however. First, the money can only be used for reimbursement of medical costs. Second, unlike a 401K or 403B, when you receive medical reimbursements after you are retired, you do not pay any taxes on the money. Thus, this program provides more tax advantages than a 401K or 403B plan.

C.      OPERATION OF PLAN

            1)         What is the legal structure of the Plan?  Program assets (i.e., contributions and earnings) will be held in a trust, legally separate from the Local or the employer.  The Trust is controlled and administered by a Board of Trustees, composed of an equal number of HPAE representatives and management representatives.  The Board administers the program, selects investment vehicles, decides on distribution options, etc.  The Board will hire a professional investment manager to provide advice regarding investments of program assets.

            The Trust is regulated by federal law, and the Trustees are charged with fiduciary responsibility to administer the plan for “the exclusive benefit” of the participating employees.  If the Trustees fail to do so, they are subject to civil and criminal penalties.

            2)         Who can become a Trustee?  HPAE’s State Executive Council (SEC) has selected the union’s trustees and the employers will determine who their trustees are.