Summary

H.F. ____ (       ); S.F. 2121 (Betzold): MSRS Health Care Savings Plan; Revising Plan to Cover Pre-Retirement Health Care Costs, revises the Minnesota State Retirement System (MSRS) Health Care Savings Plan by permitting money from accounts to be used to reimburse health care costs of active members.

Background

The MSRS Health Care Savings Plan was enacted in 2001 (Laws 2001, First Special Session, Chapter 10, Article 7, Section 1). The plan is not limited to members of MSRS plans; all Minnesota public employees are authorized to participate. Contributions to the plan are determined through a personnel policy or collective bargaining agreement of a public employer. MSRS established one or more trusts (to be used to invest the assets created in the accounts and to maintain the accounts) as authorized under the Internal Revenue Code to be eligible for tax-free treatment, enabling covered employees to save for health care costs.

Discussion

As initially enacted, the plan could provide reimbursement of health-care related expenses after retirement. Under H.F. ____ (       ); S.F. 2121 (Betzold), the plan is being revised to also allow reimbursement of health-care related costs for active employees.

The bills are not related to public pension plans. The program is a plan for health care cost reimbursement from accounts maintained separately from any retirement plan assets or retirement plan individual accounts. We raise few policy issues. The Commission may wish to consider the following:

1. Consistency with Federal Requirements. The Commission may wish to establish through testimony that the proposed expansion to include coverage of active members is consistent with current federal law.

2. Treatment of Disabilitants and Deferred Members. As revised the plan would reimburse health care expenses "following retirement from public employment or during active employment." (Page 2, lines 12 and 13.) It is unclear if deferred pension plan members (those who have terminated from covered Minnesota pension plan employment but who have not started drawing an annuity) and disabilitants are eligible. The Commission may wish to use an amendment to clarify coverage. LCPR04-159 can be used if the intention is to include deferred members and disabilitants in addition to the groups who are clearly covered by the bill language, the active members and retirees. The amendment also adds an effective date.

3. Effective Date. The bill does not have an effective date provision. LCPR04-160 could be used to make the changes effective on the day following final enactment. This amendment is not needed if LCPR04-159 is used.