Human Resources Retirement Program Changes. Covering You. Valuable. Dependable. Accessible.

Transcription

1 Human Resources Retirement Program Changes Covering You. Valuable. Dependable. Accessible.

2 new ahead. the Learn about choices

3 Retiree Medical Benefits Continued Coverage and New Options for 2009 The 3M Retiree Medical Plan provides comprehensive benefits for retirees who are non-medicare eligible, and valuable supplemental coverage for Medicare-eligible retirees. 3M is proud to be able to offer this important coverage, including expanded options for This special communication replaces the April 2008 issue of 3M Retiree Connections, and provides advance announcement of new options that will take effect beginning January 1, 2009, in addition to your current retiree medical options. As you read this brochure, please remember this announcement is informational only. No immediate action is required from you. Please read the information carefully to fully understand the choices ahead. Your Pension Plan is not changing This brochure describes new options in your retiree medical plan. Your Pension Plan is not changing. This brochure describes 3M retiree medical benefits for current retirees participating in Portfolio II who are: Non-Medicare eligible, or Medicare-eligible, but have at least one eligible dependent who is non-medicare eligible. Within this brochure, we provide an overview of your current benefits and a detailed look at what s changing. 2

4 Your Retiree Medical Benefits Benefits taking effect beginning January 1, 2009 New medical plan options depend on Medicare eligibilty The 3M Retiree Medical Plan provides flexibility to choose the coverage that s best for you both before and after you become eligible for Medicare. Take a look at the following chart to see the retiree medical choices effective beginning January 1, If you are not Medicare-eligible (generally, younger than age 65) Coverage Option You can choose the traditional 3M Retiree Preferred Provider Organization (PPO) Plan... or the NEW 3M Retiree Consumer-Directed Plan with a tax-effective Health Savings Account (HSA). Cost-Sharing Approach You will be covered under the cost-sharing approach included in Portfolio II. When you are Medicare-eligible (generally, age 65 and older) Coverage Option You can choose the 3M Retiree Medicare-Eligible Plan... or NEW purchase an individual Medicare supplement policy from the marketplace. Cost-Sharing Approach If you choose the 3M Retiree Medicare-Eligible Plan, you will be covered under the cost-sharing approach included in Portfolio II. NEW If you choose to purchase coverage from the marketplace, 3M will provide a Health Reimbursement Arrangement (HRA) that you can use toward your premiums and other eligible medical expenses. What is a retiree medical coverage option? The plan that determines how your medical expenses are covered. For example, a non-medicare eligible retiree currently has two retiree medical coverage options: the 3M Retiree Preferred Provider Organization (PPO) Plan or the 3M Retiree Consumer-Directed Plan with a tax-effective Health Savings Account (HSA). What is the 3M Retiree Preferred Provider Organization (PPO) Plan? A type of medical coverage that includes a deductible, coinsurance and co-payments for expenses such as office visits and prescriptions. The plan provides two levels of coverage (in-network and out-of-network) with increased benefits for services provided within the PPO s network. 3 Questions? Call (888) (toll free)

5 Designed with Medicare eligibility in mind Before you or any eligible dependent is eligible for Medicare, 3M provides a non-medicare coverage option based on each individual s eligibility. As you or your eligible dependent becomes eligible for Medicare, Medicare coverage becomes that individual s primary coverage, and any additional coverage (provided through 3M or elsewhere) supplements Medicare coverage. New ways we re covering you New non-medicare eligible coverage option Beginning January 1, 2009, 3M will offer non-medicare eligible retirees a new coverage option: the 3M Retiree Consumer-Directed Plan with a Health Savings Account (HSA). This type of plan is designed to encourage retirees to take an active role in their health care decisions. It does so by combining a higher-deductible plan with an HSA. Health Savings Account (HSA) This special account lets you pay eligible expenses with tax-free dollars and carry over any unused balance from year to year. An HSA can only be offered with a medical plan that meets the IRS high-deductible health plan requirements like the new 3M Retiree Consumer-Directed Plan. New Medicare-eligible cost-sharing approach Health Reimbursement Arrangement (HRA) This reimbursement arrangement provides annual credits in retirement for Medicare-eligible retirees. Retirees can use these credits to help pay retiree medical premiums for Medicare supplemental coverage purchased on the open market and for other eligible medical expenses. What is Medicare eligibility? Medicare-eligible Generally, you are eligible for Medicare if you are age 65 or older, or if you receive Medicare disability benefits, regardless of your age. Note that: If you retire when you are age 65 or older, you are immediately eligible for Medicare. If you retire before age 65, you become eligible for Medicare upon reaching age 65. Once you are eligible for Medicare, it becomes your primary medical coverage. Any additional coverage you have will supplement what Medicare doesn t cover. Non-Medicare eligible Unless you have a Medicare disability, you are non-medicare eligible while you are under age 65, even if you retire earlier than that age. Why is it important to you? Your eligibility for Medicare benefits affects the retiree medical benefits you are eligible to receive from 3M, so it s important to understand your own Medicare eligibility status. Reminder: Medicare eligibility is determined on an individual basis. For example, that could mean your spouse is Medicare-eligible, while you remain non-eligible or vice versa. In this case, the younger spouse would remain in one of the 3M non-medicare-eligible coverage options until becoming Medicare-eligible, while the Medicare-eligible spouse would be enrolled in the 3M Medicare-Eligible Plan. If this split applies to your situation, you will learn more about your and your spouse s options in a future issue of 3M Retiree Connections. Online: 4

6 Your Retiree Medical Benefits Continued Consumer-Directed Plan HSA with an Non-Medicare eligible: A NEW coverage option The Consumer-Directed Plan for non-medicare eligible retirees combines a higher-deductible, traditional medical plan with a tax-efficient way to pay medical costs. Non-Medicare eligible retirees can choose between the new 3M Retiree Consumer-Directed Plan with a tax-efficient Health Savings Account (HSA) and the 3M Retiree Preferred Provider Organization (PPO) Plan, based on the coverage options in place today. Each year the detailed design of all 3M plans is reviewed and adjusted as necessary. Regardless of the plan option you choose, you will be covered under your current cost-sharing approach through the Portfolio II Retiree Medical Credits Account. Here s how the NEW 3M Retiree Consumer-Directed Plan with an HSA works It s a more flexible arrangement that gives retirees greater control over their health care dollars: You and 3M can contribute to the HSA, up to the IRS maximum for a given year. The 3M Retiree Consumer-Directed Plan with an HSA is the only plan option that allows retirees to pay for eligible medical expenses with before-tax dollars. Beginning in 2009, if you are a non-medicare eligible retiree and enrolled in the 3M Retiree Consumer-Directed Plan, 3M will make an annual contribution to your HSA and an additional annual contribution if you cover one or more eligible dependents. The contribution details are being finalized and will be shared as soon as possible. As a retiree, you can contribute to the HSA and then claim the amount you contributed as a deduction on federal and most state income taxes. Your HSA balance can be invested in a variety of investment choices and your rate of return on your HSA will depend on those choices. Your investment choices may be limited depending on your balance. You go to the doctor of your choice. Using an in-network doctor offers the advantage of discounted medical expenses. Use your HSA to reimburse yourself for eligible out-of-pocket expenses, such as deductibles and coinsurance. You own your HSA balance any unused balance at the end of each year automatically rolls over for use in the following year. Although HSA contributions must end when you become Medicare-eligible, any unused HSA balance can be used tax-free for eligible health care expenses throughout retirement, including retiree medical premiums. According to IRS rules, a Health Savings Account (HSA) can be offered only with a qualifying highdeductible medical plan. 3M contributes to your HSA. As an enrolled retiree, you can: Contribute to your HSA, up to IRS limits. Control how the funds are spent or saved. Use your HSA to pay for eligible health care expenses. HSA At-a-Glance The account is triple tax-advantaged contributions go in taxadvantaged, the balance earns interest tax-free, and withdrawals to pay medical expenses are tax-free. Any remaining HSA balance rolls over into the next year. You own your HSA balance. 5 Questions? Call (888) (toll free)

7 Retiree Medical Benefits A review of the Retiree Medical Credits Account 3M provides a Retiree Medical Credits Account to pay for retiree medical premiums. The Retiree Medical Credits Account was established while you were employed at 3M based on your years of pension service at 3M starting at age 40 (based on your age at year-end), as follows: You earned credits to your account while employed at 3M, starting at age 40. Beginning January 1, 2002, you received 3,000 credits for each year of pension service after age 40. You earned credits for a maximum of 22 years, or until you reached 66,000 credits. Each credit currently equals one dollar (for example, 100 credits equal 100 dollars). At retirement, you use your account to pay for retiree medical premiums. If you were married when you retired, a separate set of retiree medical credits was established for your spouse. When your account is spent, you are responsible for all future premiums for your retiree medical benefits. Before you become eligible for Medicare, you can use your Retiree Medical Credits Account to pay for your retiree medical premiums. Once you become eligible for Medicare, your ability to use your Retiree Medical Credits Account depends on the option you choose to supplement Medicare coverage: If you choose coverage under the 3M Retiree Medicare-Eligible Plan, you can continue to use your Retiree Medical Credits Account to pay for this coverage. If you choose to purchase an individual policy from the marketplace, you will forfeit any remaining balance in your Retiree Medical Credits Account. However, keep in mind that you can use the Health Reimbursement Arrangement (HRA) to help pay your premiums and other eligible medical expenses. The HRA is described on page 7. Important Note! If you chose Portfolio II during the 2001 employee choice window and were age 40 or older as of January 1, 2002, you earned additional credits to your account: A January 1, 2002 opening balance equal to 1,000 credits for each year of eligible 3M pension service earned prior to 2002 and after age 40, for up to 22 years. Beginning January 1, 2002, you also earned 3,000 credits for each year of 3M service after age 40. What is the Retiree Medical Credits Account? This notional account accumulated while you were employed at 3M and is used to help pay retiree medical premiums for Portfolio II retirees. Other Important Notes If you are a surviving spouse The surviving spouse of a 3M retiree can continue coverage through 3M. 3M contributes toward the cost of the premium based on the cost-sharing approach included in Portfolio II. Once the Retiree Medical Credits Account is depleted, the surviving spouse pays the full cost of coverage. If the retiree dies and the surviving spouse is Medicare-eligible and has chosen to purchase coverage from the marketplace, 3M will credit an HRA for the surviving spouse for the remainder of the calendar year during which the retiree dies and for the next calendar year following the retiree s death. At the end of the period, 3M will provide no additional HRA credits. If you are covered by the 3M Basic Medicare Supplement Plan The 3M Basic Medicare Supplement Plan was formerly offered as a Medicare-eligible coverage option. Some retirees or their eligible dependents remain covered by this plan, although it is no longer open to new enrollees. If you or any eligible dependents are covered by the 3M Basic Medicare Supplement Plan, your coverage remains the same for You are not affected by the changes described in this brochure. If you were covered under the 3M Basic Medicare Supplement Plan and reached the coverage limit, you remain ineligible for retiree medical benefits through 3M. Online: 6

8 Your Retiree Medical Benefits Continued HRA What is the cost-sharing approach? Describes how both you and 3M share in the cost of your retiree medical coverage. Medicare-eligible: A NEW cost-sharing approach for supplemental coverage When you or your eligible dependent becomes Medicare-eligible, Medicare becomes the primary coverage. While Medicare covers many expenses, it does not cover all, and many people choose to purchase supplemental coverage. Currently, 3M provides a supplemental plan for Medicare-eligible retirees and their Medicareeligible dependents. You and 3M share in the cost of that coverage. However, beginning January 1, 2009, 3M is offering a new cost-sharing approach that allows you to purchase the supplemental coverage of your choice from the marketplace. 3M helps you pay for the cost of this coverage and other eligible medical expenses by crediting annual amounts to a Health Reimbursement Arrangement (HRA). This may be more cost-effective than what is included in Portfolio II. Choosing and using the Health Reimbursement Arrangement (HRA) only when you are Medicare-eligible Each year you can choose to purchase an individual Medicare supplement policy from the marketplace, and 3M will credit a Health Reimbursement Arrangement (HRA) for you to use toward the cost of this coverage and other eligible medical expenses. Once you choose to purchase an individual Medicare supplement policy from the marketplace and receive HRA credits, you may not return to the 3M Retiree Medicare-Eligible Plan in subsequent years. Your decision to leave the 3M Retiree Medicare-Eligible Plan is irrevocable. If you make this choice, it s important to remember that 3M s contribution to your HRA will be the only 3M retiree medical benefit available to you or your eligible dependent when you or they become eligible for Medicare. The HRA is not available to you if you choose the 3M Retiree Medicare-Eligible Plan. If you remain in the 3M Retiree Medicare-Eligible Plan, you can elect in a subsequent year to switch to the HRA. What does Medicare cover? Medicare Part A Hospital insurance helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care. Medicare Part B Medical insurance helps pay for doctors services and many other medical services and supplies that are not covered by Medicare Part A. Premiums apply. Medicare Part D This optional prescription drug coverage helps pay for medications doctors prescribe for treatment. Part D is not considered part of basic Medicare coverage. Premiums apply. Why supplement Medicare coverage? Once you become Medicare-eligible, Medicare becomes your primary insurer and covers approximately 80 percent of the cost of your Part A and Part B expenses. However, basic Medicare does not cover all your medical expenses, so many people choose to purchase supplemental coverage 3M helps you pay for this supplemental coverage through the retiree medical program. 7 Questions? Call (888) (toll free)

9 Here s how the Health Reimbursement Arrangement (HRA) works: The HRA provides you the financial flexibility to use 3M s contribution to purchase the Medicare supplemental coverage you prefer. When you become Medicare-eligible, 3M will establish an HRA for you and credit it each year you are eligible. Actual credits are based on your years of 3M service. If you cover one or more eligible dependents at retirement, 3M also will establish and credit one additional HRA for those dependents when they become Medicare-eligible (calculated at retirement). The credits applied to your account(s) depend on your years of 3M service as noted in the following chart: If you have 15 or more years of 3M service If you have fewer than 15 years of 3M service HRA annual credits Retiree $1,600 Dependent $1,600 3M will prorate the amount of your annual contributions to reflect short service. Beginning in 2010, 3M s annual credit will increase 3 percent per year. You can use your HRA to help pay the premiums for an individual Medicare supplement policy that you can purchase from the marketplace and for other eligible medical expenses. You are responsible for paying any portion of the premium for your individual Medicare supplement policy that is not paid by your HRA. If you have any balance in your HRA at the end of a year, that balance rolls over for use during the following year. The following chart shows how 3M credits to your HRA increase each year. In this example, the retiree has at least 15 years of 3M service at retirement: Starting 2009 annual credit $1, HRA credit $1, HRA credit $1, HRA credit $1,748 3M s annual HRA credit will increase 3 percent per year on a compounded basis. Online: 8

10 Your Retiree Medical Benefits Continued An example: Look how the Health Reimbursement Arrangement can work for you Keep in mind that premium amounts depend on the Medicare supplement policy you choose. This example assumes the retiree has at least 15 years of 3M service at retirement. Your 2009 HRA credit* (3M retiree only) Your Medicare supplement policy s annual premium (Note: Many policies are available, and premiums vary.) Your HRA balance after you pay your policy s annual premiums $1,600 $75 x 12 $900 $1,600 $900 $700 Your HRA balance that rolls over to 2010 Your 2010 HRA credit (3M retiree only) $700 $1,600 x 103% $1,648 Your 2010 HRA balance (3M credit plus rollover amount from previous year) $1,648 + $ 700 $2,348 *The first year contribution will be prorated to reflect your HRA enrollment date. For example, if you enroll in the HRA on July 1, you would receive ½ the annual credit amount for that year. What is a notional arrangement? The Retiree Medical Credits Account and HRA are notional arrangements, meaning that funds are not deposited as credits are earned. Rather, these arrangements are simply bookkeeping devices that allow the employer and retiree to keep track of the dollar amounts that will be made available for retiree medical benefits in the future. 3M Retirement Program Valuable. Comprehensive. Accessible. 9 Questions? Call (888) (toll free)

11 What you need to know about the changes If you are not eligible for Medicare (generally, younger than age 65), 3M will provide you non-medicare eligible retiree medical benefits that offer you a choice between coverage options: The 3M Retiree Preferred Provider Organization (PPO) Plan. or The 3M Retiree Consumer-Directed Plan with a tax-effective Health Savings Account (HSA). You and 3M will share in the cost of the coverage you choose based on the cost-sharing approach included in Portfolio II. Today, under Portfolio II, 3M pays a portion of the cost of coverage through the Retiree Medical Credits Account, and the retiree pays the remainder. If you retire when you are eligible for Medicare (generally, age 65 or older or when you turn age 65 if you retired earlier), Medicare becomes your primary medical coverage. To supplement this coverage, 3M gives you a choice of coverage and cost-sharing approaches: The 3M Retiree Medicare-Eligible Plan with the Portfolio II cost-sharing approach. or The opportunity to purchase an individual Medicare supplement policy from the marketplace. With this, 3M will credit a Health Reimbursement Arrangement (HRA) for you to use toward the cost of this coverage. Once you choose to purchase an individual Medicare supplement policy from the marketplace and receive HRA credits, you may not return to the 3M Retiree Medicare-Eligible Plan in subsequent years. Your decision to leave the 3M Retiree Medicare-Eligible Plan is irrevocable. Online: 10

12 How You ll Learn More 3M is committed to helping you understand your 3M retirement benefits and how to maximize their value. Online For the most current information, try this online source first. Log on to to find this retirement brochure, frequently asked questions (FAQs) and additional information. On the line Contact a service representative to get answers to your questions: Monday Friday, 8:00 a.m. 6:00 p.m. CDT Extended Hours (March 31 to April 11, 2008) Monday Friday, 8:00 a.m. 8:00 p.m. CDT (888) (toll free) if calling from the U.S. or Canada (847) if calling outside the U.S. or Canada On the calendar The following chart describes how you ll learn more in the coming weeks and months. Spring/Summer 2008 Fall/Winter 2008 Calendar of communication and events May Detailed listing of 2008 retirement program communication materials, tools and events. Topical education series May December The ABC s of our health care accounts. How to be an informed health care consumer. Understanding the health care market for Medicare-eligible retirees. Enrollment readiness September November Non-Medicare eligible retirees Highlights of the Consumer-Directed Plan. Details of the plan and the HSA. Medicare-eligible retirees Medicare-eligible choices and things to consider. Purchasing supplemental coverage from the marketplace. How the Health Reimbursement Arrangement (HRA) works. All retirees Enrollment materials and information. This brochure is prepared for 3M retirees participating in Portfolio II who are non-medicare eligible or Medicare-eligible but have at least one eligible dependent who is non-medicare eligible. The information in this brochure is not intended to describe or summarize the terms of 3M retirement benefit plans nor is it the official plan document for those plans. In the event of any conflict, inconsistency, or ambiguity between the information in this brochure and the official plan documents, the terms of the official plan documents will be controlling. 3M reserves the right to modify, amend, change, revoke, suspend or terminate its retirement benefit plans, in whole or in part, at any time. Human Resources 3M Center Building S-15 St. Paul, MN Please recycle. Printed in U.S.A. 3M All rights reserved. P11762