KNOX COUNTY Medical Expense Retirement Plan

Transcription

1 KNOX COUNTY Medical Expense Retirement Plan For Participants of Asset Accumulation and Closed Defined Benefit Plans Only! UOPP and STAR participants are not eligible to contribute.

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3 Table of Contents Please Note: This summary highlights the provisions of the Plan which are in a written Plan and Trust Agreement. It is not meant to interpret, extend or change the Plan in any way. Accordingly, the actual and complete provisions of the Plan can only be determined accurately by consulting the Plan and Trust Agreement itself. A copy of the Plan and Trust Agreement is on file at the Knox County Retirement & Pension Office and may be read at any reasonable time. In the event of any discrepancy between this guide and the actual provisions of the Plan, the Plan shall govern. The Plan may be amended or terminated in accordance with its terms and applicable provisions of the Knox County Retirement System. This summary is not intended as legal, tax or as investment advice. Consult a qualified professional about legal, tax or investment questions. Introduction...1 Medical Expense Retirement Plan...2 Eligibility and Participation...2 Enrollment...2 Plan Year...2 Your Contributions...2 Matching Contributions...3 Changing Contributions...3 Vesting...3 How Your Account Is Invested...3 How Your Money Grows Over Time...4 Eligible Health Care Claims...4 Account Statements...5 Account Distributions...6 Taxes on Your Distributions...7 Health Insurance Distributions...8 Beneficiary Designation...8 Qualified Domestic Relations Order (QDRO)...8 Accessing Your Account...9 Administrative Information

4 Introduction Over the recent years, we have seen dramatic and continued increases in the cost of health care. For those retiring now, the cost is much more than it was when you started your career with Knox County or Knox County Schools. Even if retirement is a few years away, you should consider the fact that you will pay more during retirement for health care benefits. For that reason, the Retirement & Pension Board developed an additional retirement savings plan to help defray your health care costs at retirement. Health care costs are eligible medical and dental insurance premiums and eligible out-of-pocket expenses not covered by your medical and/or dental insurance. This Plan is referred to as the Medical Expense Retirement Plan (MERP). Pre-Retirement Set aside money on an after-tax basis to help pay for out-ofpocket health care expenses and insurance premiums during your retirement. Post-Retirement Use the money you set aside during your working years to pay out-of-pocket health care expenses and/or health care insurance premiums during retirement. Because this Plan is designed to help you pay for health care expenses and health care insurance premiums at retirement, you can use your Asset Accumulation Program (or Closed Defined Benefit Plan) money as it was intended to enjoy your retirement. This brochure describes MERP. Remember, it is up to you to take control of your financial future. 1

5 Medical Expense Retirement Plan Eligibility and Participation Any employee who is eligible for or is participating in either the Closed Defined Benefit Plan or the Asset Accumulation Program may join MERP. Sworn officers who remain in the Asset Accumulation Program after July 1, 2007, may participate in MERP going forward. Note: Officers employed prior to June 1, 2007, who elect to participate in the Uniformed Officers Pension Plan (UOPP), will not be eligible to participate in MERP as of July 1, Such Officers will continue to hold accounts according to the terms of this Plan (i.e., pre-july 1, 2007 employee contributions and any investment earnings attributable to those employee contributions). Those Officers will not be entitled to employer contributions or earnings. Participation in the Plan is voluntary. It is up to you to decide if you want to join the Plan. Officers hired after July 1, 2007, are participants in UOPP or Sheriff Total Accumulation Retirement plan (STAR) and are not eligible to contribute to MERP. 2 Enrollment You will need to complete an enrollment form in order to participate. Enrollment forms are available at the Retirement Office or on the Knox County Retirement Website: When completing the form, be sure to indicate the amount you would like to contribute per pay period. Once you ve completed the form, sign, date and return it to the Retirement Office for processing. Plan Year The Plan Year runs from July 1st to June 30th. Your Contributions The Retirement & Pension Board has established certain minimum contribution rates. Your minimum contribution is $8.00 per bi-weekly pay period or $16 per month. Contributions are limited annually to $53,000 for 2015*, or 100% of your compensation. Contribution limits includes both the employer and employee contribution to MERP and the Asset Accumulation Program. Keep in mind that any contributions you make to MERP are made on an after-tax basis. * IRS annual contribution limit for 2015 is $53,000 and is subject to be changed annually by the IRS.

6 Medical Expense Retirement Plan Matching Contributions The County has committed to fund a 50% match on your MERP contributions, up to a maximum match of $208 per calendar year through Any matching contribution after 2019 is subject to the discretion of the Pension Board and commitment for funding from the County. Note: Although the Retirement & Pension Board is committed to providing the benefits under this Plan, it reserves the right to make changes based on the financial status of the Plan and benefits can be terminated accordingly. Changing Your Contributions You may change your contribution election by completing an Enrollment/ Change Form available from the Retirement Office or on the website at After the Retirement & Pension Board receives your Enrollment/Change Form, payroll deduction changes will take effect as soon as administratively feasible. Vesting You are always 100% vested in your contributions and the employer s matching contributions. You are also vested in any investment earnings on all contributions made to your account. How Your Account Is Invested The Retirement & Pension Board determines the investment mix in the Plan. Your contributions will be invested as follows: Conservative Investment Style 10% Moderate Investment Style 45% Ultra Aggressive Investment Style 45% These are some of the same investment styles used in the Asset Accumulation Program. The Retirement & Pension Board CANNOT guarantee future investment performance. Note: You cannot change your investment mix. 3

7 Medical Expense Retirement Plan How Your Money Grows Over Time Let s assume you are age 30 and your contribution and the employer match combined is $520 annually. Here s a look at how your money would grow until age 65. Account Balance 60,000 50,000 40,000 30,000 20,000 10, Age Note: Assumes 5% annualized return. Example is for illustrative purposes only. Account growth can fluctuate depending on future market conditions and the impact on annualized return percent. Eligible Health Care Claims As indicated earlier, the purpose of contributing to this Plan is to help pay for certain health care expenses after you retire. Eligible expenses include: Uninsured medical and prescription drug costs Uninsured eye exams and glasses Uninsured dental care Medical and or dental insurance premiums Nursing home or long term care expenses By paying for these expenses through this Plan, you preserve your retirement savings for other retirement expenses such as pursuing your favorite hobby or traveling, as well as day to day living expenses. You may request reimbursement for incurred expenses on a quarterly basis according to the chart on the next page. Please contact the Retirement Office for more information. 4

8 Medical Expense Retirement Plan Normal Quarterly Reimbursement Schedule Deadline for Claim Submission Last business day of September Last business day of December Last business day of March Last business day of June Payment Date 15 business days from end of quarter 15 business days from end of quarter 15 business days from end of quarter 15 business days from end of quarter Minimum Eligible Disbursement Lesser of $250 or account balance Lesser of $250 or account balance Lesser of $250 or account balance Lesser of $250 or account balance Note: With the exception of your after-tax contribution, all other distributions are considered taxable income, however, all distributions will be reported on a 1099-R at year end. Account Statements You will receive a statement of your account each quarter based on a calendar year. 5

9 Medical Expense Retirement Plan Account Distributions If You Terminate employment... And your account balance is $5,000 or less, you will be paid 100% of your account. And your account balance is more than $5,000, you may choose to: 1. Remain in the Plan subject to IRS minimum distribution requirements; 2. Roll over the balance to another qualified employer plan, USIRA or IRA; or 3. Take a full distribution, which may be subject to IRS penalty (if you withdraw prior to age 59 ½, unless you separated from County service after age 55, or unless the distribution does not exceed your deductible medical expenses under IRS rules). If You Retire Prior to age 59 ½, you may choose to Remain in the Plan subject to IRS minimum distribution requirements; 2. Receive distributions in equal quarterly installments for a fiveyear period (or your life expectancy, if less). While you are receiving installment distributions, you may also file claims for reimbursement of health care expenses as incurred. Any claim reimbursements from your account will reduce your account balance, thus shortening the installment payout period; 3. Pay Knox County-sponsored health care insurance premiums, and file claims for reimbursement of health care expenses as incurred; 4. Roll over the balance to another qualified employer plan, USIRA or IRA; or 5. Take a full distribution, which may be subject to IRS penalty (if you withdraw prior to age 59 ½, unless you separated from County service after age 55, or unless the distribution does not exceed your deductible medical expenses under IRS rules). If You Retire after age 59 ½, you may choose to Remain in the Plan subject to IRS minimum distribution requirements; 2. If you retire prior to age 65, receive distributions in equal quarterly installments. See #2 in the adjacent left-hand column under retirement prior to age 59 ½ for more information on this installment option; 3. Pay Knox County-sponsored health care insurance premiums, and file claims for reimbursement of health care expenses as incurred; 4. Roll over the balance to another qualified employer plan, USIRA or IRA; or 5. Take a full distribution; no IRS penalty applies. All distributions will be subject to taxation on the taxable portion. 6

10 Medical Expense Retirement Plan If You Die... Your beneficiary(ies) will receive 100% of your account balance in a lump sum. Your beneficiaries may be able to roll over this distribution to any USIRA or IRA in accordance with IRS rules. If You Are an Active Employee... In-Service Distributions Generally you are not entitled to withdraw your Program account balance while you remain a County or Schools employee. MERP permits you to apply to the Knox County Retirement & Pension Board to withdraw your entire vested MERP account in a single lump-sum, while you remain a County or Schools employee, in two limited circumstances. If you are ineligible to participate in both the Asset Accumulation Plan and MERP, and you are eligible for another State or County qualified retirement plan (e.g., Tennessee Consolidated Retirement System or Uniformed Officers Pension Plan); OR If you are ineligible to participate in both the Asset Accumulation Plan and MERP, and have been ineligible for at least six continuous months. In-Service Distributions for Severe Medical Hardship Active employees may request an inservice distribution for all or a portion of your account for a Severe Medical Hardship (e.g., unreimbursed medical expenses for you, your spouse or your dependent). This distribution can be requested at anytime and the payment will be made to you as soon as administratively possible. Contributions will be stopped for six months if you take an in-service distribution. You must complete a new enrollment form after six months to reinstate your contributions. Note: Disability participants will be treated the same as retired participants. Taxes on Your Distributions Because your contributions to this program are invested on an after-tax basis, contribution withdrawals will not be taxed. Investment earnings and the employer matching contributions are tax-deferred and will be taxed upon distribution. Generally, federal law requires the Retirement & Pension Board to withhold 20% for income tax purposes on all taxable distributions (i.e., payment of insurance premiums, reimbursement of health care expenses, etc.) from your tax-deferred investments. Your own individual tax situation and liability may vary. Consult your tax advisor to clarify your alternatives. 7

11 Medical Expense Retirement Plan Note: In addition, unless you meet one of the limited IRS exceptions, if you leave County employment prior to age 55 and receive a distribution from the MERP prior to age 59 ½, the distribution will be subject to a 10% additional tax on early withdrawal. All exceptions to the 10% additional tax applies if you elect to receive installment distributions of your MERP account over a period equal to your life expectancy, or if the taxable portion of the distribution does not exceed your deductible health care expenses. Public Safety Officers Health Insurance Distributions If you are an eligible retired Public Safety Officer and continue health insurance through the Retirement Office, you may be eligible to reduce your federal taxable income by up to $3,000 per year for retiree health insurance premiums for you and your spouse and dependents. You make this annual election on your IRS form 1040, in accordance with applicable IRS guidance. Contact your tax advisor for more information. Beneficiary Designation You may designate a beneficiary to receive any benefit payable by the Plan at your death by completing the form available from the Retirement Office. The designation becomes effective upon receipt of the signed form by 8 the Retirement Office. You may change your Beneficiary designation in the same manner, at any time. Please note: Effective January 1, 2014, unless you specify otherwise, your MERP and retirement beneficiary will be the same. If you are divorced, any designation of your spouse as Beneficiary will be automatically revoked. You may again designate your ex-spouse as Beneficiary by filing the new Beneficiary designation form with the Retirement Office after the date of your divorce. If a beneficiary has not been validly designated at the time of death, any benefit payable under the Plan will be paid to your surviving Spouse; or if there is no surviving Spouse, in equal shares to your surviving Children; or if there is no surviving Spouse or Children, to your estate. Qualified Domestic Relations Order (QDRO) Under Tennessee law, the Plan may be required to recognize your obligations incurred as a result of court ordered child support or alimony if you are in pay status, if the order complies with Internal Revenue Code 414(p). Knox County is subject to the requirements of Tennessee law. The Tennessee Code does not permit the Plan to recognize QDROs, except orders for child support or alimony in certain circumstances entered in accordance with applicable law.

12 Accessing Your Account You can access your MERP account balance by telephone or the Internet. TELEPHONE Dial: Listen for the voice prompts to select the Medical Expense Retirement Plan. INTERNET Log on to: Click on Account Access, then click on Participant Login and enter your user name and password. If you don t have your user name and password, contact USI Consulting Group at (866) plan code 524. Once you log in, you will need to select the plan you wish to access from the pull down menu under Welcome.... If you don t switch to the Medical Expense Retirement Plan, you will go into your Asset Accumulation Program account automatically. 9

13 Administrative Information Plan Name Knox County Medical Expense Retirement Plan (MERP) The Plan is a component of the Knox County Employee Benefit System. The provisions of the Plan were originally effective May 26, Plan Year July 1 through June 30 Employer Matching Contribution Year January 1 through December 31 Employer Knox County City-County Building 400 Main Street Knoxville, TN EIN: Plan Administrator Knox County Retirement & Pension Board 400 Main Street, Room 371 Knoxville, TN (865) The Plan Administrator keeps the records for the Plan and is responsible for the administration of the Plan. The Plan Administrator has discretionary authority to construe the terms of the Plan and make determinations on questions that may affect your eligibility for benefits. The Plan Administrator will also answer any questions you may 10 have about the Plan. Agent for Service of Legal Process Robertson Overbey 900 South Gay Street Knoxville, TN Plan Recordkeeper USI Consulting Group 95 Glastonbury Boulevard Glastonbury, CT Participants receive annual statements and retirees receive semi-annual statements of their Plan accounts, mailed to last known home address, and including balance and transaction information on the Plan. For More Information If you have any questions about MERP, please contact the Retirement Office at: Knox County Retirement & Pension Board City-County Building 400 Main Street, Room 371 Knoxville, TN (phone) (fax) knoxcounty.retirement@knoxcounty.org

14 Knox County Retirement & Pension Board City-County Building, RM Main Street Knoxville, TN (865) (865) (fax) January 2015