Proposal would create tax-free health perks for U employees

by Seth Rowe

A proposed benefits plan would give University employees tax-free health benefits after they retire or after their employment is terminated.

The University Senate’s Retirement Subcommittee has been reviewing the proposal for several months, setting a target date to finalize plans by July 2003.

The Post Retirement Health Care Savings Plan would allow University employees to place a percentage of their salary into a fund. Money could be added and withdrawn for health care reasons without any taxes being levied on the money. Administrative fees of up to $35 per quarter could be charged.

The money could be withdrawn for health care expenses for the employee, his or her spouse, or dependents after an employee quits working for the University or has been on an extended leave of absence. The fund could be used for expenses such as insurance premiums, dental treatment, doctor and hospital fees, nursing home costs and even contact lenses.

If the covered employee died while funds were still in the account, the funds could be withdrawn tax-free for health reasons by the employee’s spouse or dependents. If the employee did not leave behind an immediate family, the account would be paid to a named beneficiary and would then be subject to taxes, according to a memo on file with the University’s Office of Human Resources.

Employees will request the University’s monetary support for the fund. If the request is not approved, the funds will be financed only by their individual salaries.

Currently, retirement plan contributions are tax-free when placed into a savings plan but are taxed on withdrawal, regardless of the reason for withdrawal. Unlike this new proposal, these funds can be used for any purpose after retirement or termination, according to the memo.

The University currently does not contribute any money directly to retired persons’ health, said Gavin Watt, a representative on the Faculty Senate’s Benefits Advisory Committee.

The various categories of University employees would have to approve their own versions of the plan. Faculty members could have a different plan than civil service employees, for example. The Academic Professionals and Administrators group could have yet another plan or no plan at all. However, each person in that group would be required to participate in the group plan. They would all have to contribute and do so at approximately the same rate, although there might be variations based on years of service, said Dan Feeney, a Retirement Subcommittee member and Faculty Consultative Committee chairman.

Eventually, the Faculty Consultative Committee will discuss the proposal, Feeney said. The University Senate might also discuss the proposal during spring semester, which could go to a full faculty vote, he said.

“It’s an evolving project that we want to be able to deliver to the faculty and staff so they have something to talk about. There could be changes after it comes out,” Feeney said. “We’re trying to come down with something that makes sense.”

Feeney said some are unsure if younger employees will agree to the proposal.

The state Legislature authorized the creation of this type of benefit plan for public employees in 2001, according to the Minnesota State Retirement System Web site. There are currently 94 state employers who use the plan.

Seth Rowe welcomes comments at [email protected]