FAQs: Retiree Health Account
Frequently Asked Questions
Based upon employees' retirement dates, a Retiree Health Account will be created in the employee's name as long as he or she has met the retiree eligibility requirements. The account is calculated as follows: the account accumulates $2,750 for each year of full-time University service worked after age 50, with a fifteen year maximum, including an interest rate of 3% for each year. Employees can then use the money in this account to be reimbursed for "qualified health care expenses" after retirement.
Example: At retirement, if you are age 60 with twenty years of full-time service, your account will be valued at approximately $31,500 ($2,750 for each of 10 years of service, after age 50, plus 3% interest credit for each year).
We examined the previous level of University subsidy for retiree health care and determined that a limit of 15 years was appropriate. Our goal is to provide a comparable benefit (both before and after the July 1, 2006 funding changes) for an age-65 retiree with 15 years of continuous full-time service after age 50.
No. Our goal is to continue to provide access to the Loyola University Retiree Medical Plan when employees retire, regardless of the funding option they may choose.
If employees retire on or after July 1, 2006, Loyola's contribution towards their retiree health will be based on the Retiree Health Account funding based method, which consists of a choice between the annuity type funding (Option B1) or immediate access to the account for reimbursement of eligible expenses (Option B2). Please see the chart for more details on both options.
Faculty and staff members who meet the eligibility requirements for retiree health care benefits that retire on or after July 1, 2006 are eligible to make a choice between funding Option B1 or Option B2. This is a one-time choice.
The University wants to give those who are eligible for retiree health benefits a choice between the two options as a matter of fairness. Instead of forcing employees into a particular option, we want them to be able to choose the option that works best for each personal situation. That is why we are providing employees with tools to compare the options and make the choice that’s best for each individual.
Employees have two choices for how their Retiree Health Accounts will be paid out after retirement:
Option B1: Employees may choose to annuitize their accounts, which means that employees will be reimbursed a certain amount each year for the rest of their lives (and their spouse’s lives, if applicable) to be used to offset a portion of monthly premiums for coverage under the University’s Retiree Medical Insurance Plan only. There are two types of annuities that employees may choose from:
A standard annuity, in which employees receive the same amount each month to offset a portion of premiums. For instance, the annuity might be $300 per month, which employees would receive for the rest of their lives. An escalator annuity initially provides an amount lower than the standard annuity; however, the monthly payment increases each year to offset a portion of the costs associated with health care inflation. For example, the annuity might be $225 per month during the first year, $230 during the second year, $235 during the third year, and so on. The escalator annuity amount increases on January 1 each year.
Option B2: Employees may choose to access their full accounts immediately to be used for reimbursement of qualified health care expenses that have not been paid by any other plan and draw down the balance of the account over time. This means that employees have complete control over when they use their funds. For instance, you can use the balance in your account to get reimbursed for expenses for you, your spouse, and your eligible dependents in the first few years of retirement, or you can choose to pay for some expenses out-of-pocket and use the account to be reimbursed for larger expenses later. Regardless of how the account is used, when the balance reaches $0, employees are responsible for covering 100% of future health care costs.
No. Only full-time employees that retire after July 1, 2006 and have met the University’s Retiree Medical eligibility requirements will be asked to make a choice between Option B1 and Option B2 when they retire.
Qualified expenses, as defined by the Internal Revenue Service (IRS), include medical, prescription drug, dental and vision co-payments, co-insurance and deductibles, as well as over-the-counter drugs and procedures like laser eye surgery. Please note that these expenses are the same as those that can be covered by a Health Care Flexible Spending Account (FSA). For a full list of qualified expenses, visit the IRS website at www.irs.gov (see IRS Publication 502, Medical and Dental Expenses).
Yes. Upon retirement, if employees elect Option B2, the money in their Retiree Health Accounts can also be used to reimburse for monthly premiums paid for medical coverage under another insurance plan, including a Medicare Supplement and/or Medicare Part D plan, COBRA coverage, or a spouse’s insurance plan. Please note, if the spouse’s insurance plan is through an employer sponsored plan, the premiums must be paid on an after-tax basis in order to receive reimbursement through the Retiree Health Account.
No. The IRS does not define long-term care premiums as a qualified health care expense.
After the correct paperwork electing Option B2 as the funding choice has been returned to Human Resources, employees will have access to their funds on the first day of the month following their retirement date. Employees must initially pay for all expenses, and then file a claim to have the qualified expenses processed through the Retiree Health Account for reimbursement. Employees will receive a Welcome Packet from Benefit Express (Loyola’s Retiree Billing Administrator) a few weeks after their Retiree Health Account Election Form has been returned to Human Resources, explaining the details of the reimbursement process along with a supply of claim forms.
Option B1—If you choose Option B1 and your spouse/LDA has been continuously covered under your Loyola University Retiree Medical Insurance Plan, then your spouse/LDA will continue to receive the annuity amount, which can only be applied towards his/her premiums for the Loyola Retiree Medical Insurance Plan, after your death.
Option B2—If you choose Option B2 and you completed the “Surviving Spouse/LDA” section of the Retiree Health Funding Election Form, your surviving spouse/LDA will continue to have access to any remaining balance in your Retiree Health Account after your death.
Spouses become ineligible for any further Retiree Health benefits under both options if they remarry after your death.
No. Upon retirement, employees will have thirty-one (31) days to decide how to use their Retiree Health Accounts—either to have access to it as an annuity (Option B1) or to have access to the balance immediately (Option B2). If employees choose to use the annuity-based benefit, they must choose between the standard or escalator annuity.
Once you make your choice, you will not be able to change how you access the account, since this will be an irrevocable decision.
Full-time faculty members participating in the Phased-Retirement Program are eligible for the same benefits, including health care coverage, as all active full-time faculty members. Upon retirement, employees will have thirty-one days to elect or decline enrollment in the Retiree Medical Plan and choose their Retiree Health Account funding option. Contact the Provost’s Office for more information about the Faculty Phased-Retirement Program.
Retiree health care benefits are only one part of the retirement decision. There are many other factors to consider, including retirement goals, readiness to retire, and many others.
When comparing the two funding choices, there are many factors to consider. Here are a few that may influence your decision:
- Retirement income picture: Can you afford to retire? You should contact your retirement vendors directly to obtain an income illustration.
- Life expectancy: If you think you or your spouse (if you will elect coverage for him/her at retirement) will live for many years after you retire, you may want to consider Option B1.
- Choice/flexibility: If you want the flexibility to purchase coverage outside of the University Retiree Medical plan, you may want to take a close look at Option B2. With this option, you also have control over how quickly you spend the money in your Retiree Health Account.
In order to make sure that you are confident about your decision, be sure to use the tools provided by the University, including detailed information on our website and one-on-one sessions with benefits experts. We encourage you to contact our Human Resources office at the Water Tower Campus at least three months before you plan to retire. You can schedule a one-on-one session with a member of our Human Resources team to discuss your specific situation by calling 312.915.6175. Your spouse, other family members, or financial advisors are also welcome to participate in these meetings.