FAQs: Retiree Health Account
Frequently Asked Questions
- What is the Retiree Health Account and how is the dollar amount in my account determined?
Based upon your retirement date, a Retiree Health Account will be created in your name as long as you have met the retiree eligibility requirements. The account is calculated as follows: You accumulate $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. You 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.)
- Why is there a cap placed on the years of service (15 years) for which an employee is credited with the $2,750?
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.
- Does the funding option I choose affect whether I'll have access to Loyola University's Retiree Medical Insurance Plan when I retire?
No. Our goal is to continue to provide access to the Loyola University Retiree Medical Plan when you retire, regardless of the funding option you may choose.
If you retire on or after July 1, 2006, Loyola's contribution towards your 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 your account for reimbursement of eligible expenses (Option B2). Please see the chart titled, for more details on both options.
- Who has a choice between the two funding 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.
- Why is the University giving me a choice between two funding options?
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 you into a particular option, we want you to be able to choose the option that would work best for your personal situation. That’s why we’re providing you with tools to compare the options and make the choice that’s best for you.
- Can you provide some more details on the differences between Option B1 and Option B2?
You have two choices for how your Retiree Health Account will be paid out, after you retire:
Option B1: You may choose to annuitize your account, which means that you’ll be reimbursed a certain amount each year for the rest of your life (and your spouse’s life, if applicable) to be used to offset a portion of your monthly premiums for coverage under the University’s Retiree Medical Insurance Plan only. There are two types of annuities that you may choose from:
A standard annuity, in which you receive the same amount each month to offset a portion of your premiums. For instance, the annuity might be $300 per month, which you would receive for the rest of your life. An escalator annuity, which 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 1st each year.
Option B2: You may choose to access the full account 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 you have complete control over when you use your funds. For instance, you can use the balance in your account to get reimbursed for expenses for both 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 you use the account, when the balance reaches $0, you are responsible for covering 100% of your future health care costs.
- Will all employees have to make a choice between Option B1 and Option B2?
No. Only full-time employees that retire after July 1, 2006, that 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.
- What “qualified health care expenses” can be covered by the account if I choose to have access to the whole amount immediately (Option B2)?
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. You’ll 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).
- May I use the money in my Retiree Health Account to purchase medical coverage through another source, such as a spouse’s insurance plan, or a Medicare Supplement plan?
Yes. Upon retirement, if you elect Option B2, the money in your Retiree Health Account may also be used to reimburse you for monthly premiums you’ve 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 your Retiree Health Account.
- May I use the account to pay for long-term care coverage?
No. The IRS does not define long-term care premiums as a qualified health care expense.
- How and when will I start to get reimbursed for qualified medical/dental care expenses from the funds in my Retiree Health Account?
After your paperwork has been returned to Human Resources, electing Option B2 as your funding choice, you will have access to the funds on the first day of the month following your retirement date. You must initially pay for all expenses, and then file a claim to have the qualified expenses processed through your Retiree Health Account for reimbursement. You will receive a Welcome Packet from Benefit Express (Loyola’s Retiree Billing Administrator) a few weeks after your 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.
- Can my spouse/LDA continue to use the funds in my Retiree Health Account after my death?
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.
- What if my spouse remarries after I die?
Your spouse becomes ineligible for any further Retiree Health benefits under both options, if your spouse remarries after your death.
- Once I make my choice about how to use the account, may I change my mind later?
No. Upon retirement, you will have thirty-one (31) days to decide how you choose to use your Retiree Health Account- either to have access to it as an annuity (Option B1) or to have access to the balance immediately (Option B2). If you choose to use the annuity based benefit, you must make a choice 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.
- Does participation in the Faculty Phased-Retirement Program affect my choice?
If you are a full-time faculty member participating in the Phased-Retirement Program, you are eligible for the same benefits as all active, full-time faculty members—including health care coverage. Upon retirement, you will have thirty-one days to elect or decline enrollment in the Retiree Medical Plan and also choose your Retiree Health Account funding option. Contact the Provost’s Office for more information about the Faculty Phased-Retirement Program.
- What should I consider when making my decision?
Retiree health care benefits are only one part of the retirement decision. There are many other factors to consider, including your retirement goals, your readiness to retire and many others.
When comparing the two funding choices, you’ll want to weigh many factors. Here are a few that may influence your decision.
Your 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.
- What resources will Loyola provide to help me make this decision?
In order to make sure that you are confident about your decision, be sure to use the tools that the University is providing to you - including detailed information on our website and offering one-on-one sessions with our 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 advisor are also welcome to participate in these meetings.