1. Restructured Post Employment Benefits Overview
Waupun Area
Area School District
Restructured Post Employment Benefits Overview
February 20, 2017
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2. Agenda Brief review of Goals/Objectives of Post Employment Benefit
Review of steps taken by School District
Review of restructured post-employment benefit
Tiers 1 and 2:
Health Reimbursement Arrangement (HRA)
Non-elective 403(b) Contributions (TSA)
February 2017
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3. Goals/Objectives of Restructure
Goals for Retirement Plan Redesign
Recruit and retain quality staff
Move away from providing health care (Health Marketplace available)
Separate health insurance from retirement benefits
Reward for years of service
Portability and vesting of benefits
Increased employee participation retirement savings/planning
Create a plan that is financially sustainable long term
February 2017
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4. Steps Taken Look at goals/objectives when benefits were established
Identify goals and objectives today
Evaluation of cost vs. benefit and district financial sustainability
Review current benefits and options in light of determined goals
Draft option
Several meetings/discussions with employee groups
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February 2017
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5. Benefit Vehicles HRA – Health Reimbursement Arrangement
403(b)/TSA – Tax-Sheltered Annuities (the most common investment in a retiree 403(b) Plan
February 2017
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6. Restructured the Post Employment Benefit
February 2017
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7. Waupun Area School District
School Year Support Staff Post-Employment Benefit Options – Effective 7/1/17
Eligibility at Retirement
Qualification for Tier
Benefit
Tier Maximum Benefit
Benefit Vehicle
Tier 1
At least age 55 with a minimum of 15 years of District service
Eligible to retire* by 6/30/2017 and actually retired by 6/30/2019
* Age 55 & 15 years of service by 6/30/2017
HRA Contribution: ½ of employees final salary plus $1,000 for every 5 years of service
N/A
HRA Contributions: The District shall contribute funds into a post employment HRA. The HRA may be used for reimbursement of continued health coverage through an outside insurance plan or under the District’s plan, only for the duration of COBRA. Once the COBRA period has ended, the retiree may no longer remain on the District plan. The post employment HRA benefit ends upon the earlier of exhaustion of the HRA funds or the retiree becomes Medicare eligible.
If you are eligible to retire – at least age 55 with 15 years of District service, by June 30, 2017 AND you actually retire by June 30, 2019, then your post employment benefit determination does not change – HOWEVER, the determined dollar amount is now available to you via a post employment HRA.
You pay premium for health insurance and then get reimbursed from the HRA. If you stay on the District’s health plan, it is only for the duration of COBRA.
The benefit ends upon exhaustion of the HRA benefit or Medicare eligibility, whichever comes first.
February 2017
Key Benefit Concepts, LLC

8. Example Tier 1
The support staff employee’s final salary contract was for $38,000 and has 25 years of service to the District.
(Salary component: 50% of $38,000 = $19,000) + (Years component: 25 divided by 5 = x $1000 = $5,000)
The total retirement post employment HRA benefit is $24,000
February 2017
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9. Example Tier 1 The $24,000 is divided into 3 equal payments of $8,000.
Annually beginning in the calendar year of retirement, the District will make available the annual amount in the HRA.
February 2017
If the amount is:
Benefit Amt. divided by:
under $10,000 1
$10,000 - $19,999 2
$20,000 - $29,999 3
$30,000 - $39,999 4
$40,000 or more 5
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10. February 2017
Health Reimbursement Arrangement Please pay attention to the following explanation of the HRA whether you are eligible for Tier 1 or Tier 2
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11. Health Reimbursement Arrangement
A Paper Account: no physical/actual account in your name, but a determination and accounting is maintained for the duration of the benefit
Total funds are available to retiree and retiree’s dependents via the HRA
Purpose: reimburse retiree and/or retiree’s dependents for premiums paid by retiree or retiree’s dependents for health insurance premium after retirement.
Funds cannot be provided to a retiree for any other purpose.
February 2017
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12. Health Reimbursement Arrangement
MONEY GOES INTO ACCOUNT TAX FREE
February 2017
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EXPENSES ARE REIMBURSED TAX FREE

13. Health Reimbursement Arrangement
February 2017
If you have, for example, $24,000 in the HRA,
You and your dependents are able to be reimbursed for eligible premium expenses up to the $24,000
The post employment HRA benefit ends upon the earlier of :
exhaustion of the HRA funds or
the retiree becomes Medicare eligible
Retiree’s death wherein thee are no eligible dependents
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14. Health Reimbursement Arrangement
February 2017
Those in Tier 1 who are enrolled in the District’s health plan at the time of retirement may use their HRA to reimburse premium to remain on the District’s health plan.
You will need to complete documentation requesting use of the HRA to reimburse premium directly from your HRA. In this case, you do not need to maintain receipts and submit for reimbursement. However, it is prudent to check what other health plans are available to you and consider another plan that may be less expensive and allow your HRA dollars to go farther!
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15. Health Reimbursement Arrangement
If you are not enrolled on the District’s health plan at the time of retirement, you receive the HRA benefit, but it must be used for reimbursement of premiums for another health plan – you cannot enroll in the District’s health plan as a retiree.
There are many types of health insurance plans and coverage available.
Individual health plans through various insurance carriers
Group health plans through a new employer or a spouse’s employer
Health plans available through the MarketPlace Exchange
If you are paying premium for a plan outside the District’s health plan, you will need to complete and sign the HRA Request for Reimbursement form and provide a valid receipt identifying the amount of premium paid, for whom and for what period of time.
February 2017
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16. Health Reimbursement Account (HRA)
No Double-Dipping
Expenses reimbursed under your HRA cannot be reimbursed under any other plan or program such as a Flexible Spending Account or an H.S.A. account
Expenses reimburse under the HRA cannot have been paid pretax under another group plan. You can still participate in a spouse’s plan. However, if your spouse’s premium payments are made as a pre-tax payroll deduction you may not use your HRA for reimbursements. Under IRS rules, employees cannot get a tax break twice on the same premium payment.
Expenses reimbursed under an HRA may not be deducted when you file your tax return.
February 2017
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17. Heath Reimbursement Arrangement (HRA)
February 2017
ACA Regulations:
Retiree HRA Plans may be used to reimburse premiums for coverage in the marketplace
Retirees using HRA funds to purchase coverage in the marketplace are NOT eligible for subsidies
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18. Retiree HRA Plan
Retirees seeking coverage in the marketplace may be eligible for subsidies that they cannot take advantage of if using HRA funds.
The Post Employment HRA plan must offer retirees at least once annually the ability to waive (forfeit) their HRA Plan participation.
We highly recommend thorough consultation with a tax advisor before waiving the HRA benefit.
February 2017
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19. Coverage in Marketplace
February 2017
May receive subsidy
Personal Funds
No subsidy applied
HRA Funds
Health Care MarketPlace
“Obamacare”
If eligible for Subsidy
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20. Coverage in Marketplace
May receive subsidy
HRA Funds
Personal Funds
Obamacare
If eligible for Subsidy
No subsidy applied
Waive
Coverage
February 2017
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21. Heath Reimbursement Arrangement (HRA)
February 2017
If you return to employment with the District after retirement – use of your HRA funds are suspended until you are no longer on the District payroll
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22. Health Reimbursement Arrangement
February 2017
If the retiree dies before exhaustion of HRA benefits:
Funds may be used by retiree’s dependents until exhaustion
If no dependents, remaining balance is forfeited – since funds have not been drawn from District account until time of reimbursement, funds remain in District account to offset future District contributions.
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23. General or HRA-Specific Questions
February 2017
General or HRA-Specific Questions
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24. Waupun Area School District
School Year Support Staff Post-Employment Benefit Options – Effective 7/1/17
Eligibility at Retirement
Qualification for Tier
Benefit
Tier Maximum Benefit
Benefit Vehicle
Tier 2
At least age 55 with a minimum of 15 years of District service
First eligible to retire after 6/30/2017 and at least age 45 with 5 years of service as of June 30, 2017
(This includes Tier 1 employees that do not retire by 6/30/2019)
HRA/ 403(b) Contribution: ¼ of employees final salary plus $250 for every 5 years of service
HRA/ 403(b): $10,000
HRA/ 403(b) Contributions: The District shall contribute funds into a post employment Trust. The retiree amount is determined at retirement and divided by (3, 4, or 5) and equal payments are made until all payments are made or Medicare Eligibility, whichever occurs first. At retirement the determined funds will be placed into an HRA for those on the District’s health plan at retirement. For those not on the District’s health plan at retirement, funds will be placed into a 403(b).
If you are first eligible to retire (age 55 or older with at least 15 years of District service) after 6/30/17 that means that you are at least age 45 with at least 5 years of service by June 30, 2017 – OR you were eligible to retire with Tier 1 benefits, but did not retire by June 30, 2019
Your post employment retirement benefit is calculated: : ¼ of employees final salary plus $250 for every 5 years of service . Up to a maximum of $10,000.
The retiree amount is determined at retirement and divided by (3, 4, or 5) and equal payments are made until all payments are made or Medicare Eligibility, whichever occurs first
The determined funds will be placed into an HRA for those on the District’s health plan at retirement (may be used for duration of COBRA on District plan). For those not on the District’s health plan at retirement, funds will be placed into a 403(b).
February 2017
Key Benefit Concepts, LLC

25. Example: Tier 2
The support staff employee’s final salary contract was for $35,000 and has 20 years of service to the District.
(Salary component: 25% of $35,000 = $8,750) + (Years component: 20 divided by 5 = x $500 = $2,000).
The total retirement benefit which can be used towards health insurance will be $10,000 total (Amount maximum is $10,000)
The $10,000 is divided into 3 equal payments of $3,333. (Last $3,334)
Annually beginning in the calendar year of retirement, the District will contribute the annual payment…
February 2017
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26. Example: Tier 2 The $10,000 is divided into 2 equal payment of $5,000
Annually beginning in the calendar year of retirement, the District will contribute the annual payment…
February 2017
If the amount is:
Benefit Amt. divided by:
under $10,000 1
$10,000 - $19,999 2
$20,000 - $29,999 3
$30,000 - $39,999 4
$40,000 or more 5
Key Benefit Concepts, LLC

27. Example: Tier 2a - HRA
If the employee is currently enrolled in the District’s health plan at the time of retirement, the contributions are to the post employment HRA (just like Tier 1 benefits)
Annually beginning in the calendar year of retirement, the District will contribute the annual payment to the post employment HRA.
The post employment HRA benefit ends upon the earlier of :
exhaustion of the HRA funds or
the retiree becomes Medicare eligible
Retiree’s death wherein thee are no eligible dependents
February 2017
Key Benefit Concepts, LLC

28. Example: Tier 2b – 403(b)
If the employee was not covered under the health plan at the time of retirement, the District will direct the employee contributions into a 403(b) account.
The same benefit calculation and equal annual payments will apply – However,
Annually beginning in the calendar year following the year of retirement, the District will contribute the annual payment to the 403(b).
February 2017
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29. Example: Tier 2b – 403(b)
For example, if the employee retires as of 6/30/ The first annual installment to the 403(b) will occur in 2020 (most likely January of 2020).
Itis important for the District to make the first payment in the calendar year following the year of retirement to avoid lengthy calculations (required by the IRS) to determine the maximum contribution if the contribution were to occur in the same calendar year as the year of retirement.
February 2017
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30. Non-Elective 403(b) Contribution
February 2017
Non-Elective 403(b) Contribution
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31. Non-Elective 403(b) Contribution
February 2017
A Paper Account: no physical/actual account in your name, but a determination and accounting is maintained for the duration of the benefit
At retirement, District determines account balance
Balance is divided by 3 to 5 depending upon
Account balance
IRS allowed maximum annual contribution
Contributions begin the calendar year following the year of retirement
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32. Non-Elective 403(b) Contribution
February 2017
Once contribution is made to Retiree’s 403(b) account, funds belong to retiree
Purpose: Use in retirement for any purpose.
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33. Non-Elective 403(b) Contribution
MONEY GOES INTO ACCOUNT TAX FREE
February 2017
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FUNDS ARE TAXED WHEN RETIREE MAKES WITHDRAWAL

34. Non-Elective 403(b) Contribution
February 2017
How are taxes determined:
Based upon tax bracket
Retiree pays taxes – as income – in the year of withdrawal based upon retiree’s tax bracket
Based upon age:
If retiree withdraws funds prior to age 59 ½ , retiree will also pay 10% penalty on withdrawal (similar to an IRA early withdrawal).
Note: There are some specific situations wherein the 10% penalty does not apply if dollars are withdrawn after retirement but prior to age 59 ½ . However, this would be something to discuss with your tax advisor.
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35. Non-Elective 403(b) Contribution
February 2017
If the retiree returns to active work at the District after retirement(on the District’s payroll) , any contributions that the District has not made to the retiree’s 403(b) account must be suspended until the retiree is no longer an active employee.
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36. Non-Elective 403(b) Contribution
February 2017
If retiree dies before receiving all annual TSA Contributions:
Funds already received belong to retirees– and eventually to retiree’s heirs/estate
Payments not yet made may will be paid out as a lump sum upon death to the retiree’s estate.
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37. General or 403(b)-Specific Questions
February 2017
General or 403(b)-Specific Questions
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38. HRAs vs. 403(b)s Health Reimbursement Accounts (HRAs)
Pros
Benefit Options
Premium Only
Pre-tax for both District & Employee
Amount can be paid out over any length of time
Cons
$ must reimburse eligible medical premium paid by retiree
No beneficiary designation
Upon death, eligible dependents may use or funds are forfeited
Non-Elective 403(b)s
Pros
Benefit Options
District contribution
Pre-tax for District
Money can be used for anything retiree wishes
Beneficiary Designation
Cons
Taxable for Retiree when withdrawn (and penalty)
$ must be paid out within 5/6 years of retirement
February 2017
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39. Q & A Thank you
February 2017
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