How It Works
The MERS Health Care Savings Program is an employer-sponsored program providing a tax-free medical savings account for post employment medical expenses. The account is available for use by your employees, their spouses and any legal dependents, as well as a named beneficiary. The MERS Health Care Savings Program is not a Health Savings Account, Flexible Spending Account, or Health Reimbursement Account. It is a tax-exempt Section 115 Governmental Integral Part Trust, which ensures the assets are used for reimbursement of future medical expenses only.
Employer and employee groups work together to design the contribution structure using one or more of the types of contributions
Individual employee accounts are invested and grow tax-free
Upon separation of employment, regardless of age, the account becomes available for tax-free medical expense reimbursement
Funding The Program
Contributions to your Health Care Savings Program are based on the provisions indicated in the Participation Agreement and include:
Basic Employer Contributions are a flat dollar amount or a percentage of pre-tax wages, which have a vesting schedule.
Vesting can be:
- Immediate – the employee is fully vested upon participation
- Cliff – the employee is fully vested upon completion of a stated number of years of service
- Graded – the employee is partially vested in the account balance according to your adopted schedule. For example, the employee is 50% vested after 1 year and 100% vested after 2 years.
Mandatory Salary Reductions are a fixed-dollar or percentage of pre-tax wages withheld through payroll deduction. All employees in the specified division must make the specified contributions; it is not optional. These are not required to be reported on the employees' W-2s.
Post Tax Voluntary Contributions may be started or stopped at any time. The investment returns and reimbursements are tax-free even though the contribution was after tax.
Leave Conversion Contributions refer to leave time that is not used (either a portion or all) may be contributed to a participant’s MERS HCSP account. Some examples of leave include vacation, personal time, sick time, or severance pay. The leave conversion is deposited into participant accounts at a set time determined by your employer (i.e. annually, time of separation, or other time chosen by employer). If a leave conversion contribution has been selected by the employer, it is mandatory. Employees cannot choose how to receive their leave conversion. However, each division by define its own payout option.
There are many benefits of the MERS Health Care Savings Program (HCSP).
Because we operate on a not-for-profit basis, HCSP is offered at no cost to employers, and our already low participant costs continue to decrease.
Unique Beneficiary Structure
HCSP allows participants to name both a primary and contingent beneficiary, a feature that is unique to MERS.
The HCSP investment menu provides your employees with select investment options to design a diversified portfolio to match their investment needs.
MERS employs behavioral economics to design a streamlined investment menu that guides participants to make decisions in their own best interest, while giving them the freedom to pursue their own investment choices.
Retirement Readiness Resources
MERS has taken a proactive approach to helping participants achieve their financial goals with a truly comprehensive retirement readiness platform. The customized online Full Picture Report tool uses the information that MERS has along with data provided by the participant to help project retirement readiness. Free investment guidance is offered to assist participants in achieving their retirement goals if they are not on track to do so.
As the sole fiduciary for our retirement plans, MERS takes on the liability for selecting the investment options, monitoring fund performance, and ensuring fees are reasonable. Click to learn more.