MidAmerica’s 3121 FICA Alternative Plan is a unique retirement benefit specifically designed for part-time, seasonal, and temporary employees. Known as the APPLE plan to our Californian clients, the FICA Alternative Plan replaces Social Security, creating a powerful retirement benefit that has the potential to grow over time. If you’re a participant and are new to your FICA Alternative Plan, or simply need some quick reminders, we’ve outlined the need-to-know details of this valuable benefit below.

What is a 3121 FICA Alternative Plan?

A FICA Alternative retirement plan is an interest-bearing account that replaces Social Security for part-time, seasonal, and temporary employees. The plan is a type of 3121 retirement plan which substitutes the Social Security portion of the FICA tax requirement with a pre-tax contribution to a FICA Alternative account. Essentially, the benefit not only enables significant tax savings for both the employer and the employee, but allows the account to potentially grow over time through investments. Best of all, MidAmerica assures peace of mind when it comes to the  administration of your hard-earned funds through our PeopleFirst customer service philosophy and more than 25 years of experience. In fact,  the FICA Alternative plan was MidAmerica’s first-ever plan introduced at our founding in 1995!

How does it work?

Once you become a plan participant, the FICA Alternative retirement plan immediately replaces the 6.2% Social Security tax on payroll with a 7.5% pre-tax contribution to your account. Even though the contribution to the benefit increases to 7.5%, your net paycheck remains virtually unchanged due to the pre-tax nature of the contribution.  To understand how a 6.2% tax and a 7.5% contribution can have the same effect on your paycheck, please see the graph below.

How 7.5% Equals 6.2%

Employer after-tax Social Security contributions of 6.2% are replaced with pre-tax employee contributions of 7.5% into a FICA Alternative retirement plan, to potentially grow over time. This actually leaves employees with around the same take-home pay as contributing to Social Security would. Why? Because FICA Alternative Plan contributions are pre-tax.

FICA FICA Alternative Retirement Plan
Gross Salary $1,000.00 $1,000.00
Less 7.5% contribution into retirement plan $75.00
Taxable Income $1,000.00 $925.00
Less 15% Income Tax $150.00 $138.75
Less 6.2% Social Security $62.00
Less 1.45% Medicare $14.50 $14.50
Net Paycheck $773.50 $771.75

Furthermore, your employer permanently saves the matching 6.2% FICA tax which adds to your organization’s budget, freeing up funds to potentially use for needed projects or initiatives. Finally, with MidAmerica, your FICA Alternative plan is invested for potential growth over time with a minimum guaranteed annual rate of return. As a participant, you may also, depending upon plan design, have the freedom to self-direct the investment of your funds to meet personal retirement goals.

When can I access my funds?

You are immediately vested in your FICA Alternative plan (which means you fully own your account) upon retirement, separation of employment, or transfer to full-time employment from a part-time, seasonal or temporary status. Once you are vested (and deemed eligible according to IRS age requirements), you are able to withdraw your retirement funds or roll over your account to a different retirement benefit. Please note certain waiting periods may apply, depending on your unique plan design. To learn more about your unique plan, review your employer’s Plan Highlights.

Understanding the IRS Rules

IRS rules state that participants achieve penalty-free access to their funds when they reach certain age requirements based on the underlying Internal Revenue Code (IRC) section for the unique plan. Under law, regardless of the IRC section, participants are obligated to withdraw a certain percentage of their funds each year after reaching age 72.  To learn more about the IRS age requirements for your plan, review your employer’s Plan Highlights.

Best-in-Class Service

If you still have questions about your 3121 FICA Alternative Plan or need additional resources, MidAmerica’s Participant Services (PSR) team is here to help. We provide nationwide coverage for participant education, ensuring you understand how to manage and access your benefit. In addition to our service team, you always have access to your benefit online by selecting Access Account from the top right-hand corner of the website.*

The PSR team is happy to answer any questions at (800) 430-7999 Monday through Thursday from 8:30 a.m.-8:00 p.m. ET and Friday from 8:30 a.m.–6:00 p.m. ET. You can also reach us by email at accountservices@myMidAmerica.com.

 

*Please note you will not have access to your account online until MidAmerica receives your first plan contribution.

Understanding Your Special Pay Plan

Posted on June 14, 2022

We understand that navigating the world of retirement benefits may seem like a daunting task and, as an employee, you may have some questions about the Special Pay Plan your employer has set up for you. If you’re new to the plan, or just need a refresher, we’re here to help you get the most out of this powerful benefit.

What is the Special Pay Plan?

The Special Pay Plan uses special forms of compensation (hence, “Special Pay” plan) like your unused sick leave, unused vacation pay, or early retirement incentives to fund a tax-deferred retirement benefit that’s invested for potential growth. Employers and employees alike reap considerable benefits from a Special Pay Plan, as the benefit enables tax savings for both parties and MidAmerica assures peace of mind in our handling of your hard-earned funds.

How does it work?

Once you retire or separate from service, your employer deposits your accumulated unused sick leave, vacation pay, and other forms of compensation into a 401(a) or 403(b) retirement account. Crucially, these forms of compensation enter the account pre-tax, providing you with significant savings.

Pre-tax savings.

To demonstrate the extent of these savings, take the instance of a participant who receives a $10,000 deposit into their Special Pay Plan. They permanently avoid the 7.65% FICA tax, saving them $765 in FICA taxes deposited into their plan. Furthermore, the employer also avoids matching the 7.65% FICA tax they are otherwise obligated to pay per IRS rules. The employer may elect to use these savings to fund organization projects or to invest these savings back into their employees.

Tax-deferred.

The participant’s retirement account is income tax deferred, meaning any income taxes will be paid upon withdrawal from the account. Income tax deferral can usually provide you with even more savings, since you’ll likely fall into a lower income tax bracket further into retirement due to a reduction in your annual income (compared to when you were actively working.)

Invested for potential growth.

Finally, your Special Pay Plan is invested for potential tax-deferred growth with a minimum guaranteed annual rate of return. You may also have the freedom to self-direct the investment of your funds to meet personal retirement goals, if your plan allows.

When can I access my funds?

Participants are immediately vested in their Special Pay Plan upon retirement or separation of employment—which means you fully own the account—giving you immediate access to your funds once you retire. However, we encourage you to think of the account as a rainy day fund—a reservoir of resources accessible on a needs-first basis. The money is there when you need it but has the potential to grow tax-deferred when you don’t!

Important IRS rules to consider.

IRS rules state that participants achieve full access to their funds when they reach 59 ½ years of age. So, if you separate from employment before that age, a 10% tax fee will be imposed on your distribution. If you are over the age of 59 ½ when you separate from employment, you will have full access to your 401(a) or 403(b) account and are, in fact, obligated to withdraw a certain percentage of your funds after the age of 72.

 We’re here to help.

If you still have questions about your Special Pay Plan or need additional resources, MidAmerica’s Participant Services team is here to help. We provide nationwide coverage for participant education, ensuring you understand how to manage and access your benefit. In addition to our service team, you always have access to your benefit online by selecting Access Account from the top right-hand corner of the website.*

The Participant Services team is happy to answer any questions at (855) 329-0097 Monday through Thursday from 8:30 a.m. – 8:00 p.m. ET and Friday from 8:30 a.m. – 6:00 p.m. ET. You can also reach us by email at accountservices@myMidAmerica.com.

 

*Please note you will not have access to your account online until MidAmerica receives your first plan contribution. Once the contribution has been received from your employer, we will mail you a detailed Welcome Kit with instructions on how to register for your account.

Most of us look forward to the day we can retire from our jobs—maybe kick back, relax and take it easy for a change. Or, for those who can’t sit still, maybe this is a time to check off bucket list items.

No matter how you plan on spending your golden years, you’ll likely need to save some money for when it’s time to cash in. With some careful planning, you can find ways to enjoy this time—without the constant worry of finances.

5 Money-Saving Tips for the Dream-Chasing Retiree

  1. Don’t be afraid to ask for the senior discount!

    Enjoy access to a world of discounts by becoming a member of AARP or American Seniors Association for a nominal annual fee—$16 and $15, respectively. Free apps like Senior Discounts Club or Flipp can help you easily discover savings at your favorite restaurants, travel, and stores like Target, Walgreens, and Walmart.

  2. Declutter or downsize your home!

    Retirement is the perfect time to take on new projects. Get rid of unwanted items in your garage or storage unit, then have a yard sale or donate it to a family in need. If your kids have moved out, look at the empty nest phase as an opportunity to start fresh with a smaller home. Consider the savings you could generate—lower property taxes, utility bills, maintenance costs and homeowner’s insurance premiums—just to name a few!

  3. Consider donating or selling an extra vehicle.

    Now that you’re no longer commuting to work, perhaps you can get by with just one car instead of two. Sell the car for extra cash or donate the vehicle to a charity. Plus, it will save you on car insurance bills, maintenance and gasoline expenses.

  4. Keep doing what you enjoy, but less frequently.

    If you’re in the habit of eating out five times a week, try cutting back to three. It’s not a dramatic change, but you will notice the savings to your wallet. Think of the other ways you could cut back. How about golfing two days a week instead of four?

  5. Treat your Special Pay Plan or Health Reimbursement Arrangement as a rainy day fund.

    If you currently have retirement benefits through MidAmerica, it makes sense to hold off on distribution or reimbursement requests until necessary. Why? Because your benefit funds are invested for potential tax-free or tax-deferred growth. This means the longer your funds stay in your account, the more money you could potentially end up with down the road. Your 403(b)/401(a) Special Pay Plan and Health Reimbursement Arrangement is there when you need it, but it has the potential to keep growing when you don’t.

These are just a few simple ways to save money as a retiree, which we hope make you realize that saving money doesn’t need to be difficult. Living the happy retirement you deserve can be as simple as sticking to your budget, keeping track of what you spend, and appraising your spending for any savings opportunities. If you have questions about financial planning or need personalized advice, please consult your financial advisor.

One of the most common issues public sector organizations face is attracting and retaining talent—often due to a competitive job market and budgetary constraints. According to the Bureau of Labor Statistics, quitting rates have been consistently on the rise, reporting that annual total quits rose from 1.7 million in 2013 to 2 million in 2016 to 2.3 million in 2019. With the advent of the COVID-19 pandemic in 2020, quit rates—defined as voluntary separations initiated by the employee—have been rising even more significantly, from 3.3 million in December 2020 to 4.3 million as recently as January 2022.[1] Even before the pandemic, school districts were seeing teacher absence rates rising, according to a report [2] from the EdWeek Research Center, commissioned by Kelly Education, the school staffing division of Kelly Services. Fifty-six percent of those surveyed said teacher absence rates are higher now than five years ago, and 71% of school administrators and board members see the demand for substitute teachers increasing in the next five years.

While the pandemic appears to be winding down, the “Great Resignation” of 2021 is still causing many public sector employers to reconsider their talent acquisition and retention strategies. Part of forming a winning strategy involves understanding the common causes of attrition and different ways they can be addressed.

Common Reasons for Attrition

Attrition can occur for several reasons, but competitive compensation and retirement benefits, health care costs, and advancement with other employers tend to be the most prevailing factors that prompt workers to seek employment elsewhere.

With health care costs on the rise, it’s no doubt that both employees and employers are keeping a close eye on how the increase impacts both organizational and personal budgets. In fact, 95% of employers say reducing health care costs is an important workforce issue looking forward [3], which creates a unique challenge for the employer—reducing organizational costs of health care while at the same time reducing health care costs for their employees.

So how can employers bulk up their benefit package and create a competitive talent retention and acquisition strategy—without a blow to their budget?

Cost-Effective Options to Bulk Up your Benefit Package

Attractive benefit packages can increase the chances of employees staying during tough times or help persuade a candidate to choose your organization. Below are just a few ways to directly address some of the more common reasons for attrition and make your benefit package more attractive to talent prospects.

Offer Employees a Tax-Free Way to Pay for Health Care

If your organization has noticed that high health care costs have caused employees to leave, a Health Reimbursement Arrangement (HRA) may be the solution to your issue. An HRA is a triple tax-free benefit vehicle that helps participants pay for eligible medical expenses during active employment or retirement, which means the plan can be designed to either offset a high deductible health plan (HDHP) or bridge the gap between retirement and Medicare eligibility.

HRAs are funded completely by employers for potential tax-free growth over time and can either be funded while the employee is actively working (for use during or after employment) or upon retirement. Unique forms of compensation like unused accumulated leave can be used to fund the HRA, maximizing the use of already earmarked funds. What’s more, the employer can apply unique vesting schedules to the HRA that provide an incentive for employees to stay. Not only will employees see potential tax-free growth accumulating while they work, but no action is needed from them to enroll or contribute—creating a stress-free, generous benefit. Additionally, both the employer and the employee permanently save 7.65% on FICA taxes.

Depending on the plan design, HRAs can help offset costs like prescriptions, eyeglasses, doctor visits and premiums—completely tax-free—and can be used by the participant, their spouse and any eligible dependent.

Maximize Accumulated Leave and Offer a Tax-Advantaged Retirement Plan

Similar to the HRA, the Employer Sponsored Plan can be funded using unique forms of compensation, such as unused sick leave and unused vacation pay; however, with this retirement plan, the benefit can be used—tax-deferred—for whatever purpose a participant chooses once they retire or separate from service.

Funds are deposited by the employer into a 403(b) or 401(a) during active employment for use at retirement, which allows participants to monitor their retirement growth, helping them connect to the benefit they are receiving. Instead of a promise of something at retirement, they can see their retirement funds increasing in value while they work. Additionally, the employer can choose to apply a vesting schedule, which incentivizes employees to stay with the organization until they are fully vested in their benefit.

Employers and employees permanently save 7.65% on FICA taxes while also deferring income tax for the employee until a withdrawal is made. Funds are also invested with the potential to grow tax-deferred, which means increased value due to earnings over time, further maximizing the benefit.

Provide Part-Time, Seasonal and Temporary Employees with a Powerful Retirement Benefit

Many employers have difficulty providing part-time, seasonal, and temporary employees, such as substitute teachers, with meaningful benefits. The 3121 FICA Alternative Plan was specifically designed for this population of the workforce and allows employers to replace Social Security with a retirement plan that’s invested for potential growth. Instead of the 6.2% contribution into Social Security, employees contribute 7.5% of their wages into an interest-bearing account, on a tax-deferred basis, giving their money the potential to grow over time. Despite what seems like an increase in employee contributions, the employee is left with close to the same take-home pay.

The employer completely avoids the matching 6.2% Social Security contribution, which reduces the stress on their budget without sacrificing the value of the employees’ benefit.

Bulking up your organization’s offerings to employees is a great way to battle unwanted attrition and attract new talent. If you would like to learn more about our solutions, click here.

 

[1] Bureau of Labor Statistics https://www.bls.gov/bls/news-release/jolts.htm#2019

[2] https://fs24.formsite.com/edweek/images/WP-KellyServices-TheSubstituteTeacherGap.pdf

[3]   https://www.slge.org/assets/uploads/2020/04/workforcesurvey2020.pdf

Lakeland, FL – MidAmerica Administrative & Retirement Solutions, LLC (MidAmerica) has joined U.S. Retirement & Benefits Partners (USRBP) as a Partner Firm after being sold by San Francisco-based private equity firm, Alpine Investors. The announcement was made on January 3, 2022.

MidAmerica was founded in 1995 in Lakeland, FL to provide FICA Alternative programs to public sector employers such as K-12 school systems, colleges and universities, and law enforcement and public safety agegncies. Over the years, MidAmerica has experienced dramatic growth, increasing their footprint across the U.S. and expanding their core business to include additional retirement programs as well as health and welfare solutions—still remaining focused entirely on the public sector market.

As a member of USRBP, MidAmerica joins other Partner Firms specializing in employee benefits that complement their products and services while providing MidAmerica with an opportunity to increase market presence and continue their mission of delivering best-in-class service and quality retirement and wellness products to public sector employers and employees across the country.

“USRBP has deep-rooted relationships and expertise across the public sector through many of its established Partner Firms,” said Jim Tormey, MidAmerica’s President & CEO. “MidAmerica’s high quality products and services will strengthen USRBP’s already compelling offering; together, we’ll bring more impactful solutions to the ever-deserving employers and employees who do so much to take care of our communities. The partnership with USRBP is a terrific fit and I’m excited for MidAmerica’s next chapter.”

About MidAmerica Administrative & Retirement Solutions, LLC
MidAmerica was established in 1995 to take care of those who do so much to take care of our communities. For more than 26 years, MidAmerica has served public sector employers and their employees by providing impactful solutions for some of their toughest issues: rising health care costs, high post-employment liabilities, and attracting/retaining talent.

Currently serving more than half a million public sector employees across the country with $1.6 billion in assets under management, MidAmerica is one of the nation’s leading providers of FICA Alternative and Special Pay Plans, Health Reimbursement Arrangements, Flexible Spending Accounts, and Trusts. To learn more about MidAmerica, visit www.myMidAmerica.com.

About U.S. Retirement & Benefits Partners

U.S. Retirement & Benefits Partners, with headquarters in Iselin, NJ, is one of the nation’s largest independent, national financial services firms specializing in employee benefit and employer-sponsored retirement plans in the K-12 public school, governmental, corporate, and non-profit markets. USRBP serves more than 12,500 employer groups with 3 million participants through 50 regional Partner Firms. For more information, visit www.usrbpartners.com.

About Alpine Investors

Alpine Investors is a people-driven private equity firm that is committed to building enduring companies by working with, learning from, and developing exceptional people. Alpine specializes in investments in middle-market companies in the software and services industries. Its PeopleFirst strategy includes a CEO-in-Residence program which allows Alpine to bring proven leadership to situations where additional or new management is needed post-transaction. Alpine is currently investing out of its $1 billion seventh fund. For more information, visit http://www.alpineinvestors.com.

A Health Reimbursement Arrangement, or HRA, is a triple tax-free benefit vehicle that helps you pay for eligible medical expenses* during retirement or active employment, using funds contributed by your employer. There is no limit on how much your employer contributes to your account, the account is in your name, and the funds never expire. Best of all, the funds can be invested for potential growth, and you’ll benefit from tax-free deposits, accumulation, and reimbursement.

The beauty of an HRA is the flexibility of plan design—there is an HRA application for the various stages of an employee’s life.

Let’s explore just how that HRA works for you if you’ve retired or separated from the employer sponsoring your HRA.

Retired or Separated from Service

Congratulations on taking this big step! You’ve worked hard for your benefits and now it’s time to let them work for you. Once you’ve retired or separated from service, you have access to your HRA funds. Whether you received a lump sum Retiree HRA (rHRA) contribution from your employer or the funds from your Defined Contribution HRA have now become available, you can start using your HRA to pay for qualified medical expenses tax-free! The rewards don’t stop there. Your HRA remains invested for potential growth so any funds in the account will continue to accrue interest.

What happens when I retire or separate from service?

Once you become claims-eligible and we receive your retirement or termination date from your employer, we’ll mail you a detailed Welcome Kit and Plan Highlights that contains additional details on how the HRA works for you now, how to submit claims and what expenses are eligible for reimbursement under your plan. Additionally, you’ll receive two debit cards** preloaded with your HRA balance. Both cards are in your name so you can keep one for yourself and offer one to an eligible spouse or dependent.

Using your HRA funds—fast facts!

  • Medical expenses must be incurred after you retire or separate from service.
    For example, if you had a doctor’s appointment or medical procedure while you were still working, that service wouldn’t be eligible for reimbursement since it was rendered before you become claims eligible. Claims are only reimbursable once you become claims eligible, which is the date you retire or separate from the employer sponsoring your HRA.
  • Use your debit card or submit claims online when possible.
    The fastest way to pay for your eligible medical expenses is with your Journey Benefits Debit Card, which eliminates out-of-pocket costs at the point-of-sale. Submitting your claim for reimbursement through myMidAmericaJourney.com or through your Journey mobile app are also two time-saving methods that can help you receive your reimbursement funds faster than ever.
  • Review claims documentation examples—and hold onto your documentation!
    Like many retirement and health care benefits, the HRA is regulated through the Internal Revenue Service (IRS). This means that, as your third-party administrator, MidAmerica must adhere to these IRS standards to make sure your plan stays protected and compliant. So, we may follow up and ask for further documentation to verify and approve your claim. The majority of benefits debit card purchases are automatically approved without additional documentation; however, in some rare cases, we may ask for documentation to complete debit card transactions as well. Visit myMidAmerica.com/hraresources for examples of different forms of accepted documentation.

Not sure if you have a Defined Contribution HRA or a Retiree HRA? Review the Plan Highlights FAQ that was included with your Welcome Letter and/or Welcome Kit. You can also call (855) 329-0095 or email us at healthaccountservices@myMidAmerica.com!

 

* Please note your employer will determine which medical expenses are eligible for reimbursement, so be sure to review your custom Plan Highlight FAQs.

**Please note if you have a defined contribution Health Reimbursement Arrangement (HRA) and are still actively employed, you will not receive a debit card until you retire or separate from service and become claims eligible. If you have a limited purpose HRA that only allows the reimbursement of deductibles, post-deductible expenses or coinsurance you will not receive debit cards but will have access to the online portal and mobile app to submit claims. Not sure what type of HRA you have? Contact our Participant Services team at healthaccountservices@myMidAmerica.com or (855) 329-0095.

A Health Reimbursement Arrangement, or HRA, is a triple tax-free benefit vehicle that helps you pay for eligible medical expenses* during retirement or active employment, using funds contributed by your employer. There is no limit on how much your employer contributes to your account, the account is in your name, and the funds never expire. Best of all, the funds can be invested for potential growth, and you’ll benefit from tax-free deposits, accumulation, and reimbursement.

The beauty of an HRA is the flexibility of plan design—there is an HRA application for the various stages of an employee’s life.

Let’s explore just how that HRA works for you while you’re actively working for the employer sponsoring your HRA.

Actively Employed

If you’re still actively working and currently have an HRA, your employer may have enrolled you in either an Integrated HRA (iHRA) or a Defined Contribution HRA (dcHRA).

Integrated HRA
You’re eligible for reimbursement while you are actively working.

  • What it is: With the iHRA, your employer deposits a fixed dollar amount into your HRA to offset the cost of group medical coverage. While you must be enrolled in group health coverage, you’ll have the advantage of benefit dollars available to you while you’re working and a MidAmerica Journey Benefits Card to use for point-of-sale transactions, simplifying the claims process for you and your eligible dependents.
  • How it works for you now: Since you’re eligible for reimbursement while you actively work, you can use your HRA to offset eligible health care costs for you, your spouse and any eligible dependents! To learn more about eligible expenses, how to submit claims and more, visit myMidAmerica.com/hraresources.

Defined Contribution HRA
You receive deposits into your HRA while actively working but are not eligible for reimbursement until you retire or separate from service.

  • What it is: The Defined Contribution HRA operates according to the same parameters as the Integrated HRA, with your employer contributing a “defined” amount at a set frequency. However, these funds are not accessible until you retire or separate from service, continuing to accumulate year after year, along with any (tax-free!) earnings that may be generated by your funds’ underlying investments.
  • How it works for you now: While you won’t be able to use your HRA funds while you’re still working, you can monitor the growth of your HRA knowing you’ll have a benefit you can count on when you leave the workplace. It’s important to note that once you become eligible for claims reimbursement, the claims submitted must be incurred after you retire or separate from service. For example, if you had a doctor’s appointment or medical procedure while you were still working, that service wouldn’t be eligible for reimbursement since it was rendered before you become claims eligible.

Not sure if you have an Integrated HRA or a Defined Contribution HRA? Review the Plan Highlights FAQ that was included with your Welcome Letter and/or Welcome Kit. You can also call (855) 329-0095 or email us at healthaccountservices@myMidAmerica.com!

 

* Please note your employer will determine which medical expenses are eligible for reimbursement, so be sure to review your custom Plan Highlight FAQs.

1 10

Feedback Survey

Please take a few moments to complete our survey.
Your responses will help us improve our service!

Take Survey

Skip to toolbar