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.

The Internal Revenue Service (IRS) recently released the 2022 annual contribution limits for Health Flexible Spending Accounts as well as IRC Section 403(b) and Section 457(b) plans.

Health Flexible Spending Accounts

The annual limit on voluntary employee salary reductions for contributions to a health flexible spending account will be $2,850 in 2022, which represents an increase over the contribution limit for 2021.

Health Flexible Spending Accounts Contribution Limits
Tax Year Annual Limit
2022 $2,850
2021 $2,750
2020 $2,750

For more information on Health FSA limits, review Revenue Procedure 2021-45.

 

403(b) Retirement Plans

The annual salary deferral limit will be $20,500 in 2022, which represents an increase over the contribution limit for 2021.

The following limits also apply for 2022:

  • If you qualify for the full amount of the lifetime catch-up, the catch-up contribution limit remains unchanged at $3,000. This brings the annual total limit for employees who qualify for the lifetime catch-up to $23,500.
  • The catch-up contribution limit for employees who are age 50 or over remains unchanged at $6,500. This brings the annual total limit for employees who qualify for the age 50+ catch-up to $27,000.
403(b) Plan Contribution Limits
Tax Year Basic Deferral Limit for All Employees Annual Limit if you Qualify for the Full Amount of the Lifetime Catch-Up (15 Years of Service). Total Lifetime Catch-Up Max of $15,000 Annual Limit if You Qualify for the Age 50+ Catch-Up Maximum Annual Contribution if You Qualify for Both the Age 50+ and Lifetime Catch-Ups
2022 $20,500 $23,500 $27,000 $30,000
2021 $19,500 $22,500 $26,000 $29,000
2020 $19,500 $22,500 $26,000 $29,000

For more information on the current 403(b) limits, review the IRS article, IRS Announces 401(k) Limit Increases to $20,500.

 

457(b) Retirement Plans

The annual salary deferral limit will be $20,500 in 2022, which represents an increase over the contribution limit for 2021.

The following limits also apply for 2022:

  • The catch-up contribution limit for employees who are age 50 or over remains unchanged at $6,500. This brings the annual total limit for employees who qualify for the age 50+ catch-up to $27,000.
457(b) Plan Contribution Limits
Tax Year Basic Deferral Limit for All Employees Annual Limit if You Qualify for the Age 50+ Catch-Up
2022 $20,500 $27,000
2021 $19,500 $26,000
2020 $19,500 $26,000

For more information on the current 457(b) limits, review the IRS article, IRS Announces 401(k) Limit Increases to $20,500.

 

Questions?

We’re here to help. If you have questions about the recent IRS updates or the impact they may have on your plan, call us at (800) 430-7999 or email us at accountservices@myMidAmerica.com.

Open Enrollment Tips and Tricks

Posted on October 27, 2021

It’s that time of year again! Open enrollment is the yearly period when employees can enroll in a health insurance plan and voluntary benefit funding plans like Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). For employers, it is a time of year that serves as an opportunity to help their employees navigate through decisions that will significantly impact them and their families. It’s important that this period goes smoothly so that employees make the right choices for their unique situation. To that end, here are some tried-and-true tips to make the most of this crucial time.

Start Education Early

The annual benefits-election process should start well before any forms are filled out. The earlier you can get information and materials out to your employees, the better. This allows time for employees to review their options and formulate any questions before enrollment begins. Plan to answer some of the most common open enrollment questions for each program, such as:

  • Why do I need this benefit?
  • Which features fit my needs?
  • What value does the program provide?
  • How much is this going to cost me per paycheck?

If you offer an FSA through MidAmerica, we have several open enrollment and benefit education resources you can leverage. Simply reach out to your Account Manager!

Remember the Basics

Many employees don’t fully understand health insurance or benefit funding plan basics. With health insurance options changing, employees may need education on definitions and examples of co-payments, deductibles, co-insurance, and out-of-pocket maximums. Avoid using confusing jargon in your marketing collateral so that solutions are easy to understand.

Communicate Your Plan and Level of Coverage

Prepare to share information about your company’s benefits coverage and health benefit funding plans, including the different plans that you offer and their perspective coverage, and any changes you are making or considering. Be sure to clearly communicate cost information so employees understand what they will need to pay and how their benefit is changing. Prepare handouts outlining the major changes to the benefits and hold informational meetings, including new IRS guidelines and plan maximums. Anticipate questions and have FAQs ready for distribution.

Avoid Information Overload

Some employers make the mistake of handing out pages and pages of text, jamming a year’s worth of communication into a few weeks. Instead, communicate the technical details of your various benefits over time. Don’t assume employees will weed through all your materials to make sense of the benefits offered to them.

Give Employees a Generous Time Frame

While many people may wait until the last minute to fill out their forms, others consider their options with their family members for weeks. Giving them just a few days will not be enough. Be sure to build in a time frame that gives HR staff and employees the time they need. A recommended time frame is three weeks.

Although open enrollment can seem like a stressful time, it doesn’t have to be that way. By following the tips above, you can ensure that your organization has a successful open enrollment.

If you are contemplating retirement, one of your foremost concerns is probably the issue of medical insurance. How will you pay for it when you are no longer receiving a regular paycheck? If remaining on your employer’s medical plan is an option, this may be something to consider. However, the retiree health care benefit sponsored by your employer may be a Health Reimbursement Arrangement (HRA) rather than a full-fledged medical plan.

What is an HRA?

A Health Reimbursement Arrangement is an interest-bearing, employer-funded account created in your name. Deposits can be made completely tax-free¹, meaning that you receive 100% of the value of each benefit dollar.

The HRA account is designed to reimburse retirees for their eligible medical expenses and/or premiums to offset their out-of-pocket costs. Your employer determines which qualified medical expenses are eligible for reimbursement under the plan. Your employer may also decide to fund the HRA using your accumulated leave, such as unused sick leave, unused vacation pay, severance, or other retirement incentives.

What are my HRA Options?

There are two HRA options designed to benefit retirees: a Defined Contribution HRA or a Retiree HRA.

  • With a Defined Contribution HRA, funds are deposited while you are still actively working, growing over time, and becoming available for use upon retirement or separation of service.
  • With a Retiree HRA, funds are deposited in a lump sum upon retirement/separation of service. The funds are invested once deposited and can be used immediately upon deposit.

For both types of HRA, account balances roll over year to year, qualified expenses are reimbursed tax-free1, and funds can be used to reimburse eligible medical expenses incurred by you, your spouse, and any qualifying dependents.

Is an HRA really right for me?

While HRAs have been around since 2002, this type of benefit may be uncharted territory for you. One of the most common misunderstandings that retirees have about the HRA is that they’re not receiving their full benefit simply because they’re not collecting a cash payout. In reality, you would receive more money because there is no liability for FICA, Federal, or State income taxes, resulting in a “triple tax-free” benefit for you. That means deposits made into your account, any earnings on your account balance, and any reimbursements made from the account are tax-free1, ensuring that you receive dollar for dollar the benefit amount you were promised.

The HRA is a valuable vehicle for bridging the gap between retirement and Medicare eligibility. Given this financial incentive from your employer, you may consider retiring earlier than planned, and you may choose to seek an alternative health care option, rather than remaining on your employer’s plan. To learn more about the long-term benefits of an HRA solution and about what an HRA is—as well as what it’s not—click here to download our educational piece, Common HRA Misconceptions.

 

¹Not subject to FICA, Federal or State income taxes

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