Adopt Resolution #25-056 to Update the Non-Union Post-Employment Healthcare Savings Plan

The purpose of this case is to seek City Council authorization to approve an updated non-union post-employment healthcare savings plan (PEHCSP).  Updating the PEHCSP has no cost to the City.

Section 4.8 of the Personnel Policy contains the current PEHCSP, which has been in place for many years.  As healthcare costs continue to increase, a PEHCSP is an excellent option for employees to save for those expenses; both contributions and reimbursements are tax-free. The health care savings plan is an employer-sponsored program that allows Minnesota public employees to invest money in a medical savings account while they are employed.  The plan is administered by the Minnesota State Retirement System (MSRS). Employees are automatically enrolled and contribute to the Health Care Savings Plan (HCSP) as directed by either a bargaining agreement or personnel policy of their employer. Employees choose how their account balance is invested. After they end employment, they may access the funds to reimburse eligible medical expenses incurred by themselves, their spouse, legal tax-dependents and adult children up to their 26th birthday. An administrative fee is charged to employees for the cost of the plan.

In preparation for updating the policy, a representative from MSRS was invited to City Hall and presented information to employees.   Several surveys were conducted to assess employees' interest in updating the plan. Non-union employees are divided into two groups, PERA Coordinated members and PERA Police and Fire members.  Information was gathered from both groups. A vote of all non-union employees was taken, resulting in a 100% participation rate.  Non-union PERA Coordinated members had 72% of the vote in favor of revising the plan and non-union PERA Police and Fire had 80% in favor of revision.  Based on the vote, the following plan design is recommended for approval by the City Council and will be updated within the City of Ramsey Personnel Policy:

4.8    Non-Union Post-Employment Healthcare Savings Plan     

The PEHCSP is an employer-sponsored program that allows employees to invest in a tax-preferred medical savings account while employed by a Minnesota public employer. All non-union employees hired after January 1, 1984, will participate in the post-employment healthcare savings plan. 

PERA COORDINATED MEMBERS
•    GROSS WAGES: Employees shall contribute 2% of their gross wages after 1 year of service until reaching eligibility to draw their PERA pension (age 55), at such time increase the contribution to 4% of gross wages and continue thereafter.  Eligibility to draw the PERA pension shall take precedent over the duration of employment. 

  •    VACATION SEVERANCE: Employees shall, upon separation of employment, contribute their unused accrued vacation time, as follows:        

Years of Regular Employment Served	Severance Contribution of Unused Vacation Time to the HCSP	Severance Payable Directly to Employee
5 years	50%	50%
10 years	75%	25%
15 years and greater	100%	0%

PERA POLICE & FIRE MEMBERS
•    GROSS WAGES: Employees shall contribute 2% of gross wages after 1 year of service until reaching the 5th year before being eligible to draw their PERA pension (age 50), at such time, increase the contribution to 6%  of gross wages and continue thereafter. Eligibility to draw the PERA pension shall take precedent over the duration of employment. 

  •    VACATION SEVERANCE: Employees shall, upon separation of employment, contribute 100% of their unused accrued vacation time.         

BOTH PERA COORDINATED MEMBERS AND PERA POLICE & FIRE MEMBERS
•    SICK LEAVE (ESST) CONVERSION: Employees shall, at the end of the calendar year, or upon separation of employment, contribute all hours greater than 960 at a conversion rate of 2 to 1.

•    SICK LEAVE (ESST) SEVERANCE: Employees shall, upon separation of employment, contribute 100% of unused eligible accrued sick leave. Eligible sick leave is a percentage of the full balance, based on years of service, as follows: 
       

Years of Regular Employment Served	Percentage of Unused Accumulated Sick Leave Payable	Additional 10% With 3-Month Notice of Resignation
5 years	33%	43%
10 years	45%	55%
15 years and greater	50%	60%

Eligible sick leave severance is Earned Sick and Safe Time (ESST) and is defined as a lump-sum payment upon termination of employment, contributed to the PEHCSP. To qualify for eligible ESST severance pay, an employee must leave City employment in good standing.

There is no funding required for this action. 

To approve the an updated non-union post-employment healthcare savings plan, effective March 22, 2025. 

 

Motion to adopt resolution 25-056 to update the non-union post-employment healthcare savings plan, effective March 22, 2025.