How to plan (and pay!) for health insurance in retirement is often one of the first questions we get when a 3M client is considering retirement.  Fortunately, 3M provides a benefit to employees which helps reimburse medical costs in retirement. There is a lot to know, so we hope the following information will help.

What is the 3M Retiree Medical Savings Account (RMSA)?

3M’s RMSA is an account that allows retirees and some dependents to be reimbursed for certain medical expenses. Once you are retired, the account transitions to a health reimbursement account (HRA). For simplicity, the account will be referred to as an HRA throughout this blog.

Who is Eligible¹ for the 3M HRA?

• Employees that are part of Portfolios I or II
• Employees in Portfolio III hired prior to January 1, 2016
• Dependents² of eligible employees

Who is Not Eligible³ for the 3M HRA?

• Employees hired on or after January 1, 2016
• Retirees from 3M that choose to continue medical coverage under the 3M health plan⁴ through COBRA
• Employees leaving 3M prior to reaching Age 55⁵
• Dependent Children (Unless you retired on or before January 1, 2016)

How does your 3M HRA balance increase?

At age 40, you will see an account value appear on your Total Rewards Statement with an initial credit. Each January, you will receive additional credits while employed. If you are married, a dependent account will also be listed on your Total Rewards Statement.

Although 3M continues to credit your account, no actual money is contributed. Instead, it is a bookkeeping entry by 3M. So, unlike a health savings account, the account is not portable, cannot be invested in different funds, cannot have employee contributions, cannot be left to heirs, and is not available to fund health expenses while working.  

Once retired, 3M will continue to credit your account if you are Portfolio I or II⁶. Portfolio III retirees are not eligible for credits after retirement and will cease to be covered once the balance in their HRA reaches zero.

What can this 3M health account be used for?

Non-Medicare Eligible HRA (Pre-65)

After retiring from 3M and prior to Age 65, your HRA can only be used for medical and dental insurance premiums incurred and paid after-tax⁷.

Medicare Eligible HRA (65 & Beyond)

At Age 65, your account transitions to a Medicare Eligible HRA. If you also have a spouse who is 65, your balances will be combined into one account and can be used for expenses for either person. The account can be used for additional expenses including:

• Medicare Part B, Medigap, Medicare Advantage Plan, Medicare Prescription Drug Plan, Dental or Vision Insurance
• Co-pays or deductibles under the above plans, except expenses incurred for prescription drugs
• Expenses that qualify under Rev Code Section 213(d) AND are eligible expenses under the plan

This account cannot be used for long term care, expenses paid pre- tax, expenses paid by another plan, expenses that are not for the participant or covered dependent.

When do you cease to participate in the 3M HRA plan?

Non-Medicare Eligible HRA (Pre-65)

• You become Medicare Eligible (and transition to Medicare Eligible HRA)
• You have no remaining credits, and your balance is zero in your HRA
• Your death⁸
• You attempt to obtain coverage fraudulently
• You are no longer eligible

Medicare Eligible HRA (65 & Beyond)

• You have no remaining credits, and your balance is zero in your HRA
• Your death⁹
• You attempt to obtain coverage fraudulently
• You are no longer eligible

3M HRA Case Studies

John’s Pre-65 Health Expenses

John retired from 3M at age 60. His wife Laura, age 58, has also retired from her job as a nurse. He has $35,000 in his 3M HRA and his wife has $15,000 in her HRA. John’s premium for his health insurance after retirement is $750/month. Each month after he pays the premium, he is reimbursed $750 by his HRA account. John recently fell and broke his arm. The extra out-of-pocket costs relating to treating his broken arm are NOT covered by the HRA. Instead, if John has an HSA account, he could use those funds to pay for the additional expenses. Laura currently is paying $600/month in medical premiums. If she depletes her HRA balance prior to Age 65, she will not be able to use John’s balance to pay for her premiums.

Penny’s Post-65 Health Expenses

Penny and her husband, Mike, are both 66 years old. When they turned 65, their accounts combined into one Medicare eligible HRA and the total balance is $20,000. Each month they pay $600 total for Medicare Part B premiums and reimburse themselves for the cost. Recently, Penny filled a new prescription for arthritis. Penny is NOT allowed to reimburse herself from the HRA for the out-of-pocket copay for prescription drugs using their HRA account.

Two years later, Penny dies in a car accident with $10,000 still remaining in the HRA account. Mike can continue to use the money in the HRA account, but no further credits will be allocated to the account. Once the account reaches zero, Mike will no longer be a participant in the plan.

Final Thoughts

As you can see, understanding and using your HRA account is complicated and factoring in your individual situation is important.

We want you to feel confident in the financial decisions you are making for 3M’s retiree health reimbursement accounts. Please reach out if you would like additional assistance on how these benefits apply to your unique financial situation. As always, it is our pleasure to serve you.

¹ Plan can be changed at any time, credits could be reduced, and participants do not have a vested right to the credits.

² Your dependent is your spouse you are legally married to at the time of your retirement. If both you and your spouse are employed by 3M, special rules apply.

³ Not all classes of ineligible employees are covered. Refer to the plan document for other employees that may not be eligible under the plan.

⁴ If you use 3M COBRA for your medical plan after retirement, you will permanently lose access to your HRA balance. You can continue on the 3M dental and vision plan using COBRA and still be eligible to participate.

⁵ In addition to being 55, you may also need to have 5 or 10 years of service, depending upon which Portfolio you belong to

⁶ Any unused balance at the end of the year is rolled over to the next year.

⁷ The HRA cannot be used if you are eligible for a premium tax credit subsidy or if you are rehired by 3M. Additionally, the HRA account cannot be used for employer sponsored health care through your spouse. However, in all of these situations, the use of the account can be suspended until you are again eligible.

⁸Prior to Age 65, if either you or your spouse die, the balance in either the HRA or Dependent HRA are lost

⁹ With the Medicare Eligible HRA, a dependent surviving spouse will no longer receive credits to the account, but can continue to use the credits until they reach zero or they are no longer eligible