HCSP Plan Basics & Features
You are automatically enrolled in the Plan as directed by the bargaining agreement and/or personnel policy of your employer. When MSRS receives the first contribution from your employer, an account will be established for you. MSRS will send you an “HCSP welcome packet” that includes an Information Guide, investment information, and the forms you need to get started.
There are several ways to keep informed.
Participation in the HCSP does not limit your ability to have other types of tax-advantaged medical savings plans, such as an FSA, HSA, or HRA. You cannot, however, request reimbursement of the same expense from multiple plans. Also, please be aware that compatibility issues exist between a Health Savings Account (HSA)and other tax-advantaged medical savings plans, including the HCSP. For more detail, please see HCSP/HSA Compatibility (pdf).
The HCSP does not impose a minimum annual contribution amount. Generally, there is no maximum contribution limit; however, depending on the employer's HCSP plan design and number of employees in the group, limitations could apply.
No. Payouts can only be made for the reimbursement of eligible health care expenses.
No. The HCSP does not allow transfers or rollovers to another tax-advantaged medical savings plan.
No. The HCSP does not allow loans or emergency withdrawals. The Plan can only be used for the reimbursement of eligible medical expenses.
Contributions to your HCSP are automatically invested in the Money Market Fund unless you elect one or more of the investment options offered by the Plan. You can change your investment allocation or transfer any portion of your existing account balance at any time.
You can adjust the mix of investments in your HCSP account at any time. To initiate a transfer:
Transfer requests initiated prior to 3 p.m. Central Time will be processed at the close of the financial markets on that business day. Transfer requests initiated 3 p.m. Central Time or after or on non-business days will be processed at the close of the financial markets on the next business day.
Fees: there are no fees associated with an HCSP transfer.
You can access your HCSP account for the reimbursement of eligible medical expenses that are incurred after you:
An expense is incurred the date the service is provided, not the date the bill is paid
Eligible medical expenses incurred after you end Minnesota public employment can be reimbursed. The expenses can be incurred by you, your spouse, legal tax dependents (those you can claim on your tax returns) and adult children up to their 26th birthday.
An expense is incurred the date service is provided, not the date the bill is paid.
You may be asked to provide documentation as proof of adult legal tax dependents.
Yes, there is a maximum annual reimbursement limit. For example, the limit for 2020 is $35,000; the limit for 2021 is $36,000. This limit applies to all eligible medical expenses except medical, dental, and long-term care insurance premium reimbursements. Expenses that are incurred in a calendar year in which you exceed the limits can be submitted for reimbursement in subsequent calendar years.
If you return to work after termination or retirement, your eligibility to request reimbursements depends on the circumstances of your employment. You may have limited or no access to your HCSP account. Please see Returning to Work for more details.
There is no time restriction on when you must begin taking money out of your account or how long you have to deplete the account. You can submit reimbursement requests at any time for any eligible health care expenses incurred this year or in any previous year, as long as the expense was incurred after you retired or terminated from your public employer. Expenses do not have to be reimbursed in the same calendar year they were incurred.
The HCSP is tax free account, which means both contributions and reimbursements are not reportable on your income tax returns. You will not receive an IRS Form 1099 for this account. Exception: Reimbursements to a non-spousal, non-dependent beneficiary from an inherited HCSP are reportable as income. A 1099-MISC will be sent to the beneficiary to report reimbursements.
No. Federal law does not recognize domestic partnerships. However, you can request reimbursements for eligible medical expenses incurred by your domestic partner if they are your legal tax dependent.
HCSP Beneficiary & Survivor Benefits
Even if you have a spouse or legal dependents, we recommend that you have a beneficiary designation on your account because your situation may change. Life events – including marriage, divorce, death, or children growing up – can impact who will receive any remaining HCSP assets upon your death. We encourage you to periodically review your HCSP beneficiary designation to ensure it’s still appropriate.
Your spouse and/or legal dependents are automatically entitled to any remaining account balance upon your death. The beneficiary is the person next in line to receive the balance. Think of your beneficiary designation as a backup, or "contingent" beneficiary, in the event there is no spouse or dependents. Note: once your child is no longer a legal dependent, he/she can be listed as your beneficiary.
A domestic partner does not qualify as a surviving spouse under federal law; however, he/she can be the designated beneficiary. If you have no surviving legal tax dependents, then the domestic partner, as the named beneficiary, can inherit the account balance to be used for the reimbursement of eligible health care expenses. Please be aware that reimbursements paid to your domestic partner are taxed as ordinary income.
Neither your spouse nor legal dependent's name appear on the quarterly statement under "Beneficiary Information" because they are not considered a designated beneficiary. They are, by law, entitled to the account balance upon your death and therefore, supersede a beneficiary designation.
A legal tax dependent is a person who can be claimed on your tax returns. For more guidance, see Form 1040 Instructions available at www.irs.gov.
Although you can request reimbursement of medical expenses you paid for children up to their 26th birthday, he/she is not entitled to any remaining account balance unless they are a legal dependent and there is no surviving spouse. Adult children who are no longer dependents can be named as a beneficiary.
Your designated beneficiary can be any living person(s) other than your spouse or legal tax dependents (they are automatically entitled to the money upon your death). Because HCSP funds must be used for reimbursement of out-of-pocket health care expenses incurred by a natural person, MSRS cannot accept a beneficiary designation for a non-living entity including a trust, estate, or charitable organization.
You must complete a Beneficiary Designation form (pdf) and send to MSRS.
A beneficiary designation is effective upon receipt by MSRS and supersedes all prior designations. A valid beneficiary designation must be on file with MSRS prior to your death.
Yes. To change or remove the existing beneficiary, you must complete a Beneficiary Designation form (pdf). A beneficiary designation is effective upon receipt by MSRS and supersedes all prior designations. A valid beneficiary designation must be on file with MSRS prior to your death.
Yes. The HCSP beneficiary designation is separate from other MSRS-administered plans (such as the MNDCP or pension). You will need to designate a beneficiary for each plan.
If there is a balance remaining in your account upon your death, it is transferred to an HCSP account for your spouse. If there is no spouse, then it's transferred to an HCSP account for your legal dependent(s). Reimbursements to a spouse or legal dependents are tax-free.
If you do not have a spouse or legal dependent, then the money is transferred to an HCSP account for your designated beneficiary. Reimbursements to a beneficiary are subject to federal and state income taxes.
If you do not have a spouse, legal dependent, or designated beneficiary, then the representative of your estate will be asked to name a beneficiary who is eligible to receive any remaining account balance.
The personal representative of your estate will be asked to name a beneficiary. HCSP assets cannot be distributed to the estate because the balance must be used for reimbursement of healthcare expenses incurred by a natural person. Be assured that upon your death the assets are always passed on to an heir.
Yes, however, the beneficiary who disclaims their right to the remaining account balance cannot choose who will receive their portion. Instead, their portion of the money will be divided among all other designated beneficiaries. If there are no other beneficiaries, then the personal representative of the estate will name the person(s) eligible to receive the assets that were disclaimed.
HCSP does not allow a per stirpes beneficiary designation. If you are predeceased by your beneficiary, their portion of the assets would be divided among all other surviving designated beneficiaries.