VantageCare Retirement Health Savings (RHS) Plan

With ICMA-RC’s innovative VantageCare Retirement Health Savings (RHS) Plan, participants can accumulate assets to pay for one of retirement’s greatest financial needs — medical care.

The VantageCare RHS Plan, created exclusively for the public sector, is similar to other ICMA-RC administered retirement savings plans (401, 457). Employers make contributions from employee payroll deductions. Employees then invest those amounts into a lineup of quality mutual funds. Earnings are tax-deferred and withdrawals are tax-free when used for qualified expenses.

Governmental Accounting Standards Board (GASB) statements on “Other Post-Employment Benefits” require financial statement reporting of retiree health liabilities. ICMA-RC offers a program specifically for public employers who have been promised health care benefits to retirees: a dedicated funding vehicle designed to help meet those obligations — the VantageCare RHS Employer Investment Program (EIP).

The VantageCare RHS Plan provides the following:

• Participants accumulate assets tax-free to pay for medical expenses for themselves, their spouse and/or dependents (e.g., health insurance and prescription expenses) in retirement (or other eligibility)
• Funds are withdrawn tax-free when used for qualified medical expenses for the employee, their spouse and/or dependents.
• Employers choose the types of contributions that may be made to the RHS account. Employers may provide specific limits for different types of contributions. Please see RHS Contributions below for detailed information.
• While there is no dollar or percentage limit for most contribution types, Plan Sponsors may place specific limits for different types of contributions.
• Employers specify when participants are eligible to begin receiving benefits and which medical expenses are covered.

RHS Contributions

RHS contributions may be any or all of the following:

1. Direct employer contributions can be either a fixed percentage or dollar amount, or a discretionary employer contribution.* (Note that percentage-of-earnings contributions may be subject to nondiscrimination testing for non-collectively bargained plans or plans that permit benefit payments for other than insurance premiums).
2. Mandatory unused leave contribution of accrued sick and/or vacation leave are mandated by the employer — employees may not choose whether or not to make these contributions.* The employer can establish an unused leave contribution formula that best fits the needs of its covered employees.
3. Mandatory pre-tax contributions of employee compensation would require employees to contribute a certain portion of their salary.* Alternatively, the employer might mandate that all or a portion of an incentive payment be contributed to the RHS plan.

No FICA (Social Security and Medicare) or income tax applies to the contributed funds and, if used for participant, spouse or dependent medical expenses, no FICA or income tax will be due at distribution.

* These contributions will be made to all plan participants' accounts without completion of additional contribution forms.

Note: For more information on the VantageCare RHS Plan, please contact an ICMA-RC Retirement Plans Specialist.