Can 403(b) distributions be limited to health care premiums?

[Guest Spudo769]

Currently a school district is funding health care premiums for retirees for a period of time. The person at the school that handles the program is looking for a cleaner way to run this program, and was told a 403(b) plan, which they do not currently offer, would be the ticket. Her goal is to limit the uses for the funds to health care premiums or health care related expenses only. I have never heard of any retirement plan that could put a limit on how money from the plan could be spent. Has anyone else ever heard of this scenario? If not does anyone have a creative idea to meet her goals?

[GBurns]

Is the Scool District going to fund on an "as needed" basis or in a lump sum? If lump sum, will this be periodically (specified), annually or all at once (for the entire coverage period)?

Why is a "creative idea" needed? What is wrong with a reserve fund? What does "cleaner way to run this" mean?

Who is the limit applied to? If the SD is paying premiums or reimbursing expenses, what purpose would the limit serve? Isn't already self limiting?

[Guest Spudo769]

She says she is 'tired of being in the insurance business'. They calculate what they need to fund the retirees premiums that year and pay them as they are due. Apparently there is also billing required after the retirees fund has been used and they want to stay in the plan. They way I understand her request, she thinks that a group 403(b) plan could be used for administering the premium payments, etc. I do not know of a way to use a 403(b) plan to exclusively fund health benefits by company mandate, that is the main question.

[mbozek]

I dont understand what the school district is going to transfer /pay. Are the Health ins premiums going to be paid from the 403(b) annuity instead of the schools funds? also are there restrictions to doing this under state law or a labor agreement with the union? Contributions to a 403b plan can only be invested in annuities, mutual funds and LI.

[Guest Spudo769]

That is what she is wondering. If they set up a 403(b), can the money that would come back out of the 403(b) at retirement be mandated to be used for the health care premiums.

[mbozek]

If the 403(b) annuity payments are going to be made to the employee there is no way to require the payments to be used to pay health ins.

[Guest Mpowers]

We can show her a way.

Mark Powers

Precison Retirement Group

203-453-3151

[Guest mjb]

you care to explain how it can be done.