The PORAC Retiree Medical Trust is a health insurance premium and medical expense reimbursement plan. We are excited to announce a couple of significant changes to our plan.
Since inception in 2008, the required minimum contribution has always been $100 per month. At the last board meeting, the trustees voted to change that requirement. It seemed that there might be some associations out there that would prefer to start at a lower rate. The new requirement is that an association can now join with a minimum contribution of $50; however, a transition to a $100 monthly contribution is required within one year.
But perhaps of greater significance is another change by the trustees. Previously, increases in the monthly contributions had to be in $50 increments. Now those increases can be done in $25 increments. The trustees believe that this will allow associations a better opportunity to incrementally increase their contribution rate with less disruption to their members’ paychecks.
These changes reflect the trustees’ desire to grow the RMT in ways that will afford additional associations the opportunity to join and share in the tax advantages that the program offers.
If you have followed any of the RMT’s previous articles, you are likely aware that the Trust enjoys a triple tax-free benefit. Are there taxes on the contributions? Nope. Are the earnings from the investments taxed? Not a chance. What about the benefits — do you have to pay tax on them? Absolutely not.
Recently I got to thinking about deferred compensation. It’s a great way to put away some money in a tax-sheltered plan. Many young rookies are encouraged by their veteran partners to begin stashing away money from the early stages of their careers. When you finally retire and take that money out, you are hopefully in a better taxation situation, which will make it easier and more bearable to pay the taxes on the money — because you do get taxed at the point when the money comes back to you. And it was right there that I asked myself a question: If deferred compensation is a good investment with taxes being paid at the end of the program, wouldn’t a similar investment program (such as the RMT) wherein no taxes are ever paid be just as good? Or perhaps better? And then add to the equation that the benefit is anticipated to be paid for a lifetime.
Perhaps it’s a matter of balancing your investments. But a critical component is planning. Both investing plans require that you make contributions, and the longer you contribute, the bigger the benefit return will be. Starting contributions at the end of your career clearly isn’t the optimal plan, though it is certainly better than no plan at all.
The RMT is able to help those members who are near the end of their careers. Even if you can’t get to the contribution level where you are eligible for a lifetime benefit, we can still distribute your money back to you on a totally tax-free basis. Unlike deferred compensation, you won’t pay taxes.
If you are a participant and wish to check your account, you can now do that online. There are two ways to get to our website. You can use the Retiree Medical Trust link on the top bar of the PORAC website, or you can go directly to PORACRMT.org. If it is your first time, you will need to register and request a registration code. Just click the the Members button on our home page to log in; it’s fairly self-explanatory.
Let us know if we can provide you with some additional information. We will be glad to show up at one of your meetings. Give us a call or send an email.
And finally, one last thank-you to outgoing PORAC Vice President Brent Meyer. In addition to his many years of service at PORAC Headquarters, he also served as a trustee with the RMT. We appreciate his dedicated service, wisdom, and balanced and fair sense of leadership as this Trust has grown. We wish him the best of luck as he returns to the streets of Sacramento.