Important Update on ORS 3% Healthcare Deduction and Reimbursement for Public School Employees

We have received a few questions regarding the ORS (Office of Retirement Services) 3% employee health care deduction and reimbursement. Certain public school employees who were hired prior to 9/4/12 and made the election to continue to pay the 3% in 2013 and beyond would qualify. Those employees who were hired after 9/4/12 or who did not elect to continue to contribute will not qualify for the reimbursement. 

You can check your pay stub to see if the premium subsidy is being taken from your check.

What has Changed?

Public Act (PA) 120 of 2024, the school appropriations bill for state fiscal year 2024-25, has a new section, Sec. 147g, related to the 3% employee healthcare contributions made by public school employees with the premium subsidy benefit. The Office of Retirement Services (ORS) is currently reviewing this section of PA 120 of 2024 and has not yet provided any direction. Here’s what we know at this point.

Reporting units (RUs) must continue to withhold the 3% healthcare contributions from these employees and remit those contributions to ORS.  ORS has advised that we do not make any reporting changes at this time. 

Distributions of Reimbursement to Reporting Units

The new budget section allocates $181.5 million to be distributed to MPSERS RUs (excluding universities). We will receive a proportionate amount of this allocation, based on the healthcare contributions collected from us last year. The allocation will be disbursed through our School Aid Fund payment.  No definitive date or timeline has been announced as to when we will start receiving the disbursement.   

PA 120 of 2024 states that this allocation is intended as reimbursement for employees with the premium subsidy healthcare benefit but notes that future legislation may impact how the money is to be used. If any legislation passes that impacts the 3% employee healthcare contribution, we will notify you and provide further guidance.

This new reimbursement doesn’t apply to employees with the Personal Healthcare Fund or retirees who have returned to work.

Employee Reimbursement Process

We will develop a plan for how we intend to reimburse employees for their 3% healthcare contributions once the ORS provides more information. There is no process or frequency prescribed in PA 120 of 2024.  These reimbursements will be taxable. Our current understanding is that the reimbursement period begins October 1, 2024, which aligns with the state fiscal year.  Our current understanding is that reimbursements will occur during the period starting October 1, 2024 and ending September 30, 2025. 

What Changes in 2025

On October 3, 2024, House Bill 5803 of 2024 was signed by the governor and became law as Public Act 127 of 2024.  Beginning October 1, 2025, employees with the premium subsidy healthcare benefit will no longer be required to contribute 3% toward future healthcare benefits.  At that time, the 3% premium subsidy will no longer be taken from your check. 

As we learn more, we will share the information with you.