M.J. Day – Individual Spending Accounts
An Account will be established in your name during your active employment with a contributing employer. After you retire, eligible healthcare premiums for you and your eligible dependents may be reimbursed from the balance in your Account at the time a claim is submitted. This section of the SPD describes how your Account is funded and how it is administered.
Your Account is funded exclusively through contributions made by your employer as negotiated through a Collective Bargaining Agreement or other contribution agreement that has been approved by the Board of Trustees. Contributions received by the Plan will be held in a trust for the purpose of reimbursing healthcare premiums of eligible retirees and their dependents. The assets of the Account are held in trust and are invested by an investment manager appointed by the Board of Trustees.
Accounts will be established for each eligible Participant on the first Valuation Date after the date contributions are made by a contributing employer on behalf of a Participant under the terms of a Collective Bargaining Agreement or contribution agreement accepted by the Board of Trustees. Accounts shall be valued on a quarterly basis.
If your active employment under the Collective Bargaining Agreement ends for any reason, including retirement, contributions to your Account will stop at that time. Contributions made to the Account during any COBRA continuation will not be accepted.
You are not permitted to make contributions to your Account. In general, this means no pre-tax, salary reduction contributions under a cafeteria plan (e.g., flex credits) or after-tax employee contributions will be accepted by the Plan. The only contributions that are permitted to the Account are employer contributions.
All reimbursements payable from the Plan will be paid from the assets of the Plan that are held in the Michael J. Day Machinists Retiree Health Investment Trust (“Trust). Your Account is a bookkeeping record to track in writing any contributions and investment gains credited to your Account and losses debited to the Account such as reimbursements, investment losses, and administrative expenses.
The balance in your Account will be determined as of December 31st of each Plan Year. Your balance will be computed by looking at:
- the balance in your Account on January 1st of the previous year; plus
- the amount of employer contributions and net investment income credited to your Account during the Plan Year; minus
- the benefit payments, administrative expenses (including Account expense charges), and investment losses (if any) debited to your Account during the Plan Year.
Account Expense Charge
The Account expense charge (how much it has cost to administer the Trust over the past year) will be determined as follows:
- Determine the total of all operating expenses (net of forfeitures and liquidated damages) incurred by the Plan during the current valuation period (excluding all investment manager and brokerage fees).
- Determine the number of Accounts that are in existence on the current valuation date.
- Divide number 1 by number 3. The result is the Account expense charge for the valuation period.
Investment Income Factor
The investment income factor (the total of the gains and losses on investments that have been applied to the Account over the past year) will be determined as follows:
- Determine the total net investment income (including gains and losses) for the valuation period, including all realized and unrealized capital gains or losses less any investment manager or brokerage fees. Should the forfeitures and liquidated damages for a year exceed the Plan’s operating expenses for that year; the excess will be included in total investment income.
- Determine the sum of the Account balances on the preceding valuation date, add total Contributions to individual Accounts for the current valuation period, and subtract total Plan payments made since the last valuation date.
- Divide number 1 by number 3. The result is the investment income factor.
The net investment income, including gains and losses, to be allocated to the Participant’s Account for the valuation period is obtained by multiplying the investment income factor by the Account balance. This is determined by taking the Account Balance on the preceding valuation date, add total contributions made to the Participant’s Account since the last valuation date, and subtract payments made from the Participant’s Account since the last valuation date.
Since contributions, investment earnings and expenses are posted to your Account quarterly, during the time between quarterly postings, the Plan will pay up to 80% of your Account balance as of the last valuation date. Any additional amount reimbursable from the Plan will be paid after the next following valuation is made. The valuation date is the last day of each calendar quarter, when the value of the Plan’s investments is determined.
The fact that Accounts are established and valued as of each valuation date will not give any Retiree or Dependents any right, title or interest in the Trust or its assets, or in the Account, except at the time or times and upon the terms and conditions provided in the Summary Plan Description / Plan Document.
Investment of your Account Balance
The money in your Account is invested conservatively with the goal of the investments being preservation of the principal sum with modest growth. In an environment with low interest rates, the principal sum could go down. The Trustees monitor the Trust closely and can change investments if needed.
Interest on your Account Balance
Any interest accrued from the investments on the money in your Account (after administrative expenses incurred by the Fund are paid) will be allocated to your Account.
You will receive a statement at the end of each Plan Year reflecting the balance of your Account.
Carryover of Account Balance
Any unused amounts in your Account at the end of a Plan Year will be carried over into the next Plan Year.
If you leave covered employment before you retire, your Account may be forfeited. Forfeitures will be used by the Board of Trustees to reduce Plan administrative expenses and/or may be reallocated to the Accounts of other participants.
Also, any benefit payments that are unclaimed (e.g., unclaimed benefit checks) within the 12-month period after the close of the Plan Year in which the claim expense was incurred will be forfeited.