District approves new payout option

The Red Wing School Board unanimously approved a motion Monday evening that will allow severance payments for top management employees to be paid into a health care savings plan, rather than paid out in cash.

The school district saves money by establishing the program, Finance Director Brad Johnson said in a memo to the Board. “It doesn’t change the amount being paid out, but it does reduce the tax liability.”

The health care savings plan is sponsored by the Minnesota State Retirement System. The change will affect principals, assistant principals, district directors and the superintendent.

Previously, employees in the top management group who retired were paid their unused sick or vacation time in cash as one lump sum.

That money will still be paid in a lump sum, however, the district will place the money into the health care savings account. By doing so, both the district and retirees will pay about 14 percent less in taxes on the severance payments.

The issue came up earlier this summer when former curriculum Director Kathy Radmer retired in June 2012. She requested that her severance be put in a health care savings plan, which can be used to pay for health-related items in retirement.

However, the district could not establish an account for just one employee; the entire management group would need to participate. The principal group voted for the program, and Johnson said the directors and superintendent agreed as well.

The district’s MSRS-sponsored health care savings plan is effective June 1, 2012, through June 1, 2014. The plan will be reviewed after that time, Johnson said.

With the adoption of the health care savings plan, the superintendent’s contract was amended and memorandums of agreement were added to the other affected employees’ contracts.

The health care savings plan will not affect any retiree’s health insurance items or alter any of their payout amounts.

The district chose the MSRS-sponsored health care savings plan because it allows for beneficiaries other than the retiree’s spouse, Johnson said.

So far, Johnson said, Radmer is the only retiree actively participating in the program because she is the only employee to retire since June 1.

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