Beneficiary & Survivor Benefits
It is important to understand how HCSP assets are distributed upon your death to avoid an improper beneficiary designation or unforeseen surprises. If there is a balance in your HCSP account at the time of your death, the assets are distributed as follows:
If you have . . .
Then . . .
A surviving spouse
100% of the account balance is transferred to your spouse to use for tax-free reimbursements of eligible healthcare expenses. A spouse cannot disclaim their right to the funds.
No spouse but surviving legal dependents
The account balance transfers to your legal dependents to use for tax-free reimbursements of eligible healthcare expenses.
No spouse or legal dependents
The designated beneficiary(ies) inherits remaining account balance for reimbursements of eligible healthcare expenses. Reimbursements to a beneficiary are taxed as ordinary income.
No spouse, legal dependents or
The personal representative of your estate must name a beneficiary. HCSP assets cannot be distributed to the estate, as the balance must be used for reimbursement of healthcare expenses incurred by a natural person.
Why designate a beneficiary
It's a good idea to name a beneficiary, even if you have a spouse or legal dependents. Life events - including marriage, divorce, death or children growing up - can impact who will receive any remaining HCSP assets upon your death. And a beneficiary designation is even more critical if you do not have a spouse or legal dependents.
To name , change, or remove your beneficiary designation
Complete a Beneficiary Designation form. A beneficiary designation is effective upon receipt by MSRS and supersedes all prior designations. A valid beneficiary designation must be on file with MSRS prior to your death.
If the beneficiary predeceases you
If your named beneficiary predeceases you, their share is distributed to any surviving beneficiaries. For example, let's say Paul and Laura are your beneficiaries and Laura died. Assuming you don't change your beneficiary designation before you die (and are not survived by a spouse or legal dependents), Paul would inherit 100% of the HCSP account balance. Laura's share would not be paid to her living children (this is a per stirpes designation, which is not allowed by the HCSP).
If you die with no surviving beneficiary, the representative of your estate must identify individual(s) who will receive the account balance.
Your beneficiary designation after a divorce
Your former spouse is no longer entitled to the HCSP account assets upon your death unless mandated by the divorce decree. To name your former spouse as the beneficiary, complete a Beneficiary Designation form after the effective date of the marriage dissolution.
You cannot request reimbursement of your former spouse's medical expenses, even if you are required by the divorce decree to pay those expenses.
We encourage you to periodically review your beneficiary designation to ensure it is up-to-date.