1 HSTA Voluntary Employees Beneficiary Association (VEBA) Trust VEBA General Information.
Exploring Special Plan Types (ESOP, kSOP, MEP, MET, VEBA)
Transcript of Exploring Special Plan Types (ESOP, kSOP, MEP, MET, VEBA)
Partner Conference 2014
VEBA/HRA 101A New Innovative Alternative
Partner Conference 2014
Today’s Agenda• Introduction• VEBA Applications• GASB 45• Questions
Partner Conference 2014
Code Section 501(c)(9)
VEBAEstablished 1928
VVoluntary
EEmployees’
BBeneficiary
AAssociation
Tax-Exempt Employee Benefits Trust
Partner Conference 2014
What is a VEBA?
• A tax-exempt irrevocable trust arrangement• Funds deposited by the employer on behalf of the
employee• Funds may be used to pay for current or future out-of-
pocket health-care-related expenses • Timing and ability to access funds always based on the
bargaining agreement
Partner Conference 2014
Rev. Rul. 2002-41 & Notice 2002-45
HRAEstablished June 2002
HHealth
RReimbursement
AArrangement
Individual Medical Reimbursement Accounts
Partner Conference 2014
What is an HRA?
• Account-based health plan• Participants use HRA funds to cover qualified
health-care expenses and premiums• Employer contributions, earnings, and
withdrawals (claims) are exempt from taxes
Partner Conference 2014
Two Separate Pieces Must Work Together
HRA• Rev. Rul. 2002-41• Notice 2002-45• Rev. Rul. 2005-24• Rev. Rul. 2006-36• Notice 2010-38• Notice 2010-59• Rev. Rul. 2010-23
VEBA• IRC Section
501(c)(9)• Funding Source
for Participant Accounts VEBA
HRA
Partner Conference 2014
VEBA Applications
Partner Conference 2014
VEBA Characteristics
• Separate legal entity – Irrevocable – Assets protected from creditors
• Can fund Health Reimbursement Arrangement (HRA) individual accounts
• Directed investments• Triple-dip tax-advantaged accounts
Partner Conference 2014
Triple Tax Advantage
ContributionsEarningsWithdrawals
Income ReplacementPension401(k)
457401(a)403(b)
IRARoth
Expense Management
Health Savings Account (HSA)
VEBA-funded HRA
Partner Conference 2014
What’s Possible with a VEBA?
• Fund post-employment premiums and expenses Retiree Medical Savings Accounts
• Embed with High Deductible Health Plan for active employees
Consumer Directed Health Care• Hold health care “reserves” for future medical
expenditures GASB 45 pre-funding Self-funded plan reserves
Partner Conference 2014
Qualified Reimbursable Expenses
• Qualified Expenses Reimbursed from Participant Account• Most Legitimate Expenses for Active Employees and Post-
Employment Participants (See IRS Publication 502):– Non-Insured Medical and Dental Expenses– Prescription Drugs– Chiropractic, Acupuncture, Alternative Remedies– Eye Glasses, Contact Lenses, and Supplies
Partner Conference 2014
Qualified Reimbursable Expenses
• Post-Employment Insurance Premiums:– Medical, Dental & Vision – Post-Employment COBRA and Retiree – Medicare Parts B & D– Medicare Advantage Plans (Part C)– Medicare Supplement Plans – Medigap Coverage (HRA only) – Qualified Long-Term Care
Partner Conference 2014
Funding Sources
• Fringe Contributions• Function of Future Wage Increases• Recapture Strategies
– Mandatory Employee Contributions– Accrued Sick/Vacation Time– Employee Contributions to Other Benefit Plans– Participation in High Deductible Health Plan (HDHP)
Partner Conference 2014
Who is a good prospect?
• Municipalities• Schools• Universities• Taft Hartley (love the idea that
employer can’t take it away)
Partner Conference 2014
Questions?