Veba Overview
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Transcript of Veba Overview
Veba OverviewFor Public Employees
Presented by:Melanie Denning, VEBA Health OfficerHealth Care & Benefits Division Dept. of Administration
●Drafted SB51-passed April, 2001 to 2-18-1301, MCA
●Began offering to State, Cities, Counties, K-12 & University system employees in September, 2003.
●SB 168 passed during the 2007 session which allows an additional source of contribution.
History of VEBA
What IS a VEBA100% tax-free medical savings account
Funded with tax-free employer $$’s
For public service employees in MontanaCities, CountiesPublic Schools (K-12)MT University SystemAll State Employees
Why VEBAIntention is to assist with creation of a
supplemental medical fund for use after separation/retirement
Avoid taxes on compensation – 100%!Pre-65 average retiree medical cost -
$10,000/yr on PremiumsAverage Medicare retiree medical cost -
$6,000/yr on PremiumsIRS rules require us to administer the
plan in specified measures which call for “group” participation.
You may pay for medical out of pocket expenses related to Medical, Dental, Prescription Drugs, Vision benefits as well as many over-the-counter items.
VEBA also allows you to pay for your Insurance premiums which include;Health - Medical, Dental & VisionLong-Term Care, and Medicare B
How to use VEBA?
Your Employer may decide how to offer the VEBA.
Active Contributions vs. Separation only
Employees may request the benefit by 25% of eligible group
How is VEBA offered?
100% tax free! Tax free contributionsTax free earningsTax free withdrawals
What’s in it for YOU?
$ 10,000 Benefit- 4,265 Taxes
$ 5,735 Cash Payout
$10,000 benefit available27% Federal income
tax7.65% FICA8% State income tax
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$10,000 – NO VEBA
$10,000 Benefit- 0 Taxes
$10,000 MT VEBA
$10,000 benefit available27% Federal income
tax7.65% FICA8% State income tax
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$10,000 – WITH VEBA
Montana VEBA HRA saves $4,265 in taxes!!!
MSA VEBA
CASH$5,735$10,000
Tax Savings
Not required!No W-2 to employeeNo 1099 on earnings or withdrawals
No 1040 tax return reportingNo state return reportingNo employer tax reporting
Tax Reporting
Surviving spouse, dependents or heirs can continue to use account for their medical expenses and premiums
If no will, then follow Montana Laws of Intestacy
Money only can be used for Qualified Medical Expenses
If no spouse or dependents, then reverts back to plan.
What is Death Benefit?
Your Social Security Benefit is calculated on lifetime of earnings.
Calculation made late in salary career.Tax-free portion of VEBA payout also late in
career.VERY minimal impact to benefit amount.
Impact on Social Security?
Low monthly policy fee of $5/mo.All other costs are paid from
investment earnings – 1 ¾ % annualized.
Some members’ investment choices pay for monthly costs.
Administrative Cost
Union or non-union employee groups
Recommend using existing group boundaries
All or none decision – ballot process
Vote may be taken annuallyContribution Source-Agree before
vote!PERS HAC Discussion
What IS a Group?
www.montanaveba.org
Summary
Decide on your Group!
Agree on
Contri-bution
Do Research!
Check with PERS for
YOUR impact!
Review the
website
VOTE when you
see a ballot!
Group vote is for “1”
year
Ask Questions!!
Put the pieces in place!