4. 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
6. 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
7. 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
9. 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
10. Partner Conference 2014
Triple Tax Advantage
Contributions
Earnings
Withdrawals
Income Replacement
Pension
401(k)
457
401(a)
403(b)
IRA
Roth
Expense
Management
Health Savings
Account (HSA)
VEBA-funded HRA
11. 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
12. 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
13. 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
14. 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)
15. Partner Conference 2014
Who is a good prospect?
• Municipalities
• Schools
• Universities
• Taft Hartley (love the idea that
employer can’t take it away)
