2. 2015 Partner ConferenceStronger Together
Welcome
• What is a VEBA
• Current VEBA landscape
• Starting the conversation
• VEBA talking points
• Questions
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Code Section 501(c)(9)
Tax-Exempt Employee Benefits Trust
VEBA
Voluntary
Employees Beneficiary
Association
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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
5. 2015 Partner ConferenceStronger Together
Rev. Rul. 2002-41 & Notice 2002-45
HRA
Established
June 2002
•Health
•Reimbursement
•Arrangement
Individual Medical Reimbursement Accounts
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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
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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
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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
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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
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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
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Funding Sources
• Fringe Contributions
• Function of Future Wage Increases
‒ Bargaining groups only
• Recapture Strategies
‒ Accrued Sick/Vacation Time
‒ Participation in High Deductible Health Plan (HDHP)
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Current VEBA Landscape
• $36 million in assets
• 6,000 participants
• 2016 is looking strong
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Current Medical Plan
$1,500/month
$18,000/annually
Health
Insurance
• Plan Design:
— $500 Deductible
— $20 Office Visit Copay
— 80/20 Coinsurance
— $2,500 Max Out-of-Pocket
— RX 10/20/40
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New Plan
$1,200/ month
$14,400/annual
$300/ month
$3,600/annual
Health
Insurance
Plan Design:
• $1,500 Deductible
• $30 Office Visit Copay
• 80/20 Coinsurance
• $4,000 Max Out-of-Pocket
• RX 10/20/40
HRA
VEBA
Eligible Expenses:
• Deductible
• Copay
• Coinsurance
• RX Copays
• Dental
• Vision
Rollover unused balances to use during
your lifetime. Post employment premiums
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Talking Points With Stakeholders
Public Entity Employer
• Budget Crisis
• Reducing Health Costs
• Employee Accountability
• Stabilization of Rates
• Unfunded Liability
Union Employees
• Wasted Premium $$
• Post Employment Costs
• Flexible Use
• Investment Returns
• Account Ownership
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Questions
Thank you
David Ritchie, VP, VEBA Sales
Gordon Goshong, CEBS,
Account Executive