Todays Agenda Introduction VEBA Applications GASB 45 Questions Code Section 501c9 TaxExempt Employee Benefits Trust What is a VEBA A taxexempt irrevocable trust arrangement Funds deposited by the employer on behalf of the employee ID: 813415
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Slide1
VEBA/HRA 101
A New Innovative Alternative
Slide2Today’s Agenda
Introduction
VEBA ApplicationsGASB 45Questions
Slide3Code Section 501(c)(9)
Tax-Exempt Employee Benefits Trust
Slide4What 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
Slide5Rev. Rul. 2002-41 & Notice 2002-45
Individual Medical Reimbursement Accounts
Slide6What is an HRA?
Account-based health plan
Participants use HRA funds to cover qualified health-care expenses and premiumsEmployer contributions, earnings, and withdrawals (claims) are exempt from taxes
Slide7Two 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
Slide8VEBA
Applications
Slide9VEBA Characteristics
Separate legal entity
Irrevocable
Assets protected from creditors
Can fund Health Reimbursement Arrangement (HRA) individual accountsDirected investmentsTriple-dip tax-advantaged accounts
Slide10Triple Tax Advantage
Slide11What’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 CareHold health care “reserves” for future medical expendituresGASB 45 pre-fundingSelf-funded plan reserves
Slide12Qualified 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 DrugsChiropractic, Acupuncture, Alternative RemediesEye Glasses, Contact Lenses, and Supplies
Slide13Qualified 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
Slide14Funding Sources
Fringe Contributions
Function of Future Wage Increases
Recapture Strategies
Mandatory Employee ContributionsAccrued Sick/Vacation TimeEmployee Contributions to Other Benefit PlansParticipation in High Deductible Health Plan (HDHP)
Slide15Who is a good prospect?
Municipalities
SchoolsUniversities
Taft Hartley
(love the idea that employer can’t take it away)
Slide16Questions?
Slide17Contact
David Ritchie
VP of VEBA Sales
BPAS
425.330.5990dritchie@bpas.com