How to Add VEBA Plans to Your Production Portfolio
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Transcript of How to Add VEBA Plans to Your Production Portfolio
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STRONGER
together
Strategies for success
2015 Partner Conference
How to Add VEBA Plans to Your
Product Portfolio David Ritchie, VP, VEBA Sales
Gordon Goshong, CEBS, Account Executive
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2015 Partner ConferenceStronger Together
Welcome
• What is a VEBA• Current VEBA landscape• Starting the conversation• VEBA talking points• Questions
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2015 Partner ConferenceStronger Together
Code Section 501(c)(9)
Tax-Exempt Employee Benefits Trust
VEBAVoluntary
Employees Beneficiary
Association
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2015 Partner ConferenceStronger Together
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
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2015 Partner ConferenceStronger Together
Rev. Rul. 2002-41 & Notice 2002-45
HRAEstablished June 2002
• Health• Reimbursement• Arrangement
Individual Medical Reimbursement Accounts
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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
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
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2015 Partner ConferenceStronger Together
Triple Tax Advantage
ContributionsEarningsWithdrawals
Income Replacement
Pension401(k)457401(a)403(b)IRARoth
Expense Management
Health Savings Account (HSA)VEBA-funded HRA
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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
Current VEBA Landscape
• $36 million in assets• 6,000 participants• 2016 is looking strong
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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
New Plan
$1,200/ month$14,400/annual
$300/ month$3,600/annual
HealthInsurance
Plan Design:• $1,500 Deductible• $30 Office Visit Copay• 80/20 Coinsurance• $4,000 Max Out-of-Pocket• RX 10/20/40
HRAVEBA
Eligible Expenses:• Deductible• Copay• Coinsurance• RX Copays• Dental • Vision
Rollover unused balances to use during your lifetime. Post employment premiums
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2015 Partner ConferenceStronger Together
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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2015 Partner ConferenceStronger Together
Questions
Thank you
David Ritchie, VP, VEBA Sales
Gordon Goshong, CEBS, Account Executive