How to Add VEBA Plans to Your Production Portfolio

transcript

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

2015 Partner ConferenceStronger Together

Welcome

• What is a VEBA• Current VEBA landscape• Starting the conversation• VEBA talking points• Questions

Code Section 501(c)(9)

Tax-Exempt Employee Benefits Trust

VEBAVoluntary

Employees Beneficiary

Association

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

Rev. Rul. 2002-41 & Notice 2002-45

HRAEstablished June 2002

• Health• Reimbursement• Arrangement

Individual Medical Reimbursement Accounts

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

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)

• Funding Source for Participant Accounts VEBA

Triple Tax Advantage

ContributionsEarningsWithdrawals

Income Replacement

Pension401(k)457401(a)403(b)IRARoth

Expense Management

Health Savings Account (HSA)VEBA-funded HRA

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

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

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)

Current VEBA Landscape

• $36 million in assets• 6,000 participants• 2016 is looking strong

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

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

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

Questions

Thank you

David Ritchie, VP, VEBA Sales

Gordon Goshong, CEBS, Account Executive

How to Add VEBA Plans to Your Production Portfolio

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