How to Add VEBA Plans to Your Production Portfolio

1. 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

2. 2015 Partner ConferenceStronger Together
Welcome
• What is a VEBA
• Current VEBA landscape
• Starting the conversation
• VEBA talking points
• Questions

3. 2015 Partner ConferenceStronger Together
Code Section 501(c)(9)
Tax-Exempt Employee Benefits Trust
VEBA
Voluntary
Employees Beneficiary
Association

4. 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

5. 2015 Partner ConferenceStronger Together
Rev. Rul. 2002-41 & Notice 2002-45
HRA
Established
June 2002
•Health
•Reimbursement
•Arrangement
Individual Medical Reimbursement Accounts

6. 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

7. 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

8. 2015 Partner ConferenceStronger Together
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

9. 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

10. 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

11. 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)

12. 2015 Partner ConferenceStronger Together
Current VEBA Landscape
• $36 million in assets
• 6,000 participants
• 2016 is looking strong

13. 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

14. 2015 Partner ConferenceStronger Together
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

15. 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

16. 2015 Partner ConferenceStronger Together
Questions
Thank you
David Ritchie, VP, VEBA Sales
Gordon Goshong, CEBS,
Account Executive