 Personal Finance PowerPoint Presentation. Voluntary Influencies Beneficiary Association Plan, otherwise known as a VEBA EVBA, prepare to get financially fit by practicing personal finance. Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice cut, once put in a formal process in place, look in something like set in the goals, develop a plan to reach them, put the plan in action, review the results and repeat the process periodically. Most of this information can be found at Investopedia Voluntary Employees Beneficiary Association Plan, a VEBA, which you can find online. Take a look at the references, resources, continue your research from there. This is by Adam Baron, updated March 9th, 2022. In prior presentations, we've been talking about insurance in general. We then went into the health insurance and different kinds of health insurance and then to long-term care. And now we're thinking about the VEBA and association in conjunction with those topics. So what is a Voluntary Employees Beneficiary Association Plan? You might ask a VEBA, a Voluntary Employees Beneficiary Association Plan, a VEBA plan is a type of tax exempt trust used by its members and eligible dependents to pay for eligible medical expenses. The plan is typically funded by an employer. So this is another kind of situations, as we've seen with many of the healthcare information that oftentimes is tied with an employer-employee type of relationship, possibly resulting in a benefit due to the fact that if an employer can give some benefits to the employee, which isn't simply income or wages that can be exempt for taxes, for example, that would of course be a benefit to both the employer and the employee because that could mean that the money that is being received is going further, therefore being worth more and as it's being paid more by basically trying to get elimination of the taxes if possible. So while the popularity of VEBAs has waned, there are companies that continue to offer them. Employee contributions may or may not be mandatory depending on the company plan, although individual elections are not permitted. However, employees must be covered by an employer-sponsored health plan to be eligible for a VEBA membership. Additionally, the company must observe rules established by the Internal Revenue Service, that's the IRS, of course, for creating and maintaining a VEBA because obviously part of the reason that you might be doing it, if you were to do it, would possibly be to get some tax benefit from it. So how VEBA plans work, VEBAs allow employers to provide benefits to employees on the condition that they follow certain guidelines. For instance, VEBA rules state that employers must first obtain a letter of determination from the IRS for their plan to be considered a VEBA for federal income tax purposes. VEBAs are subject to some aspects of the Employee Retirement Income Security Act, that's the ERISA, however, they are not considered to be qualified retirement plans. Beneficiaries must be employees, their dependents or their designated beneficiaries. VEBA plans are considered to be welfare benefit plans under federal tax law and are tax exempt under section 501C9 of the Internal Revenue Code. Employer contributions made to a VEBA plan are tax deductible and have no limit. Funds in a VEBA grow tax-free and there are no tax penalties levied upon employees or VEBA members who take distributions from a VEBA for qualified medical expenses, which could be nice, which often includes copays, insurance and deductibles as well as dental and vision payments. These expenses are defined in section 213D of the Internal Revenue Code. So if you wanna take a look at some of that information one of the places to go would be obviously the IRS website to dig in a little bit in more detail on that side, which you can find by going to irs.gov, irs.gov. Members can also use VEBA plans to fund post-retirement health insurance premiums. Even though these accounts are usually used as savings vehicles to fund healthcare expenses in retirement, employees can use money from their VEBAs to pay for qualified medical expenses while working. If account holders don't use the money in their VEBA plans for a given year, then that amount rolls over to the next year's balance. That means a VEBA is not a use it or lose it plan unlike a flexible spending account. So we talked about a flexible spending account where you're basically more confined. You have similar kind of idea that you're trying to get a tax benefit from it, but it's more that you got to use it or lose it kind of activity where here you got that roll over kind of benefit, which is nice because that's good for your planning and possibly more for the long-term planning. You don't have to be as specific possibly as if you're gonna lose the benefits over a certain time period if not used. Special considerations, a VEBA can also act as a type of health reimbursement arrangement, an HRA, a post-deductible VEBA, for example, is designed to reimburse vision and dental expenses until a member meets their health plan deductible. So now you've got this reimbursement component which you can compare to a similar component of an HRA which we talked about in prior presentations. After the deductible is met, members can be reimbursed for non-health plan related medical expenses. A limited VEBA, however, can reimburse only medical and vision expenses. Meanwhile, money in a post-employment VEBA can be used only after an individual has retired or left employment with VEBA's sponsor. When a VEBA plan is paired with a health savings account, that's the HSA which we talked about in prior presentations, VEBA dollars will be limited towards eligible dental and vision expenses until individuals meet their medical health plan deductibles. What's a VEBA? A Voluntary Employees Beneficiary Association Plan is a type of tax exempt trust that employers can offer to help employees with the cost of medical care. These plans are typically funded by the employer and governed under Internal Revenue Code Section 501C9 who is eligible for a VEBA. To be eligible for a VEBA plan, your employer must offer one. So obviously this is something that you would expect or possibly could be if you're subject to from your employer, so you'd be checking with your employer about it and possibly digging in more detail about it from there if offered. Also, you must be an active employee and be covered by your employer's health insurance plan to participate in a VEBA. Is a VEBA an HRA? Health reimbursement arrangements, HRAs allow employers to reimburse employees for certain medical expenses. Employees can roll over contributions year to year while investing contributions for growth under the definition a VEBA can be considered a type of HRA. What is the difference between a VEBA and an HSA? Health savings accounts, which we talked about in prior presentations, allow you to save for qualified medical expenses on tax-advantaged basis. These accounts are associated with high deductible health plans. So again, we looked at these in prior presentations about the different times of healthcare plans you might have and the high deductible plans are usually kind of the cheaper plans because they have the high deductibles, but they could be good for certain needs. And then you've got the litigation or the law that tries to incentivize or still give benefits to people that have the high deductible plans possibly to try to help them to do more of the preventative stuff. And so then that's kind of where the HSAs fit in. You could take a look at prior presentations for more detail. The main difference between VEBA and an HSA is how they're funded. VEBAs are funded only by the employer in most cases, while HSAs can be funded with employer and employee contributions. Can I have a VEBA and an HSA? We're getting greedy here. Can I put them, but can I get, I want all of these health words that we have here? Yes, depending on the options offered by your employer, it is possible to have both a VEBA and an HSA. If you have both, it's important to understand the rules for contributions withdrawals and taxations to ensure that you're making the most of these benefits. Which again, that's important because they can be confusing all these different acronyms. So you wanna check out what's available to you, do your comparison and contrasting. Take a look at the references on investopedia. You can continue your research from there as you're looking into these topics.