What does "VEBA" stand for?

"VEBA" stands for voluntary employees’ beneficiary association. VEBAs are a type of trust instrument used to hold plan assets for the purpose of providing employee benefits. VEBAs are authorized by Internal Revenue Code section 501(c)(9). VEBA Trust offers a health reimbursement arrangement commonly known as the VEBA Plan.

 

 

What is an HRA?

A health reimbursement arrangement (HRA) is an account-based health plan you can use, after becoming claims-eligible, to reimburse your qualified out-of-pocket medical care costs as defined by the IRS. Common qualified expenses include co-pays, deductibles, prescription drugs, retiree insurance premiums, etc. An HRA is not an insurance plan, and you do not pay a premium. Your account is funded with contributions from your employer. Employer contributions, investment earnings, and withdrawals (claims) are tax-fee. Contribution amounts will not be included on Form W-2 from your employer, and you will not receive a Form 1099 for earnings or withdrawals (claims).

 

 

Why are HRAs sometimes called VEBAs?

Many governmental employers in the Northwest are familiar with the term "VEBA" and understand it to mean a benefit plan that reimburses medical care expenses and premiums. These medical reimbursement programs are actually defined by the IRS as HRAs, but are commonly referred to as "VEBA" plans.

 

 

What is the difference between the Standard and Post-separation HRA Plans?

The main difference between the two plans has to do with claims eligibility. Under the Standard HRA Plan, participants can file claims at any time (subject to their employer's plan design).

 

Under the Post-separation HRA Plan, participants must first separate from service or retire from their employer before becoming claims-eligible. In addition, Post-separation HRA Plan participants who separate from service or retire and become re-employed by the employer that made or is making contributions to their Post-separation HRA Plan account will not be eligible to file claims to that account for medical care expenses and premiums incurred while re-employed. All other terms and conditions are the same.

 

You do not need to choose a plan. Your employer will automatically direct its contributions for you to either the Standard HRA Plan or Post-separation HRA Plan. Generally, this will depend upon your eligibility to enroll in your employer's qualified group health plan and whether you are enrolled in or covered by your employer's group health plan or another qualified group health plan. It could also depend on the terms of employer policy, collective bargaining agreements, or other factors that may be unique to the employer's HRA program or the participant's employee group. Read our VEBA Plan brochure to learn more.