Veba OverviewFor Public Employees

Presented by:Melanie Denning, VEBA Health OfficerHealth Care & Benefits Division Dept. of Administration

●Drafted SB51-passed April, 2001 to 2-18-1301, MCA

●Began offering to State, Cities, Counties, K-12 & University system employees in September, 2003.

●SB 168 passed during the 2007 session which allows an additional source of contribution.

History of VEBA

What IS a VEBA100% tax-free medical savings account

Funded with tax-free employer $$’s

For public service employees in MontanaCities, CountiesPublic Schools (K-12)MT University SystemAll State Employees

Why VEBAIntention is to assist with creation of a

supplemental medical fund for use after separation/retirement

Avoid taxes on compensation – 100%!Pre-65 average retiree medical cost -

$10,000/yr on PremiumsAverage Medicare retiree medical cost -

$6,000/yr on PremiumsIRS rules require us to administer the

plan in specified measures which call for “group” participation.

You may pay for medical out of pocket expenses related to Medical, Dental, Prescription Drugs, Vision benefits as well as many over-the-counter items.

VEBA also allows you to pay for your Insurance premiums which include;Health - Medical, Dental & VisionLong-Term Care, and Medicare B

How to use VEBA?

Your Employer may decide how to offer the VEBA.

Active Contributions vs. Separation only

Employees may request the benefit by 25% of eligible group

How is VEBA offered?

100% tax free! Tax free contributionsTax free earningsTax free withdrawals

What’s in it for YOU?

$ 10,000 Benefit- 4,265 Taxes

$ 5,735 Cash Payout

$10,000 benefit available27% Federal income

tax7.65% FICA8% State income tax

__________________

$10,000 – NO VEBA

$10,000 Benefit- 0 Taxes

$10,000 MT VEBA

$10,000 benefit available27% Federal income

tax7.65% FICA8% State income tax

__________________

$10,000 – WITH VEBA

Montana VEBA HRA saves $4,265 in taxes!!!

MSA VEBA

CASH$5,735$10,000

Tax Savings

Not required!No W-2 to employeeNo 1099 on earnings or withdrawals

No 1040 tax return reportingNo state return reportingNo employer tax reporting

Tax Reporting

Surviving spouse, dependents or heirs can continue to use account for their medical expenses and premiums

If no will, then follow Montana Laws of Intestacy

Money only can be used for Qualified Medical Expenses

If no spouse or dependents, then reverts back to plan.

What is Death Benefit?

Your Social Security Benefit is calculated on lifetime of earnings.

Calculation made late in salary career.Tax-free portion of VEBA payout also late in

career.VERY minimal impact to benefit amount.

Impact on Social Security?

Low monthly policy fee of $5/mo.All other costs are paid from

investment earnings – 1 ¾ % annualized.

Some members’ investment choices pay for monthly costs.

Administrative Cost

Union or non-union employee groups

Recommend using existing group boundaries

All or none decision – ballot process

Vote may be taken annuallyContribution Source-Agree before

vote!PERS HAC Discussion

What IS a Group?

www.montanaveba.org

Summary

Decide on your Group!

Agree on

Contri-bution

Do Research!

Check with PERS for

YOUR impact!

Review the

website

VOTE when you

see a ballot!

Group vote is for “1”

year

Ask Questions!!

Put the pieces in place!

Your Payroll Staff

Melanie Denning, 444-3745 mdenning@mt.gov

www.montanaveba.org

Who to contact