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Fact Sheet: Voluntary Employee Beneficiary Associations (VEBAs)

Fact sheet:

Voluntary Employee Beneficiary Associations (VEBAs)

What is a VEBA and how does it work?
A voluntary employee beneficiary association (VEBA) account is a health reimbursement account that allows employers to contribute pretax money to a 501(c)(9) tax-exempt trust on behalf of its employees. Money in the trust can be used to pay for current eligible medical expenses and is often saved for medical expenses in retirement.

Further offers VEBAs to governmental entities and 501(c) organizations that are tax-exempt trusts. (Further can also provide these same services to governmental entities as Section 115 tax exempt governmental trusts).
What types of expenses are eligible to be paid from a VEBA account?
The IRS outlines VEBA-eligible medical expenses in Section 213(d). The list of eligible expenses varies year-to-year and ranges from acupuncture to hearing aids or bandages. Employers can limit the types of expenses that can be reimbursed from the account, so your employees should review the Summary Plan Description for any exclusions before incurring the expense.
What types of VEBA accounts are available?
  • General Purpose – Eligible expenses include medical, dental, vision, orthodontia, and other eligible items (see Section 213(d) of the Internal Revenue Code).
  • Post Deductible VEBA – Limited to reimburse vision and dental expenses until the health plan deductible has been met.
  • Limited VEBA – Always limited to reimburse vision and dental expenses only.
  • Post-Employment VEBA – Payments can only be made from this account when the employee has retired or left employment.
How do employees save on taxes?
Employees save money with VEBA plans because they pay zero taxes on contributions from their employer, earnings and withdrawals. The money goes into an employee’s account tax-free, is invested tax-free, and is withdrawn tax-free.
What investment options are available with a VEBA?
VEBA plans also provide investment opportunities for employees to help them plan for future medical expenses, possibly in retirement. Money allocated to the employee’s VEBA account is known as the VEBA base balance. This base balance is used to reimburse employees for eligible medical expenses. Once an employee’s VEBA base balance exceeds $1,000, they can open a VEBA basic investment account.

A wide variety of pre-selected mutual funds are offered by Further. Devenir Investment Advisors, LLC, a registered investment advisor, is Further’s investment advisor for the optional investment program. See the list of VEBA mutual funds.
 

 

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