Voluntary Employee Beneficiary Association (VEBA)
For more information on the Montana VEBA HRA, please click on the following link: http://www.montanaveba.org/
What is a Voluntary Employee Beneficiary Association (VEBA)?
The federal government allows entities to receive favorable tax treatment on contributions to a trust set up under section 501(c)(9), IRC. Contributions to this trust may be made on a pre-tax basis, assets in the trust may be invested and earnings are tax-exempt, and certain qualified benefits may be paid out on a tax-exempt basis. Under Title 2, chapter 18, section 13, MCA, the state also allows favorable tax treatment for a VEBA trust.
What is the purpose of the VEBA?
Montana has defined in statute a specific set of benefits which may be paid from a VEBA trust set up for eligible Montana public employees. That purpose is to pay for qualified health care expenditures as defined by the IRS. The goal is to assist eligible public employees in accumulating assets for the purpose of paying for health care expenditures.
What will be the source of funding for this benefit?
State law provides for conversion of sick leave payouts, on a tax-exempt basis, to contributions in a VEBA on behalf of employees. Other sources of contributions such as allocations of salary (flat dollar amount or flat percentage of salary per employee) are not prohibited, but must be determined by an agreement between employees and employers and must meet criteria for maintaining the exempt status of the plan.
Who is eligible to participate?
Employees of legally constituted departments, boards, or commissions of the state, counties, incorporated cities and towns, or any political subdivision of the state, including school districts or units of the university system are potentially eligible to join the VEBA. Within an employer group, employees defined as potentially eligible to participate in the plan must vote to join the VEBA. If a majority of employees voting on the question to join elect to participate, then all employees defined and eligible become members. An eligible employee may elect not to become a member, but they will not receive any contributions made by the employer on their behalf, except through membership and participation in the VEBA plan.
How will the VEBA be administered?
Administration of the VEBA plan involves enrollment and service to plan members, payment of qualified health care claims funded by individual member VEBA accounts, administration of accounts on behalf of members, investment of trust assets, and management of the trust.
