H R A V EBA

Benefits You Can Trust In

2 www.benefitresource.com

TABLE OF CONTENTS

Intro: What is an HRA VEBA? 03

Funding Options 05

Advantages of an HRA VEBA 06

Differentiating Between Active Employees and 07

Retired Employees

Key Benefits Employees Can Expect to Receive from 08

an HRA VEBA

Conclusion: Exclusive Benefits of an HRA VEBA with 09

BRI
3 www.benefitresource.com

INTRO: WHAT IS AN HR A VEBA?

DEFINING AN HRA VEBA

In its most basic form, an HRA VEBA is two separate components – the VEBA and the HRA – that come together
and are greater than the sum of their parts.

The VEBA component, or ”Voluntary Employee Beneficiary Association,” is a 501(c)(9) tax-exempt trust into
which an employer can contribute pre-tax money on behalf of its employees. Being held in trust, they are a
commitment on behalf of the employer to fund and are protected from creditors in case of bankruptcy. The HRA
component determines the rules for how money in the VEBA is used.

For example, a VEBA can be paired with any kind of HRA, such as an embedded deductible Limited HRA or
a post-deductible HRA. It may be helpful to think of a VEBA as the bucket of money that funds the HRA, as
opposed to the more traditional model of employers funding a claim.

The two separate pieces work together to create an equation:

Moving beyond the basics of the account, one of the main benefits of the HRA VEBA arranagement is the tax
advantages it provides.

TAX ADVANTAGES
When it comes to an HRA VEBA, withdrawals for
premiums, qualified health care expenses, investment
earnings, and account contributions are exempt from
Social Security, Medicare, state and federal income
taxes.

The tax treatment of the funds in an HRA VEBA is

similar to the tax treatment of funds in HRAs and
HSAs, which can lead to confusion about the distinct
advantages of each account.

On the next page, we outline the similarities,

differences, and distinct advantages of each account.
4 www.benefitresource.com

EXPLORING SIMIL ARITIES AND DIFFERENCES

BET WEEN HR A VEBAs, HR As, & HSAs
HSA HRA HRA VEBA
FACTOR (HEALTH SAVINGS ACCOUNT) (HEALTH REIMBURSEMENT ACCOUNT)
(HRA VOLUNATARY EMPLOYEE
BENEFITS ACCOUNT)

Employee; funds held in a

Account Owner Employee Employer
Trust

Employee, employer, and/or

Funding of Account 3rd party
Employer Employer

Permitted, but must be

Annual Rollover Yes
designed by employer
Yes

Permitted, but must be

Portability Yes
designed by employer
No

Claims Adjudication
No Yes Yes
Requirement

Defined by Section 213(d);

Eligible Expenses Defined by Section 213(d) employers can restrict Defined by Section 213(d)
further

Funds Can Earn Interest or

Yes No Yes
be Invested

Permissible for Non- Yes, but normal tax + penalty

No No
qualified Expenses applies

Covered by HSA-compatible Requirements defined by Requirements defined by

Insurance Requirements health plan employer employer

Limits to
Annual limits set by IRS Limits set by employer Limits set by employer
Contributions

Limits on When Services Expenses eligible and can

are Eligible and Must be be withdrawn anytime after Defined by employer Defined by employer
Reimbursed HSA is established

Changes to Elections No limitations Defined by employer Defined by employer

See the full comparison chart on BenefitResource.com.

5 www.benefitresource.com

FUNDING OPTIONS
Depending on the employer’s goals and the agreement between an employer and its employees, various arrangements
can be made.

1
TI O N
OP FLAT DOLLAR FUNDING
With this option, the most common method is for employers to fund the same amount to
each employee within the HRA VEBA. While there can be variations by bargaining unit, the
funding must be the same across all employee sets.

2
TI O N
OP MANDATORY SALARY DEFERRALS
Taking a slightly different approach than the flat dollar funding, mandatory salary deferrals
require each employee to defer the same percentage or dollar amount into the HRA VEBA.
Employees are not allowed to set an individual election. Instead, the election amount for
each employee is a group decision, typically negotiated by the union.

3
TI O N LEAVE CONVERSION
OP
The final option employers have for funding an HRA VEBA is to convert unused leave.
Sources can include vacation time, sick leave, and paid time off. Like mandatory salary
deferrals, employees do not set an individual election. A bargaining group decides both the
source(s) of funding and the election amount each employee sets aside.

For example, employees could be offered a 35% sick leave cash out and/or a vacation cash
out, with 50% going to the HRA VEBA and 50% paid as regular taxable wages.

Beyond the ability to choose

a preferred funding option,
employers can use HRA VEBA
accounts to manage liabilities
specific to the public sector,
improve negotiations with unions,
receive better tax breaks, and
help employees fund health care
expenses both during employment
and in retirement..
6 www.benefitresource.com

ADVANTAGES OF AN YOU’RE A PRIME CANDIDATE

HR A VEBA FOR AN HR A VEBA IF YOU ARE:

In this section, we address how an HRA VEBA equips

employers to manage liabilities specific to the public
sector, improve negotiations with unions, receive better
tax breaks, and help employees fund current and future
health care expenses

In the introduction, we outlined that an HRA VEBA

is comprised of two separate components that come
together: a VEBA, which is where the money goes, and
then an HRA, which defines the rules for how money A P U B L I C S E C TO R C O M PA N Y
in the VEBA is spent.

Let’s take a closer look at the VEBA account portion of

the equation.

While the process of opening a VEBA account is

complicated, the end result uniquely positions
employers to achieve multiple goals specific to the
public sector, including:

• Liability management (including GASB and OPEB) A SCHOOL OR UNIVERSITY

• Improving union negotiations
• Receiving better tax breaks

Public sector entities that offer HRA VEBAs can take

advantage of the tax benefits previously
mentioned and the chance to provide rich healthcare
benefits to active employees and retirees.

A M U N I C I PA L I T Y

TA F T- H A RT L E Y U N I O N - B A S E D
7 www.benefitresource.com

DIFFERENTIATING ACTIVE EMPLOYEES

FROM RETIRED EMPLOYEES
Depending on the employer’s goals and the agreement between an employer and its employees, various
arrangements can be made.

ACTIVE EMPLOYEES
When first introducing an HRA VEBA, it is
recommended to offer a simple version in order to
encourage employees to participate. As an example,
set it up to be used toward an embedded deductible.

Once employees are more comfortable with the

plan setup, future discussions can focus on adjusting
the plan to be a more complicated, but equally
advantageous, arrangement for both parties.

RETIRED EMPLOYEES
When it comes to an HRA VEBA for retired
employees, employers often want to control when
post-employment premiums and expenses can be
paid. One of the most common approaches is to let
employees accrue dollars within the VEBA while they
are active employees, but not spend them until they
have retired or separated from the company.

BLENDED APPROACH
Finally, employers can offer a blend of both options.
While there is flexibility in the plan design and set up,
the main concept is to have two VEBA HRA buckets:
one that active employees can use to pay pre-decided
expenses (e.g. copays) and one that’s earmarked
for access in retirement only. When an employee
separates, the two merge into a single bucket.
8 www.benefitresource.com

KEY BENEFITS EMPLOYEES CAN EXPECT FROM

AN HR A VEBA

Convenient access to Generous investment

funds when needed. opportunities

Ability to pay for

insurance premiums after
Options for a guaranteed
employment, including
rate on investments
Medicare (parts B, C, D),
and Medigap.

Easier healthcare plan

eligibility requirements
than other pre-tax
accounts

Thanks to the numerous advantages an HRA VEBA

provides to both employers and their employees, it
remains an attractive plan option, especially within
the public sector.
9 www.benefitresource.com

CONCLUSION
In addition to the tax-free savings and spending control an HRA VEBA provides, an HRA VEBA from Benefit
Resource offers these exclusive benefits:

5 EXCLUSIVE BENEFITS OF A HRA VEBA WITH BRI

EXTENSIVE SERVICE CENTRALIZED

EXPERTISE
High touch HRA VEBA
administration with local
support, offering you the
customized experience you
and your employees want.
MODEL
Clients are assigned a
single dedicated specialist,
alongside other BRI experts,
providing comprehensive
support for any account
needs.
ADMINISTRATION
Clients can expect a
centralized, customer-first
experience that combines a
multi-account offering with
a single debit card, website,
and mobile app.

BPAS FIDUCIARY RICH INVESTMENT

SERVICES
BRI partners with BPAS
as a record keeper and
custodian, offering ERISA
3(38) for full fiduciary
responsibility and ERISA
3(21) for shared fiduciary
responsibility.
OPTIONS
Our investment platform
through BPAS supports
open architecture, full
fee transparency, and the
ability to match funds to a
retirement plan.

If you are looking for a solution that can help you understand plan design options, manage liability and answer
questions like “How do I limit spending within 213(d)?” or “What is the best way to factor my employee set into
my offering?” reach out to one of our specialists.

Book a free consultation today.

Call (866) 996-5200.