Public employees everywhere are struggling to cope with the soaring cost of health care, particularly after retiring. Many who are eligible to retire keep working because their retirement pensions and other taxable retiree income sources aren’t enough. The average 60-year-old public employee and spouse retiring today may spend well more than $300,000 of their own money on health care expenses and insurance premiums during retirement! Fortunately, the HRA VEBA plan can help.
HRA VEBA overview
Defined by the IRS as a health reimbursement arrangement (HRA), HRA VEBA is a type of health plan that reimburses qualified health care costs and insurance premiums for you, your spouse and qualified dependents. The funding source for King County’s HRA VEBA program is leave cash-out at the time of retirement from PERS, LEOFF 2, PSERS and the Seattle City Employees’ Retirement System. Funds are deposited tax-free into participant accounts held by the nonprofit, tax-exempt HRA VEBA Trust, a voluntary employees’ beneficiary association (VEBA) authorized under section 501(c)(9) of the Internal Revenue Code.
With an HRA VEBA:
You pay no tax on contributions, earnings, or withdrawals (claims).
You can use your account anytime after it is opened.
Your unused account balance carries over from year to year.
You can invest your account among the available investment funds, including any one of four premixed portfolios.
The voting process
In 2009, most King County employees through their bargaining units or as part of a non-represented employee group voted on whether to participate in the HRA VEBA program.
- For non-represented employees, the decision of the group applies to all retirements in that group during a three-year period, beginning Jan. 1, 2010. In 2012, non-represented employees will have an opportunity to reconsider their participation in the HRA VEBA for another three-year period beginning Jan. 1, 2013.
- For represented employees, the decision will remain in effect until the bargaining unit’s representative notifies the county of a change. Bargaining units may vote each year to change their HRA VEBA participation. Any changes must be communicated to Benefits, Payroll and Retirement Operations by the last Tuesday in June. The changes will be effective Jan. 1 of the following year.
Check out the voting results to determine whether you are in an HRA VEBA employee group for 2011 or 2012.
How HRA VEBA works
Retirement triggers VEBA leave cash-out benefit
To receive the leave cash-out benefit with or without VEBA and any other retiree benefits, retiring employees must, before their last day of employment, advise King County Benefits, Payroll and Retirement Operations of the intent to retire by completing a Termination Notice indicating that they have formally applied to the Washington State Department of Retirement Systems (DRS) for retirement benefits.
Employees who fail to notify the county of their intent to retire before their last day of employment will be considered to have terminated employment and will forfeit the leave cash-out with or without VEBA. See Leaving employment for more information.
Enroll or forfeit
Retiring employees will have up to 12 months from their last day of employment with King County to submit a properly completed HRA VEBA enrollment form. Failure to do so will result in forfeiture of their leave cash-out. You must formally retire before your last day of employment with the county.
Using HRA VEBA
Eligible retirees complete an HRA VEBA Membership Enrollment Form at the time of retirement to open an account into which their leave cash-out is directly deposited. Retiree funds are held by a nonprofit, tax-exempt VEBA trust managed by a participant-elected board of trustees of city, county and special purpose district representatives. Retirees can select from among several investment funds and can change investments easily. Accounts are subject to a monthly administrative fee. Claims for qualified medical expenses and insurance premiums are submitted to a third-party administrator for reimbursement. Retirees can access their accounts online, arrange for automatic payments of health insurance premiums and direct deposit of reimbursements, submit claims electronically or by mail or fax, and talk to a person if they have questions.
See the links on the right side of this page for more online information. For questions about VEBA, your leave cash-out benefit or when and how to get your retirement process started:
- Call Benefits, Payroll and Retirement Operations at 206-684-1556 weekdays from 9 a.m. to 4 p.m.
- E-mail email@example.com anytime.