About VEBA

A health reimbursement arrangement (HRA) is a type of health plan that reimburses eligible out-of-pocket health care costs and insurance premiums incurred by you, your spouse and qualified dependents. All contributions, investment earnings and withdrawals (claims) are tax-free.

The IRS has issued several pieces of guidance on HRAs, including a series of Notices and Revenue Rulings. In addition, the tax exemption for HRA contributions and withdrawals (claims) is based on the provisions of sections 105 and 106 of the Internal Revenue Code.

A voluntary employees’ beneficiary association (VEBA) is a type of tax-exempt trust instrument through which employee benefits (for example, HRAs) are provided. VEBAs are authorized by Internal Revenue Code section 501(c)(9).

Many governmental employers in Washington are familiar with the term “VEBA” and understand it to mean a benefit plan that reimburses health care expenses and premiums. These plans are technically HRAs as defined by the IRS but have been commonly referred to as “VEBA” plans for more than two decades.

HRA VEBA is a funded HRA program that reimburses qualified health care costs and insurance premiums for you, your spouse and your qualified dependents. HRA VEBA enables the county to make tax-free contributions on your behalf using your sick leave cash-out at retirement.

• 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.

Simply put, the benefit for eligible employees is a 30 percent increase in the value of their sick leave cash through avoidance of 7.65 percent FICA and federal tax withholding when the sick leave cash-out payment is made.

The county’s HRA VEBA benefit is the result of an agreement made between King County and a coalition of bargaining units during 2006 discussions about the Health Reform Initiative.

Most King County employees are eligible to be cashed out for 35 percent of their sick leave at the time of retirement. To receive the sick leave cash-out benefit with or without HRA VEBA and any other retiree benefits, retiring employees must, before their last day of employment, advise King County Benefits, Payroll and Retirement Operations of their intent to retire by completing a Termination Notice indicating that they have formally applied to the Washington State Department of Retirement Services (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 sick leave cash-out with or without HRA VEBA.

First, you must belong to an employee group that has acted to participate in HRA VEBA, and you must then retire from King County as a member of PERS, LEOFF 2 , PSERS or the Seattle City Employees' Retirement System.

Second, as part of your retirement process paperwork, you will have to complete an HRA VEBA Membership Enrollment Form and deliver it to the King County Benefits, Payroll and Retirement office. Your HRA VEBA account will be opened after Benefits, Payroll and Retirement Operations sends funds to the HRA VEBA third-party administrator. You will then receive information about your account from the third-party administrator.

You submit a completed and signed claim form for qualified medical expenses, along with proper verification, to the third-party administrator, or you can arrange to have automatic payment of insurance premiums by submitting a systematic payment form. Claims payment is efficient and hassle-free. Sign up for direct deposit –it's faster and more secure.

You may submit claims for qualified out-of-pocket medical, dental and vision expenses incurred by yourself, your spouse and/or your qualified dependents. You may file claims for any amount. Benefits will be paid until your account is depleted. If your spouse or dependents are covered under different medical plans, their insurance premiums may also be reimbursed out of this account.

Meritain Health is the HRA VEBA third-party administrator. Meritain Health is an experienced benefits administrator specializing in the administration of HRAs. All correspondence, accounting and benefit payment services are provided by Meritain Health.

Trustees are elected by HRA VEBA participants from counties, cities and special purpose districts. The trustees are fiduciaries and have a duty to act prudently and in the best interest of you and all other plan participants and beneficiaries.

Trust operating and administrative expenses vary slightly from month to month and include legal fees, consulting, local servicing, printing, postage, auditing, claims processing and account administration. All expenses of operating the HRA VEBA Trust are paid by a $1.50 fee per account per month, plus an annualized fee of approximately 1.25 percent. The annualized fee is paid by a reduction in investment earnings or, if there are no earnings, charged as a deduction to participant accounts.

Participants can choose from either one of two participant-directed investment options:

Option A: Do-it-yourself

Build your own asset allocation portfolio using funds from seven individual asset classes.

Option B: Choose a premix

Select any one of four professionally designed, premixed asset allocation portfolios.

You can change your investment fund allocation as often as once a month. After fund management and Trust operating and administrative expenses have been deducted, net investment earnings (or losses) are credited tax-free to your account on a monthly basis.

More information can be found in the Investment Fund Information brochure and on the quarterly Investment Fund Overview. These informational pieces are included in your Membership Enrollment Kit or are available online at www.hraveba.org.

There are no guarantees. Funds are not FDIC-insured, are not guaranteed by a bank, and may lose value. Even the most conservative investment fund option may lose value.

The Stable Value Fund is invested among interest-bearing guaranteed investment contracts (GICs) and is the most conservative fund choice. The remaining funds are invested in securities that will fluctuate in value on a monthly basis; withdrawals from these funds may be worth more or less than your original employer contribution.

Yes, you will receive semiannual participant activity statements in January and July detailing all activity in your account. You may also call or e-mail the third-party administrator to request additional statements at any time. Contact information is available at http://www.hraveba.org/plan_info.asp.