VEBA and you Do I have a choice on whether to participate?
No, IRS rules do not permit individual choice – all employee group members defined as eligible must participate. In other words, if a group acts to adopt HRA VEBA, the decision is binding on all members who retire from that group. The employee group you belong to at the time you retire determines your participation in HRA VEBA.
What if I retire from a different group than I am with now? Which decision determines whether I am VEBA-eligible? If you are currently a member of a group that decides not to participate in HRA VEBA, but you change positions and later retire from a group that voted to participate in HRA VEBA, you must participate in HRA VEBA. The employee group you belong to at the time you retire determines your participation in HRA VEBA. What if I retire and get an HRA VEBA account and the group I retire from decides at a later date not to participate in HRA VEBA? Does that affect my HRA VEBA account?
No, if you have retired and have an HRA VEBA account, your account will continue even if the group you retired from decides later not to participate.
Will the HRA VEBA affect how my PERS 1 pension is calculated?
No, the calculation for the sick leave cash-out benefit is completely separate from the calculation of sick leave for the PERS 1 pension. The Washington State Department of Retirement Systems (DRS) makes the final calculations, not King County. If you are a PERS 1 member, we encourage you to go to the DRS Web site, www.drs.wa.gov, or call 1-800-547-6657 for assistance in determining what your final retirement benefit will be.
Why can I only contribute 35 percent of my sick leave to HRA VEBA and not 100 percent?
The only sick leave cash-out payment authorized for county employees at retirement is the 35 percent at time of retirement. Therefore, the 35 percent sick leave cash-out is the only option available with which to fund HRA VEBA.
Is there a time limit on spending funds in my HRA VEBA account?
There is no time limit. Unused account balances carry over from year to year.
Can I use my HRA VEBA account to reimburse medical expenses that occur before I retire?
No, reimbursable health-related expenses and insurance premiums include those incurred after your HRA VEBA account is opened. Only then are you eligible to pay claims.
What medical expenses and insurance premiums qualify for reimbursement?
Common qualified expenses include copays, coinsurance, deductibles and prescriptions. Qualified insurance premiums include medical, dental, vision, tax-qualified long-term care (subject to IRS limits), Medicare Part B, Medicare Part D and Medicare supplement plans. A more detailed list can be found online at www.hraveba.org. Qualified expenses and premiums are defined in section 213(d) of the Internal Revenue Code and described in IRS Publication 502 (2005). Insurance premiums paid by an employer or premiums that are or could be deducted pretax through your or your spouse’s section 125 cafeteria plan are not eligible for reimbursement. If you or your spouse has a section 125 health care flexible spending account (FSA), you must exhaust the FSA benefits before submitting an eligible HRA VEBA claim. Can the cost of retiree medical plans be paid from my HRA VEBA account? Yes, premiums for medical plan coverage as described above are eligible for reimbursement, particularly during retirement. What is a qualified dependent? Are expenses for my domestic partner eligible? Generally, dependents must satisfy the definition of "qualifying child" or "qualifying relative" as of the end of the calendar year in which qualified expenses are incurred. These requirements are defined in IRS Publication 502. The definition does not include domestic partners. A definition of dependents is available online at www.hraveba.orgHow does HRA VEBA affect my income taxes? What gets reported? What do I report? What kind of tax information will I get?
HRA VEBA contributions, investment earnings and withdrawals (claims) are not tax-reportable. Contributions will not be included on your Form W-2, and you will not receive a Form 1099 for any earnings or withdrawals. You cannot deduct qualified medical expenses that are equal to the distribution from HRA VEBA as an itemized deduction on Schedule A (Form 1040). Other general information is provided on the IRS Web site:
What if I have money in a county flexible spending account (FSA) when I retire? Can that go into my HRA VEBA?
No, IRS rules require that HRA VEBAs be funded only with employer contributions. While HRA VEBAs and FSAs are both reimbursement programs for health-related expenses, funds from an FSA account must be exhausted before filing eligible claims on an HRA VEBA account, according to Part V of IRS Notice 2002-45. The county’s FSA Guideaddresses post-retirement use of an FSA.
I'm going to travel extensively or live abroad after retirement. Will health-related expenses incurred in other countries be eligible for reimbursement from my HRA VEBA account?
Generally, yes. If you're living in another country and incur health care expenses, those expenses are treated the same as if you lived in the United States. Expenses include IRS-qualified medical expenses, including the cost of health care premiums purchased in another country.
We encourage retirees planning to live abroad to contact the IRS at www.irs.gov to find out about tax-related matters related to living abroad. A general list of qualified expenses is on the HRA VEBA Trust Web site at www.hraveba.org/claims.asp. Questions about specific expenses should be directed to the HRA VEBA third-party administrator, Meritain Health at 1-888-659-8828 or myhraveba@meritaincom. I will have a sizable sick leave cash-out and don’t expect to have any significant health expenses after I retire. How will HRA VEBA help me?
HRA VEBA is not a one-size-fits-all plan, but even employees who have access to health care coverage through a spouse, as a military retiree or through other programs will have out-of-pocket medical expenses at some point . No plan covers everything. Dental and vision coverage is generally very limited. Nearly everyone will have some premium of some sort, even if only Medicare Part B premiums that are taken directly out of Social Security checks. Nearly everyone has out-of-pocket expenses. Nearly everyone buys over-the-counter medications. Check out the back of You Do the Math for useful links to pre- and post-65 retiree medical expenses. See the list of qualified expense and premiums on the HRA VEBA Web site.
When I die, can my spouse or the executor of my estate file claims to my HRA VEBA account to pay for my funeral?
No, funeral expenses are not eligible for reimbursement. When I die, can my spouse or the executor of my estate file claims to my HRA VEBA account to pay for my health care expenses before my death?
Yes, your surviving spouse or executor can file claims for qualified medical expenses you incurred before your death.
What happens if I don’t withdraw money from my account or if I die before my account is depleted?
While this is a common question, it is a very rare occurrence for HRA VEBA funds to remain in an account following the death of the participant, the participant’s spouse and qualified dependents. Given the cost of health insurance premiums, prescription drugs and other health-related expenses, HRA VEBA accounts are usually drawn down very quickly.
If you are survived by a spouse or dependent children (or other dependents as defined by the IRS), they may submit requests for medical expense reimbursements until your account is exhausted. If you have no surviving spouse or eligible dependents, the funds remaining in your account may be paid as medical expense reimbursements to the heirs of your estate. Payments to heirs are taxable.
IRS Revenue Ruling 2006-36 requires HRA VEBAs to discontinue providing reimbursements to nondependent heirs for expenses incurred on or after October 1, 2009. This ruling only affects benefits paid to nondependent heirs; reimbursements to a surviving spouse or dependents will continue.
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