Veba Overview
For Public Employees
Presented by:
Melanie Denning, VEBA Health Officer
Health Care & Benefits Division
Dept. of Administration
History of VEBA
● Drafted SB51-passed April, 2001 to 2-18-
1301, MCA
● Began offering to State, Cities, Counties,
K-12 & University system employees in
September, 2003.
● SB 168 passed during the 2007 session
which allows an additional source of
contribution.
What IS a VEBA
100% tax-free medical savings
account
 Funded with tax-free employer
$$’s
 For public service employees in
Montana

Cities, Counties
 Public Schools (K-12)
 MT University System
 All State Employees

Why VEBA
 Intention is to assist with creation of a
supplemental medical fund for use after
separation/retirement
 Avoid taxes on compensation – 100%!
 Pre-65 average retiree medical cost $10,000/yr on Premiums
 Average Medicare retiree medical cost $6,000/yr on Premiums
 IRS rules require us to administer the plan in
specified measures which call for “group”
participation.
How to use VEBA?
 You may pay for medical out of
pocket expenses related to Medical,
Dental, Prescription Drugs, Vision
benefits as well as many over-thecounter items.
 VEBA also allows you to pay for your
Insurance premiums which include;
 Health - Medical, Dental & Vision
 Long-Term Care, and
 Medicare B
How is VEBA offered?
 Your Employer may decide how to
offer the VEBA.
 Active Contributions vs.
Separation only
 Employees may request the
benefit by 25% of eligible group
What’s in it for YOU?
100% tax free!
 Tax free contributions
 Tax free earnings
 Tax free withdrawals
$10,000 – NO VEBA
$10,000 benefit available
 27% Federal income tax
 7.65% FICA
 8% State income tax
$ 10,000 Benefit
__________________
- 4,265 Taxes
$ 5,735 Cash Payout
$10,000 – WITH VEBA
$10,000 benefit available
 27% Federal income tax
 7.65% FICA
 8% State income tax
$10,000 Benefit
0
Taxes
__________________
$10,000 MT VEBA
Tax Savings
$5,735
MSA VEBA
CASH
$10,000
Montana VEBA HRA saves
$4,265 in taxes!!!
Tax Reporting
Not required!
 No W-2 to employee
 No 1099 on earnings or
withdrawals
 No 1040 tax return reporting
 No state return reporting
 No employer tax reporting
What is Death Benefit?
 Surviving spouse, dependents or heirs can
continue to use account for their medical
expenses and premiums
 If no will, then follow Montana Laws of
Intestacy
 Money only can be used for Qualified
Medical Expenses
 If no spouse or dependents, then reverts
back to plan.
Impact on Social Security?
 Your Social Security Benefit is calculated on
lifetime of earnings.
 Calculation made late in salary career.
 Tax-free portion of VEBA payout also late in
career.
 VERY minimal impact to benefit amount.
Administrative Cost
 Low monthly policy fee of $5/mo.
 All other costs are paid from investment
earnings – 1 ¾ % annualized.
 Some members’ investment choices pay
for monthly costs.
What IS a Group?
 Union or non-union employee groups
 Recommend using existing group
boundaries
 All or none decision – ballot process
 Vote may be taken annually
 Contribution Source-Agree before vote!
 PERS HAC Discussion
www.montanaveba.org
Summary
Put the pieces in place!
Decide
on your
Group!
Agree
on
Check with
Do
ContriResearch! PERS for
bution
YOUR
impact!
VOTE Group vote
Ask
Review when you is for “1” Questions!!
see a
the
year
ballot!
website
Who to contact
 Your Payroll Staff
 Melanie Denning, 444-3745
[email protected]
 www.montanaveba.org