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Funded HRAs with a VEBA trust (sometimes just referred to as a “VEBA”) are another type of benefit that allows employers to support employees鈥� long-term healthcare needs. The tax law for VEBAs has been around for nearly 100 years, but VEBA usage and popularity has evolved over time as additional benefits, such as health savings accounts (HSAs) have been introduced.聽

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What is a VEBA?

VEBA stands for . VEBAs are employer-funded, tax-free irrevocable trust arrangements that are often paired with HRAs. Because of this, the term 鈥淰EBA鈥� often refers to the VEBA-funded HRA. 

governs VEBAs and describes them as 鈥渁n organization organized to pay life, sick, accident, or similar benefits to members or their dependents, or designated beneficiaries.鈥� 

What employers commonly offer VEBAs?

They are primarily offered within the public sector (such as school districts) and by unions. For these organizations that support retiree medical needs, VEBAs reduce liability because a trust is used. That鈥檚 why you typically see VEBAs in these industries. 

The IRS states that they can only be offered by organizations that : 

• It must be a voluntary association of employees.
• The organization must provide for payment of life, sick, accident, or other similar benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose.
• Its earnings may not inure to the benefit of any private individual or shareholder other than through the payment of benefits described above. 

Who is eligible to participate?

Employees must be covered by an employer-sponsored health plan to be eligible for a VEBA-funded HRA. 

Who contributes funds?

Employers contribute 100 percent of the funds. 

What expenses are eligible?

They can be used to pay for 213(d) eligible expenses and medicare premiums in retirement. The employer determines eligible expenses and if enrollees can spend their funds on eligible medical expenses while actively employed. 

亚洲色吧 makes it easy to spend VEBA-funded HRA dollars by providing one mobile app and one 亚洲色吧 benefits card for all of their 亚洲色吧 benefits. 

Can participants invest VEBA funds?

Yes! The ability to invest VEBA-funded HRA dollars is similar to what you鈥檇 find with an HSA. And any VEBA earnings through investment accumulate. Like HSAs, VEBAs also have the triple-tax advantage of tax-free: 

• Contributions 
• Earnings (through interest or investment)
• Withdrawals for eligible expenses

Can someone participate in a VEBA and an HSA?

Yes, the two accounts are compatible when the VEBA is limited to dental and vision expenses. When the participant meets their deductible, then the VEBA can cover qualified medical expenses. 

Would you like to learn more about how VEBAs compare with HSAs? Check out our graphic below and learn more about benefits accounts with 亚洲色吧!

David Ritchie of contributed to this blog post. 

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel. 

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