King County VEBA Vote
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VEBA
Accounts for All – PRO! Steve Coffing - Local 17 member _______________________________ VEBA accounts or HRA VEBA accounts, as they are
currently advertised, have been around for some time. The acronyms stand for "Health Reimbursement Arrangement" and "Voluntary Employee Benefit Association", and its purpose is to provide a tax-advantaged method of putting aside money for health care expenses.
NOTE: the term "Voluntary" means that we can use it or not, BUT, we have to decide as a group (in this case the DOT Professional and Technical bargaining unit of Local 17) whether to use it. That is why we voted before,
and why we are voting again, as we have decided to put it up for
consideration every 3 years, much like our contract.
We in Local 17 have been enrolled in this benefit
program for the past 2-1/2 years, since we voted in 2006. At that time, the only (pro) VEBA
option was to contribute the 35% of the value of your final sick leave
balance tax free to the VEBA account, or, alternatively, to take the 35% as a
cash payout upon retirement, which was subject to immediate income tax. Then, the retiree would use the funds
in the account to pay for health expenses as long as the account was
funded. Indeed, the only persons
affected were those that retired in the 3-year window that we were voting on
(2007-2009). Now we have more options. The 35% sick leave cashout is still
available (I think it will be option A on your ballot). There will also be an option to
contribute 50% of your vacation leave balance to the VEBA account, whether or
not we vote in the Sick Leave contribution. What? You say!
Give up half of my hard earned vacation pay? Well, no, you are most certainly NOT giving it up, rather,
you are putting it away to pay for your medical expenses, which
we all know we will have after we retire. Medical insurance, copays, deductibles, over the
counter medicines, all qualify as expenses payable from your VEBA savings
account. The last option we have is one that ALL members
of our bargaining unit can participate in (remember, options A & B happen
when you retire, and have to decide what to do with your benefit cashout
funds). We have been given the
option (again, as a group) to have a mandatory contribution of $50 per month
- before taxes! - that will go
into a Health Reimbursement Arrangement VEBA (HRA VEBA), that we can start
using the day after your first contribution. This is similar to a flexible spending account, with the
advantage that it does not have to be used by the end of each calendar year,
as an FSA does. The account
continues even after you leave county employment. So itŐs all about the taxes. VEBAs are tax advantaged, meaning
that you donŐt pay taxes on money that you use for your health care
expenses. We all have those, so
we might as well pay them before we pay Uncle Sam! HereŐs a link to the HRA VEBA website for more
information: http://www.hraveba.org |
VEBA Accounts – Vote No for All Three Choices
Julie Paone - Local 17 member
The upcoming vote on VEBA (Voluntary Employees Beneficiary Association) will determine the results for the next three years 2010-2012. There will be three independent funding choices presented on the ballot. A majority vote of "yes" on one or all three funding options approve the VEBA contributions for our bargaining unit (Local 17 Professional & Technical 17D) or a majority vote of "no" on one or all reject the VEBA contributions for our bargaining unit. The first two funding choices will affect employees retiring in the next three years - 35% sick leave or 50% vacation cash out, while the third choice will affect all employees - $50/monthly deduction or $600 a year.
Do you want your money tied up in a VEBA account that restricts your access, reduces your investment choices and mandates that you participate? There are other ways to maximize your tax savings such as deferred compensation, investing in an IRA or using the voluntary FSA (flexible spending account) to get reimbursed for health care expenses. I have outlined other reasons to vote NO on all three VEBA funding choices.
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Voluntary? – No, this plan is not voluntary for individuals. If the majority of our bargaining unit votes for these funding options, you will not have a choice of whether or not to participate, your financial contributions will be mandatory.
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IRS changed the ability to bequeath remaining balance to heirs - "Effective October 1, 2009, payments to heirs will no longer be permitted and unused account balances will forfeit to the Plan."
In other words, the IRS has changed the tax code so employees without a spouse or IRS-qualified dependents are unable to bequeath the unused balance in their VEBA accounts at the time of death to a chosen beneficiary. Likewise, single employees without dependents or employees with a domestic partner will not have the ability to bequeath their remaining balance to their heirs. Instead, the balance of the accounts will be given over to the administrator to be divided among other participants in the trust.
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Retirement cash out – loss in retirement savings - The recent stock market downturn has reduced investment accounts for many employees who are retiring in the next three years. Many employees are counting on using their money earned through sick leave or vacation cash out when they retire to pay off debts (car loans, a mortgage, house projects, monthly expenses, etc). Once your financial contributions are paid to the VEBA trust your flexibility to spend your money is lost, your contributions are limited to medical reimbursements only. Do not lose your freedom to choose where to spend your money.
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$50/month funding option – employees want to manage their money. Employees are already losing money through 10 furlough days in 2009, a plan that may be implemented again in 2010. Losing an additional $600 from mandatory contributions is significant. Even more unacceptable, every employee will pay a monthly fee of $1.50 and an annual 1.25% fee to the plan administrator to manage their mandatory contributions. In comparison, employees currently have access to pre-tax, voluntary FSA which are truly voluntary and have no fees.
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Risk of Investment – Your contributions into the VEBA trust account will not be guaranteed or insured. There is no principal guarantee like any other investment account, poor market timing could result in loss of some or all of the account balance.
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VEBA trust fees - Two firms provide daily service to Trust participants and employees. These firms are the third-party administrator, REHN & ASSOCIATES of Spokane, Washington, and the plan consultant, VEBA Service Group, LLC. They both will be taking a percentage of your money through the current fee structure - $1.50/month and a 1.25% annualized fee, plus the management fee on which investment account you choose. With the VEBA trust you have limited investment options, here is a list of the options - http://www.hraveba.org/pdfs/HRA_VEBA_Investment_Fund_Overview.pdf
There are too many questions about contributing to a VEBA at this time. I strongly urge you to vote no on all three funding choices.
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