HRA (Health Reimbursement Arrangement) VEBA (Voluntary Employee Benefit Association) plans have special tax treatments because the account balances are used solely for the purpose of paying for qualified health care expenses such as premiums, copays, deductibles, and pharmacy costs.
The special tax treatment is that contributions to VEBA are not subject to the social security, Medicare, or personal income taxes you normally pay on compensation. In addition, earnings on your contribution grow tax free and are not taxed when withdrawn.
Participation in a VEBA plan is determined by vote by members of your group and the results of the vote are binding on all members.
If your union does not vote to participate in HRA VEBA
Retiring employees will receive a cash-out of 25% of their accrued sick leave as compensation OR retiring employees may contribute up to 35% (See * below) of their accrued sick leave balance to their City Deferred Compensation Plan account. Contributions and earnings to Deferred Compensation account are federal income tax deferred, which means the money in your deferred compensation account is subject to federal income tax withholding when withdrawn. Contributions are subject to FICA taxes (7.65%).
Your union votes to participate in HRA VEBA
Retiring employees from the unions that have voted for HRA VEBA account must convert 35% of their sick leave balance into a VEBA account. Because of the special tax treatment, there are no exceptions or other options for the sick leave. Participation is mandatory.
Check your union's 12/9/2016 Eligibility Chart .
See the guidelines for converting unused sick leave balance upon retirement into either VEBA or Deferred Compensation
Here are the steps for establishing your VEBA account:
Once you retire from City service, you will be automatically enrolled in HRA VEBA. HRA VEBA will mail you a welcome packet after your sick leave has been converted. The packet will contain your account number, claims-eligibility status, investment allocation and online account access instructions.
For more information about the plan and how to register, please read the Your HRA Plan Benefits flyer.
If you are enrolling in a City medical retiree plan and want to be
reimbursed by VEBA for the regular premium payment -
the Auto Premium Reimbursement Form or submit the request online at www.hraveba.org
Request a letter from Central Benefits at Benefits.Unit@seattle.gov which includes:
name(s) of covered individual(s);
policy period; and
insurance provider name and address.
Submit the form and letter to HRA VEBA PO Box 80587, Seattle, WA 98108
HRA VEBA will notify you once they have set up the regular reimbursement process, usually within two weeks of receipt of the systematic reimbursement form and letter about your plan.