A VEBA is a post-retirement medical expense reimbursement account available to eligible state and higher education employees. If your employer offers a VEBA, it is a good idea for employees to become a participant in the plan. The VEBA account may be used to pay any qualified post-retirement medical, dental, or vision out-of-pocket expenses including, deductibles and co-insurance, Medicare Part B premiums and tax qualified long term care insurance premiums.
The tax objectives of the plan are to:
1. enable your employer to make tax free deposits on your behalf
2. for your account to be credited with tax-free earnings
3. to obtain tax-free reimbursements for your medical expenses
As a general rule, on a January-December calendar year basis, a participant can transfer 12 unused sick leave days tax free into the VEBA. Since the end of December is fast approaching and if a participant is eligible for the VEBA transfer, time is of the essence. Check with your employer.
When you retire, the total amount equivalent to your sick leave cash-out, based on your salary at the time of retirement, is calculated at ¼ of a participant’s unused sick leave balance. For example, if you retire with 40 days of unused sick leave, you would be able to add the equivalent of 10 days of pay to your VEBA account.
As always, if you have questions, please call our office.
