Voluntary Employee Beneficiary Association (VEBA)
The vehicle utilized to provide this unique Health & Accident benefit program is an Internal Revenue Code – section 501(c)(9) tax-exempt trust, commonly referred to as a Voluntary Employee Beneficiary Association (“VEBA”).
A VEBA is a benefit plan whereby sponsoring Employers can provide certain medical benefits, on a tax-deductible basis, for Owners, Officers, Employees and their respective dependents (“Employee”). Under a VEBA, sponsoring Employers deduct VEBA contributions as ordinary and necessary business expenses under IRC sections 162 and 461.
This program does not typically try to “shoehorn” everyone into a single plan of benefits. Instead, it allows the Employer to select any, or all, of nine (9) comprehensive major medical plans.
Each Employee individually choses one of the Employer selected benefit plans. Each plan’s premium rates reflect how much, or how little, coverage that person wants.
The rates for all nine plans remain consistent across all 50 States, regardless of where the Employer locations are located in the U.S.
Example: If a $500 deductible plan is chosen by a person with family coverage working in Chicago, New York, Dallas, Los Angeles, or even Honolulu, premium rates are the same and covered benefits are paid for any licensed physician or hospital in all 50 States.
General Information / Program Components
- Level funded with excess-loss coverage through Hanover Re.
- Provides coverage throughout all 50 states. No ineligible industries.
- Utilizes CIGNA “Choice Fund”, First Health, and PHCS PPO networks for Employers in all 50 states. Can be offered to five employees (1 if a member of an approved association).
- Coverage effective from the 1st of the month following 30-days from date of employment. W-2 and 1099 Employees working 20-hours per employer per week or more are eligible.
- Choice of 9 separate plans - each Employee selects one plan.
- Medical questionnaires required – may waive individual applications based on underwriting approval.
- Employer is either Accepted or Rejected based on medical questionnaires – turnaround response usually within 10 business days.
- All Employers - Rates change each January 1st and guaranteed thru December 31st. Up to 2-yr rate guarantees may be available for extremely large cases.
- All Employers - Open enrollment is every December.
- If Employer terminates - NO run-out claim liability to Employer. Only liability is that the Employer has to pay the monthly premiums on time.
- Employer minimum premium payment requirement is State or Federal minimum premium for employee only coverage of the lowest cost plan chosen.
- COBRA administration handled by the Administrator, including premium collection.- NO Employer involvement
- The Annual Deductible is included in the Out of Pocket Maximum.