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VEMAs - anyone heard of this?

Guest KEK

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Has anyone heard of a Variable Employee Medical Account (VEMA)?

One company, Professional Benefits Retiree Services (www.retireeservices.com/solutions/vema.html), is marketing this idea. Evidently, it combines the benefits of 401k plans (EE controls investments which grow tax free and health FSAs (pay medical expense with pre-tax dollars).

Supposedly, the EE (and/or the Company) contributes money to a tax-exempt trust. At retirement, the EE can use the accumulation to pay for retiree medical and there is no "use it or lose it" provision as with FSAs.

I've emailed the company asking for more info, but haven't yet received a response. Any thoughts?

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The only thing I ever found on this was at http://www.wealthadvisors.bigstep.com (but it might not be there anymore).

You also might try a search of these Message Boards.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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  • 1 month later...

They are another name for employee medical accounts. There are articles at http://www.bsgbenefits.com/cgi-bin/docs.cgi?artnum=1 and http://www.bsgbenefits.com/cgi-bin/docs.cgi?artnum=4.

The employer receives a deduction. The employees may also make tax-deductible contribution. No amount is subject to "use-it-or-lose-it" since only employer money carries over from year to year.

This is a very effective model for "defined contribution" or "consumer-driven" health plans. It also works for funding retiree medical benefits on a defined contribution basis, thus avoiding the open ended liability of most retiree health plans as well as the FAS 106 disclosure problems.

It isn't deferred compensation because it is a welfare plan which may only be used to purchase or provide welfare benefits. On death the proceeds of any life insurance policies are distributed to beneficiaries. Any amount left in the employee medical account is available for use by dependents during their lifetime. Deminimis benefits are cashed out.

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Guest b2kates

It looks like a repackaged post retirement medical VEBA.

They work in the right situation. I have assisted with similar programs for public companies that have post retirement obligations. it does approximate and offset the FASB 106 liability.

In this situation seems like an insurance marketing strategy.

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