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Separate Plans for Comissioned Employees - Do We Set Up a New VEBA and spin off assets of old for sales employees or do we create separate subaccounts


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Company X has a commissioned sales force to sell its products. Historically, Company X has maintained one self-funded medical plan with several options for all of its employees, which has been funded in part by a VEBA. In 2005, to induce greater productivity among its commissioned sales force, Company X has proposed to peg its subsidy of the commissioned employee's medical benefits upon reaching certain minimum sales goals based on the employee's level withint the Company. To comply with self-funded medical plan nondiscrimination testing, Company X has placed their medical benefits (other than prescription drugs) into an insured arrangement providing substantially similar coverages (other than state mandates) to that provided to salaried employees. In addition, Company X has establised a separate 125 plan for the commissioned employees. As a result of these changes, the Company's account limit for commissioned employees is limited to the incurred but not paid claims for prescription drugs and dental coverage. In order to have these changes respected, Company X is considering whether it needs to either (a) place its liability for incurred but not paid claims for prescription drug and dental benefits attributable to commissioned employees into a separate VEBA or (b) establish subaccounts under the existing VEBA for the saleried employees versus the commissioned employees. What are the pros and cons of each approach and which approach do you consider more likely to result in treatment as separate plans and/or funds?

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