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PreTax Employee Contributions into VEBA

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Guest Treasurer

We are a local governmental entity and started having mandatory employee contributions into our VEBA plan that was previously only funded by employer contributions. The employer continues to still make its contibutions. Currently, the employee contribution is being made with post tax dollars. Is there a way to have the employee contribution come from pre tax dollars? Please Help!!

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Guest b2kates

a VEBA is fundementally a funding vehicle. Assuming it is used to provide medical benefits employees could contribute on a pretax basis through a cafeteria arrangement.

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Is there any way you can cite any IRS provisions for a VEBA?

My understanding is that employee contributions are not tax deductible.

Don Levit

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Whether or not there is a VEBA as the funding vehicle is not pertinent to the question of whether employee contributions can be pre-tax. They can be pre-tax only if made pursuant to a Section 125 plan. Whether the employer can, or does, or should, or must deposit $$ equivalent to its employees' contributions to a VEBA is a totally different issue.

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Don Levit: What about them (the "discrimination issues," that is)?

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If the VEBA is an employee-pay-all arrangement (after-tax) with at least 50 employees, there are no limits to the amounts that employees can contribute.

Don Levit

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Guest americasVEBA.com
We are a local governmental entity and started having mandatory employee contributions into our VEBA plan that was previously only funded by employer contributions. The employer continues to still make its contibutions. Currently, the employee contribution is being made with post tax dollars. Is there a way to have the employee contribution come from pre tax dollars? Please Help!!

It depends on the type of plan funded with the VEBA. If the plan reimburses medical expenses and premiums during retirement the plan is an HRA. If an HRA, if employee contributions are mandatory contributions can be pre-tax. If employees have not choice they have not constructively recieved those monies and the contribution is viewed as an employer contribution. Is this waht you are getting at?

See www.americasVEBA.com

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