Wellness Programs and VEBA

[Guest janetd]

I am in the process of getting contracting with a Wellness Provider. We would like to have Health Assessments, a Wellness self help portal and communications, Biometric Screenings, and High Risk Wellness Coaching. According to the VEBA requirements, an employer can pay for life, sick, accident or other benefits to its members or their beneficiaries. My understanding from that sentence is that since this is for the benefit of employees, these expenses can be run through our VEBA.

Does anyone have an opinion in agreement or disagreement?

[vebaguru]

I agree, but you are subjecting wellness and other benefits to the VEBA rules as well.

[ERISAatty]

Vebaguru,

I am currently looking at the same issue, i.e. funding wellness program costs through an exisiting VEBA.

By 'subjecting' the benefits to the VEBA rules, I assume you are referring to the funding limits, if applicable, the no-inurement rules, and nondiscrimination rules correct?

From my research, it seems that an employer may contribute to the VEBA the costs to be paid out for wellness expenses.

I'm still looking into what to make of the fact that some wellness expenses are (i.e. non-prescription smoking cessation aids) are NOT 213(d) medical expenses, but my thought is that, while that may create a tax impact for the wellness program recipient, it shouldn't make VEBA funding impossible.

Does that sound reasonable to you?

(She asks, as a non veba guru)

-Thank you

[Don Levit]

ERISAatty:

Qualified benefits are those designed to safeguard or improve the health of members.

Social, recreational, and cultural benefits designed to promote members' physical, mental, and emotional well-being may also qualify as VEBA benefits.

Don Levit

[ERISAatty]

ERISAatty:

Qualified benefits are those designed to safeguard or improve the health of members.

Social, recreational, and cultural benefits designed to promote members' physical, mental, and emotional well-being may also qualify as VEBA benefits.

Don Levit

Thanks, Don. For anyone else interested in this topic, I have found a nice cite (in which the IRS approved VEBA payment of a broad range of recreational and social benefits). See Private Letter Ruling 9802038 (January 1, 1998).

[Don Levit]

ERISAatty:

Thanks for providing that very intersting PLR.

While the "other benefits" qualified for the VEBA, I did notice that part of the reason seemed to be that the funds disbursed for those benefits were only one-tenth of one percent of the funds available.

So, in order to qualify, the benefits may have to be a very minor part of the total benefits available.

In addition, no reserve could be set up for these benefits.

If any funds were left over at the end of the year, they were subject to UBIT.

The ruling did say, though, that if the benefits were part of a collective bargaining agreement, they could accumulate from year to year, and not be subject to UBIT.

While not saying so, I assume a reserve could also be accumulated, and not subject to UBIT, if the payments into the VEBA for these benefits were made by the employees on an after-tax basis.

Don Levit

[vebaguru]

Looks like you arrived at the correct answers in my absence.

In a similar manner, Flex plans (FSAs) and HRAs may be used to reimburse long-term care premiums, even though the long-term care benefits may include living expenses in addition to medical expenses.

[Guest jhall]

ERISA Attorney,

We are contemplating a similar use of VEBA assets remaining in trust after MEWA decided to get out of the self-funded group health insurance business. Was curious if your situation was similar or if your situation involved contributions of new funds to the VEBA or if you too might be trying to spend down remaining amounts with the VEBA funds?

At any rate, I am curious on thoughts as to how best to structure such a program. We are in situaiton where many of the original employers in the self-funded group health insurance dropped out of the plan years ago so that the current participants in the MEWA are only a small subset of the larger pool of participants that participated over the years and thus contributed to the "excess" amounts remaining in the VEBA upon discontinuance of the group health plan. Thanks.

[ERISAatty]

jhall,

The situation I was involved with related to putting new assets into the (employer self-funded) VEBA, for the purpose of paying those portions of the wellness plan that we decided were permitted VEBA (and ERISA, per the terms of the trust agreement) benefits.

In this case, we decided (1) that the wellness benefits were permitted VEBA "sick" and/or "other" benefits. Moreover, the actual wellness benefits turned out to be a de minimis percentage of the entire benefits paid annually through the trust, so in any event, we determined that paying wellness benefits through the VEBA was permitted, so long as the underlying wellness benefits could also be characterized as a permitted ERISA benefit. There was a DOL ruling from the late 80's saying that EAP-type (kind of a wellness plan precursor) programs provide 'medical' care within the meaning of ERISA 3(1).

We decided that those parts of the wellness program (i.e. financial and or tangible property incentive items) that could not be characterized as medical/ERISA/VEBA benefits must be funded other than through the VEBA (i.e. from general employer assets).

I have very little working knowledge of MEWAs, or about how those funds can be spent, (or if the individual state laws, and any related restrictions, would still apply) so I wouldn't want to comment on that aspect.

Good luck!

[QDROphile]

vebaguru:

I think the statement that FSAs can reimburse long-term care premiums needs a bit of qualification given the terms of section 125(f) and the fact that most health FSAs are delivered through cafeteria plans.

[Don Levit]

ERISAatty:

Regarding state MEWA laws, it sounds like your multiple employer VEBA is in more than one state.

Would you agree that state regulation of MEWAs would differ, depending on whether the MEWA is in one state or more than one state?

I am referring to the uniform regulation of ERISA plans located in more than one state.

I noticed you are in Wisconsin.

Have you discussed MEWA regulation with Fred Nepple?

Don Levit

[ERISAatty]

Thanks for your comments, Don, but in my case, we were not dealing with a multiple employer situation - just a single employer in multiple states.

I still disclaim, as above, any significant knowledge about MEWA rules, ( I think that was jhall's issue) but I appreciate the reference to Mr. Nepple, should such a need arise.

(And by the way, in case anyone was wondering, yes, it is terribly cold in Wisconsin just now).

[Guest jhall]

ERISAatty,

Thanks very much for your response and helpful thoughts. Stay warm!