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Age weighting contributions to a funded HRA

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Now that HRAs have been restricted to retiree health benefits and non-major medical benefits (e.g., dental and/or vision only), and yet extant are IRS rulings from the past decade that allow for funding of HRAs (such as into a VEBA), I've been asked if about funded retiree health HRAs much more than pre-Obamacare.

Owners of small business have been reluctant to participate in MEWA VEBAs for HRAs because of the nondiscrimination requirements of section 105(h). The small business owner makes much more than his/her employees, and has benefited from the factoring of those compensation differences in the contributions/allocations/testing when it comes to company contributions to their 401k's. They do not like the idea of the same dollar amount having to be contributed to a funded retiree HRA for the lower paid employees as is contributed for themselves, higher paid. But section 105(h) and regulation 1.105-11 don't allow for differences proportionate to compensation.

However, what about taking into account differences in age and thus numbers of years until retirement? Using age weighting concepts allowed for 401(a) plans, can the employer put more in for older employees than younger ones, calculated based on investment earnings assumptions so that presumably from a current contribution both would have the same dollar amount when they reach retirement age and are thus eligible for the benefit from the VEBA?

John Simmons


Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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