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CaliBen

Adding retiree life to existing medical VEBA

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How difficult is it to add another benefit to an existing VEBA. We have an existing VEBA and management asked us to evaluate adding the existing retiree life plan. The company pays most of the retiree life premiums, but retirees contribute a portion.

What are the key considerations? Upfront and ongoing legal and accounting costs? Our current annual retiree life premium is relatively small (about $600,000 per year including retiree contributions) so one of my concerns is that the initial cost to move the plan into the VEBA and the ongoing legal, accounting and investment expense could be significant in comparison.

 

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Depending on the sponsorship (employer, union, or joint committee), it may or may not be easy to add a retiree life plan to an existing VEBA.  The degree of difficulty depends upon the politics of the process and the number and types of parties involved who have to sign off.

Key considerations include answering the question, what advantage is there in running a current cost plan through a tax-exempt trust?  Will the trust be accumulating amounts currently for future plan/tax years? The legal, accounting and investment expenses could be significant whether the benefit is provided directly by the employer or through a VEBA.  The costs would not be appreciably higher because this is done through an existing VEBA.

I suspect that you are leaving some essential information out of your question.
 

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