BuckeyeRISA

Ease of administration. The Plan covers multiple employee groups, but only some of the employee groups are VEBA trust funded. The claims administrator intakes and pays all claims, regardless of the employee groups and invoices the employer. This allows the plan sponsor to promptly reimburse the claims administrator for claims paid without having to bifurcate the process into trust-payable and non-trust-payable amounts. They can determine the trust-payable amount on the back end and seek any applicable reimbursement. Claims administrators often do not want to deal with seeking payment from multiple sources, especially in cases where there are multiple different VEBAs and associated subaccounts that fund the plan. Prohibited Transaction Exemption 80-26 (PTE 80-26) allows for certain interest free loans to employee benefit plans. The plan sponsor has a reimbursement agreement between itself and the trust that allows the plan sponsor to pay trust-eligible claims and the trust to reimburse the plan sponsor. Under this structure, there are no assets revering to the employer and no prohibited transaction - the trust is simply repaying an interest-free obligation of the trust (which happens to be to the plan sponsor) incurred by the pre-payment of trust-eligible claims. We have had informal (non-binding) discussions with the IRS regarding this process, during which they agreed that such an arrangement would not constitute a reversion.

All of the above information has been very helpful. I have a bit of a twist on the scenario... An employer sponsors a self-funded health plan with certain benefits paid from a VEBA trust and other benefits paid through the general assets of the employer. Where assets are VEBA trust payable, the employer first pays the claim through its general assets and then seeks reimbursement from the VEBA trust. This is accomplished through an interest free "loan" by the employer to the trust. The question that has arisen: Must the employer account for employee contributions made through a Section 125 plan when seeking reimbursement from the VEBA (considering the employee contributions to be a plan asset rather than a general asset of the employer), or may the employer seek reimbursement from the VEBA for the entire amount of eligible claims/expenses under the VEBA, regardless of such employee contributions? My initial thought was that such employee contributions would be considered plan assets, rather than general assets of the employer, and would reduce the amount eligible for reimbursement from the VEBA. However, upon review of the information above and DOL Technical Release 92-01, it appears that the employee contributions would be considered general assets of the employer, and that the employer could reimburse the full amount paid. The VEBA in question is quite overfunded, which would make this an ideal outcome for the employer. Note that the employee premiums are not held in any trust. I do not have full clarity on how employee premiums are held, though I suspect they are held in a separate account in the employer's name. Additional thoughts or considerations are appreciated!