Cost to start a VEBA/MEWA?

[misterfinder]

(Sorry, I posted this in "other kinds of welfare benefit plans" as well, but I'm not sure that's the right place for it.  So I'm posting it here as well.)

Stumbled on this forum, what a great wealth of wisdom!

I'm a union rep and we are considering starting a healthcare plan for our members.  Instead of the various employers having their own healthcare plans for our members, the employers are going to give us the money and we will provide the healthcare plan for our own members.

I believe we will need to start a VEBA and a MEWA, but I am uncertain as to how much we will need to allocate for start-up costs (e.g. legal advice, documents, etc.).  We have 10-15k local union members.  I'm assuming it will cost $500-$1mm to start up and at least 1.5 years before we can go live.  Am I even in the ballpark?  

Anyone know how much it will cost us to get this started?  Any help is much appreciated!

[CuseFan]

Why are you not working with a provider for this?

[misterfinder]

We are just starting out; brainstorming concept stage.  Just want to get a ballpark on cost before we dive deeper.

[Chaz]

It appears as if the arrangement you are contemplating is a multi-employer health and welfare plan.  That is a plan that covers union employees of two or more unrelated employers pursuant to one or more collective bargaining agreements.

That is an entirely different concept than a MEWA or VEBA.

[misterfinder]

Now I'm really feeling dumb...

Can you enlighten me?  Don't we need to create a MEWA and a VEBA in order to do that?

[leevena]

2 hours ago, misterfinder said:

Now I'm really feeling dumb...

Can you enlighten me?  Don't we need to create a MEWA and a VEBA in order to do that?

May I make a suggestion to you.  Could you take a few moments and provide more information?  Your question is very vague, not blaming you at all, what you are asking about can go in a variety of directions.   

As a starting point, how many members, how many employer groups, geographical area, and why you believe your plan is a better solution.  Also, if you were to do this, are you planning on outsourcing the administration, or doing it in-house?  There will be more questions I am sure, but this will point us in the right direction.

[Chaz]

You wouldn't need to create a MEWA.  You would not need to set up a VEBA, although the amounts will generally need to be placed in trust.  A multiemployer plan is usually (but not always) governed by a board of trustees, half of which represent the union and half of which represent contributing employers.  The structure will be a product of the collective bargaining process

You need to engage experienced labor law and benefits consultants and counsel and probably are wasting your time seeking answers on this board (except, of course, with respect to my excellent advice!).

[Chaz]

Here is a good introduction to multiemployer funds (both pension and health and welfare);

http://www.ifebp.org/news/featuredtopics/multiemployer/Pages/default.aspx

 

[misterfinder]

On 6/14/2019 at 3:27 PM, Chaz said:

You wouldn't need to create a MEWA.  You would not need to set up a VEBA, although the amounts will generally need to be placed in trust.  A multiemployer plan is usually (but not always) governed by a board of trustees, half of which represent the union and half of which represent contributing employers.  The structure will be a product of the collective bargaining process

You need to engage experienced labor law and benefits consultants and counsel and probably are wasting your time seeking answers on this board (except, of course, with respect to my excellent advice!).

Definitely not a waste of time because you've already helped me tremendously.  Thank you!

My goal in posting here is simply to have a decent groundwork of knowledge before I engage the lawyers.  I want to at least know what questions to ask.  

So what you're saying is that it doesn't have to be a MEWA or a VEBA, but a multiemployer plan instead.  Furthermore, who controls the plan depends on whatever is negotiated between the employer and union.  Am I correct in my summarization?

We've thrown around ideas where the members could own the plan and be able to cash-out some of the reserves after a certain period of time (assuming the reserves grow as large as we believe they can).  Do you think that idea is legally viable?

We are a state-wide union with 15,000 members.  Primarily (90+%) public sector employees at the municipal level.  We will outsource nearly 100% of the admin of this plan to start.  

[Chaz]

1-You are generally correct in your summarization.

2-I would need to know more specifics about your cash-out question but I am skeptical that it will work because of constraints under a myriad of applicable laws.

[vebaguru]

There are special sets of rules which apply to multiple-employer welfare benefit plans ("MEWAs") (which likely don't apply to you), VEBAs (which may apply to you if you choose to use a VEBA structure), to multi-employer welfare benefit plans (which likely do apply to your situation), to collectively-bargained benefits (which likely do apply to your situation), etc. 

I have established VEBAs on behalf of several unions, typically public safety employees, teachers, etc. The primary reason for creating such plans has usually been because there is a gap between the employer's health plan and Medicare for those who are eligible to and desire to retire before their Medicare eligibility date.

In such situations, my fees, including travel, meetings, consulting time, question and answer sessions, drafting of documents, submissions to IRS (for VEBAs) and US Department of Labor, have been in the range of $5,000 to $12,000, plus government filing fees.  You weren't in the ballpark.

I have actively participated in the American Bar Association, Section of Taxation, Employee Benefits Committee and the Welfare Benefit Plans subcommittee and could (at no charge) refer you to an attorney who specializes in this area of law.  If you would like such a referral, simply let me know.

[rocknrolls2]

It is almost always preferable to start simple and add complexity only if you feel it is necessary to meet your needs. VEBAs are generally established only by sponsors with some degree of sophistication in the health care field. Unless you are driven to having the administration work done in-house, you may find that it is probably more convenient (and possibly cheaper) to have medical coverage provided through health insurance at first, in which case, you would be outsourcing the administration of the health plan. Even before you get to the point of establishing a relationship with benefit consultants and competent benefits counsel, I think the first thing you need to do is to establish contact with a health insurer, even if you ultimately decide to go the VEBA route.