Recent guidance from the IRS suggests that it will be helpful to segregate funding for retiree health benefits from funding for all other welfare benefits (such as retiree life insurance, disability benefits, and health benefits for active employees) in order to minimize tax liabilities. A proposed regulation issued earlier this year indicates that segregating the retiree health assets in a separate trust might reduce the unrelated business income tax on the trust’s investment income. (As we explain below, this tax issue is limited to benefits that are not collectively-bargained.)
Continue Reading Can You Reduce Your VEBA’s Taxable Income?
VEBA
Will VEBAs Be Subject to the Annual Fee for Health Insurance Providers?
By Amy N. Moore on
Posted in Health Plans, Welfare Plans
The Affordable Care Act imposes a host of new fees on employers in connection with the health benefits they provide to their employees. One fee that has received little attention is the annual fee for health insurance providers under section 9010 of ACA, which becomes effective with respect to premiums written in 2013. The government will calculate the fee for each covered entity based on the relative amount of health premiums the entity writes compared with all other covered entities.
It is not surprising that large employers have ignored section 9010, since the annual fee applies only to certain health insurance providers. Most large employers self-insure their group health plans, and the statute makes clear that the “covered entities” subject to the fee do not include employers that self-insure employees’ health risks.
It is less clear, however, that voluntary employees’ beneficiary associations (“VEBAs”) and other funding arrangements for self-insured group health plans are exempt from the annual fee. The definition of a “covered entity” expressly excludes a VEBA “established by an entity (other than an employer or employers) for purposes of providing health care benefits.” For example, a VEBA maintained by labor union for its members would not be a covered entity; but this limited exception strongly implies that a VEBA maintained by an employer would be a covered entity, and would potentially be subject to the annual fee.
Continue Reading Will VEBAs Be Subject to the Annual Fee for Health Insurance Providers?