HomeMy WebLinkAboutItem 07 Health Reimbursement Arrangement-Voluntary Employees' Beneficiary Association (VEBA) Plans Resolution AGENDA ITEM SUMMARY Meeting Date: 6/15/2015
Meeting Type: Regular Meeting
Staff Contact/Dept.: Greta Utecht, HR Dept. Staff Phone No: x3787
Estimated Time: Consent Calendar
S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Provide Financially Responsible and Innovative Government
Services ITEM TITLE: HEALTH REIMBURSEMENT ARRANGEMENT/VOLUNTARY EMPLOYEES’
BENEFICIARY ASSOCIATION (VEBA) PLANS RESOLUTION
ACTION REQUESTED:
Adopt/not adopt the following Resolution:
A RESOLUTION AUTHORIZING THE ESTABLISHMENT OF THE HEALTH
REIMBURSEMENT ARRANGMENT/VOLUNTARY EMPLOYEES’ BENEFICIARY ASSOCIATION (“HRA VEBA”) PLANS
ISSUE
STATEMENT:
Most employees who retire from the City of Springfield receive a cash-out of up to 480
hours of any remaining sick leave they may have. In order to reduce the cost of these disbursements to the City (by avoiding payroll taxes) and to allow the full amount of the
payment to be available to the employee for retirement health expenses, staff recommends
the establishment of an HRA VEBA plan.
ATTACHMENTS: 1. Resolution
DISCUSSION/ FINANCIAL
IMPACT:
An HRA VEBA plan is a type of tax-exempt trust instrument through which post-retirement
benefits can be paid. VEBAs are authorized by Internal Revenue Code section 501(c)(9).
The HRA VEBA plan is administered by the Voluntary Employees’ Beneficiary Association Trust for Public Employees in the Northwest (“Trust”). The City currently administers an HRA-only plan for active employees as part of our high deductible health
benefit, but our HRA plan does not allow for lump-sum retirement cash-out deposits.
Currently the City deposits a fixed amount per employee to his or her HRA account, which
can be used to partially fund the high deductible and out of pocket expenses our health plan is designed with. The money in the HRA account does not earn interest, but any money not
used at the end of each calendar year rolls over to the next year and can grow over the
employee’s tenure with the City. After retirement the HRA dollars remain available for use by the retiree, but the account continues to be managed by the City, which is an additional
administrative load and liability to the City. By establishing the HRA VEBA plan, sick leave cash out dollars will be deposited into a
tax free account that has investment options similar to deferred compensation accounts. Interest earned is not taxed, and dollars withdrawn to reimburse qualified medical, dental, vision and tax qualified long-term care premiums and non-covered healthcare expenses of
the employees and their qualified dependents is also tax free. In addition, remaining HRA account dollars can be folded into the VEBA at retirement, reducing the liability and
administrative load on the City, and combining all funds for use for retirement health
expenses into one account for the employee.
The Trust is an independent entity; the funds in the Trust are managed by the employee and
the Trust. The City pays nothing to the Trust, nor is the City exposed to any liability as a result of establishing the plan. The financial advantage to establishing the plan is the
avoidance of payroll taxes on the cash-outs.
RESOLUTION
NO.
A RESOLUTION AUTHORIZING THE ESTABLISHMENT OF
THE HEALTH REIMBURSEMENT ARRANGEMENT/VOLUNTARY EMPLOYEES'
BENEFICIARY ASSOCIATION C'HRA VEBA") PLANS
WHEREAS,the Internal Revenue Code Section 501(c)(9)allows for the creation of a voluntary
employees'beneficiary association which Is a tax-exempt health and welfare trust;and
WHEREAS,IRS regulations and guidelines allow an employer to offer health reimbursement
arrangement (HRA)plans;and
WHEREAS,such HRA plans are available to governmental employers In the Northwest;and
WHEREAS,the Voluntary Employees' BeneficiaryAssociation Trust for Public Employees In the
Northwest C'Trust") offers and will administer two HRA VEBA plans (collectively the "Plans") as
amended and restated:the Standard HRA Plan,which shall be Integrated with the City of
Springfield's or another qualified group health plan and which shall accept City of Springfield
contributions on behalf of eligible employees who are enrolled In or covered by such qualified
group health plan and any other contributions that may be permitted under applicable law
from time to time;and the Post-separation HRA Plan,which shall accept contributions on
behalf of eligible employees.Including eligible employees who are not enrolled In or covered
by the City of Springfield's or another qualified group health plan, and which shall provide
benefits only after a participant separates from service or retires; and
WHEREAS,The Cityof Springfield has determined that It Is In the best Interest of the Cityand
Its employees to establish the Plans, which provide tax-free,defined contribution accounts for
employees to reimburse qualified medical,dental,vision and tax qualified long-term care
premiums and non-covered healthcare expenses of the employees and their qualified
dependents;and
WHEREAS,The Cityof Springfield desires to establish the Plans for Its employees;and
WHEREAS,The City of Springfield desires to use the services of the Trust to administer such
Plans;and
WHEREAS,the Plans will be administered In accordance with the Plan documents provided by
the Trust on file In the Employer's main office.
NOW,THEREFORE,BEIT RESOLVED by the City of Springfield as follows:
Section 1.The City of Springfield hereby elects to participate In the Plans and Trust
as presently constituted or hereafter amended using the Trust as Its plan administrator for the
benefit of eligible employees as defined by City of Springfield policies or collective bargaining
agreements.
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Attachment 1
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Section 2. The Plans will be funded with City of Springfield employee contributions at
retirement in amounts determined from time to time pursuant to the City of Springfield's
policies and collective bargaining agreements.
Section 3.The City Manager is authorized to execute documents and establish
procedures consistent with Plan and Trust provisions and applicable City of Springfield Policies
polices and collective bargaining agreements necessary to effect the adoption and
administration of the Plans.
Section 4. This Resolution shall take effect upon its adoption by the Council and
approval by the Mayor.
ADOPTED by the Common Council of the City of Springfield this day of June,2015,
with a vote of for and against.
Christine L.Lundberg,Mayor
ATTEST:
nfv:ji:::uAF['ROVED
AS 'I'O
Amy Sowa,City Recorder DAi ir;_Lz
OFFICE OF Oi lYATTORNEY
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Attachment 1
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