CALGOVEBA

THE CALIFORNIA GOVERNMENT VEBA

The Public Sector's own solution for funding OPEB and addressing employee healthcare benefits.

The CALGOVEBA allows agencies to fund OPEB liabilities through an approved 501(c)(9) Trust and provides necessary heath care benefits to both active and retired employees.

The CALGOVEBA was developed by a public agency to meet the needs of public agencies across California. As a 501(c)(9) Trust, contributions are irrevocable, and are protected from creditors. All contributions, interest, and reimbursements are tax free. Employees may makeunlimited contributions, and all benefits accumulate year to year. There is no "use it or lose it" policy. Benefits can be enjoyed by both actively employed and retired participants, as well as their spouse or other qualified dependents. All assets of the trust are for the exclusive benefit of plan members and their beneficiaries.

Agency contributions will reduce disclosed OPEB liabilities, as the Trust meets the Requirements of GASB 45. Contributing agencies have a seat on the board. This is a full service, turnkey solution, with plan administration through an experienced capital advisory firm. Investment management works through an STIF fund with a AA rated bank. Stable value and equity management has ensured that the CALGOVEBA has not lost any principle or interest, even through difficult economic times.

Several agencies have already taken advantage of the CALGOVEBA for funding OPEB liabilities and offering a needed and flexible health care benefit. Additional public agencies exploring the various solutions are seeing the CALGOVEBA as the best option to meet their needs.

Welcome

Retiree health care costs continue to soar while public agencies struggle to fund their benefit programs.  This leaves employees and agencies having to consider ways to most efficiently save and invest for retiree health care expenses.

Investment firms project that the average healthy couple will need between $220,000 and $400,000 for out-of-pocket health care expenses during their retirement.  This amount shocks most people.  In fact, only 8% of the population has factored these expenses into their retirement investment portfolio.                                   

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The CALGOVEBA was developed by the City of Foster City in 2004 to address these issues.  The program takes advantage of favorable IRS tax regulations that encourage employees to plan ahead for these substantial expenses.  Each participant has an individual account which is portable, and the program features guaranteed investment returns.  Additionally, participants can use their account for current expenses if they so choose.

The CALGOVEBA is enabled by IRC § 501(c) 9 which establishes VEBA Trusts.  The VEBA Trust is a collectively bargained agreement that offers special tax incentives to encourage individuals to save for these expenses.  Specifically, the CALGOVEBA program allows for:

1.    Pre-Tax Contributions

2.    Tax-Exempt Investment Growth

3.    Tax-Exempt Reimbursements

The CALGOVEBA also permits tax-free Leave Pay contributions.  Too often employees who diligently save up Leave Pay end up with a significant tax burden.  Bargaining units are able to elect to contribute all or part of their Leave Pay into their account.

For agencies with OPEB liabilities, the CALGOVEBA is GASB 45 approved.  Therefore, agency contributions will reduce disclosed OPEB liabilities.

The CALGOVEBA is an integral and critical component of one's retirement plan.  Retiree health care expenses are significant.  Taking advantage of the § 501(c) 9 tax advantages reduces this burden.

Please contact us for more information on how we can help.

 

 

5999 RIDGE VIEW ST
CAMARILLO, CA, 93012
805.764.0300
scot.wallington@brentwoodllc.com