Using Your VEBA
Your VEBA account is designed to pay for Eligible Medical Expenses. The IRS has specific rules for what is considered eligible. These include:
Most Insurance Premiums
For extensive detail on eligible expenses, you can access Publication 502 at this link:
IRS Code Section 213(d) Eligible Medical Expenses
An eligible expense is defined as those expenses paid for care as described in Section 213 (d) of the Internal Revenue Code. Below are two lists which may help determine whether an expense is eligible.
For more detailed information, please refer to IRS Publication 502 titled, “Medical and Dental Expenses,” If tax advice is required, you should seek the services of a competent professional.
Bridge to Retirement Coverage / Medicare:
Many public sector employees are able to retire in their 50’s with full pension. While this is a great benefit from your years of public service, many agencies have limited or no retiree health insurance. At age 65 you will qualify for Medicare and the reduced premiums of the program, but you have to bridge the gap to that date. Therefore you will be responsible not only for your out-of-pocket expenses, but 100% of your premiums too.
Most recent retirees are shocked that the monthly premiums for a couple can reach $1,500 to $2,000. There are too many instances where an employee simply cannot afford to retire because of these hefty expenses.
The CALGOVEBA enables you to build a tax-advantaged savings account dedicated to pay these premiums as well as the other expenses you will face even after you qualify for Medicare (including dental and vision).
Updated Chart of Rising Expenses:
VEBA funds can be used to help pay for long term care (LTC) insurance premiums. The policy must be a “qualified long term care insurance contract”. Most LTC plans in the market qualify, but ask you insurer to be sure. Also note, certain life insurance plans also provide a LTC benefit alongside the life insurance. These plans do NOT qualify.
The amount eligible to be reimbursed is driven by your age: