About MT VEBA HRA

The Montana Voluntary Employees’ Beneficiary Association Health Reimbursement Account (the Montana VEBA HRA) is a post-employment medical expense reimbursement program.

The Department of Administration (DOA) has an IRS determination of the tax-exempt status of the Montana VEBA HRA under IRC 501(c)(9) since July 2003.

IRS requirements for the Montana VEBA HRA include the group participation of eligible employees in a work unit. The IRS rulings prohibits an employee from making the individual choice to participate in (or not participate in) a Montana VEBA HRA group. An employee cannot choose between non-taxable benefits (employer contribution of accrued leave to the Montana VEBA HRA) or the cashing out of accrued leave at termination of employment.

The following guidelines are designed to help employers and employees establish groups for the Montana VEBA HRA:

• A group is an association of employees employed by the same employer under an existing organizational structure. Groups may also be formed from smaller sub-units, such as a recognized organizational division of the employer. Sub-units may be determined by geographical location of a work unit, job positions, or another reasonable classification of employees.
• A group must have at least 5 eligible employees. The most common type of group formation will be those employees who are eligible to retire and voting on a contribution of 25% of accrued sick-leave, or 25% of accrued sick-leave and 100% of accrued annual-leave at termination of employment.
• Groups may also be formed from all employees at the termination of employment, as long as those employees are eligible to receive a payout of accrued sick-leave or a payout of accrued sick-leave and annual-leave at termination of employment, regardless of age or years of service. 

Eligible to Retire 

Employee must be eligible to retire and pay into a public retirement program. A participating employer may request a list of employees eligible to retire based on criteria for years of service and age for the employer at the Health Care and Benefits Division. Public retirement programs include, (PERS, Game Wardens, Sheriff, Police, Fire, Judges, and Correctional Officers)

Employee must be:

• Active in PERS or other public retirement program
• Eligible for benefits from the employer
• Receive the employer share (employer contribution for benefits)

Termination from Employment

Eligibility/criteria - The group should have a department ID or other organizational boundary. The employee must terminate from employment with the employer. If the employee transfers to another state agency within state government, or to another public employer (i.e., a city or county), the employee’s eligibility for the Montana VEBA HRA will be based on the new position and if it is Montana VEBA HRA eligible job position.

Employee must be:

• Active in PERS or other public retirement program
• Eligible for benefits from the employer
• Receiving the employer share (employer contribution for benefits)

NOTE: A group may be all union members, or a combination of union and non-union employees (blended). HCBD recommends that employers proactively contact the union when a group of employees elects to form a group, obtain written agreement with the union to form a blended group, and advise the union of the vote results.   

Employee participation in a group after the group has been established, may occur in the following ways:

1. Employee becomes eligible to be a group member if the employee is hired into a Montana VEBA HRA eligible job position in an existing group
2. Employee becomes eligible to retire (meets criteria for public retirement program based on years of service and age) while in a Montana VEBA HRA eligible job position during the period that the group is in effect
3. If the employee takes a new Montana VEBA HRA eligible job position in a different group for the same employer and meets eligibility criteria to become a member of that new group

If the employee takes a new job position that is not a Montana VEBA HRA eligible position or the employee does not meet the individual eligibility criteria to become a group member within an existing group (e.g., not eligible to retire), the employee will not be a Montana VEBA HRA group member in the new job position.