Montana VEBA HRA Logo
State of MT Employer Questions And Answers
  1. What is the Montana VEBA HRA?
  2. What is the legal basis for the Montana VEBA HRA?
  3. Am I an eligible employer?
  4. What is the benefit to me as an employer to offer the Montana VEBA HRA to my employees?
  5. What are the benefits to my employees if they choose to belong to the Montana VEBA HRA?
  6. What are my ongoing employer responsibilities going to be to the Montana VEBA HRA, should we decide to enroll?
  7. How does an employer go about establishing the Plan?
  8. How does the employee enroll after the Plan is established?
  9. What Plan features of the program can an employer choose from?
  10. What funding sources are available for Montana VEBA HRA contributions?
  11. Where will the assets of the Plan be invested?
  12. What are the fees charged to the employer? The employee?
  13. What do I need to report for tax purposes?
  14. What will my employees receive for materials?
  15. When may employees begin participating once they enroll?
  16. Who will pay employee claims?
  17. What is an employee group and who can be in a group?
  18. What types of reports will I receive as an employer, what will my employees receive?
  19. Do I have to set the Plan up on a calendar year basis?
  20. Whom should I contact for more information?


  1. What is the Montana VEBA HRA?
    The Montana VEBA HRA is a pre-retirement and post-retirement health reimbursement plan funded with employer contributions.
  2. What is the legal basis for the Montana VEBA HRA?
    The 2001 legislature established the VEBA through enacting     2-18-1301 et seq. This law instructed the Department of Administration to implement a VEBA Health Reimbursement Plan for Montana Public Employees. This Plan is the result of those efforts. Internal Revenue Code Section 501(c)(9) authorizes the creation of a VEBA - an acronym for Voluntary Employees’ Beneficiary Association - to hold assets to provide welfare benefits to employees. The State has received a 501(c)(9) letter of determination from the IRS, which confirms our tax-exempt status as a VEBA. The benefit provided is a medical reimbursement plan, which is also commonly referred to as an HRA or “health reimbursement arrangement.” In June 2002, the IRS issued Notice 2002-45 and Revenue Ruling 2002-41, which outlines how employers and plan administrators properly operate a health reimbursement arrangement plan to achieve desirable tax results. Our Plan is an HRA, and we call it “Montana VEBA HRA.”
  3. Am I an eligible employer?
    Eligible employers are defined in statute as “any public employer, defined under Montana statute as a legally constituted department, board, commission, or any other administrative unit of state government, a county, an incorporated city or town, or any other political subdivision of the state, including a school district, or unit of the university system.”
  4. What is the benefit to me as an employer to offer the Montana VEBA HRA to my employees?
    Employer advantages include:
    1. The Montana VEBA HRA is the best tax-advantaged tool for employees to accumulate assets to pay for the rapidly rising costs of post-employment health care.
    2. Employer savings on taxes such as FICA, worker’s compensation and unemployment insurance on the VEBA contribution.
    3. Employer savings on retirement for VEBA contributions
    4. A new employer provided benefit that requires no tax reporting
    5. The Montana VEBA HRA helps employees offset the increasing costs of medical plan deductibles and co-payments.
    6. Reduce future liability of unused sick leave cash-outs by paying a portion of these costs annually.
  5. What are the benefits to my employees if they choose to belong to the Montana VEBA HRA?
    Employee advantages include:
    1. Employees will have a resource to pay for the increasingly high cost of post-employment health care.
    2. Employees will save federal income tax, state income tax, and employment taxes on the contributions.
    3. Employees will not pay any tax on the earnings on their Montana VEBA HRA account balances.
    4. Employees will not pay taxes on withdrawals for qualified benefits.
    5. Employees will appreciate the opportunity to participate in a new benefit plan offered by their employer.
  6. What are my ongoing employer responsibilities going to be to the Montana VEBA HRA, should we decide to enroll?
    1. Ongoing employer responsibilities will be to communicate and enroll new eligible employees in the Plan.
    2. Notify the Department of Admin – Employee Benefits Bureau when a participant separates from service.
    3. To assist the educational firm, VALIC Financial Advisors, with an opportunity to educate employees regarding the Plan and the investment choices available under the Plan.
    4. To set up and process contributions as required, depending upon the contribution method chosen.
    5. Assist employer groups with the facilitation of a vote on new contribution options or recurring contribution options.
  7. How does an employer go about establishing the Plan?
    In the link, “How to Set Up and Administer the Montana VEBA HRA” - you will find a step-by-step guide to establishing and administrating the Plan.
  8. How does the employee enroll after the Plan is established?
    Employers will be provided with a one-page Enrollment Form for employees to complete and return to your employee benefits/human resource department. The Enrollment Form should be sent to the Department of Admin – Employee Benefits Bureau office.
  9. What Plan features of the program can an employer choose from?
    All the benefits of this turnkey program are available to all employers. Employees and employers determine which funding options are appropriate.
  10. What funding sources are available for Montana VEBA HRA contributions?
    The primary source of funding provided for in statute is sick leave cash-outs. For State of Montana employees, the ONLY source of contributions at this time is accumulated sick- leave balance at a rate of 25% at separation from service or retirement.
  11. Where will the assets of the Plan be invested?
    Nine investment options are offered to Plan participants. When each Plan participant completes their Enrollment Form, they will direct how their account is to be allocated among the choices. The employees may make changes as often as monthly and will communicate directly with the Montana VEBA HRA Administrator with regard to fund allocation changes.
  12. What are the fees charged to the employer? The employee?
    There are no fees charged to the employer (State of Montana.) The employees will be charged a flat amount administration fee of $5 each month, plus a percent of their assets will be reduced to reflect the Plan expenses, which are not covered by the flat amount fee. Expenses will fluctuate each month depending upon the actual costs incurred by the Plan for Plan operation.
  13. What do I need to report for tax purposes?
    There is no tax reporting, no W-2 reporting, no 1099 reporting, no individual 1040 reporting, no Montana income tax reporting.
  14. What will my employees receive for materials?
    At the education sessions, Employees will receive a Summary of Benefits, a list of qualified expenses and premiums, a Question & Answer brochure and an Investment Fund Overview. They may also review the websites of each particular investment fund for detailed fund performance and information.
  15. When may employees begin participating once they enroll?
    Participation begins immediately. Employees may file claims for expenses incurred after the Montana VEBA HRA Administrator has received a properly completed Enrollment Form and a contribution from the employer on the employee’s behalf. Claims are paid weekly.
  16. Who will pay employee claims?
    The Department of Administration has employed REHN & Associates, Inc., an experienced VEBA HRA third-party administrator in Spokane, to pay employee claims. Participants will submit claims for benefits directly to the REHN.
  17. What is an employee group and who can be in a group?
    Group participation is required due to IRS rules that prohibit individuals from choosing to participate, or not, in the program. Therefore, the following group formation guidelines are intended to eliminate the possibility of an employee moving from one group to another, or choosing to join or not to join a group so they can be included, or not included, in the Montana VEBA HRA Plan. If individuals have the choice, the contributions to the program are no longer tax-free.

    Groups should consider using existing group boundaries. Group means a collection of employees who are employed by the same employer under an existing organizational structure. The most common form of group will be employees eligible to retire voting on sick leave cash-out at retirement. Employees eligible for sick leave cash at separation from service, but not eligible to retire, will also be a common group. Groups may also be formed into smaller sub-units. Sub-unit means a collection of employees who are employed by the same employer under a recognized organizational division for the purposes of administration of the statutory or otherwise designated duties of the employer. A sub-unit must consist of at least 2 employees.

  18. What types of reports will I receive as an employer, what will my employees receive?
    The Department of Administration receives a billing statement from the Montana VEBA HRA Administrator to assist with facilitation of periodic employer contributions. Upon initial enrollment, employees will receive a Welcome Packet mailed to their home address, which includes the following:
    1. Welcome Letter confirming the deposit and investment allocation
    2. Claim Form
    3. Systematic Payment Form
    4. Account Information/Fund Allocation Change Form
    5. Plan Summary

    In addition, employees will receive semi-annual statements detailing all activity in their account. An employee will also be able to view their account activity online at any time.

  19. 19. Do I have to set the Plan up on a calendar year basis?
    No. The group may vote annually, but it does not have to be on a calendar year basis.
  20. 20. Whom should I contact for more information?
    Contact your VALIC Educational Montana VEBA HRA representative to schedule education session at:
    AIG VALIC Montana VEBA Educator
    John Wing, District Manager
    430 Ryman Street
    Missoula, MT 59802
    Email:     john_wing@aigvalic.com
    Office Phone: (406) 329-5500
    Fax: (406) 329-5505

    Contact the Department of Administration, Employee Benefits Bureau, VEBA Health Officer at:
    Melanie Denning
    Phone: (406) 444-3745
    E-mail: mdenning@mt.gov

    After the Plan is adopted, you may contact the Montana VEBA HRA Administrator for additional questions regarding Plan operation and individual accounts at:
    Montana VEBA HRA Plan Administrator
    P.O. Box 5433
    Spokane, WA 99205-0433
    (509) 534-0600
    1-800-VEBA101 (832-2101)
    Fax: (509) 535-7883
    E-mail: montana@rehnonline.com
    Briana Davis: briana@rehnonline.com
    Malinda Kimmet: malinda@rehnonline.com