Voluntary Employees’ Beneficiary Association – Medical Expense Plan (VEBA-MEP) Summary 

In 1998, the legislature passed HB 2371 authorizing state agencies and higher education institutions to offer eligible retiring employees a post-retirement medical expense reimbursement account under IRS Section 501c(9). The VEBA Medical Expense Plan (VEBA-MEP) account was established with funds from the payment for 25% of unused sick leave at retirement.

Currently the 25% sick leave cash out at retirement is paid directly to the retiring employee, with the usual federal and social security tax deductions. Funds deposited into a VEBA-MEP account, as well as the earnings on the account, are not subject to federal income or social security taxes.

Washington State, under the Department of Personnel, has contracted with the VEBA Plan Administrator c/o REHN & Associates as the trust for all state agencies who elect to participate in the VEBA Medical Expense Plan.

After the Board of Trustees approved the VEBA program, employee groups may then vote to determine whether or not their group will participate in the program. The vote is binding on all employees in the group, as Internal Revenue Service regulations do not allow individual election. If an employee group votes for VEBA-MEP, all retirees in that group must have their sick leave cash out paid into the VEBA-MEP Trust, or forfeit the cash out. Participation in the VEBA-MEP can be ended by a subsequent vote by the employee group.

The eligible employee groups that accrue sick leave are Professional Staff and classified staff. Faculty are not included as an employee group as they do not accrue sick leave.

The VEBA-MEP program has been established at all of the other public four year higher education institutions in the State, and many of the community and technical colleges.