HRA VEBA Basics

Hi there, My name is Scott Johnson, and this is the Financial Success Academy. Health care costs can be one of the biggest financial concerns for many people. In this video, we're going to break down the basics of HRA VEBA, a powerful tax-advantaged account. We'll talk about how it works, the type of expenses it can cover, and how letting the account grow tax-free can set you up for a more secure financial future.

VEBA stands for Voluntary Employees Beneficiary Association, and the acronym is commonly used to describe a benefit plan that reimburses medical expenses. Often, VEBAs are used to manage health reimbursement arrangements, or HRAs. An HRA is a tax-advantaged account that helps cover health care costs now and during retirement. Common eligible expenses include out-of-pocket costs like copays, deductibles, over-the-counter medicine and drugs, dental care, orthodontics, vision care, Medicare, and other post-retirement coverage. HRAs are one of the few types of accounts that have triple tax savings: first, no taxes on contributions; second, no taxes on investment earnings; and third, no taxes on withdrawals for eligible expenses.

Now let's focus on the real game changer—tax-free growth with an HRA VEBA. Any money you don't spend right away stays in the account and continues to grow if properly invested. That means the longer your account sits untouched, the more it can grow tax-free over time. This can provide a significant financial cushion for health care expenses in retirement. We've learned through our on-site visits and when conducting financial planning meetings with many of you that it's not uncommon for people to not know if their HRA account is invested or not. It's important for you to understand where your account is and how it's invested. The more disciplined you are about letting it grow, the more it can benefit you down the road. There's a considerable advantage that comes when you resist the temptation to use these funds too soon.

Another question we receive is what happens to the funds when you pass away. If funds remain after all outstanding claims have been reimbursed, your HRA will be transferred to your surviving spouse. After your surviving spouse passes away, or if you have no spouse, any remaining HRA funds may be transferred equally to the other survivors in the following order of priority: first, dependents and non-dependent adult children; second, designated beneficiaries; or third, other survivors.

In summary, with its advantage of tax-free contributions and growth, your HRA VEBA account offers a great way to cover health care expenses both now and in retirement. We hope you found this video helpful. If you have specific questions about any of the information that I've shared with you today, or questions about getting your HRA dollars invested, please call our office and we'll be happy to help you.