VEBA
09-03-2016, 01:59 PM
#1
Gets Weekends Off
Thread Starter
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,143
VEBA
I just watched the VEBA video, and at first glance...I'm not really sure what to think.
PLEASE without this devolving into another 12 v 7 pi$$ing match, can we lay out the pros/cons of this thing?
It's all about me, so let's take a hypothetical 35 year old that is currently using the HSA as a health care plan. We've been lucky and haven't gotten sick as a family for the past few years so I'm up to about $10k in the HSA. My thinking to this point has been to try to sock away as much as possible in the HSA over the next 30 years and that was going to be the bulk of our retiree healthcare fund. The portion of the HSA over $2k is currently invested in an S&P index fund.
I'll admit, I have done very little math on this, and am also going on the (probably pie in the sky) hope that we will continue to be lucky enough to not appreciably eat into our HSA account.
So to kick off the conversation, my questions to this point would be:
1. Am I at risk of overfunding either the HSA or the VEBA, having a relatively long time to go until retirement?
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
I realize the math is probably different for a pilot in their 20's or 50's, so maybe someone else will chime in with their demographics/numbers so we can compare the apples and oranges.
PLEASE without this devolving into another 12 v 7 pi$$ing match, can we lay out the pros/cons of this thing?
It's all about me, so let's take a hypothetical 35 year old that is currently using the HSA as a health care plan. We've been lucky and haven't gotten sick as a family for the past few years so I'm up to about $10k in the HSA. My thinking to this point has been to try to sock away as much as possible in the HSA over the next 30 years and that was going to be the bulk of our retiree healthcare fund. The portion of the HSA over $2k is currently invested in an S&P index fund.
I'll admit, I have done very little math on this, and am also going on the (probably pie in the sky) hope that we will continue to be lucky enough to not appreciably eat into our HSA account.
So to kick off the conversation, my questions to this point would be:
1. Am I at risk of overfunding either the HSA or the VEBA, having a relatively long time to go until retirement?
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
I realize the math is probably different for a pilot in their 20's or 50's, so maybe someone else will chime in with their demographics/numbers so we can compare the apples and oranges.
09-03-2016, 02:25 PM
#2
Gets Weekends Off
Joined APC: Sep 2008
Position: Kickin’ Back
Posts: 6,971
Originally Posted by LeineLodge
I just watched the VEBA video, and at first glance...I'm not really sure what to think.
PLEASE without this devolving into another 12 v 7 pi$$ing match, can we lay out the pros/cons of this thing?
It's all about me, so let's take a hypothetical 35 year old that is currently using the HSA as a health care plan. We've been lucky and haven't gotten sick as a family for the past few years so I'm up to about $10k in the HSA. My thinking to this point has been to try to sock away as much as possible in the HSA over the next 30 years and that was going to be the bulk of our retiree healthcare fund. The portion of the HSA over $2k is currently invested in an S&P index fund.
I'll admit, I have done very little math on this, and am also going on the (probably pie in the sky) hope that we will continue to be lucky enough to not appreciably eat into our HSA account.
So to kick off the conversation, my questions to this point would be:
1. Am I at risk of overfunding either the HSA or the VEBA, having a relatively long time to go until retirement?
IMO you cannot overfund an HSA for a couple of reasons. 1. You can pass it to heirs. 2. Once you turn 65, you can treat it just like an IRA with the added benefit of tax free withdrawls for qualified medical expenses. At age 35, a VEBA could possibly accrue more money in it than you are comfortable with. It all depends on how much of the excess retirement funds the VEBA board determines will go into the VEBA. If they set it at 100%, from what I've read, there is a way to mitigate close to $5k.
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
Do NOT stop funding your HSA! See above.
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
For someone like me(57), a VEBA could be a good deal. I have 7 years to go. I figure, at the very max I could have about $100k in it. With $50k being able to go to my heirs, I would need to spend it down to that amount. I'm guessing I could do that in about 5 years just with Medicare and Medicare supplemental insurance.
I realize the math is probably different for a pilot in their 20's or 50's, so maybe someone else will chime in with their demographics/numbers so we can compare the apples and oranges.
PLEASE without this devolving into another 12 v 7 pi$$ing match, can we lay out the pros/cons of this thing?
It's all about me, so let's take a hypothetical 35 year old that is currently using the HSA as a health care plan. We've been lucky and haven't gotten sick as a family for the past few years so I'm up to about $10k in the HSA. My thinking to this point has been to try to sock away as much as possible in the HSA over the next 30 years and that was going to be the bulk of our retiree healthcare fund. The portion of the HSA over $2k is currently invested in an S&P index fund.
I'll admit, I have done very little math on this, and am also going on the (probably pie in the sky) hope that we will continue to be lucky enough to not appreciably eat into our HSA account.
So to kick off the conversation, my questions to this point would be:
1. Am I at risk of overfunding either the HSA or the VEBA, having a relatively long time to go until retirement?
IMO you cannot overfund an HSA for a couple of reasons. 1. You can pass it to heirs. 2. Once you turn 65, you can treat it just like an IRA with the added benefit of tax free withdrawls for qualified medical expenses. At age 35, a VEBA could possibly accrue more money in it than you are comfortable with. It all depends on how much of the excess retirement funds the VEBA board determines will go into the VEBA. If they set it at 100%, from what I've read, there is a way to mitigate close to $5k.
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
Do NOT stop funding your HSA! See above.
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
For someone like me(57), a VEBA could be a good deal. I have 7 years to go. I figure, at the very max I could have about $100k in it. With $50k being able to go to my heirs, I would need to spend it down to that amount. I'm guessing I could do that in about 5 years just with Medicare and Medicare supplemental insurance.
I realize the math is probably different for a pilot in their 20's or 50's, so maybe someone else will chime in with their demographics/numbers so we can compare the apples and oranges.
Denny
Last edited by Denny Crane; 09-03-2016 at 03:05 PM.
09-03-2016, 02:36 PM
#3
Gets Weekends Off
Thread Starter
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,143
Originally Posted by Denny Crane
If you have both a VEBA and an HSA, you would want to deplete the VEBA first and then the HSA when covering medical expenses.
Denny
Denny
When you say spend the HSA like an IRA, do you mean one can take distributions at any time after 60, and then just pay taxes on the distributions (not the gains?) as if it were a traditional IRA?
09-03-2016, 02:43 PM
#4
Gets Weekends Off
Joined APC: Apr 2007
Position: Flying the SEC
Posts: 2,350
What happens to all that money if we get Bernie Care? I think the writing is on the wall. With Obamacare such a mess and the insurers pulling out, I can see a single payer plan taking over. What happens to all that VEBA money then?
09-03-2016, 02:43 PM
#5
Gets Weekends Off
Joined APC: Aug 2012
Posts: 539
Originally Posted by LeineLodge
1. Am I at risk of overfunding either the HSA or the VEBA, having a relatively long time to go until retirement?
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
2. If we do end up going with this VEBA program, should I stop funding my HSA to the max every year? If so, why?
3. I've heard lots of beyotching about the VEBA - almost exclusively on APC and Facebook. What's the big deal? At first glance, I don't see what all the heartburn is about. Maybe I'm missing something?
09-03-2016, 02:50 PM
#6
Gets Weekends Off
Thread Starter
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,143
Originally Posted by satchip
What happens to all that money if we get Bernie Care? I think the writing is on the wall. With Obamacare such a mess and the insurers pulling out, I can see a single payer plan taking over. What happens to all that VEBA money then?
This seems like a far-fetched concern. If things get that bad, we'll have bigger problems IMO.
09-03-2016, 02:51 PM
#7
Gets Weekends Off
Joined APC: Sep 2008
Position: Kickin’ Back
Posts: 6,971
Originally Posted by LeineLodge
Thanks Denny.
When you say spend the HSA like an IRA, do you mean one can take distributions at any time after 60, and then just pay taxes on the distributions (not the gains?) as if it were a traditional IRA?
When you say spend the HSA like an IRA, do you mean one can take distributions at any time after 60, and then just pay taxes on the distributions (not the gains?) as if it were a traditional IRA?
The gains in a traditional ira are taxable when withdrawn. The same with an HSA withdrawal that is not used for medical expenses.
Denny
Last edited by Denny Crane; 09-03-2016 at 03:04 PM.
09-03-2016, 02:55 PM
#8
Gets Weekends Off
Thread Starter
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,143
Originally Posted by Redbird611
The nice thing about the HSA is that once you're over 65 you can withdraw funds for non-medical expenses without penalty. You'll just have to pay tax like you would on an IRA. If the VEBA program comes to pass my plan is to keep aggressively saving in the HSA. That way if I need the money for medical expenses it is tax free, and if I don't it is at least additional tax deferred retirement investing. I'd naturally use VEBA money first in retirement and keep HSA money in reserve until needed. I'm in about the same demographic as you and to be honest the VEBA sounds like it could be an advantageous tax shelter. At the same time I can understand the heartburn over some of the terms that apparently can't be addressed until the program is running and the IRS is petitioned.
1. Potentially accruing WAY more than $50k...more than I'll ever be able to spend? Doubtful considering where things are heading with health costs, but I guess the math needs to be run just the same.
2. More importantly, as we all progress and start surpassing 401c limits, will the 401c excesses be mandatorily directed to the VEBA, which is how #1 would occur. At $1k/year, I'm not really that worried about ending up with too much in the VEBA. At $5k/year does the math change? I assume the principal would be invested and compound over the next 3 decades? How would each individual's basis be accounted for?
It's a good problem to have - contemplating a situation where we have too much money to spend on retiree healthcare. Of course, if that money could be better spent somewhere else...
For me, from what I've read and watched so far, the crux of this comes down to how #2 will be handled by the IRS.
09-03-2016, 02:57 PM
#9
Gets Weekends Off
Thread Starter
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,143
Originally Posted by Denny Crane
After 60 it is treated just like a traditional ira. You will pay taxes at your going rate on any distribution that is NOT towards a medical expense. Those are still made tax free from an HSA.
The gains in a traditional ira are taxable when withdrawn. The same with an HSA withdrawal that is not used for medical expenses.
Denny
The gains in a traditional ira are taxable when withdrawn. The same with an HSA withdrawal that is not used for medical expenses.
Denny
Thread
Thread Starter
Forum
Replies
Last Post
