Do you guys know the tax implications or rules for passing on the RHA to family members after the pilot dies? The rules for a Roth and 401K are pretty clear but I haven’t been able to find much about the RHA piece. It does sound like an awesome investment vehicle with the triple tax advantage.

 

It can be used by a spouse or IRS-defined "dependents" but is not inheritable in the estate. That’s why it can exist—the funds are part of a VEBA, Voluntary Employee Benefits Association, a carved out area of IRS rules that allow company contributions beyond the 403b limit because the funds aren’t owned by an individual, but by a group. However, contributions are tracked and designated for the individual, spouse and dependents. If there are none of those, the funds belong to the association, not the estate.

 

A lot of people have heartburn over the fact it goes back to the pool if there is no spouse or eligible dependents, but to me the tax free nature of the plan more than outweighs it. It’s a pretty good deal.

 

The vast majority are okay one way or the other. At $1 per hour, over a 30-year career, at a modest 5% growth, you’ll have $70k going into retirement. But with estimates of 65-to-grave health care costs running at $250k+, some are all in (you can even sell vacation* to go directly into RHA). Others don’t even want the $1/hr going in and would like that to be negotiated out.

*Q17: I’ve heard I can put forfeited vacation into my RHA, is that possible?
A: Yes, it is possible to direct your vacation forfeiture directly to your RHA. At the end of each calendar year the company will give you the option to make this election. The election is made in the calendar year prior to the beginning of the vacation year. For example, an election made in December 2019 to have the vacation forfeiture to directly into the RHA is applied to the 2020–2021 vacation year. This forfeiture is processed on or before June 16, 2021.

 

I see what you did there.

 

Roth accounts don’t require Required Minimum Distribution (RMD) at 70 1/2, which is a taxable event. Post tax contributions can be rolled into a Roth account, bypassing the usual Roth contribution limits, also known as a "backdoor Roth."

 

Thank your for all of this discussion-it has answered a lot of my questions. My question is this-I am a narrow body fo so won’t get near those big numbers where things start spilling over. I have enough cash to cover living expenses so I’d like to maximize b fund, rha etc. Thanks for any advice.

 

your math is correct. Can someone else confirm that this is the correct way it is calculated?

sounds like your question is similar to above, if you max out your 401k, are you getting the maximum company money (16%) you are contractually entitled to? I think the answer is- if you make less than $231,250 the full 16% goes to your B fund. So even if you had an RHA there would be no company spillage because all 16% would already be in the B fund, so don't worry about it until you make $231,250. Can someone else confirm this?

Does anyone who makes less than $231,250,(5 years is?) have an RHA or contribute to it? would you suggest doing that? why?

 

Every pilot has an RHA. $1 per flight hour is deposited into your account regardless of your income. Someone correct me if I’m wrong. When you log into MBR...my benefits resources in FT, you can see your account balance.

 

This discussion has prompted me to do a little research, just a heads up-open enrollment is currently open and there are a few changes:

If you choose to set aside your pre-tax dollars in a Healthcare Flexible Spending Account (HCFSA) in addition to the Health Reimbursement Account (HRA) that comes with your medical plan, during Annual Enrollment you’ll need to select which of those accounts your medical and prescription drug reimbursements are pulled from first — your HCFSA or your HRA.

There will be a $4,800 cap on how much you can accumulate in your HRA. This goes into effect Jan. 1, 2020 — make sure to use enough of your HRA dollars so that your HRA balance is below $4,800 by the end of 2019, so you don’t miss out on wellness incentive dollars from United.