VEBA Plan Overview & Administrative Updates

1. February 11, 2011 VEBA Plan Overview& Administrative Updates Presented by: Brian Riehs, Service Representative VEBA Service Group, LLC Mike Smolko, Service Representative VEBA Service Group, LLC Sponsored by AWSP, WASA, and WASBO since 1984

2. Today’s topics • VEBA Plan overview • Administrative updates • Online resources • Q&A

3. VEBA Plan Overview • What is the VEBA Plan? • Sponsors, trustees, service providers • Projected retiree healthcare costs • Key benefits • Getting money in • Investment options • Getting money out • Typical group adoption process

4. What is the VEBA Plan? Health Reimbursement Arrangement • “Account-based” health plan • Funded by employer • Tax-free money for future health care costs

5. Sponsors and trustees John Knutson, Kent SD Wayne Leonard, Mead SD Gordon Grassi, Central Valley SD Paula Bond, Tacoma SD Dr. Steve Rasmussen, Issaquah SD Dr. Polly Crowley, West Valley SD (Spokane)

6. Service providers THIRD-PARTY ADMINISTRATOR PLAN CONSULTANT INVESTMENT CONSULTANT LEGAL COUNSEL AUDITOR

7. Plan consultant hraconsultants.org • 26+ years of experience • Nationally recognized 1-800-888-VEBA (8322)

8. Third-party administrator • Claims • Customer service • Account administration • - Contributions • - Investment changes 1-888-828-4953 employersupport@meritain.com

9. How much will you spend? Find your current age below: Current Age

10. How will you pay for it?

11. Key benefits You…

12. Key benefits Your…

13. Getting money in • Leave cash outs (sick leave, vacation, personal, other) • Mandatory employee contributions • Future COLAs; pay increases • Early retirement/separation incentives • No individual choice; all employee group members defined as eligible must participate per IRS rules.

14. “Win-win” tax advantage Employees and employers Pay No Tax

15. Save tax. Keep more. WITHOUT VEBA: WITH VEBA: You keep 100% You keep 67%

16. Investment options

17. Getting money out

18. Systematic premium reimbursements • Systematic Premium Reimbursement Form available online at veba.org • Provides reimbursement to participants for qualified premiums only • No direct payments to insurance companies or providers

19. Typical group adoption process

20. Written agreements; policies • Provide copies to VSG (IRS recommendation) • Use model language in handbook • Creative language usually a problem • No one year on/one year off

21. Small group guidance • Avoid groups with less than five voting members • Combine small groups into a single, larger group for VEBA purposes

22. Administrative updates • New Claim Form • Coordination of benefits with Medicare • Participant Status Change Form • Over-the-counter (OTC) medicines & drugs • Extended dependent coverage • Participant effective dates • Form W-2 reporting

23. New Claim Form • Updated 12/2010 to comply with new federal reporting rules (i.e. Medicare secondary payer) • Please discard all outdated versions • Participants submit one Claim Form per covered individual • New forms will be sent with statements in mid-January • Effective March 1, 2011, claims received on outdated forms will be denied • Standard claims processing takes up to seven business days • Five business days from date of receipt to process, plus two business days to execute the necessary investment fund trades

25. Medicare coordination of benefits • Help your separated participants on Medicare avoid denied benefits • Meritain Health needs separation dates for separated employees/participants • If Meritain Health doesn’t know a participant is separated, and has reported them to Medicare as an active employee, Medicare may • Consider HRA (VEBA) account primary to Medicare • Deny Medicare benefits at point of service • Recent emails from VSG and Meritain Health contained more details

26. Participant Status Change Form • Submit Participant Status Change Form when active employees/participants • Separate and/or • Experience COBRA qualifying events which affect their receipt of future contributions (e.g. monthly contributions)

27. <<insert Participant Status Change Form>>

28. Over-the-counter (OTC) medicines and drugs • Still covered • Beginning January 1, 2011, prescription or note from medical practitioner required • Applies only to medicines and drugs (except insulin); not to other types of OTC items like bandages, crutches, etc. • See Qualified Expenses and Premiums for more details

29. Extended dependent coverage • Effective September 1, 2010 • Young adult children covered through end of calendar year in which they turn age 26 • Other health plans may have different effective dates or eligibility criteria • See Definition of Dependent for more details

30. Contribution remittance • ACH or wire transfer is recommended • Electronic contributions visible to participants online within five business days from receipt • Mail paper checks to the Trust’s lockbox; contribution data reports to Meritain Health • Paper check contributions visible to participants online within nine business days from receipt

31. Participant effective dates • Updated Enrollment Form permits an employer to specify a newly-enrolling participant’s effective date as long as such date is • Not prior to participant’s hire date • Not prior to September 1, 2010 • If no date is specified on Enrollment Form, employee shall become a participant the latter date upon which both an Enrollment Form and contribution have been received

33. Form W-2 reporting • Employer tax reporting • Tax Year 2010: Do not report contributions on Form W-2 • Tax Year 2011: Value of coverage reporting on Form W-2 is not required • Tax Year 2012: Value of coverage reportable on Form W-2; awaiting further guidance from IRS on how to calculate value of coverage

34. Online resources • Online employer portal • Online participant portal (myVEBA Plan online)

35. Online employer portal veba.org • View posted contributions • Upload contribution data reports • View and print employer reports • Access the VEBA Employer Handbook • Step-by-step adoption/renewal processSection 4.5 • Sample languageSections 4.7 - 4.8 • Electronic remittance instructions Sections 6.3 - 6.4 • Applicable laws and rules Section 9

36. Online participant portal veba.org • myVEBA Plan online • View account detail • Track status of claims • View claims history; look up EOBs • Update personal/spouse/dependent information, investment allocations, etc.

37. Questions?