April 1996 Government Employees Benefits Update, "Prefunding Retiree Health Care Costs"
With the number of future retirees steadily growing and longevity on the rise, a number of state and local government employers have been considering prefunding health care coverage. One of the advantages of prefunding is that it can help with the financial management of health benefit plans. New and anticipated accounting requirements from the Government Accounting Standards Board (GASB) are emerging as another impetus. The following funding vehicles are discussed: Internal Revenue Code (IRC) Section 501(c)(9) voluntary employees' beneficiary association (VEBA) trusts, IRC Section 401(h) retiree medical pension accounts, state-law grantor trusts and employer general asset accounts. The advantages and disadvantages of each of these four prefunding vehicles are weighed. Data on longevity demographics and the cost of retiree coverage is included.
"Washington Update: Taxes...Relief, Source and Securities" Various taxes are discussed: possible relief for governmental plans from compliance with Section 415 and Section 457 of the Internal Revenue Code, the source tax under P.L. 104-95 on out-of-state retirees and the Securities Transfer Excise Tax (STET).