I administer a 401(a) defined contribution plan for a public college system. We are prohibited by law from using current funds to provide compensation (including benefits) to former employees including retirees).

I would like to set up some method for taking current contributions to the governmental 401(a) defined contribution plan to be used in the future to subsidize the plan retirees' health insurance premiums.

At first it seemed that a 401(h) account was the way to go, but I am not so sure now.
What about a Retiree Lives Reserve or a Voluntary Employees'Benenfits Association.

Have any of you made such an arrangement? If so, how do I find out how to do it and the pros and cons of the various mechanisms?

Dan Gould

In a related matter, I am interested in the experience of governmental DB plans that have utilized IRC 420 to transfer excess pension assets to retiree health accounts, pros, cons ,etc.

You did not state whether the individual is also covered under a state run DB plan. This is a rather long discussion. Feel free to contact me.

They are not,for the most part, members of the State's DB plan. (Some may be from a previous employment. A few were in the State's DB Plan in 1994 when we created this DC Plan, so they will become retirees from both.)