Employer is applying for the Medicare Part D subsidy for the prescription drug coverage provided under its retiree health plan. Retiree health plans are funded with Code Section 501©(9) VEBAs. VEBA trust agreements include the requisite language limiting payment of trust assets for the exclusive purposes of providing benefits and defraying the reasonable costs of administering the retiree health plans.

Employer wants to know if it can be reimbursed from the VEBA for the expenses it incurs related to the Medicare Part D subsidy - the actuarial certification, supplying participant Rx data to CMS, and the creditable coverage notices.

I'm almost positive almost all of the expenses would not be reimbursable by the VEBA, because the subsidy only benefits the employer. There is no benefit to the plan participants, so the expenses would not be reasonable costs of administering the retiree health care plan.

But I'm not sure about the creditable coverage notices. The notices are a requirement for the subsidy, but the notices do provide some benefit to the participants.

Any thoughts?

AMP-I love that you joined in 2000 and have posted 8 times already.

While 501©(9) does not contain an "exclusive benefit rule", it does contain a proscription against "private" or "prohibited" inurement. However, if the plan provided that the employer's contributions were to be offset or reduced by named expenses, it could achieve the same net result. Make sure that this would not violate a CBA.