VEBA: Sick leave cash-out at retirement
When you retire from UW, you don’t lose your sick leave. Instead, 25 percent of your unused sick leave balance is cashed out and placed into a medical expense plan. This money is then yours to use on out-of-pocket health care costs including premiums, deductibles, copayments, coinsurance, prescriptions, and many other qualified expenses.
The medical expense plan for UW retirees is managed by the Voluntary Employees’ Beneficiary Association (VEBA) trust, which serves more than 50,000 Washington state employees. Through the trust, you get a Health Reimbursement Arrangement (HRA) account — your VEBA account — to help you pay for health care cost during retirement.
The money in your VEBA account is completely tax free — the money’s not taxed when your account is funded nor do you pay tax when you use the money on medical expenses.
Participating in the VEBA medical expense plan
For most UW employees, participating in VEBA is the only way to cash out unused sick leave at retirement. If your position falls under one of these employee types, you’re required to participate in VEBA:
- Professional staff
- Classified non-union staff
- Campus police officers covered by either Teamsters 117 or WFSE
- Contract classified staff represented by one of the following unions:
- SEIU Local 925
- SEIU Healthcare 1199NW
- Local 1001 UFCW
- Teamsters 117 – print plan craft employees
- WFSE/AFSCME Council 28
Additionally, tenured faculty who opt for the Voluntary Retirement Incentive (VRI) have their lump-sum payment deposited in a VEBA account.
Enroll in VEBA
To enroll in VEBA, attend a UW retirement workshop where you’ll receive a VEBA enrollment form and enrollment kit. Fill out the form and return it to the UW Benefits Office to establish your VEBA account. If you don’t submit your enrollment form, you’ll forfeit your sick leave.
How your VEBA account works
When you retire and enroll in VEBA, your unused sick leave balance is cashed out and deposited into your VEBA account. The cash-out converts your accumulated, unused sick leave hours into their equivalent dollar value, which depends on your salary at retirement. Then 25 percent of that amount is deposited into your account.
In other words when you retire, you get paid for 25 percent of your remaining sick leave hours. You access this money by using your VEBA account.
Spending your VEBA funds
You have immediate, tax-free access to the funds in your VEBA account. You can spend this money on qualified out-of-pocket health care expenses such as premiums, deductibles, copayments, coinsurance, prescriptions, and many other qualified expenses.
However, you don’t have to use your VEBA funds right away. It’s not a “use-it-or-lose-it” account — your funds remain in your account year after year. Furthermore, you get to choose how your VEBA account funds are invested. While this isn’t a substitute for general retirement investing, it allows you to decide how best to use your money during retirement.
To learn more about how to use your VEBA account, visit the VEBA Trust website for higher education employees to get more details about:
- Qualified medical expenses
- Submitting claims
- Automatic reimbursement
- The VEBA debit card
- Investment options
- Spouse and dependent coverage
- Plan administrative fees
For a general overview and introduction to VEBA, download the VEBA plan brochure (PDF).