What Schools Need to Know About VEBA (And What Most Get Wrong)

VEBA accounts can be a powerful tool for school districts, but they’re often misunderstood by both HR teams and retirees. Here’s what VEBA really is—and what to watch out for.

What it is: A tax-exempt trust used by public employers (like schools) to fund post-employment health benefits, such as retiree medical coverage or premium reimbursements.

Common uses:

• Covering retiree healthcare premiums

• Paying out unused sick time into a tax-sheltered medical account

• Setting aside funds to help employees transition into retirement

What people get wrong:

• Thinking employees can use the money for anything—they can’t. It’s strictly for qualifying medical expenses.

• Not educating retirees on how to access or file claims from the VEBA.

• Believing VEBA is “free money” for employees. It’s restricted, and miscommunication can cause frustration fast.

🎓 Case example: One district thought offering a VEBA would eliminate the need for retiree coverage education. The result? Dozens of frustrated former employees calling payroll when they couldn’t figure out how to submit reimbursement claims. We stepped in and built a simple FAQ and onboarding session—calls dropped by 80%.