Tax Advantages

An RMT can offer several tax advantages, depending on how the plan and contribution obligation are structured.

Employer Advantage

Employee Advantage

Retiree Advantage

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Why Choose a Retiree Medical Trust (RMT)

Tax Advantages

Employer Advantage Employer Advantage

Employers are not required to pay payroll taxes on the RMT contributions, provided that the entire bargaining unit or group participates. Contributions are made with pre-tax dollars under current law if they are mandatory.

Employee Advantage

Employee AdvantageThe employee also avoids taxation on the contributions if they are mandatory. And, earnings on contributions are tax-exempt if the plan is set up as an integral part trust under Internal Revenue Code Section 115, or as a Voluntary Employee Beneficiary Association (VEBA) under IRS Section 501(c)(9).

An employee benefit trust that gains IRS tax exempt status can realize significant earnings, none of which are taxed.

Retiree Advantage Retiree Advantage

Because the benefit payments are used to reimburse medical costs, they are tax free under Internal Revenue Code Section 105 to the retiree, compared to pension benefits that are taxable.

This tax exclusion results from the requirement that benefits may be spent only on medical costs. Tax-free earnings and compound interest allow significant appreciation on contributions.