Retiree medical benefits: Making the fund or finance decision

This article discusses the differences between funding and financing of retiree medical benefits. It also describes various employer‐provided arrangements that are used for funding or financing retiree medical benefits, and the types of employers for which each vehicle might be appropriate. Several issues will be discussed with respect to each vehicle, including: the ability of the employer to take a tax deduction; the applicability of any nondiscrimination rules; and the applicability of income tax on investment income and on receipt of benefits. The criteria for making a decision on whether to utilize a funding or financing vehicle will also be addressed.