(1) Employer contributions into an account, the accumulation of interest or other earnings in an account, and payments from an account for qualified health care expenses are tax-exempt, as provided in 15-30-2110, MCA, and under applicable federal laws and regulations to the extent that the plan is qualified under applicable sections of the Internal Revenue Code.

(2) Each employer shall make deposits to the VEBA health benefit plan on behalf of its eligible members pursuant to the terms of collective bargaining agreements or employer policies. Employer deposits shall be specifically allocated to each participating member's account.

(3) Each participating employer shall provide for a member to annually designate how many hours (if any) of the member's annual vacation leave balance in excess of 240 hours and/or sick leave will be automatically converted to an employer contribution to the member's account each pay period, as provided in 2-18-1311, MCA. The state's VEBA plan does not allow contributions of leave prior to separation from service.

(4) Sick leave is considered a contribution source, as approved by the voting entity, and may be converted tax-free for the purposes of a contribution. The rate of sick leave is 25% of the employee's balance at the time of separation. As agreed upon by the voting entity, the sick leave balance of 25% may be divided as listed by the department between VEBA HRA contribution and taxable cash.

(5) Each participating employer may establish a maximum amount of sick leave hours that may be automatically converted to an annual contribution. An employer may establish the maximum annual hours at "0" until an employee separates from service.

(6) Annual vacation leave is considered a contribution source, as approved by the voting entity, and may be converted tax-free for the purposes of a contribution. The rate of annual vacation leave is 100% of the employee's balance at the time of separation from service.

(7) Other contributions shall be allowed as outlined in statute, but may not be discriminatory in favoring highly compensated employees. The group must all participate in any form of approved contributions.