Part Three

Q: What are the distinguishing characteristics of VEBA plans?

The distinguishing characteristics of VEBA plans are:

More than ten employers are required to participate in the association sponsoring the plan and each employer must adopt the plan.

VEBA plans that qualify are not subjected to IRC 419 and 419A deduction limitations.

No employer may make contributions of more than 10 percent of the total amount contributed to the plan by employers.

Each plan is subject to fiduciary and reporting requirements of the Employee Retirement Income Security Act of 1974 (ERISA).

Q: What benefits can VEBA plans provide?

VEBA plans may be used to provide life insurance, medical, disability, and education benefits. The plans also provide supplemental unemployment, post-retirement medical and post-retirement death, and severance benefits.

Q: Is a VEBA a retirement plan?

No, it is not.

Q: Are there limits on the contribution amount employers may deduct?

No. Qualifying VEBA plans are exempted from provisions of IRC 419 and 419A, which limit the amount an employer may contribute to a welfare benefit fund for a particular period. Consequently, there are NO limits on the contribution amount employers are able to deduct.

Q: Are account balances subject to loss due to investment risks or market fluctuations?

Account values are guaranteed by a life insurance company, to the extent life insurance policies are used in the plan. But, should interest sensitive or mutual fund based products be used, investment risk and market fluctuations may affect the fund balances.

Q: What is the meaning of a multi-employer VEBA?

A multi-employer VEBA is a trust which covers more than one employer. To qualify for the most favorable tax benefits, no more than 10% of annual contributions made to the VEBA trust can be made by a single employer. This means that the VEBA should have 10 or more employers contributing roughly equal amounts to a common plan.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.