Part Four

Q: Is the employer required to contribute each year once it initiates the VEBA?

No. However, depending on the type of funding vehicle(s) which are used in the plan, there may be a loss of benefits unless arrangements are made for continuing support of the funding vehicle(s) at a minimum level. Employers will want to continue to fund the plan to take advantage of the tax benefits. Minimal annual administration fees must be paid whether or not a contribution is made in the plan year.

Q: Do all employees have to be included in a VEBA?

No. The Internal Revenue Code (IRC) permits a company to exclude certain categories of employees from participation (e.g., part-time employees, those having fewer then three years of service, etc.). These exclusions are optional.

Q: Is contributing to a VEBA adopted on the last day of the taxable year fully deductible?

Yes. If you have executed the VEBA Adoption Agreement, appointed a Plan Committee, and followed other procedural requirements mandated by the IRS prior to the end of the year, then contributions are fully deductible.

Q: How is the death benefit level determined?

Each employer decides upon his own level of death benefits, which may range from one to several times the annual compensation. This multiple must be the same for all employees. The cost of the benefit for an employee is not a consideration, only the amount of the benefit.

Q: Why is it necessary to have a third-party trustee?

Regulations require that a VEBA be under employee control. Having an independent trustee satisfies the "employee control" requirement, because the trustee acts on behalf of the employees. The existence of an independent trustee alleviates the employer's fiduciary duty as well as reducing liability exposure. When a bank or other corporate fiduciary acts as trustee, they are assuming the fiduciary duty. Therefore, using an independent trustee prevents any IRS argument that the VEBA is not a true multi-employer plan.

Q: Upon joining a VEBA, are you still able to use your own attorney, CPA or other advisors?

Yes. The VEBA will not interfere with any function normally performed by your professional advisors.

Q: Am I able to start my own VEBA instead of joining a multiple employer VEBA?

The law does not prevent employers from having their own single-employer plan. But, a single employer plan is not eligible for the unlimited deduction which is available to properly structure a multiple employer plan.

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