Voluntary Employee Beneficiary Association

IRS Definition

A voluntary employees' beneficiary association (VEBA) under Internal Revenue Code section 501(c)(9) is an organization organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries if no part of the net earnings of the association inures to the benefit of any private shareholder or individual.

The organization must meet the following requirements:

1. It must be a voluntary association of employees;

2. It must provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose; and

3. Its earnings may not inure to the benefit of any private individual or shareholder other than through the payment of benefits described in (2) above.

Membership of a section 501(c)(9) organization must consist of individuals who are employees who have an employment-related common bond. This common bond may be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. However, if the organization is part of a plan maintained under a collective bargaining agreement between employee representatives and employers, and such plan was the subject of good faith bargaining between such employee representatives and employers, the plan need not meet such nondiscrimination requirements for the organization to qualify as tax exempt.

A major use of the concept was implemented in 2007 when the UAW agreed to form VEBAs for their workers at the Big Three automobile manufacturers, thus relieving the companies from funding health plans.

For More Information

Refer to IRS web site at http://www.irs.gov for general information about VEBA trusts or refer to VEBA-specific IRS publications. [http://www.irs.gov/pub/irs-tege/eotopicf84.pdf] .


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