A voluntary employees' beneficiary association (VEBA) is a form of
trust fund
A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...
permitted under
United States federal tax law
Tax law or revenue law is an area of legal study in which public or sanctioned authorities, such as federal, state and municipal governments (as in the case of the US) use a body of rules and procedures (laws) to assess and collect taxes in a ...
, whose sole purpose must be to provide
employee benefit
Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any ...
s.
[Hopkins, Bruce R. ''The Law of Tax-Exempt Organizations.'' Hoboken, N.J.: Wiley, 2007, p. 490.] Among the types of benefits which a VEBA may provide are
accident insurance benefits,
childcare
Child care, otherwise known as day care, is the care and supervision of a child or multiple children at a time, whose ages range from two weeks of age to 18 years. Although most parents spend a significant amount of time caring for their child(r ...
costs, employee
continuing education
Continuing education (similar to further education in the United Kingdom and Ireland) is an all-encompassing term within a broad list of post-secondary learning activities and programs. The term is used mainly in the United States and Canada.
...
, the cost of legal services,
life insurance
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the dea ...
benefits,
severance pay
Severance may refer to:
Arts and entertainment
* ''Severance'' (film), a 2006 British horror film
* ''Severance'' (novel), a 2018 novel by Ling Ma
*''Severance'', a 2006 short-story collection by Robert Olen Butler
* ''Severance'' (TV series), ...
, supplemental
unemployment benefits
Unemployment benefits, also called unemployment insurance, unemployment payment, unemployment compensation, or simply unemployment, are payments made by authorized bodies to unemployed people. In the United States, benefits are funded by a comp ...
,
sick leave
Sick leave (or paid sick days or sick pay) is paid time off from work that workers can use to stay home to address their health needs without losing pay. It differs from paid vacation time or time off work to deal with personal matters, because sic ...
pay, training benefits, and
vacation
A vacation (American English) or holiday (British English) is either a leave of absence from a regular job or an instance of leisure travel away from home. People often take a vacation during specific holiday observances or for specific fes ...
pay.
[Rattiner, Jeffrey H. ''Financial Planning Answer Book 2009.'' CCH Inc., 2008, p. 3-37.] A VEBA cannot, however, provide
commuter benefits, miscellaneous
fringe benefits
Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, or perks) include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Insta ...
, or
retiree income.
The plan may pay benefits to employees, their
dependents, or their designated
beneficiaries
A beneficiary (also, in trust law, '' cestui que use'') in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the perso ...
, or to
disabled
Disability is the experience of any condition that makes it more difficult for a person to do certain activities or have equitable access within a given society. Disabilities may be cognitive, developmental, intellectual, mental, physical, ...
,
laid-off, or
retired former employees.
The organization must also meet the following additional requirements:
# It must be a voluntary association of employees;.
# Substantially all of its operations are for the purpose of providing benefits;
# Its earnings may not benefit of any private individual, organization, or shareholder other than through the payment of benefits;
# It must be controlled by its members, in whole or part by their
trustee
Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...
s, or by an independent trustee; and
# It must be
nondiscriminatory in the payment of its benefits (unless it was established pursuant to a
collective bargaining
Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The ...
agreement).
Employer contributions to a VEBA are
tax-deductible
Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and tax credits. ...
Beneficiaries of a VEBA must have an employment-related common bond (such as a common employer), be covered by a collective bargaining agreement, or belong to a
labor union
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits (s ...
.
However, if multiple employers share the same line of business and the same geographic area, they are considered to share the "common bond" specified by the law.
A major use of the concept was implemented in 2007 when the
United Auto Workers
The International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, better known as the United Auto Workers (UAW), is an American Labor unions in the United States, labor union that represents workers in the Un ...
agreed to form VEBAs for their workers at the
Big Three automobile manufacturers
In the automotive industry, the term Big Three is used for a country's three largest motor vehicle manufacturers, especially indicating companies that sell under multiple brand names.
The term originated in the United States, where General Moto ...
, thus relieving the companies from carrying the liability for their health plans on their accounting books. The UAW Retiree Medical Benefits Trust, with more than $45 billion in assets as of June 2010, and $58.8 billion as of March 2014, is the world's largest VEBA.
Dolan, Matthew. "UAW Fund: $45 Billion For Investing."
''Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
.'' June 15, 2010.
References
{{reflist
External links
''Selected Problems of Voluntary Employees' Beneficiary Associations (VEBAs).'' Internal Revenue Service, U.S. Department of the Treasury
Taxation in the United States