How do VEBA plans work?
• The employer joins a sponsoring association of 10 or more other employers. • The employer adopts the association’s welfare benefit plan. • The employer makes annual contributions to the plan’s trust to buy benefits. • The employer takes an income tax deduction each year equal to its annual contributions. • All trust assets are held in a pool. There are no segregated employer accounts. Employer contributions create trust assets, which the trust may use to provide benefits, even after a sponsoring employer is no longer able to make contributions. • The trust accumulates funds and buys insurance coverage (i.e., life, health, and disability insurance) on each employee-participant. Trust cash accumulations and/or insurance benefits are used to meet the trust’s obligations to the participants and their beneficiaries. • Each employer participating in the plan may select to offer any or all other plan’s benefits to its employees. The employer can choose the level of participation by determin
