Why is a third-party trustee necessary?
Regulations require that a VEBA be controlled by employees. Having an independent trustee satisfies the “employee control” requirement, because the trustee acts on behalf of the employees. The existence of an independent trustee also mitigates the employer’s fiduciary duty and reduces liability exposure. When a bank or other corporate fiduciary acts as trustee, they assume the fiduciary duty. Use of an independent trustee deters any IRS argument that the VEBA is not a true multi-employer plan.
