Chapter 59
VEBA WELFARE BENEFIT TRUST
LEARNING OBJECTIVES:

Identify key issues related to VEBAs
REVIEW:
This chapter covers VEBAs (Voluntary Employees Beneficiary Associations). A
VEBA is used to provide employee benefits in the future. After discussing
advantages and disadvantages, the chapter moves to VEBA design issues and
the focus is on coverage and nondiscrimination issues. The types of benefits that
can be provided are discussed next, followed by a section on tax implications.
Taxes are considered in the following areas: taxation of employees; taxation of
the VEBA; and the employer’s deduction. ERISA (Employee Retirement Income
Security Act) requirements are discussed, and there is a section with three
references for learning more. Finally, the chapter closes with a question and
answer section.
CHAPTER OUTLINE:
I. What Is It?
II. When Is It Indicated?
III. Advantages
IV. Disadvantages
V. VEBA Design Issues
A. Who Must Be Covered?
B. What Kinds of Benefits Can Be Provided?
VI. Tax Implications
A. Taxation of Employees
B. Taxation of VEBA
C. Employer’s Deduction
VII. ERISA and Other Requirements
VIII. Where Can I Find Out More About It?
IX. Questions and Answers
1
Chapter 59
X Chapter Endnotes
FEATURED TOPICS:
VEBA welfare benefit trusts
CFP® CERTIFICATION EXAMINATION TOPIC:
Topic 30: Other employee benefits
C. Voluntary employees’ beneficiary association (VEBA)
COMPETENCY:
Upon completion of this chapter, the student should be able to:
1. Identify key issues related to VEBAs
DISCUSSION:
1. Discuss the types of benefits that may, and may not, be provided by a VEBA.
2. Discuss requirements for and application of a 419(f)(6) welfare benefit trust
arrangement.
KEY WORDS:
VEBA
IRC Section 501(c)(9)
Multiple-employer plan
419A(f)(6) plan
Reversion of assets
Allowed benefit
Prohibited benefits
Allocation of plan assets
Differential pricing
Chapter 59
No fixed welfare benefit package
Nonstandard benefit triggers
QUESTIONS:
1. In addition to being set up as a trust, how may a VEBA be structured?
a.
b.
c.
d.
nonqualified deferred compensation plan
qualified retirement plan
partnership
corporation
Chapter 59, p. 419
2. What is one of the primary reasons to use a VEBA?
a.
b.
c.
d.
lower administration and installation expenses
flexibility regarding potential overfunding and reversion to the employer
benefit security
the ability to provide benefits for as little as one employee
Chapter 59, p. 419
3. Which of the following are benefits that can be provided by a VEBA?
(1) life insurance
(2) vacation benefits
(3) sick and accident benefits
(4) coverage of commuting expenses
a.
b.
c.
d.
(1) and (3) only
(1), (2), and (3) only
(2), (3), and (4) only
(1), (2), (3), and (4)
Chapter 59, p. 420
4. In order for income to be exempt from regular income tax, the VEBA must
meet all the requirements of which one of the following IRC sections?
a.
b.
c.
d.
501 (c)(9)
401(k)
457
403(b)(7)
Chapter 59
Chapter 59, p. 421
ANSWERS:
1. d
2. c
3. b
4. a