Voluntary Employees Beneficiary Association

What Does Voluntary Employees Beneficiary Association Mean?

A Voluntary Employees’ Beneficiary Association (VEBA) is a trust fund established by an employer or a group of employees to provide various benefits, such as health, accident, life insurance, and more, to employees, their dependents, beneficiaries, or former employees who are disabled, laid-off, or retired. In this regard, it resembles various insurance products. To be considered legitimate, a VEBA must consist solely of members from the same labor union or company.

Insuranceopedia Explains Voluntary Employees Beneficiary Association

Contributions made by employers to a VEBA are typically tax-deductible, providing an incentive for them to contribute. Additionally, the Internal Revenue Service (IRS) code designates the VEBA as a tax-exempt account, as long as the funds are used exclusively to pay out benefits.

VEBAs are often established when employees seek to expand the benefits available through their jobs. These beneficiary associations offer a framework for creating such benefits. However, an individual can only receive benefits while they are employed by the company or a member of the labor union.