Key
Features
-
Contributions are tax
deductible
-
Growth of trust is tax exempt
-
Certain distributions are
excluded from taxes
A
Voluntary Employees’ Beneficiary
Association, also known as a
"Section 501(c)(9) Plan" or a "VEBA,"
is a plan under which employers
may elect to provide future
welfare benefits for employees
and their beneficiaries through
a welfare benefit fund which is
allowed to accumulate tax-free.
Sections 79, 101, 105, 419, 419A
and 505 of the Internal Revenue
Code impose additional
limitations on welfare benefit
funds.
The
types of welfare benefits which
may be provided through a VEBA
include severance pay, life
benefits, sick and accident
benefits, disability benefits
and other similar benefits. The
Sterling Benefit Plan VEBA
emphasizes the following types
of benefits:
-
Pre-retirement death benefit
-
Post-retirement death benefit
reserve
-
Severance pay benefit
-
Retiree medical benefit
-
Health reimbursement account
benefit (collectively
bargained)
-
College education benefit
VEBAs are generally appropriate
for employers who desire to
provide additional benefits over
and above retirement benefits to
their employees (and obtain
additional tax deductions for
providing such benefits). More
and more frequently professional
corporations have adopted VEBAs
as a supplement to their
existing benefit programs. In
addition, they are appropriate
for those employers who desire
to provide excellent benefits to
their employees, but prefer
slower vesting and benefit
accrual rules than those
provided under qualified
retirement plans.
Although VEBA plans are subject
to non-discrimination rules
which require that "non-highly
compensated" employees benefit
under the plan at a rate
comparable to the rate at which
"highly compensated" employees
benefit. However, such
requirements are much easier to
satisfy than similar
requirements imposed under
qualified retirement plans.
Because of administrative costs
associated with this type of
program, it is generally a good
idea for employers with 10 or
more employees who desire to
make substantial contributions
to the plan ($40,000 or more
annually).
For
further information, you may
visit the following links:
VEBAPlan.com
VEBA Insurance and Investment
Links |
