Jump to content
Sign in to follow this  
Guest TeriH

VEBA Set-up

Recommended Posts

Guest TeriH

We are looking to set up a VEBA for a client and I have a few questions that I have not been able to locate in all of my research.

First, is a trust required in setting up this type of plan? Some information states that it is, others do not.

Second, is a plan document required when setting up a VEBA?

Finally, is a separate account required for key employees?

Thank you in advance for the information.

Share this post


Link to post
Share on other sites

The VEBA is the funding mechanism for the plan. The VEBA is a tax exempt entity under 501©(9). The employer's deductions are subject to the 419 rules on funding. And the related plan is subject to applicable rules for that type of plan.

See the IRS' training on VEBAs at http://www.irs.gov/pub/irs-utl/lesson5.pdf.

I have only seen VEBAs set up as trusts (I believe that it must be some form of legal entity in order to obtain tax exemption).

There should be a trust document for the VEBA. ERISA will generally require a plan document for any welfare benefits.

Section 419 requires separate accounts for key employees.

Share this post


Link to post
Share on other sites

Setting up a VEBA properly requires detailed knowledge and preferably some experience. Why not use an experienced professional?

Share this post


Link to post
Share on other sites

VEBAs are subject to nondiscrimination rules under IRC 505(B). VEBA can be set up as a nonprofit association under state law or a trust. Aslo VEBA must be approved as a TXO by IRS in order to operate.

Share this post


Link to post
Share on other sites

Teri H-

A VEBA may either be a trust or a non-profit corporation as indicated by mbozek above.

A trust document is required to set up a VEBA. The plan provisions may either be incorporated in the trust or separate. They may even be in the form of insurance contracts.

Separate accounts for key employees are not required under VEBAs but may be required under welfare plans to which IRC sections 419 and 419A apply. In addition, amounts allocated to such separate acciounts may count as annual additions under IRC section 415.

G Burns is correct that you would be foolish not to employ a professional to set up a VEBA. And mbozek is correct that it must be submitted to IRS in order to claim tax-exempt status.

Finally, here is a link to the IRS' Exempt Organizations Handbook provisions relative to VEBAs: http://www.irs.gov/taxpros/display/0,,i1%3...3D22088,00.html

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...