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ERISA-Bubs

Termination of VEBA Trust

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We have a VEBA trust that is running out of money and can't continue in operation. How do we wrap up the VEBA trust? Is there a specific process for this?

If we cannot finish out the year or cover current costs (no money) are the trustees going to be on the hook? The employers?

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ERISA-Bubs,

Not sure there is a standard or pre-set checklist but will offer a few thoughts off the top of my head:

1. The termination process should be addressed in the trust provisions. That likely will require an amendment to the plan / trust / and preparation of a "plan of termination / dissolution" that complies with the VEBA rules. The VEBA regs talk about what can be done with remaining funds but that may not be a real concern for you if you are running out of moeny.

2. In addition to the VEBA trust termination provisions, the plan providing benefits also likely has termination provisions in the plan document. Typically the plan will be regulated under ERISA and, if this is a situation involving multiple employers may also be a multiple employer welfare arrangement (MEWA) subject to state regulation and specific advance notice rules regarding discontinuation of coverage. If you have a VEBA for a single employer things should be easier. You will also want to check for compliance with new health reform rules if applicable regarding change / termination of coverage, etc.

3. I've traditionally worked with VEBAs funding MEWA arrangements where the participating employers sign participation agreements. I would think you may have something similar which would require the employer(s) to cover the shortfall in coverage and make additional contributions to the VEBA to the extent necessary to cover previously promised coverage. Beyond the employer as an entity will also likely be the VEBA Trustee(s) and officers / directors of the employer(s) as sources of potential fiduciary liability for shortfall in funds.

4. Seems to me the biggest thing here, however, is likely to stop digging the hole any deeper and get on a path to either get additional funding or lock in a termination of the VEBA so that you do not find the trust insolvent.

Again, those are just general thoughts without research or particular consideration. I hope they are a bit helfpul. If you find any formal guidance, checklist, or roadmap on the VEBA termination and wind up process, I would welcome hearing about it here.

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Good comments by Chaos.

Every VEBA trust I have read contains termination and wrap-up language, usually generic, that requires that all assets be used to provide benefits.

Is the VEBA running out of money because of something the Trustees did or failed to do? Are they indemnified under the trust?

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