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Union VEBA and Cafeteria Plan

Guest VEBA1234

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Guest VEBA1234

A local affiliate of a national union sponsors a VEBA (they have received a 501©(9) letter) through which they offer health and welfare benefits, such as payment of insurance premiums, and reimbursement of medical expenses. The VEBA is funded entirely by employer contributions. When participants have a certain amount of funds in their account in the VEBA, they are then allowed to make elections through a cafeteria plan to either contribute additional funds to a vacation/sick account, their VEBA account, and/or a 401(k) plan. For example, if the threshold is $3,500, and a participant has $4,000 in her account, the additional $500 may be allocated by the participant into any combination of the participant’s VEBA account, a vacation/sick bank, and/or the 401(k) plan. Balances in the VEBA are rolled over from year to year and have not been cashed out. Can the VEBA and cafeteria plan work together as is without requiring VEBA (health & welfare) balances to be subject to the use-it-or-lose-it cafeteria plan rules?

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