Use VEBA to Fund HSA

[Guest K Conklin]

Can a VEBA sponsored by an employer to provide funds for employee health costs contribute funds to employees' HSAs?

[Ron Snyder]

If one looks at a VEBA as a paying agent for the employer, there is no reason that an intervening VEBA trust could not provide the same benefits on the same basis as the employer/sponsor. That is the argument in favor.

If one looks at a VEBA as an independent welfare benefit trust, it would seem unnatural to have provisions for making distributions on any basis other than as claims for benefits are filed by employees, dependents and beneficiaries for which they are eligible.

Therefore I wonder how the VEBA would be worded. What benefits does it provide? On what basis would the HSA transfers/contributions be made? Is it optional to the employee? Would this cause the VEBA not to comply with applicable nondiscrimination rules?

My informal conclusion is that it would not work. A VEBA may be used to provide certain benefits on a nondiscriminatory basis. I have a hard time envisioning the structure of a benefit that complies with both the VEBA requirements and the HSA rules.