Independent Contractors & VEBAs

[strategicbenefits]

Is it possible for a group of 1099 contractors to set up a VEBA for medical benefits? I have a group of truck drivers for a moving company looking to obtain benefits. Company has 30 employees and 80 1099 contractors.

[GBurns]

I doubt it plus the cost to set up the Trust and to maintain it should be prohibitive since there are only 80 contractors.

The main problem is that being ICs they are each an employer which would create a MEWA.

It is possible for the moving company to include ICs in their medical coverage, but that would need an amendment to the Plan Document and approval by the insurance company. Also, state insurance law has to allow it and there are a few which do not, but, the insurer should know. Remember that the ICs cannot participate in the Cafeteria Plan, so their premiums would be after tax, but they can deduct on their 1040.

[GBurns]

I should have asked you, How do you know that they are really 1099 IC and not employees? How was this determined?

Just because they get 1099s mean that this is their correct classification. Classification is not detemined by either the Moving Company or the person, There are rules set by the state and the IRS. Penalties for misclassification are very severe.