VEBA Part of a Plan?

[Scott]

Is a VEBA a part of a plan?

Here's the situation: Under a collective bargaining agreement, a company was required to set up a VEBA to fund certain welfare plans for union employees. The collective bargaining agreement has been superseded by a new agreement, which no longer contains a specific requirement to maintain a VEBA, but which requires the company to keep the welfare plans which the VEBA has funded in place. The company would like to terminate the VEBA, but if the VEBA has become a part of the welfare plans, it can't.

Any thoughts?

[Kirk Maldonado]

A VEBA is simply a trust that is used to fund benefits; it does not provide any benefits per se.

[Guest Charlie Stevens]

This is a combined labor law and benefits law issue. If the VEBA is terminated, it is likely that the Union will argue that the Company unilaterally changed a term or condition of employment without bargaining. In the past, the Union had bargained for these benefits to be provided through a trust. Now the Company terminates the trust, arguably making the benefits less "secure". Even though this provision is no longer in the Collective Bargaining Agreement, it is likely that the termination of the trust would be found to have violated the Collective Bargaining Agreement and/or the law requiring the bargaining of such changes. While I am usually an advocate for employers on these issues, I would not recommend a termination of the VEBA without contemplating some strategy to obtain Union approval.

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Charlie Stevens

Michael Best & Friedrich LLP