Voluntary Employees Beneficiary Association Voluntary Employees Benefit Associations or VEBAs may be ideal for companies that no longer desire to administer welfare benefit plans for their current and former employees. A Welfare Benefit Trust is formed under the authority of the Plan Sponsor (Settlor), which is typically the employer. The Settlor and the Trustee execute the Trust Agreement and the Settlor names the Trustees. A commercial bank or similar financial institution usually acts as the trustee and custodian of funds. If applicable, the Trust document should provide for a successor Settlor and/or permanent fiduciary replacement at some specified point in time or based upon some event (e.g. dissolution of the initial Settlor organization). The successor Settlor may be an employee organization comprised of former employees or some form of Settlor committee consisting of former employees or beneficiaries under the Trust. The Trust provides benefits to eligible participants who are former employees (and their eligible dependents) of the corporation and qualifying subsidiaries. Funding for the program may be provided by the corporation and by participant contributions or any combination of the two. If the corporation provides a one-time fixed dollar contribution on behalf of each participant, it is not required to provide any additional funding or financial resources to the Trust, nor will it promise any level of benefits or share in any risk due to lack of funding. The Trust may make certain benefits available, including medical, dental, catastrophic illness and death benefits, through one or more benefit plans. These plans may be either self funded or fully insured. Fully insured plans should have group policies issued to the Trust. Self funded plans need to have a Plan Document, which expressly indicates that the plan of benefits is self funded (except in the case where there is an initial contribution made by the company) and that benefits are funded entirely by contributions of participants in the Trust. In order to participate in these benefits, the individuals must make contributions to the trust, which is intended to qualify under section 501(c)(9) of the Internal Revenue Code of 1986 ("Code") as a voluntary employee beneficiary association ("VEBA"). The VEBA pays for specified medical expenses pursuant to the benefit plan document. The benefit plan document limits the amount the VEBA pays for an individual annually and during the individual's lifetime. The non-Medicare eligible population usually accesses benefits under a self funded plan. The self funded plan is intended to qualify under ERISA. In order to qualify as an employee welfare benefit plan under Section 3(1) of ERISA, a program must be maintained by an employer or by an employee organization, or by both, for the purpose of providing for participants and their beneficiaries certain non-pension benefits, including medical, surgical or hospital care. The fund is usually protected by an aggregate stop loss insurance policy. The following schematic provides a brief summary of the overall structure and functions. View Proposed Health Care VEBA Structure