Voluntary Employee Beneficiary Association (VEBA)

A VEBA account is a flexible, tax effective vehicle to accumulate assets to pay the health related expenses of employees, retirees, and their dependents. The VEBA consists of a plan and trust. The Plan directs money into the trust, defines what the money can be used for, and describes the operating procedures of the VEBA. The Trust is a separate legal entity which holds the VEBA money and protects it from the claims of the employer's creditors.

The Trust is only authorized to pay the expenses identified in the plan. Once the money is in the VEBA, it cannot be returned to the employer. Contributions go in to the VEBA tax-free, grow tax-free, and come out tax-free to pay for qualified expenses. While a VEBA can be organized to pay for all kinds of health and welfare benefits, payments of uninsured medical expenses is the most popular use of VEBA money.