The 'Big Three' VEBAs and Other Stand-Alone Welfare Benefit Trusts: What Is and Is Not Novel about Them
Tax & Accounting Insights and Commentary, December 2009
6 Pages Posted: 15 Nov 2010
Date Written: December 1, 2009
Some conceptual confusion appears to surround the voluntary employees’ beneficiary associations, or VEBAs, recently established by “Big Three” automakers Ford, General Motors and Chrysler (as well as other companies) to meet these employers’ post-retirement health insurance obligations. In particular there seems a generally held apprehension that VEBAs themselves represent an inherently innovative funding strategy. The article emphasizes that what is innovative about the Big Three retiree benefit trusts is not the fact that they are VEBAs – a form of tax-exempt trust that has been routinely used to pre-fund benefit obligations for many decades – but rather that in these cases the trusts have assumed, from the employer, the legal liability for benefit obligations to plan participants.
Keywords: VEBA, Big Three, Retiree health, health insurance, erisa, employee benefits, tax
JEL Classification: J2, E62, H29, I11, J26
Suggested Citation: Suggested Citation