An association formed under Section 501(c)(9) of the Internal Revenue Code (Code) to pay certain welfare plan benefits (including life, sick, accident or other benefits) for members of the association (including participants, beneficiaries, and certain dependents) (26 U.S.C. § 501(c)(9)). VEBAs may be used to pay for benefits under self-insured health plans. A VEBA trust is exempt from federal income tax if the Code's requirements are met, but is subject to trust requirements and plan asset rules under the Employee Retirement Income Security Act of 1974 (ERISA) (see Legal Update, In Fiduciary Litigation, VEBA Trust Assets Were ERISA Plan Assets).

The Code imposes several operational requirements for VEBAs. For example, a VEBA must:

(26 U.S.C. § 501(c)(9).)

VEBA assets may not revert to an employer, and the Code includes a 100% excise tax on employer reversions (26 U.S.C. § 4976(a)).

Applications for tax-exempt status of a VEBA trust must be submitted to the Internal Revenue Service (IRS) (using IRS Form 1024) within 15 months after the end of the month in which the VEBA was organized.