Archived Insight | November 3, 2008

Study of Retiree Health VEBAs

Recent agreements between several automobile manufacturers and the UAW to establish and manage Voluntary Employees’ Beneficiary Associations (VEBAs) to fund retiree health care have focused attention on VEBAs.

In response, Segal conducted a study of 25 stand-alone retiree health VEBAs, which represent a significant share of all stand-alone retiree health VEBAs at the time the study was conducted in late 2007.

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Key findings

The following are among the key findings of the study:

  • Historically, bankruptcy has been the most common reason for the formation of retiree health VEBAs, although collective bargaining is becoming a more prominent trigger.
  • Although many retiree health VEBAs are new, some have been in existence for decades.
  • Retiree health VEBAs are not only for very large retiree populations.
  • The number of participants covered by a retiree health VEBA may grow by design.
  • Retiree health VEBA funding is not limited to upfront company contributions. Many VEBAs in the study have ongoing funding streams.
  • VEBAs are not limited to traditional retiree major medical/hospitalization and prescription drug coverage. Many VEBAs in the study offer other types of benefits in addition to or instead of that coverage, including Part B premium reimbursement, life insurance or health reimbursement accounts.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.