New VEBA Study Highlights Common Traits of Retiree Funds

VEBA Lifecycle: What you don’t know about VEBAs might surprise you. Voluntary employees’ beneficiary associations came to national attention this fall when the United Auto Workers created one to help secure funding from the Detroit 3 automakers for retiree health care expenses. The Segal Co. recently published a study of 25 VEBAs that are clients of the consultancy to better understand what these funds had in common and how they differed:

• Seventeen of the 25 VEBAs studied were created out of a bankruptcy or from collective bargaining during bankruptcy. Collective bargaining alone led to the creation of six of the VEBAs.

• Only three of the VEBAs have been terminated. One VEBA was designed to terminate. A second was taken over by the company, and the last VEBA ran out of money.

• Although VEBAs have been around since the early 20th century, a third of the VEBAs in the study were created during the past year.

• As is the case with the UAW VEBA, 21 of the 25 VEBAs studied by Segal were set up to provide retiree health care. The remaining four pay for supplemental benefits like life insurance, dental and other supplemental benefits or help reduce retiree contributions to premiums, deductibles and co-pays for drugs.