DEFINITION of 'Voluntary Employees' Beneficiary Association - VEBA'
A type of mutual organization that provides life, illness, accident, medical and similar benefits to members, their dependents or their beneficiaries. The association can be established by employees or by an employer and must consist of employees of the same company or same labor union. VEBA benefits normally end when the employee leaves the company or labor union with which the VEBA is associated.
BREAKING DOWN 'Voluntary Employees' Beneficiary Association - VEBA'
Funds may be contributed to a VEBA either the employees or their employer. Employer contributions are often tax-deductible to the employer. VEBAs themselves are authorized by Internal Revenue Code section 501(c)(9) as tax-exempt organizations as long as their earnings are only used for providing benefits. However, benefits paid out to employees are not necessarily tax exempt to the employee.