Voluntary Employees' Beneficiary Association (VEBA) VEBA stands for Voluntary Employees' Beneficiary Association and is authorized by IRC Section 501(c)(9). Many governmental plan sponsors have set up HRAs (or medical reimbursement plans) using a VEBA trust. Many programs are called VEBAs simply because VEBA is a simple, memorable term, and the IRS did not coin the “HRA” phrase until 2002. Many plan sponsors have been operating medical reimbursement programs through VEBAs for governmental employers for many years prior to 2002. You will find the word "VEBA" many times interchangeable with "HRA". You should be aware, however, that VEBAs are also used to hold assets for self-insured medical plans, dental plans, severance pay plans and other benefits. HRAs offered through VEBA trusts typically offer the same tax benefits as HRAs offered through Section 115 integral part trusts. It should be noted that VEBAs are subject to additional discrimination rules under IRC Section 505 and are much more expensive to set up on either a single- or multiple-employer basis. The IRC 505 discrimination rules are not applicable to HRAs offered through Section 115 trusts. The result is that HRAs can offer discriminatory contributions if the benefits are limited to post-retirement insurance premiums, because Section 105(h) discrimination testing does not apply to HRAs that are restricted to paying only post-retirement insurance premiums. Discriminatory contributions to VEBAs offering HRAs may result in the VEBA losing its tax-exempt status under 501(c)(9). #40253