Voluntary Employee Benefit Association (VEBA) Trusts meet requirements to file both Form 5500 and Form 990

 This requirement to file two returns made me question why other collectively-bargained benefit plans, such as the Pension, Annuity Funds, as well as 403(b) or 401(k) plans, are only required to file a Form 5500. In our practice, VEBA Trusts are used in connection with multiemployer Health and Welfare Plans. The difference between these plans is the Internal Revenue Service Code Sections under which the trusts are organized. While both are nontaxable trusts, there are differences between the code sections that regulate them.

Form 990 filing requirements

Form 990 filing is due on the 15th day of the 5th month after the plan year end. Two 90-day extensions can be obtained by filing Form 8868. The latest due date for the Form 990 is the 15th day of the 11th month after the year end.

• Nonprofit organizations organized under the Internal Revenue Code Section 501, meeting certain asset and revenue criteria, are required to file the Form 990 annually. VEBA Trusts are tax exempt under IRC § 501(c)(9). This is different from multiemployer Pension and Annuity plans which are commonly organized under IRC § 400 series. As a result, multiemployer Pension and Annuity Plans are not required to file a Form 990. The Form 990’s focus is the entity’s purpose, mission, programs and finances. The filing of the Form 990 ensures that a VEBA Trust’s assets are efficiently managed for the purpose of providing benefits to the plan’s participants.
• IRC § 501(c)(9) provides a broad definition of benefits which range from common health benefits to emergency loans in times of disaster. One of the limits that IRC § 501(c)(9) places on VEBAs is that 90% or more of the members must be employees with a common bond (employees in the same line of business in the same geographic area), unless the members are subject to a collective bargaining agreement. Multiemployer plans create VEBA Trusts to provide health benefits granted in collective bargaining agreements. The Internal Revenue Service has placed this limitation on VEBAs to ensure businesses do not use this form of organization in place of a bona fide insurance organization which would be separately regulated. Additionally, at least 90% of members are required to be employees, with up to 10% of members who are not employees being related to the members of the VEBA, such as in an employer capacity. Some of our multiemployer Health and Welfare plan clients allow participating employers to cover the company’s non-union office employees.

Form 5500 filing requirements

Form 5500 is due on the last day of the 7th month following the plan’s year end and can be extended for two and a half months by filing Form 5558.

• Form 5500 is a joint effort of the Department of Labor, Pension Benefit Guaranty Corporation, and the Internal Revenue Service. The Form 5500’s purpose is to report information regarding compliance with the Employee Retirement Income Security Act (ERISA). VEBA Trusts are subject to ERISA because their purpose is the provision of health benefits to participants. As a result, VEBA Trusts with over 100 participants are required to file the Form 5500. Multiemployer Health and Welfare plans commonly have over 100 participants, and generally require the filing of Form 5500.The core purpose of ERISA is to ensure plans provide the benefits as promised to participants including a detailed reporting of insurance companies utilized. In addition, Form 5500 requires the reporting of professional fees paid out of plan assets for services rendered to the plan. These disclosure requirements have a significant impact on multiemployer Health and Welfare Plans because these plans commonly use plan assets to pay for service providers such as fund consultants, legal counsel, investment managers, third party administrators, and audit fees. The goal of the Form 5500 is to ensure the trust is well managed for the benefit of the participants.

Forms 990 and 5500 serve separate, but equally important purposes. These forms provide the Internal Revenue Service and Secretary of Labor the information necessary to oversee VEBA Trusts.