December 2007 Spotlight, "Options for Managing the Cost and Risk Associated with Retiree Health Coverage, Including Remarks on the Current Interest in VEBAs"

Abstract

Voluntary Employees' Beneficiary Associations (VEBAs), which have existed for years, are suddenly in the media spotlight in the wake of recent agreements between General Motors, Chrysler and Ford Motor Company and the UAW to establish and manage a VEBA to fund retiree health care. Those actions are intended to eliminate the companies' substantial retiree health liabilities that must be reported under Financial Accounting Standard No. 106 (FAS 106). Employers that are interested in adopting that strategy should note its limited applicability. A text box in the article, which summarizes the news from the automobile industry, describes what a VEBA is, and explains why not all employers will be good candidates for VEBAs.

This Spotlight presents an overview of strategies for addressing retiree health liabilities, including advantages and disadvantages. It also briefly notes factors employers should consider before selecting a strategy.

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