Plans collapse when they run out of funds, participants' claims are left unpaid, and promoters set up a new union and start over. Some MEWAs serve a legitimate purpose often this is the best selling tool a union can offer in trying to organize new members. A legitimate plan must be actuarially sound. If prices are too low, the plan can't survive. VEBAs VEBAs can be a legitimate tool to provide benefits inexpensively, to accumulate wealth for the owners, to address liquidity and estate concerns, and to provide insurance benefits on an after-tax basis.
Problems arise due to aggressive selling.
Some promoters are selling VEBAs as deferred compensation plans that permit dramatic discrimination in favor of owner. Use of universal life and variable annuities within VEBA should raise questions about whether the plan is a deferred compensation plan. IRS is showing some stepped up enforcement of VEBAs, but DOL is going to be the agency to watch out for. Review actuary's report 3. Review plan's determination letter 4.