Can VEBAs Alleviate Retiree Health Care Problems?

Recent negotiations between the United Auto Workers (UAW) and Detroit automakers focused attention on an innovative response to the long-term decline in retiree health insurance in the United States. The union agreed to set up a trust called a Voluntary Employees’ Beneficiary Association (VEBA) to assume responsibility for the UAW retiree medical care at the companies. An analysis of the General Motors Corporation VEBA suggests that it is a second-best option to employer-paid retiree coverage. However, absent comprehensive national health-care reform, it may be a viable alternative for those unable to fend off the elimination of retiree health elimination by an employer.