A health and welfare fund subject to 1.501©(9)-2 is made up of employees. A related business of non-employees wants to join the fund. However, according to that regulation, the non-employees can make up no more than 10% of the VEBA.

1) How is the number of employees calculated?
1a) Is it just straight number of employees, or are spouses & dependents included?

2) Is the number flexible, or is it set at a certain time?

Thank you.

1) The number of employees benefiting under a plan should be determined the same way as the participant count is done.
1a) Spouses and dependents are not counted for this purpose.
2) IRS has given PLRs with respect to non-employees participating in a VEBA in the case of life insurance agents and others whose relationship with the employer is similar to an employee.
The regulation you cite primarily is referring to self-employed individuals or partners not exceeding 10% of the plan's participants.