Guest kredlin Posted February 5, 2003 Report Share Posted February 5, 2003 Are there any advantages to using a grantor trust or welfare benefit fund rather than a VEBA for a self-insured health plan with "church plan" status that provides benefits to employees of multiple affiliated organizations? Link to comment Share on other sites More sharing options...
mbozek Posted February 10, 2003 Report Share Posted February 10, 2003 I am trying to figure out your question. Why would a church need to establish a veba which is a tax exempt organization if the church is tax exempt ? Is it because the affiliated organizations are not tax exempt? A grantor trust is not subject to the restrictions imposed on vebas- e.g., 200k limit on comp covered. mjb Link to comment Share on other sites More sharing options...
Guest Danny Miller Posted February 10, 2003 Report Share Posted February 10, 2003 The use of a grantor trust, or a trust that is itself exempt from taxation under section 501©(3) of the Code, should be considered. As the recent reply to your question indicated, the use of such a trust in lieu of a VEBA will avoid the application of the VEBA requirements, some of which could be problematic. Link to comment Share on other sites More sharing options...
Guest kredlin Posted February 10, 2003 Report Share Posted February 10, 2003 I agree that a VEBA is not needed. As a second question, wouldn't this trust be a welfare benefit fund? If so, hasn't the IRS ruled that a WBF can't be a grantor trust? Also, other than a VEBA, how can a trust be tax-exempt? Link to comment Share on other sites More sharing options...
Guest Danny Miller Posted February 10, 2003 Report Share Posted February 10, 2003 The IRS has issued determination letters to trusts formed by 501©(3) organizations that grant the trust section 501©(3) status based on what I would call an "incoporated pocketbook" theory. That is, the trust is performing a function that would be permitted to be performed by the "parent" tax exempt organization directly, so the trust's activity is itself tax-exempt. The feeder organization regs suggest this reasoning as a possibility. I don't know of any PLRs directly on point, as these determinations are of course made through the determination letter process rather than by rulings. But I believe the 501©(3) route should work. Some organzations add the trust to their group ruling exemption letter to obtain 501©(3) status for it, assuming they have such a letter. On the grantor trust issue-- I think you may be right about that. Do you have a cite or cites to the rulings you mentioned? Link to comment Share on other sites More sharing options...
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