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Guest LAA

Termination

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Guest LAA

I'm working with a VEBA that has a vacation property as its only asset. The property has lost value since it was purchased, and the VEBA no longer has any employees!! There isn't much guidance, but it appears to me that the employer could try to sell the property to a third party to get it out of the VEBA - but at what price? Obviously, a third party would only pay FMV. Any ideas? Could the VEBA hang onto the property and amend the VEBA trust to benefit different employees with a common employer bond?

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Presumably you mean that the employer that established the VEBA no longer has employees. However, the VEBA regs. are relatively clear: the assets of the trust must be used to provide benefits for employees and former employees. IRS has approved a distribution of excess assets upon plan termination to former participants based upon their compensation during years of participation in the plan.

In PLR 2001-36028 IRS approved the transfer of excess assets to an educational trust fund. And in PLR 2001-50030 IRS permitted transfer of excess assets to a charity. And in PLR 1999-52094 IRS approved using excess assets to fund benefits for new employees.

I have encouraged some clients to do is to use the VEBA (with proper amendments) to pay health insurance premiums for participants or retirees.

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