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Scott

Asset Transfer

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A company maintains a master welfare benefit plan that provides various types of benefits, including retiree medical and life insurance for union and non-union employees. The company has 3 separate VEBAs to fund this plan. Each VEBA contains a short statement in the preamble that sets forth the VEBA's "fundamental purpose." The fundamental purpose of one is to provide retiree medical benefits under the plan to non-bargaining participants. The fundamental purpose of another is to provide retiree medical benefits under the plan to bargaining participants. The fundamental purpose of the third is to provide retiree life benefits under the plan to participants regardless of their bargaining status. Other than these statements, the VEBAs are identical and do not have any language that specifically says that assets can be used only to pay certain types of benefits under the plan. To date, the company has used each VEBA to pay only the types of benefits described in the fundamental purpose.

The VEBA for non-bargaining retiree medical has a liquidity problem, and the company would like to use assets in the other 2 VEBAs to pay retiree medical benefits for non-bargaining participants.

Can the company transfer assets from the other 2 VEBAs into the non-bargaining VEBA?

If not, could the company accomplish the result by amending the other 2 VEBAs to revise their "fundamental purpose"?

Can the company just disregard the "fundamental purpose" and pay non-bargaining retiree medical benefits out of the other 2 VEBAs?

Any help would be appreciated.

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There was 1 primary reason to separate the trusts originally: To limit the liability of each trust to separate assets, so that if one trust went broke, for example, the other benefits could still be provided to the extent of the assets. This is primarily true when one of the groups covered has collectively-bargained benefits. A minor second reason to separate the trusts is because the non-union retiree medical trust is subject to UBIT.

The liquidity problem you describe is precisely the primary reason to separate the trusts. Without a plan amendment to the other trusts (at least one of which would require collective bargaining) it is NOT okay to "disregard the "fundamental purpose" and pay non-bargaining retiree medical benefits out of the other 2 VEBAs."

A transfer is permissible, but would require the same level of approval: action by Board of Directors, sign off by employee representatives, etc.

In short, none of the approaches you suggest would work because of the operative collective bargaining agreement. The employer should take this problem to the union to see if they are willing to permit their assets to be used for non-union employees. If not, the employer must find another solution.

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