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Really tired of arguing with someone - need substantial authority


Lori Friedman
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A VEBA serves as the funding medium for 2 welfare benefit plans sponsored by 1 employer. There are 3 entities in this arrangement:

1. VEBA (exempt organization) - Form 990

2. Plan 1 - Form 5500

3. Plan 2 - Form 5500

The assets for both plans are commingled in the VEBA trust and can't be divided or segregated. The asset values are allocated, on a fair and reasonable basis, for Form 5500 disclosure. Each plan reports its own interest in the trust's assets.

The sponsor's attorney insists that each plan's Form 5500 should report all of the VEBA assets. He's saying that Form 5500 should, in effect, overstate each plan's assets to include everything held inthe trust. On a publicly-disclosed document, each plan would report misleading information about its resources, financial position, and ability to pay benefits.

I need to put an end to this discussion, but I haven't come up with any substantial authority. Can anyone point me toward a DOL regulation, IRS instruction, or other cite to back up my position?

Lori Friedman

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No, the VEBA doesn't file Form 5500. As a 501©(9) exempt organization, it files Form 990.

Yes, both the VEBA and the plans are audited -- 3 sets of financial statements. Each plan discloses its allocated interest in the trust assets and share of the investment income.

Are you saying that if the VEBA isn't a DFE, each plan has an undivided interest in all of the trust's underlying assets? If a CCT or PSA doesn't elect to file Form 5500 as a DFE, its participating plans are required to break out and report their percentage interests in the underlying assets. Is there a different rule for a VEBA?

Lori Friedman

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I think the trust held by your VEBA is a DFE that will file both 5500 and 990. I had one of these arrangements a few years back when you first had to file 5500 for MT and our counsel decided it was a MT arrangement.

If you don't set up the MT inside VEBA you will have to include all the underlaying asset detail on Sch H. If you put in MT you can list all assets all on 1c11 and earnings on 2b8.

JanetM CPA, MBA

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I think that the attorney is technically right, in that all of the assets of the trust could be used to pay the benefits under either of the plans. However, I do agree that might give the appearance that the Trust has assets worth twice its actual holdings. The way to prevent "overstating" the assets of the Trust would be to add a footnote that explains this arrangement. I think that satisfies both of your concerns.

However, I must admit that I've never done this before, so I'm not promising that it works. Nor have I done any research on this point. Accordingly, if somebody finds a flaw or two in my analysis, please enlighten me (and the other persons reading this thread).

Kirk Maldonado

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