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Randy Watson

VEBA Spinoff?

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Assume Company A and Company B plan on entering into a purchase agreement where A will purchase some of the assets of Company B. Some employees of Company B will become the employees of Company A. Company B has a VEBA to cover the health benefits of its employees. Is it possible to spinoff a portion of the VEBA assets to the new company to fund the health benefits of the newly "acquired" employees of Company B similar to a pension plan spinoff? If so, would those assets have to go into another VEBA?

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Yes, and yes. It is possible.

There is no corresponding provision to 414(l), although ERISA fiduciary duties to participants in both plans may impute a similar requirement.

IRS has issued PLRs on similar situations.

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