Welfare plan deductions, taxation

[Gary 1]

I submit my post to this board because the H&W board doesn't appear too active.

Say a husband and wife own a company and implement a welfare benefit plan.

The actuarial level reserve to pre fund their post retirement medical benefit of 100k each is 15k each for a total of 30k.

Say they contribute and deduct 20k and the plan earns 4k in investment income leaving 24k in plan at year-end.

Since the 24k is less than the 419 deduction limit of 30k does that mean none of the income is subject to taxation?

Or is the 4k income subject to taxation?

Thanks.

[GBurns 20]

Is there a VEBA or what else ?

If there is a VEBA, Why ? There only 2 people and they are the owners of the company. What type of corporate entity ?

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I just saw that vebaguru had given you a response on the other Forum. You probably got no further responses because there probably was nothing that anyone else wanted to add. It might not have been the answer you wanted, but that's the way the coookie crumbles sometimes.

[Gary 1]

For purposes of the question it is a C corp and it is a welfare benefit plan fund. No VEBA.

The question has to due with taxation of income, please review the question again.

Thank you.

[vebaguru 4]

The limit is reduced by the fund's earnings, not the tax deduction. Under your assumptions, the deduction is $30,000 less $4,000 for a net available of $26,000.

The other approach provide a deduction of $0 if they funded $4,000!