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Guest DonnaRonna

VEBA acquired via company purchase

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Guest DonnaRonna

I work for a company which acquired another company. Below is the scenario:

The acquiring (parent) company - has a medical plan which is a combination of self-funded (or unfunded -- that terminology always confuses me; the company pays claims out of general assets, of which the employee pays a portion) and fully insured (some states and clients require insurance contracts so there are a few of those; those premiums are paid directly to the insurance company).

The acquired company (which was acquired in the middle of the fiscal/calendar year) - has a VEBA. The VEBA is about 10 years old, and although they may have used it to advantage in the past, currently they are just moving cash to the bank account to cover claims, much like an unfunded plan -- no advanced funding or investment being done.

During the year of acquisition, the acquired company was held as a separate subsidiary and the plan audit and Form 5500 were filed with just the financial information for that subsidiary.

NOW the acquired company has been fully integrated into the parent company (it's no longer a subsidiary). All claims are now paid through the parent company's TPA, using the general assets of the parent company. There were some residual run-off claims from the old plan of the acquired company that happened in the first part of the year (which were paid by the parent company through general assets), but any current year claims are being paid through the parent company's TPA from general assets of the company.

The questions are - do I now have to combine all of the parent company and acquired (now absorbed) company data, and get that audited for the 5500, just because there were run-off claims that were associated with the VEBA? Do I have to get an audit next year simply because that VEBA exists, even though then it won't be used at all? Will that go on until I officially terminate the VEBA?

Yes, I will be talking to the accounting firm about this, but I would like an objective opinion that isn't influence by potential audit fees (yes, that's cynical, I know).

Any insight would be most appreciated. My knowledge of VEBAs is solely based on what I can find to read about it.

Thanks in advance.

Donna

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