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Transfer to 501(c)(5)


Guest jmc51
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Guest jmc51

A VEBA has a Health Reimbursement Arrangment within it and is looking to transfer the assets of that HRA into an HRA maintained by a 501©(5) (labor organization) entity. The assets will be used for the same purpose but I can't find any IRS PLR's on point addressing any issues raised. Any thoughts?

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I recently researched transfers between welfare benefit plans and found over 100 private letter rulings dealing with (and generally approving) such transfers. The real question is whether you are taking benefits from one group and giving them to another (which could conceivably be deemed an impermissible reversion or prohibited inurement). However, if a group of employees who were covered under a VEBA have now organized, transfer of their benefits into a 501©(5) should be okay.

If you review the PLRs, you are likely to conclude (as I have) that the proper course of action will be for them to obtain a PLR of their own prior to effecting the transfer.

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Guest jmc51

Thanks for your comments--my initial post was vague. The specific issues--whether there is an imperssible reversion or prohibited inurement--are the ones we are concerned with. We didn't find a PLR addressing a transfer from ©(9) to ©(5)--there are PLRs on ©(9) to ©(9) as well as ©(9) to ©(3) regarding surplus assets. The VEBA is collectively bargained and the group of participants is transferring over their account balance and will participate in the 501©(5). We've gotten over the reversion concern: Legislative history for the DRA of 1984 (which added section 7976 to the Code), provides “f an amount is paid by a fund to anther fund for the purpose of providing welfare benefits to employees of the employer, then the payment is not to be considered a reversion.” The inurement issue is lingering but since no employer contributions have been made to these accounts in some nor will future contributions be made will be--it's a matter of administering them out--the inurement concerned is somewhat lessoned.

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