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TESNY

VEBA question

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Hi.  I am sorry if I am asking a question in the wrong place, but I have been trying to find info and can't seem to get it. You all seem extremely knowledgeable. My husband is in a construction union in NY. They have what I think is a VEBA.  I searched online on ProPublica and it says that it is defined as a Voluntary Employees Beneficiary Association with a NonProfit Tax code Designation of 501(c)(9). I think money is paid into the account by the employer. Reasons withdrawals are allowed are listed below.

I am wondering if the union member should be paying Federal and State income tax for all withdrawals, especially for medical withdrawals.  We have had to withdraw money for very sick and disabled children. The withdrawals were for things like coinsurance,  copays, special education schooling, speech therapy, etc.  Those withdrawals have been reported on a 1099-misc.  Is this correct?  Is there a way the union could have this set up so union members would not have to pay income tax on medical withdrawals? 

Thank you for your help.  This is not my area and I can't seem to find anyone at the union fund office who has a clue.

Withdrawals can be made for the following reasons:

1. DEATH OF PARTICIPANT (ATTACH CERTIFIED DEATH TRANSCRIPT)

2. UNEMPLOYMENT, DISABILITY OR COMPENSATION (PROOF OF PAYMENT FOR PERIOD CLAIMED)

3. HOSPITALIZATION, MEDICAL OR DENTAL BILLS NOT REIMBURSABLE (SUBMIT BILLS)

4. ADDITIONAL ASSISTANCE BENEFIT (PROOF OF ECONOMIC HARDSHIP - ATTACH STATEMENT)

5. SEVERANCE BENEFIT (SUBMIT PROOF YOU HAVE WITHDRAWN FROM THE INDUSTRY)

 

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Google "taxation of VEBA withdrawals" and you'll find a lot, including this, which indicates that distributions for qualified medical expenses should not be taxable. However, just because distributions were reported to IRS does not mean they were reported as taxable - double check your 1099. If you still have questions, contact the plan administrator, which should be listed in your Summary Plan Description. Hope this helps, good luck.

https://www.investopedia.com/terms/v/voluntaryemployeesassoc.asp

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Thanks.  It is reported as "other income" and federal income taxes are withheld.  I will tell my husband to find out who the plan administrator is.  He asked for information at the fund office and they were clueless, but perhaps he was asking the wrong people.

Thanks again.

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TESNY, your question is not clear whether (1) you presented medical expenses of covered individuals to the VEBA for reimbursement, or (2) you were able to make cash withdrawals for unspecified purposes, and the reason you made the withdrawals was that you had family medical expenses. Without researching this or studying your documents, and speaking only very generally, I would hazard a guess that the former might be excludable from income, the latter probably not.

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50 minutes ago, Luke Bailey said:

TESNY, your question is not clear whether (1) you presented medical expenses of covered individuals to the VEBA for reimbursement, or (2) you were able to make cash withdrawals for unspecified purposes, and the reason you made the withdrawals was that you had family medical expenses. Without researching this or studying your documents, and speaking only very generally, I would hazard a guess that the former might be excludable from income, the latter probably not.

Thanks.  Withdrawals were made for medical expenses.  Documentation of the medical expenses was required.  I don't think they are just making a mistake with my husband.  I think the union fund in general is either making a mistake, or should set things up differently so that income taxes should not have to be paid.

Thanks again for your help!

 

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