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VEBA writes check to employer, and employer uses money to send a wire transfer to health reserve fund


Carol V. Calhoun
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Employer has a health plan, and a VEBA.  The VEBA permits use of VEBA assets to fund health benefits.  However, the health plan is not insured.  Rather, a vendor requires that a reserve fund be set up.  That fund is used for health benefits, and must be replenished as it is used for that purpose.

The vendor will only accept amounts sent by wire transfer.  However, the bank that holds the VEBA account will only send money by checks. (This strikes me as odd, but that's the facts we have.)

Employer would like to have the VEBA write a check to the employer, and the employer would immediately contribute the funds to the reserve fund by wire transfer.  However, for some brief period of time, the money would be in the employer's hands.  Has anyone seen the IRS argue that this is an impermissible inurement?

Employee benefits legal resource site

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  • Carol V. Calhoun changed the title to VEBA writes check to employer, and employer uses money to send a wire transfer to health reserve fund

While I’ve advised regarding a VEBA, I haven’t faced a situation of the kind you describe.

In other situations, I’ve seen reasoning that a trustee may act through an agent.

But a good agent segregates her principal’s assets from her personal assets.

Before using the workaround, the VEBA trustees might consider how they would prove:

that the employer/agent could not use the VEBA trust’s money for anything beyond the VEBA’s purpose; or

that there were prudent controls for the trustees to detect the employer/agent’s bad act, and fidelity-bond insurance or other ready means to recover what’s stolen or misused.

Might it be quicker for the VEBA trustees to select a bank with the needed wire-transfer services?

Or to select a TPA that accepts the trustees’ check?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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7 hours ago, Peter Gulia said:

Might it be quicker for the VEBA trustees to select a bank with the needed wire-transfer services?

Or to select a TPA that accepts the trustees’ check?

Or make someone at the employer a co-trustee just of the assets occasionally transferred to it, with the trust addendum describing the arrangement, the scope of the trustee's responsibilities, the segregation of assets in an account in the trustee's name, etc.?

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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