VEBA Termination

[pjr@frdayton.com]

Will the IRS issue a private letter ruling with respect to the termination and final distribution of VEBA assets or is this a no ruling area.  Thanks.

[Luke Bailey]

I think they generally will. I have received letter rulings in connection with VEBA terminations that involved the distribution of disability annuities, for example, and the tax issues for the employees were novel so we needed the comfort of a ruling. There are a couple of "no-ruling" areas covered in Rev. Proc. 2022-1, however. These no-ruling areas do not directly involve termination, but rather amendments to VEBAs that implicate the tax benefit rule or the reversion excise tax in the case of a transfer of assets from one VEBA to another.

[401 Chaos]

PJR (or others), I was just curious if you had been able to determine whether PLRs were still issued on VEBA termination / final distribution issues?  I ask, in part, because I've got a client facing this issue and a search for PLRs referencing "1.501(c)(9)-4(d)" does not pull up any recent PLRs.  I think 2016 is the most recent year I have seen.  Curious if everybody figured out the VEBA distribution stuff or just stopped asking or if they were no longer being granted.  I agree with Luke's comment about the no-ruling area noted not appearing to expressly rule out VEBA distrubition notices but seems a bit strange there aren't any recent rulings.  Am I missing some?

Also, while on the topic, does anyone have thoughts about use of excess VEBA amounts to provide some health / wellness education and prevention and/or health screening initiatives rather than trying to purchase additional insurance or direct benefits or reimbursements to covered employees and members?  The remaining amounts in our case are likely to be relatively small such that trying to allocate and distribute on an individual basis would be highly inefficient.  The sponsor, however, could use the pool of assets to mount a nice series of health education / prevention articles or initiatives or screening events to the same general pool of participants.

[Luke Bailey]

401 Chaos, I don't know. Suspect you are right. The PLRs I got were over 20 years ago, and at that time the user fee was nominal, which is of course no longer the case.