Limit on $ amount employer can contribute to 501 (c) (9) Plan?

[Guest dhp]

Is there a limit on the amount an employer can contribute to a self-funded welfare benefit plan (health insurance) in one tax year? The Plan is an IRS approved 501 © (9) VEBA trust. The employer is a tax-exempt organization. An extremely negative year in terms of claims paid has resulted in the trust reserve balance falling to uncomfortable levels. Can a lump-sum payment be made to bring the reserve up to acceptable amounts? And can that level of reserves be established by the Plan trustee based on claims history or some criteria other than an actuarial calculation?

[mroberts]

It would make sense to leave it up to the actuaries. Obviously last year your organization had a bad year, but what if this year is a fantastic year? I believe there is a law anyway that a tax exempt organization needs to follow to determine reserves. It's only a minimal amount, so if you wanted to go above that level, so be it.

As far as a lump sum adjustment goes, it should be legal. Again the whole tax exempt thing is throwing me off. I've worked on a number of employers' self-insured plans and at times they have made lump sum payments to catch up. Regardless, I would work with your broker or actuaries to get the best advice. It's not worth over reacting if you just had a bad year.