Welfare Benefit Plan Documents

[Guest Kimberly Flett]

What guidance is there on the specific plan document requirements for a VEBA? Should the document state if the trust classifies as a 501© organization? Should the document have been updated with legislative changes as qualified plans? I'm working with an audited VEBA plan and the last document is dated 1987 and has not been amended.

[mbozek]

VEBAs are tax exempt organizatons under IRC 501©(9) and are approved by the IRS by filing a form 1023(?). The trust will recieve a letter from the IRS designating it as a txo under 501c9. My understanding is the VEBA is created either as a trust or an association under state law. The VEBA holds assets and pays out benefits in accordance with the terms of a plan which can either be part of the trust or can be a separate document. The plan must conform to IRC Section 505(B) regarding certain non discrimination provisions in order for the trust to retain its tax exempt status. Since the plan is subject to qualification requirements similar to the requirements for a qualified pension plan, the plan must be amended and operated in accordance with the provisons of IRC 505(B) in effect for each tax year.

[Guest Kimberly Flett]

Thank you so much for your response.

[Ron Snyder]

There have been no specific law changes which would have necessitated amending VEBA trusts over the past 15 years, although the VEBA regulations have been amended and IRS has issued considerable guidance over that period, along with a couple of important court cases.

The larger problem is that each benefit to be provided under the VEBA trust is subject to other sections of the IRC. Many of those have been amended in the past 15 years. So, although the trust itself may not need amended, the plan provisions may need to be amended to comply with current laws. Moreover, many VEBAs use combined plan and trust documents, so the plan and trust, after being brought into conformity with the law, would need to be resubmitted to IRS for a determination.

[Guest Kimberly Flett]

Dear Veba Guru:

Thanks. Do you have a specific regulation reference or other reading that I can refer to on this topic?

[Ron Snyder]

Kim: Thanks. Do you have a specific regulation reference or other reading that I can refer to on this topic?

The problem is that there is a lot of information about this topic. The Code and regulations under 501©(9) are good places to start. Also Code and regs under 505, 419, 419A, 101, 105, 106, 125, 79, 83, 61, 162, 264, 414, 4976, also contain information about VEBAs and welfare benefit plans. Since I don't know what type(s) of benefits are provided, I can't really narrow the list.

IRS issued a VEBA Manual many years ago which has been recently updated. I have access to it through my tax service (from Tax Analysts). I found it on IRS's website in the Tax Professional's Corner, "Handbook 7.8.1, Exempt Organizations Handbook,

Chapter 9, Voluntary Employees' Beneficiary Associations-- IRC 501©(9)".

IRS has issued rulings such as TAM 9141003 and 9141004, RRs 79-406, 79-221, 81-16, 85-199, 91-26, Notice 95-34, numerous private letter rulings (too many to mention),

In addition to IRS pronouncements the Treasury Department has issues some guidance. Take note of GCMs 39785, 39817, 39818, 39834, 39884. There have also been many court cases: Water Quality, Wellons, Sherwin Williams, Schneider, Parker, LIMA Surgical, Neonatology, Canton Police, Booth, American Bar Endowment, etc.

These are not everything, but they are a good start.

[Guest Kimberly Flett]

so kind of you VEBA GURU! Have a lovely day.

[Kirk Maldonado]

You might also want to check out BNA Tax Management Portfolio #395, VEBAs and Other Self-Insured Arrangements. It has an extensive discussion of the VEBA rules.