Terminating VEBA

[katieinny]

An employer has decided to terminate their VEBA. If any assets remain after the outstanding claims are paid, can that money revert to the employer? If so, would the employer be subject to an excise tax?

[E as in ERISA]

What kind of benefits are in it? I think that most let the VEBA stay in place long enough to run out, in order to avoid the issue altogether.

[KJohnson]

100% excise tax on reversion if I recall correctly. You can typically use the remainder for other VEBA type benefits or even make taxable distirbutions to members/participants.

[katieinny]

Thank you both for your input. My research this morning indicates that any remaining assets cannot revert to the employer and must be distributed in a nondiscriminatory fashion to the participants. So, the 100% excise tax is probably right.

[Ron Snyder]

You are correct: reversion is not an option.

There have been a couple of PLR's from IRS that have permitted excess assets from a terminating VEBA to go to a charity after satisfaction of all of the plan's liabilities.