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Rolling a VEBA into another VEBA

Alexis K

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Our corporation has a VEBA trust. There is one employee. There is a loan against the cash value of the whole life policy that is in the VEBA trust. A couple years ago, the IRS demanded that the administrator stop accepting funding because he was not keeping clean books. So, a judge turned it over to a law firm to clean things up, which they did. Now, the judge won't let us put any more assets into the VEBA, but in the mean time, there is still this loan, which is accruing interest, which we are not allowed to pay, because it would constitute adding assets to the trust. (We specifically had the VEBA administrators ask the judge about paying off the loan, and he said no.) So ... the only things in the trust are a whole life insurance policy and a loan. Thus, the VEBA is losing money every year because of the interest on the loan.
Is it possible to transfer the VEBA into another VEBA so that we can continue to fund it (and pay off the loan)? We can't really cash our of the VEBA because the taxes would be insane and there is no cash in the VEBA with which to pay them.
Finally, do you know of any VEBAs that are accepting transfers?
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Why is a judge involved?  Bankruptcy?


I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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The new administrator told us we could transfer the assets out of the VEBA to a new one, if we could find one. A judge is involved because the previous administrator was fraudulently representing the VEBA, so it was taken away from him, the books were cleaned up by a law firm, and now we are free to leave that VEBA, if we want. 

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  • 2 years later...

You did not clarify whether this was a state court proceeding or a federal court case. 
There are several alternatives available to your client:

Close down the VEBA;

Pay the loan interest directly rather than through the VEBA;

Appoint the client as the trustee;

Transfer to a more flexible trust not under the court's control;


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