Trust Required?

[chris]

Caf plan provides for cash, health care fsa and dependent care fsa. To what extent must either of the nontaxable benefits be funded through a trust? My understanding is that they are to be funded from the general assets of the employer (i.e., no trust required). Any replies greatly appreciated.

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[Guest kclark]

Chris:

Technically, under DOL Regs. employee contributions to a plan subject to ERISA must be segregated from employer's general assets. However, in June 1992 the DOL issued additional guidance to a "delayed enforcement policy" on the trust requirement and also backed off the audit requirement.

In August 1996, the DOL issued final regs. shortening the time period in which Ee contributions to 401(k) & other retirement plans must be placed in trust. These regs. specifically EXCLUDED health plans, and stated that flex plan administrators could continue to rely upon Technical Relese 92-01 which simply stated the DOL would not assert a violation to employers NOT holding cafeteria plan contributions in trust.

Probably more data than you needed, but just a little history.......short answer......NO.

[chris]

kclark:

Thank you very much for your help. By the way, I didn't mind the history lesson. Thanks again.

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[Guest DANB]

You should also check with your Tax Department. Contributions to a VEBA are tax deductible in the year of contribution and earnings of excess cash in the VEBA in most cases would be tax exempt.