Regional Vice President of Sales The Retirement Plan Company
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Bates & Company, Inc.
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AimPoint Pension
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Loan & Distribution Specialist AimPoint Pension
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Defined Benefit Combo Cash Balance Compliance Consultant Loren D. Stark Company (LDSCO)
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Compass
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Text of Rev. Rul. 2014-15: Guidance to Employers Funding Retiree Health Benefits Through a Wholly Owned Subsidiary (PDF)
Internal Revenue Service [IRS] [Official Guidance] May 8, 2014
"[T]he risks being indemnified are the covered retirees' and their dependents' risks of incurring medical expenses during retirement due to accident and health contingencies. Although the VEBA entered into Contract A [to secure reimbursement from the unrelated Insurance Company for medical expenses], the covered retirees' health insurance is an economic benefit to the retirees since it relieves them of the expense of purchasing health insurance for themselves and their dependents. Furthermore, at the time that Contract A goes into effect, neither [the employer (X)] nor the VEBA have any commitment or obligation to offer health benefits to the covered retirees and their dependents, and both X and the VEBA may cancel any provided coverage at any time. Consequently, the risks that are shifted in the situation above are those of the covered retirees and their dependents and not risks of the VEBA or X. These risks are reinsured by S1 [a wholly-owned subsidiary of X] under Contract B. The risks under Contract B are distributed among this large group of covered individuals ... Accordingly, the risks under Contract B are insurance risks, and Contract B constitutes insurance for federal income tax purposes."
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