The Law of Tax-Exempt Organizations + Website, 2017 Cumulative Supplement, 11th Edition

CHAPTER EIGHTEENEmployee Benefit Funds

1. § 18.3 Voluntary Employees' Beneficiary Associations

§ 18.3 VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATIONS

p. 484, first complete paragraph. Insert as seventh sentence:

Where the exempt sponsor is dissolving, the VEBA's assets may be distributed as taxable lump-sum payments among the participants without triggering excise tax.^76.1

p. 484, first complete paragraph. Insert as penultimate sentence:

Indeed, a VEBA, without any remaining participants and that has paid all benefits that were due, may terminate by distributing its remaining assets to charitable organizations.^77.1

p. 484, last paragraph. Insert as second sentence:

For example, the IRS, having determined that a welfare plan's membership is not voluntary, because the plan excludes certain employees from participation in it, held that the plan cannot qualify as an exempt VEBA because it is discriminatory.^79.1

^76.1 Priv. Ltr. Rul. 201528038. This excise tax (IRC § 4976(a)) was avoided inasmuch as the amounts to be distributed did not give rise to a disqualified benefit (IRC § 4976(b)(1)(C)), in part because these amounts were not the subject of an employer plan deduction (IRC § 419) in any year, since the employer had been tax-exempt.

^77.1 Priv. Ltr. Rul. 201545026.

^79.1 Priv. Ltr. Rul. 201515036. The statute on which the IRS relied (IRC § 50(b)(1)) addresses discrimi­nation only in favor of employees who are highly compensated.