April 21, 2010 www.ipbtax.com

VEBA Retiree Medical Reserves – Two New Tax Reduction Strategies

Ivins, Phillips & Barker has developed two tax-reduction strategies for employers that maintain VEBAs to fund retiree medical expenses for non-union employees.  Each of the strategies has been implemented by large employers.

The strategies apply in either of the following two situations:

  • Deductions for contributions to fund retiree medical reserves have been restricted (deferred) under Code §419A; or
  • Investment returns have been subject to UBIT under Code §512(a)(3)(E).

Under the first strategy, deductions typically may be accelerated at the same rate as under the method described in Wells Fargo v. Commissioner, 120 T.C. 69 (2003).  Under the second strategy, the VEBA typically can invest in taxable investments and yet still avoid UBIT.

Please contact Will Sollee or your regular Ivins contact for more information.


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