Groom Recommends IRS/Treasury Guidance That Removes Potential Tax Obstacles to Repurposing Surplus VEBA Assets

Groom principals Louis Mazawey and Kathryn Bjornstad Amin recently recommended that the Internal Revenue Service (“IRS”) issue published guidance in a critical area affecting VEBAs with surplus retiree health plan assets.  Specifically, they recommended official IRS guidance confirming that the 100% excise tax on “reversions” under IRC section 4976 does not apply when such surplus assets are repurposed to pay active employee health or other welfare benefits.

Groom has assisted a number of clients in navigating the tax and ERISA issues in these transactions, but the draconian excise tax continues to complicate effective planning strategies, especially since this has been a “no rule” area for the last two years.