Groom regularly participates in the guidance processes of the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”), (together the “Agencies”), particularly when the Agencies solicit recommendations each year.

In Groom’s recent, enclosed letter commenting on the 2024-2025 Priority Guidance Plan, principals Lou Mazawey and Katie Bjornstad Amin continue to press the Agencies for guidance that the 100% excise tax on reversions under section 4976 of the Internal Revenue Code of 1986 (“Code”) does not apply when an employer “repurposes” surplus retiree benefit assets in a welfare benefit fund to provide other health and welfare benefits, including to active employees.

These transactions, typically involving Code section 501(c)(9) VEBAs, have been hamstrung by IRS “no rule” positions on the excise tax and related income tax issues for the last five years.  As a result, many employers have been frustrated in efforts to efficiently use the VEBA assets for other employee benefit purposes. The authors hope that favorable guidance will be forthcoming.  

To read Groom’s comment letter, click here.