A previously qualified Taft-Hartley severance plan lost its qualified status (501©(9)). The trust and fund for this plan were created to provide lump sum payments upon severance or death to eligible members employed by various employers who entered into collective bargaining agreements w/ the Union. The trust is funded solely through employer contributions.

The Plan was terminated as of 11/97. Distributions were made to participants. Subsequently, a tax refund was issued and the assets amount to approximately $100,000.

1. Can these assets be transferred into another fund maintained by the Union, also funded solely through employer contributions?

2. Is there any prohibition on terminating a plan whose assets are above a certain dollar amount?

3. Other than issuing dividends or refunding administrative charges, is there anything else that can be done w/ the $?

Any help is greatly appreciated.

Sorry to sound pedantic, what does the trust document say. Normally, the Trust agreement restricts payment of benefits to participants and for necessary expenses.

Last Veba I helped dissolve was a corporation and the bylaws required distribution of any excess assets to a qualified tax exempt. We used the proceeds to create a fund which paid ( while funds lasted) life time medical benefits to former members.

Question, how does Collectively bargained VEBA lose its tax exempt status?

The trust document states that upon termination, assets of the Trust fund should be allocated among the participants and beneficiaries of the plan in the manner set forth in the plan after making provisions for payment of any and all fund obligations including expenses preceding and incidental to the termination and after a final audit was made. However, other than the trust document, there is no other plan document.

The IRS decided that it erroneously gave the fund tax exempt status and subsequently realized they "made a mistake".

The majority of the remaining monies are from an IRS refund.

Q1. Can these assets be transferred into another fund maintained by the Union, also funded solely through employer contributions?

A1. Yes. Of course you must assure compliance with plan documents (as amended), collective bargaining agreements and tax laws.

Q2. Is there any prohibition on terminating a plan whose assets are above a certain dollar amount?

A2. No.

Q3. Other than issuing dividends or refunding administrative charges, is there anything else that can be done w/ the $?

A3. Yes. I addressed this on another thread today, giving examples. I would apply for a private letter ruling prior to taking any of these steps.