VEBA lawsuits audits get your money back | LinkedIn

VEBA lawsuits audits get your money back | LinkedIn

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  1. In February 2014, proposed Treasury regulations were issued which, when finalized, will change the way in which most VEBA’s in the 6th Circuit (Michigan, Ohio, Kentucky and Tennessee) are taxed. Essentially, these funds’ investment income will be subject to tax except to the extent that the fund covers participants who are included in a collective bargaining agreement. VEBA’s that are substantially funded by tax-exempt employers are also exempt from the impact of the new regulations.

    Each plan’s status should be reviewed as soon as possible in light of this upcoming change to determine the applicability of the changes to the plan, the potential tax cost to the plan, and any action that may be warranted to prepare for the change. Unless a plan covers only collectively bargained participants, or is funded substantially by tax-exempt employers, action may be required to calculate and plan for this tax and reporting responsibility.

    Issue and Discussion:
    Although they are generally tax-exempt entities, VEBA’s are subject to unrelated business income tax (UBIT) on income that is other than “exempt function income.” Exempt function income is generally defined as any fees, dues, and other charges received in exchange for the provision of the VEBA benefits to the members or their dependents. Hence, investment income is potentially taxable, subject to several additional rules that are specific to VEBA’s.

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