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Cases & Deals

September 13, 2017

King & Spalding Advises Client on IRS Private Letter Ruling Requests

King & Spalding advised our client with respect to the preparation and prosecution of two Internal Revenue Service private letter ruling requests regarding the proposed use of excess assets in a voluntary employees beneficiary association (VEBA) trust.  The VEBA trust has assets in excess of $100 million earmarked to provide life insurance benefits to retirees. The private letter ruling applications request the IRS to determine that the proposed use of the VEBA trust’s assets to provide other employee benefits, including health benefits for active employees (a) is permitted, (b) will not jeopardize the tax qualified status of the VEBA trust, and (c) will not be deemed a reversion to the employer resulting in a 100% excise tax.  The IRS has previously indicated that the use of excess assets of a VEBA trust would generally be deemed to result in an impermissible reversion of assets to the sponsoring employer and would disqualify the VEBA trust for favorable tax treatment.  However, recent private letter rulings indicate a reversal of this position in specific cases.  These private letter rulings have been limited to very specific circumstances and left a number of related issues unresolved.  The private letter ruling applications for our client seek to provide assurances and resolve the open issues. A favorable determination would result in a significant reduction of our client’s financial burdens related to providing benefits to active employees and minimize the risk of future benefit reductions