Transfer of Assets Will Not Affect VEBA's Exemption

Contact Person: * * *

We have considered your ruling request dated October 3, 2013, concerning the tax consequences under § 501(c)(9) of the Internal Revenue Code of the proposed transfer of $x from Trust to you.

You have represented that all of your assets and the assets in Trust were contributed by the employers of Category P and C Employees, and no contributions were made by a beneficiary of either you or Trust. Trust ceased to have an obligation to provide benefits for inactive vested Category P Employees or retired Category P Employees, and this obligation was placed on you. As a consequence, the only benefit provided through Trust is life insurance for active and inactive vested Category C Employees. Before this change, your obligation was limited to providing medical, dental, prescription drug, life insurance and accidental death and dismemberment insurance benefits for active and recently retired Category P Employees. The purpose of the transfer of obligations was to consolidate the obligation to provide welfare benefits to active and retired Category P Employees, and only Category P Employees, under a single trust -- you. Certain of the benefit programs provided through you are administered pursuant to a collective bargaining agreement.

You have represented that as a result of the transfer of the obligation to provide welfare benefits for retired Category P Employees from Trust to you, Trust has assets in excess of its needs for the foreseeable future. Trust proposes to transfer $x of these excess assets to you. You have also represented that if this proposed transfer of assets is approved and implemented, no beneficiary will suffer a decrease in the quality or quantity of benefits as a result.

Section 501(c)(9) describes VEBAs as providing for the payment of life, sick, accident, or other benefits to the members of such associations or their dependents or designated beneficiaries, if no part of the net earnings of such association inures (other than through such payments) to the benefit of any private shareholder or individual.

Treas. Reg. § 1.501(c)(9)-1 summarizes the requirements to be met in order to qualify as a tax exempt organization described in § 501(c)(9) as follows:

Both you and Trust have been recognized as exempt under § 501(a) because you both meet the requirements of VEBAs as described under § 501(c)(9). The obligation to provide life insurance benefits for inactive vested Category P Employees or medical benefits for retired Category P Employees was transferred from Trust to you. Also as a result of this transfer of obligations, Trust is "over funded" by $x and you are "under funded" by $x. The proposed transaction is to transfer $x from Trust to you to be used to provide welfare benefits to active and retired Category P Employees. Although Trust will now only provide benefits to Category C Employees and you will now only provide benefits to Category P Employees, it has been represented that no beneficiary of either you or Trust will suffer a decrease in the quality or quantity of benefits as a result of this transaction. As such, both you and Trust will continue to provide for the payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of both your operations are in furtherance of providing such benefits.

This ruling will be made available for public inspection under § 6110 after certain deletions of identifying information are made. For details, see enclosed Notice 437, Notice of Intention to Disclose. A copy of this ruling with deletions that we intend to make available for public inspection is attached to Notice 437. If you disagree with our proposed deletions, you should follow the instructions in Notice 437.

This ruling is directed only to the organization that requested it. Section 6110(k)(3) provides that it may not be used or cited by others as precedent.

This ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts. This ruling does not address the applicability of any section of the Code or regulations to the facts submitted other than with respect to the sections described. Because it could help resolve questions concerning your federal income tax status, this ruling should be kept in your permanent records.

If you have any questions about this ruling, please contact the person whose name and telephone number are shown in the heading of this letter.

In accordance with the Power of Attorney currently on file with the Internal Revenue Service, we are sending a copy of this letter to your authorized representative.