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reserve limit principles for collectively bargained plans.
Before final regulations were issued, current section
419A(f)(5)(A) was enacted, eliminating the need for such
regulations. See Tax Reform Act of 1986, Pub. L. 99-514, sec.
1851(a)(13), 100 Stat. 2862.
Respondent argues that petitioner should not be allowed to
deduct the portion of the contribution related to collectively
bargained employees because a separate fund was not created.
This argument arises out of the language of section 419A(f)(5)
that refers to any “qualified asset account under a separate
welfare benefit fund * * * under a collective bargaining
agreement”. Emphasis added. Respondent’s position is that
“separate” means distinct and different from welfare benefits for
noncollectively bargained employees. Because petitioner
commingled the assets that were contributed for collectively
bargained employees with those for noncollectively bargained
employees, respondent argues that petitioner should not be
allowed to deduct the portion of the 1987 contribution for union
medical benefits.
Petitioner asserts that the use of “separate” means that the
funds in the VEBA should be separate from the general assets of
petitioner and beyond the reach of petitioner’s creditors. Under
the terms of the VEBA Trust, such reversion of petitioner’s
contributions was expressly prohibited.
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