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On June 30, 1987, petitioner had 28,708 employees, of whom
approximately 1,854, or 6.46 percent, were represented by unions.
The plan was not the result of collective bargaining or required
by any agreement with the union. Petitioner attempts to
distinguish between the union and nonunion contributions under
the VEBA by calculating the respective contributions in
isolation. The plan itself, however, does not make that
distinction and cannot as a whole reasonably be characterized as
a welfare benefit fund maintained pursuant to a collective
bargaining agreement.
Because the contribution for collectively bargained
employees does not meet the requirements of section 419A(f)(5),
the deductibility of the contribution for union medical benefits
must be tested under section 419A(c)(1). The analysis of the
treatment of the contribution for medical benefits to union
members and of the contribution for long-term disability claims
is combined below.
Medical Benefits for Union Members and Long-Term Disability
Claims
In addition to the medical benefits for union members,
petitioner included $2.5 million in the 1987 contribution for
long-term disability claims. Petitioner alleges that the
long-term disability claims were incurred but unpaid as of the
close of its 1987 fiscal year.
Section 419A(c)(1) provides the account limit for claims
described in section 419A(a), including disability benefits, sec.
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