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the VEBA Trust during the 1986 calendar year. The amount of the
1986 contribution was based on an actuarial valuation by Wyatt.
Wyatt ascertained that the maximum deductible contribution for
1986 for PRMB's was $25,391,059. Administrative expenses were
considered to be 6.5 percent of the PRMB's, or $1,650,419, making
the total deductible amount $27,041,478. Regarding the
calculation of the deductible amounts, a December 24, 1986,
letter to petitioner from Wyatt stated the following:
As mentioned on the phone, there are rulings several
years old providing slim guidance to amounts which may
be deducted for postretirement medical benefits. In
general, deductible amounts are to be determined on an
"actuarial basis", and are specified to be in one lump
sum (or alternatively, over the remaining average
lifetime) for persons who are already retired, and are
specified as level amounts (or percentages) over the
future working lifetimes for persons who are currently
actively at work.
These rules would apparently permit the full
$20,446,059 to be deducted in 1986 for pensioners, and
approximately $4,945,000 for currently active
employees. Lesser amounts could, of course, be
deducted for 1986.
Petitioner was obligated by the Plan to pay all medical, dental,
accident, sickness, and long-term disability benefits offered
under the plan. The VEBA Trust used its assets, including the
1986 contribution and its investment earnings, to pay such
benefits (and administrative costs) to petitioner's employees and
retirees as those benefits (and costs) came due (or arose) during
the next 11 months of the Plan year. During the calendar year
1987, the VEBA Trust paid medical and dental benefit claims under
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