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plus related expenses in the amount of $26,902,481, and medical
and dental benefit claims under the Plan for retirees in the
amount of $4,092,000.
Post-1987 Facts and Circumstances
Petitioner ceased prefunding the VEBA Trust after the
December 1987 contribution when, sometime during October 1988,
the VEBA Trust assets were depleted. After that time, petitioner
funded the VEBA Trust as the benefit claims were incurred.
Because petitioner was no longer prefunding the VEBA Trust,
during May 1990 it changed its VEBA Trust yearend from November
30 back to a calendar yearend.
Petitioner did not disclose in its financial reports that it
funded a reserve for the provision of postretirement medical
benefits. The only reference to the VEBA Trust in petitioner's
financial reports was to the fact that petitioner received a
deferred tax benefit as a result of prefunding its group health
insurance trust.3
During 1988, for retirees and disabled employees, and during
1990, for active employees, petitioner began disclosing to such
employees the existence of the VEBA Trust. No disclosure was
ever made to retirees, employees, or collective bargaining units
3 For example, petitioner's 1986 annual report indicates that
$12,420,000 of Federal income taxes (46 percent of petitioner's
$27 million contribution) was deferred by prefunding the
company's group health insurance trust, and the deferral of the
tax effect of prefunding in 1985 in the amount of $13,648,000 was
reversed.
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