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we conclude that petitioner is entitled to an increase in the
account limit attributable to medical, dental and short-term
disability CIBU's in the amounts of $7,619,925 (plus $395,683 of
related administrative costs) and $5,290,729 (plus $261,232 of
related administrative costs) for the VEBA Trust years ended 1986
and 1987, respectively.
B. Reserve for Postretirement Medical Benefits
Petitioner argues that the phrase "reserve funded over the
working lives of the covered employees" in section 419A(c)(2)
describes a method of measuring a liability to provide PRMB's and
does not require a separate accumulation of assets. The issue of
whether an actual reserve must be created has been addressed by
this Court in General Signal Corp. & Subs. v. Commissioner,
supra, and Parker-Hannifin Corp. v. Commissioner, T.C. Memo.
1996-337. In those cases, we held that the phrase "reserve
funded over the working lives of covered employees" requires an
accumulation of assets equal to the deduction taken, and that
those assets must be used to pay retiree welfare benefit
expenses. In General Signal, we stated that
the plain language of section 419A(c)(2) suggests that
Congress intended to allow the accumulation of funds
over the working lives of employees for the purpose of
providing postretirement benefits. This interpretation
is supported by repeated references in the legislative
history to the accumulation of reserves for purposes of
funding postretirement benefits and by the reference to
revenue rulings which dealt with reserves used to
accumulate funds for postretirement benefits.
Additionally, the legislative history also establishes
that Congress intended "to prevent employers from
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