Wells Fargo & Company (f.k.a. Norwest Corporation) and Subsidiaries - Page 36




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                              (B) post-retirement life insurance benefits to                            
                        be provided to covered employees.                                               
                  We first addressed the requirements of section 419A(c)(2) in                          
            Gen. Signal Corp. v. Commissioner, 103 T.C. 216, 239 (1994), affd.                          
            142 F.3d 546 (2d Cir. 1998).  In that case, we held that section                            
            419A(c)(2) requires an accumulation of assets equal to the                                  
            deduction taken, and that those assets must be used to pay welfare                          
            benefit expenses of retired employees.  See also Square D Co. v.                            
            Commissioner, 109 T.C. 200 (1997); Parker-Hannifin Corp. v.                                 
            Commissioner, T.C. Memo. 1996-337, affd. in part, revd. in part and                         
            remanded 139 F.3d 1090 (6th Cir. 1998).  In Gen. Signal Corp.,                              
            Square D Co., and Parker-Hannifin Corp., we found that no reserves                          
            had been created, obviating the need to consider whether the                                
            contributions were excessive from an actuarial standpoint.  In the                          
            case at hand, respondent agrees that a reserve was created; i.e.,                           
            assets in the amount of the deduction taken were accumulated to be                          
            used to pay medical expenses of retired employees.                                          
                        a.    Reserve                                                                   
                  Petitioners assert that the term “reserve” in section                                 
            419A(c)(2) refers to the employer’s accrued liability to provide                            
            the postretirement benefits.  Petitioners conclude, therefore, that                         
            the method used in computing the reserve must compute the accrued                           
            liability.                                                                                  
                  Respondent asserts that section 419A(c)(2) does not define the                        
            account limit but rather describes contributions to a reserve                               





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