I am getting ready to write a more technical single employer welfare trusts under IRC Sec 419(e). The cousin of these plans – the multi employer welfare benefit trust suffered a slow and painful death with the IRS auditing every plan under the sun. Well planned single employer welfare benefit trusts had no where near the problems as the multi-employer plans.
These plans can have a lot of planning utility. These plans can provide for post retirement medical benefits which is a topic that is rarely if ever discussed in the small business owner realm. We all know that large private employers and state and municipal employers are grossly under-funded for this benefit along with retirement. It may be even more important for a small business owner in the changing landscape – (1) Landmark transition under Obamacare (2) High Cost of medical care (3) High cost of nursing home care and unlikelihood of qualifying for Medicaid. (4) Lower reimbursements and greater out of pocket costs under private insurance and Medicare. The plan may even be a valuable resource for planning for the future costs of a special needs child – a Special Needs Trust using pre-tax dollars.
The Welfare Benefit Trust has been looked at for too long as a deferred compensation vehicle. Obamacare certainly has everyone’s attention on healthcare costs. It is virtually impossible assets in order to qualify for Medicare. Better to pre-fund in advance. Stay tuned for an article coming your way. By the way, don’t forget to count your blessings!