IRS: Student loan servicing not a VEBA benefit


The IRS has concluded in a private letter ruling (PLR 202125002) that a proposed student loan servicing benefit was not a permissible “other benefit” that generally could be provided under a voluntary employees’ beneficiary association (VEBA). However, consistent with previously issued PLRs, the IRS ultimately ruled that if the total annual expenditures for the student loan benefit (together with any other nonqualifying benefits provided by the VEBA) would not exceed 3% of the VEBA’s annual benefit expenditures, the benefit would be de minimis and would not adversely affect the VEBA’s tax-exempt status under Section 501(c)(9).


The proposed student loan servicing benefit was an online tool that the VEBA members could use to comply with certain government loan subsidy programs, including a calculation of optimal forgiveness and repayment programs based on individual member data. The online tool would also provide members with a financial literacy course that would teach them about government loan programs. The VEBA represented that the student loan benefit would be approximately 0.51% of the total benefits provided by the VEBA in the first year and would almost certainly never be more than 3% of the VEBA’s annual expenditures.


A VEBA generally can provide only for the payment of life, sickness, accident or other benefits to its members and cannot systematically and knowingly provide benefits of more than a de minimis amount that are not otherwise expressly permitted. For this purpose, the term “other benefits” includes only benefits that are similar to life, sickness, or accident benefits, which generally encompasses only benefits that are intended to safeguard or improve the health of a member or protect against a contingency that interrupts or impairs a member’s earning power.




Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics