The U.S. Supreme Court has decided not to hear an appeal by users of voluntary employee beneficiary association arrangements in a suit against VEBA providers.

The court’s refusal to review the decision represents a victory for the VEBA providers including a variety of life insurers and financial consultants, against the VEBA users, who included doctors and doctors’ professional corporations.

The case, Schneider et al. vs. Kirwan Financial et al., involved efforts by doctors to use life insurance policies held within VEBAs to lower their taxes.

The Internal Revenue Service announced in 1995 that it would disallow use of VEBAs to avoid taxes, and the Tax Court decided in 2000 that the VEBA plans owned by many doctors violated the Internal Revenue Code.

The doctors settled some claims against the VEBA providers, but the U.S. District Court in Newark, N.J., blocked other claims, and the 3rd Circuit Court of Appeals affirmed the district court’s motions for summary judgment.

Representatives for the doctors and the providers were not immediately available for comment or declined to comment because they had just learned about the Supreme Court decision not to review the VEBA case.

The Supreme Court’s decision not to hear Schneider makes the case a precedent in the 3rd Circuit, which includes Delaware, New Jersey and Pennsylvania, but does not affect VEBA cases in other circuits.

The Supreme Court also declined to hear Summers et al. vs. State Street Bank & Trust Company and Melley et al. vs. Blue Cross and Blue Shield.

Summers is a 3rd Circuit case that deals with whether administrators of employee stock ownership plans that invest in company stock have a duty to sell the stock when the stock performs very badly. The 3rd Circuit ruled against the employees, and the judge in the case questioned whether ESOPs should encourage the continued existence of ESOPs.

Melley is a 7th Circuit case that deals with an early retiree from a health insurance company and a widow of a health insurance company retiree who were trying to fight for what they thought would be free lifetime access to post-retirement health insurance benefits. In that case, the appellate court ruled against the employees, contending that the employees had no standing under Employee Retirement Income Security Act to sue the plan sponsor because they were not members of an ERISA plan. One judge suggested that the early retiree might have had standing to sue because she might have continued to be a member of an ERISA plan if incorrect information about retiree health benefits had not led her to retire early.

A copy of the Kirwan circuit court ruling is on the Web at Document Link

A copy of the Summers circuit court ruling is on the Web at Document Link

A copy of the Melley circuit court ruling is on the Web at Document Link