419(e) Welfare Benefit Plans

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DEFINITION of '419(e) Welfare Benefit Plans'

A type of employer-sponsored employee welfare benefit plan. 419(e) welfare benefit plans qualify under paragraph (e) of Section 419 of the Internal Revenue Code. They provide a range of benefits to employees, such as life, health, disability, long-term care and post-retirement medical. These plans can be either target contribution or target benefit in design, and are intended to provide additional financial stability for employees during their retirement years.

INVESTOPEDIA EXPLAINS '419(e) Welfare Benefit Plans'

The same company pays for all of the benefits of the plan, and does not pool benefits among employees of other companies. Irrevocable cash contributions are made on behalf of the employees on a periodic basis. The assets in these plans are usually held by an independent trustee, and are exempt from seizure by any creditors the company may have. The Internal Revenue Service (IRS) issued revised guidance in October 2007 that excluded some benefits for plans that were funded with permanent insurance. This plan can also keep contributions made for key employees separate from those of rank-and-file employees.

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