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Employers in Multi-eemployer - Taxation without Representation


austin3515

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Interesting...however, the trustees of the plan are 50% Employer representatives, so is this any different than a private citizen not being permitted to sue Congress because their mismanagement caused them to pay higher taxes?

I agree at one level it feels like taxation without representation, however, the reality is they are represented.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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I suppose the issue ends up being if your particular employer is not a trustee, but I admittedly have zero experience in multiemployer plans... It just sounds awful. I advise anyone who will listen to never join because of these withdrawal liabilities...

Austin Powers, CPA, QPA, ERPA

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It might sound awful when taken out of context. If the employer funded the same benefit in a single employer plan would the liability been higher? Probably. So if the employees received a higher benefit, and the employer paid less for it, so why is that automatically bad?

Not really trying to get into a debate about the merits of multiemployer plans, but to automatically dismiss something because you don't understand it, isn't always giving the best advice. Yes, these plans have issues, but no more than single employer db plans. Lots of discussion about w/drawal liability because of poor pension laws that forced trustees to raise benefits, and adverse investment results in 2007-2008. The bad funding laws have been changed, but many plans are still slowly recovering from the poor investments. Not all of these plans are in bad shape. Many are very healthy and provide a nice benefit for a very reasonable cost.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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I definitely concede to the ignorance allegations, but I've never heard good things about that process. Some of it of course was the employer's fault because they did not know about "withdrawal liabilities" on the way in - they only found out about when they want to leave. So I suppose what I actually say to them is "watch out for withdrawal liability on these under-funded plans." I think that is actually pretty close to good advice for a lay-person like me. Would you agree?

And also, your phrasing here I think is indicative that you also see a problem:

Not all of these plans are in bad shape.

i.e., many of them are. Buyer beware!

Austin Powers, CPA, QPA, ERPA

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Buyer beware is always good advice.

I had a recent situation where a sponsor's single employer plan was underfunded by $3M. Instead of terminating, they merged with a multi who took all the assets and agreed to pay all past benefits. 10 years later he withdrew from the fund and had to pay a $1M withdrawal liability. He wasn't happy about paying the liability and refused to see that he traded a $3M bill for a $1M bill. Sponsors can be very short sighted and forgetful. I knew it was a good deal, but the sponsor is probably still complaining about his "bad experience".

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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It was my understanding that the Trustees have fiduciary obligations to the participants covered by the multi-employer plan and none to the sponsoring employers. In fact, is that not the case for all retirement plans? All trustee decisions are supposed to be made with the best interests of the participants in mind, even if contrary to the best interests of the plan sponsor(s). If a single employer defined benefit plan's trustees, exercising prudent investment analysis and judgment, choose investments that lead to higher required employer contributions, nobody would think twice as to whether a claim by the sponsor that the higher required financial commitment represented any kind of actionable fiduciary violation, so why would a similar claim with respect to actions taken by the multi-employer plan trustees deserve anything other than quick dismissal?

As for multi-employer plans, is it not generally the case that an employer participates in a multi-employer plan because they must, not because they want to? If the employer's workforce is covered by a CBA calling for it, they participate in the multi-employer plan, otherwise they don't.

Always check with your actuary first!

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The difference from the single employer world is that the Employer of course decides who the trustee will be therefore has no one to blame but itself.

As for multi-employer plans, is it not generally the case that an employer participates in a multi-employer plan because they must, not because they want to? If the employer's workforce is covered by a CBA calling for it, they participate in the multi-employer plan, otherwise they don't.

Whatever the case may be, whenever I have clients that are negotiating with unions (either existing or negotiating for the first time) I always tell them at all costs to avoid the pension plan. It just seems like a 100 foot pit. Maybe even bottomless...

Austin Powers, CPA, QPA, ERPA

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