Mandatory participation

[Guest bobmeyer58]

The Union that I belong to is thinking of joining a 403(b) pension plan.

If the body agrees to join everyone most participate. They will all pay the same %, or dollar amount per shift. Is there any way to opt out of this plan? I heard that there is a form to fill out. If so what is it called?

I have a Roth for myself and my wife, I contribute to a 401, and a company retirement account. plus I save on my own. Help I don't want this as I want to retire early. When I do they will only give me my money back, NO INTEREST.

[mbozek]

If the union members vote to require mandatory participation by all members then you will have to make the contributions as required by applicable labor laws. I dont know what kind of plans are those that you referred to.

[GBurns]

Like mbozek, I woder what kind of plan this really is etc.

While mandatory participation is highly unlikely, unless there is an employer contribution, employee election to contibute most likely cannot be mandatory unless enough union members vote in such a requirement. For the majority to vote that requirement in would indicate that they see some great benefit that you do not see.

In addition, you state that when you retire "they will only give me my money back, NO INTEREST". This does not make sense, the money contributed must be invested somewhere and must or should earn an investment return. The investment return on vested money must belong to you.

I suggest that you reread and review the material that has been distributed to make sure that you understand the plan and ask some questions.

[Guest river1]

like bob (hi bob) i am a member of the union local that is contemplating joining a 403b plan. i will add some info to hopefully clear some of your questions.

1."they will only give me my money back, NO INTEREST"

they only guarantee our money back in 26 months if we die (even 1 day into retirement) our spouses don't get any of the interest the our contributions have earned.

2.if we include our spouse our distributions are cut a considerable amount.

if a married couple were to die before our distribution totaled our contribution our heirs wouldn't get any of the interest our contributions have earned.

3. like bob i have various retirement accounts as i would like to retire early also.

if we retire early our distributions are cut a considerable amount on top of the cut if we were to add our spouses.

4. we (bob and i) are near the limit for contributing to our 401ks would contributing to a 403b affect that?

as we are both relatively young we would like maximize the money we put in our 401ks so we could take advantage of the power of interest compounding.

5. we both don't like the mandatory aspect of joining and contrbution rates

as everybodies situation is different some can afford to contribute more then others.

we are looking for a way out of the mandatory taking of OUR money to invest in something that we don't believe will pay off as well as our own investments.

thanks jim

[GBurns]

Are we to understand that in this 403(b) plan there will be only ONE (1) investment option????

I am also wondering whether it is the union telling you this or is it the investment???

By the way, who is sponsoring this 403(b)?? A single employer or multiple employers? Are all the employees all members of only this one union?

[Guest river1]

the plan is called "inter-local pension fund"

yes as i understand only one (NO) option.

the local is the go between between us and the plan

the plan is sponsored by our international union of which our local is one of many. not all local are part of the plan.

for some info on this plan try http://www.gciu.org/ilpf.shtml

as an added point our trade (union newspaper printing) is a shrinking trade so they will have less people to contribute as they have more people recieving distribution, similiar to social security

thanks jim

[GBurns]

If, as you state, not all locals are part of the plan, then I have to ask Why are you allowing your local to participate?

In any case, this whole thing SMELLS.

I am not a 403(b) expert but I cannot see how this plan can be a 403(b) plan

in the first place, which is what was posted.

403(b) plans that I see have mainly individual accounts and there is no way that any sponsor can dictate what the returns etc will be.

In a 403(b) and most, if not all pension plans, it does not matter whether or not there is shrinking membership. This has no bearing on the distributions.

In this case, the union is making dictates that is not within the power of a plan sponsor to make, as far as I know, BUT in any case I do not see how this union can even be a Plan sponsor if this is a 403(b) or even any form of tax deductible pension plan.

I am also supicious about the statement on their website, to the effect, that you can take off your contributions on your tax return. This is not what is done for Pension Plans etc. So again I have to wonder what sort of plan this is?

If it were me I would be not only running away as fast as I could, but would be calling in every regulator that ever existed.

I question whether or not this qualifies as a Pension Plan of any sort and I do not see where it can be a 403(b), or where it will be tax deductible and a whole bunch of etc etc etc.

I hope that some of our 403(b) and pension plan readers will post some definitive opinions on this.

[mbozek]

I didnt see any reference to 403(b) in the materials provided by the union. Howver the type of arrangemnt described is permissible as an employee funded retirement plan under IRC 501©(18). It is a money purchase plan that provides an annuity benefit for members based upon amount contributed.

[Guest river1]

I am not a 403(b) expert but I cannot see how this plan can be a 403(b) plan

in the first place, which is what was posted.

--------- it may not be a 403b but that is what the union local is telling us.------

If, as you state, not all locals are part of the plan, then I have to ask Why are you allowing your local to participate?

----------while we don't want it if the union local votes for it we HAVE to go along-----

I didnt see any reference to 403(b) in the materials provided by the union. Howver the type of arrangemnt described is permissible as an employee funded retirement plan under IRC 501©(18). It is a money purchase plan that provides an annuity benefit for members based upon amount contributed.

--------- if it is a 501c is that a good thing? i will check when i go to work this week to get more info on it.---

thanks for all your help jim

[GBurns]

mbozek,

The reference to 403(b0 was made by the original poster, bobmeyer58 and confirmed by river1.

Re : "Howver the type of arrangemnt described is permissible as an employee funded retirement plan under IRC 501©(18)."

Are non employers allowed to establish such plans?

Are non-employees allowed to participate?

I thought that these plans were established for employees and when set up through unions were collectively bargained.

This plan seems neither collectively bargained nor employer related much less sponsored. Note the tax treatment of contributions.

[mbozek]

The summary provided by the union appears to conform to the provisons of a 501©(18) trust which is entirely employee funded. Unions establish these plans when the employer refuses to pay for a pension benefit. There are only about 20 of these trusts in existance. You should review the statutory provisions for a better descripton.

[GBurns]

Can you name any of these similar union Trusts?

[mbozek]

Amalgamated Lithographers of America Local Number 1

[GBurns]

I do not see any similarity between the ALA plan and the GCIU plan posted.

Under the ALA Plan, the plan is established for employees (who are union members) and contributions are deducted by the employer from the employee's paycheck as follows :

"Pursuant to a collective bargaining agreement between a commercial printing firm, the D.L. Terwilliger Co., Inc. ("the Company), and Local One, Amalgamated Lithographers of America ("the Union"), the Company had an obligation to deduct from its employees' paychecks contributions which, in turn, it was to forward to the Union's pension fund and Sickness & Accident Fund (collectively, "the Funds"). "

In the GCIU plan, it not only appears that the members might not all have the same employer, but the participation etc is not pursuant to any collective bargaining nor employer acceptance nor salary reductions or deductions.

Although it is possible that after the members of the local vote to join the GCIU Plan, then they go and collectively bargain with the employer. But there is no mention of collective bargaining on the GCIU site in contrast to the ALA website. I doubt that there is any collective bargaining because of the statement in the summary on the GCIU website that:

"The fund benefits are not negotiated with any employer."

Another difference between the 2 plans is the tax treatment of contributions. Members of ALA get their contributions deducted on the employer's payroll, which, although not explicitly stated, allows for standard pre-taxing. However, the ALA plan seems to have no payroll treatment leaving the members to make some sort of adjustment on their tax return. The statement in the ALA summary is:

"Participants in the Inter-Local Pension Fund can deduct their contributions to the fund on their taxes. "

This is not the usual tax treatment of contributions to a pension plan or a 403(b) (which is what the 2 union member posters stated that they were told by GCIU that it was).

[mbozek]

See 501©18)(D). pre tax contributons are permitted- Since the contributions are made by the employees there is no collective bargaining agreement with the employer. In the ala plan the employee contributions were treated as union dues. The similarity is that benefits in both plans are funded entirely by employee contributions to a tax exempt trust.

[GBurns]

Yes! The ALA employee contributions are most likely pre-tax and Yes! 501©(18)(D) applies to ALA, and again YES! like all salary reductions, the employee salary reductions are treated as employer contributions.

My statement was that as per the summary on the GCIU website, these features are not in the GCIU plan.

In ALA the employee contributions ARE NOT treated as union dues. Union dues are a separate and different OTHER deduction.

It is spurious and incorrect to make the statement "Since the contributions are made by the employees there is no collective bargaining agreement with the employer."

Any plan that involves any employer and unionized employees must be either directly collectively bargained or incorporated by reference in the CBA or adopted via a Memorandum of Understanding.

[mbozek]

GB As usual you go off the track- My reference to the ALA plan was in response to your demand for an example of a 501©(18) trust. There can be variations in the type of plan provisions adopted by a trust that meets the requirements of 501©(18). If you reread my post you will see that was stated was that contributions to the ALA plan were treated as union dues - not that they are treated as union dues now. The contributions were originally deducted as union dues to avoid the inference that there was any bargaining over the contributions under the labor law which would make them a condition of employment in an employer sponsored plan.

[GBurns]

Without addressing the other discrepancies in your posts .. Where did you ever read that "The contributions were originally deducted as union dues to avoid the inference that there was any bargaining over the contributions under the labor law which would make them a condition of employment in an employer sponsored plan." ??

The following was excerpted from a recent case since I do not have their documents on file, only in hard copy.. "Under that collective bargaining agreement, the Company also was obligated to deduct from its employees' paychecks Union dues and assessments (collectively, "the dues"), which it was to forward to the Union."

The standard practice for ALA and ALL unions has ALWAYS been to deduct dues etc as dues etc and not to misrepresent any deduction by fraudulently claiming it as something else.