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Employment-related common bond and CBA


MAM08
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I posted this the other day on the multiemployer forum and haven't gotten a reply, but think it might be more appropriate here....

Our client is a collectively bargained multiemployer health and welfare Plan and VEBA that has limited participation to bargaining units represented by a single local union and non-bargaining unit employees of their contributing employers. It covers participants engaged in a number of industries in a relatively limited geographical range (primarily several contiguous counties).

The client has recently received an overture from a bargaining unit affiliated with an entirely different international union which would like to join the Plan. If the trustees accepted this group, it would be the first unit not affiliated with the sponsoring union. The new group is engaged in one of the industries currently covered by the Plan and within the Plan’s geographic region.

If this new group is accepted, would this jeopardize the Trust’s VEBA status because of the absence of an employment-related bond?. I've been unable to find any IRS guidance on this question. I'm stuck on Treas. Reg. 1.501©(9)-2(a)(1) which reads:

“Typically, those eligible for membership in an organization described in section 501©(9) are defined by reference to a common employer (or affiliated employers), to coverage under one or more collective bargaining agreements (with respect to benefits provided by reason of such agreement(s)), to membership in a labor union, or to membership in one or more locals of a national or international labor union. For example, membership in an association might be open to all employees of a particular employer, or to employees in specified job classifications working for certain employers at specified locations and who are entitled to benefits by reason of one or more collective bargaining agreements.”

On the one hand, the regulation could be read to say that either coverage under any CBA or membership in a labor union will suffice as an employment-related bond. But I wonder if this is too broad a reading and some other employment-related bond (e.g., common union affiliation, common industry) is required. Another way to ask this, is whether any Plan provided for in a CBA will automatically satisfy the employment-related bond requirement? Thanks for any input.

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  • 2 weeks later...
Guest jmc51

I have to direclty deal with the issue you pose. Could not find any definitive guidance and was left with your question. To get around the potential issue, we actually converted the VEBA to a ©(5) and got IRS approval. We have since converted a few ©(9) health and welfare funds to ©(5) because it provides a bit more grey area and the only requirement is coverage under a CBA.

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Thanks both for the input.

vebaguru -- Our situation is that we won't have one CBA. It's not a single master agreement, but a number of agreements with different employers in various industries, each providing for participation in the multiemployer plan/VEBA. Until now, all the CBAs have been with the same local union. If we accept the new group, it would not only be a different local union, but an affiliate of an entirely separate international union. I'm concerned that this wouldn't satisfy the employment-related bond. I agree that if we had a single CBA we'd be fine, but am doubtful that multiple CBAs would suffice (at least where there isn't a common employer or industry).

jmc51-- I'll check out your suggestion about the ©(5). In different contexts, our accountants have cautioned us against converting from/to a ©(5), but I think only because the cost/hassles outweighed the benefits.

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Guest jmc51

See if there is any connection at the international level of the unions, such as belonging to the AFL-CIO or the Change to Win Coalition. That might provide additional support for the proposition that the employers have some time, such as dealing with affiliated unions.

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