ERISA-Bubs Posted February 22, 2012 Share Posted February 22, 2012 Can a multiemployer pension plan require contributing employers to increase plan contributions without having to re-open collective bargaining? Is this purely a contractual issue, or is there controlling authority on point? Link to comment Share on other sites More sharing options...
Effen Posted February 23, 2012 Share Posted February 23, 2012 Maybe. If the plan is Critical there are surcharges that apply without opening the agreement until the parties adopt a Rehabilitation Plan. If the plan is Critical or Endangered the Trustees develop a Rehabilitation Plan or a Funding Improvement Plan. Once bargaining contract is opened, the parties need to adopt one of the plans, which generally forces contribution increases. These subsequent increases may be more or less than the surcharges. It is fairly complex, but yes, surcharges can apply without negotiations if the plan is in Critical status. 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. Link to comment Share on other sites More sharing options...
mal Posted February 28, 2012 Share Posted February 28, 2012 The PPA says that any schedule of contributions negotiated between the parties and consistent with a rehab plan are locked in until the expiration of that CBA. Our interpretation is that the actuary will have to update the rehab plan annually, but despite whether progress is being made or not the Board cannot compel an increase in contribution rates. What we are not sure about is if the negotiated rates end up being dramatically lower than required to make scheduled progress. Assume for example the parties negotiated a 5 year CBA, the market tanks and an additional $.50 per hour is needed in each of the next 4 years. The actuary is going to certify the plan is not making progress, but the Board can't compel additional money. After three years of no progress are the employers subject to an excise tax? They are paying the negotiated rates, but could they still be on the hook? It doesn't make much sense. Link to comment Share on other sites More sharing options...
Brian Haynes Posted March 2, 2012 Share Posted March 2, 2012 It is pretty clear to me that under the PPA, if a pension fund in critical status fails to leave critical status at the end of the rehabilitation period or for 3 consecutive years has failed to make scheduled progess, the fund is treated as having an AFD subject to excise tax. This excise tax may be waived by the IRS for reasonable cause and not willful neglect (who knows how willing the IRS will be to waive the tax). If this appears likely to happen, employers may have to agree to increase their contributions to avoid the excise tax. Since the pension fund rules in the PPA expire at the end of 2014, it is unclear whether this AFD-excise tax will remain in the law. Further, since no pension fund has yet reached the end of its rehabiliation period, no AFD-excise has yet been triggered. It is also clear to me that the employer contribution rates under an adopted schedule may not be increased during the duration of the applicable collective bargaining agreement, although some funds allow contribution rates to be decreased if the rates go down in future schedules. Some funds have a provision in their trust agreement that allows the trustees to establish "minimum contribution rates" (which allows the trustees to theoretically increase rates above the adopted schedule rate). I would forefully argue that a fund in critical or endangered status may not use such a provision to increase rates beyond those specified in the adopted schedule. Link to comment Share on other sites More sharing options...
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