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Years ago I came across a line of cases suggesting that a multiemployer plan could not enforce the contribution obligation against an owner who chose to work at the trade. This issue has presented itself again and I am unable to locate the case citations. Of course the CBA is silent on this issue. Preliminary research shows a few recent decisions that allowed plans to recover from working owners. They focus on the issue of whether an owner can be considered an "employee" under ERISA. (My recollection is that the Supreme Court indicated a person can be both an owner and employee). Has anyone researched this issue lately? If so I would appreciate a summary of your findings and any case citations. Thanks in advance.

Proceed with caution! There are several cases which suggest it is improper to use a benefit plan to strengthen a union's bargaining power or to improperly advance union goals. We have always advised clients that plan fiduciaries cannot take any action to directly benefit a union, but that any plan change recommended by plan professionals which may be an indirect benefit is probably acceptable. I think the key is that the Board has documented legitimate reasons for the rule, and the rule affects more than just those who are not paying dues. In this regard, a cost-benefit analysis from an actuary or consultant is a great help. For example, some health plans want to target those participants with a dollar bank/hour bank who leave covered employment and go to work for a non-union employer. I believe that such a rule aimed only at the non-union folks violates ERISA. On the other hand, if the Board adopts a rule under which the dollar bank is cancelled for all people who are no longer available for work with a contributing employer (for any reason, such as a new career, enrollment in school, multiple refusals of job offers, etc.) a court would likely uphold the rule. In the latter case, the participant who goes to work for a non-union employer is not available for work and is treated just like the participant who decides to leave the industry and pursue another career. Just my opinion. Look at these cases for a discussion of rules designed to improperly advance union goals: Central Transport (Supreme Court, 1985); Deak v. Masters & Mates (11th Cir. 1987); Chambless v. Masters & Mates (2nd Cir. 1985); Duer Construction (6th Cir. 2005).

Received a call today about a union and governmental employer that want to limit eligibility to participate in the Cafeteria plan to only those employees who have not waived employer provided health coverage. (Why? I have no idea) I am not comfortable with Section 125 plans and am starting to do some research. The plan covers only collectively bargained employees, none of whom are highly compensated. This doesn't "smell" right to me. Aren't there numerous welfare decisions and regulations which hold that plans must have a rational basis for differentiating among similarly situated groups of participants? A push in the right direction would be appreciated.

Districts routinely offer retiring teachers a "severance" payment based on accumulated sick leave. A teacher with no accumulated sick leave would be entitled to no severance. Both 409A and 457 contained exceptions for bona-fide sick leave payments. My understanding is that this exception means districts will not need to be concerned about the final 409A regs. Agree?

The Segal Company's website address is www.segalco.com. You will have to poke around and find their health plan auditing arm. I think they are in Phoenix. The fees we were quoted for a comprehensive claims audit were in the $35k-$65k range for a plan with 3000 active employees. All bids were from national consulting firms.

We have used Segal in the past. The Trustees were pleased with the results and the cost was less than some of the other national consulting firms.

Otherwise, the correction is to provide the spouse a benefit "equal to the portion of the qualified joint and survivor annuity that would have been payable to the spouse upon the death of the participant had a qualified joint and survivor annuity been provided to the participant under the plan at the annuity starting date for the prior distribution. Such spousal benefit must be provided if a claim is made by the spouse." Rev Rul 2006-27, sec 6.04(2)(a). The plan can offer the spouse an actuarially-equivalent lump sum payment instead of a survivor annuity form of benefit. Rev Rul 2006-27, sec 6.04(2)(b). I did some more reading on this issue and saw the same guidance. While the VCP fee is not terribly significant, the prospect of providing a QJSA for any spouse who does not predecease her husband is downright scary. This is a multi-employer DC plan. How does the plan finance such an expense?

I do not understand why you keep having this concern with Death Benefit and payment to survivors, there was no such suggestion by the OP that the money set aside in this "HRA type" segment would be used for any such purpose, that I can see. That's the problem. Each member has one account balance from which all VEBA benefits are paid. There is no clearly identified HRA portion of the member's balance.

Yes and yes. We had the same thoughts initially and looked to see if it could be classified as a profit-sharing plan, but it is a undoubtedly a money purchase plan.

Client began a Money Purchase Plan about 10 years ago using a document supplied by a bank. The document states the normal form of benefit is a lump-sum payment...there is no mention of the qualifed joint and survivor annuity rules. The IRS issued a determination letter during the GUST restatement process with no mention of the problem. The SPD for the group contains the proper QJSA language, but the distribution form being used does not contain an explanation of the QJSA or require a spousal waiver. Any idea of the costs associated with self-reporting to the IRS and taking remedial action? Plan has roughly $10mm in assets and 700 or so participants. What remedial action does the IRS want to see in this type of situation? How can the plan offer a QJSA waiver to a participant and his spouse when the money has already been distributed and likely spent?

There is no true HRA account, but the VEBA pays benefits that would typically be paid from a stand-alone HRA...in addition to others already mentioned. Account balances are capped at $12,000 and do roll from year to year. Retirees can use the remainer of their VEBA balance to pay medical premiums to the Union's health plan, or for medical expense reimbursement. In event of death, the surviving spouse may take remainder as death benefit or continue to use it for medical premium payments. Nothing exotic.

The fund uses one collective trust and each participant has a hypothetical account balance.

Don, That's the exact problem we are facing...this is a traditional construction industry VEBA that pays a number of other non-medical benefits. The members have one account from which they can draw unemployment pay, supplement medical premiums, training benefits, death benefits, post-retirement health premiums, and the reimbursement of out-of-pocket medical costs.

Take a look at the discussion that was initially posted on March 13, 2007. The heart of the argument revolves around IRC 105(b) and the applicable regulations. In Notice 2002-45 the IRS said that an HRA could offer only medical care reimbursements and not other traditional VEBA benefits..."if any person has a right to receive cash or any other taxable or non-taxable benefit", the IRS said the arrangement is not an HRA and reimbursements for medical expenses would be taxable income to the employee. Hopefully someone will tell me there is no reason for concern, but to this point the reading I've done suggests the IRS will require HRA plans to be a separate plan under the VEBA trust.

A multiemployer group has maintained a 501©(9) trust for several years. It is used to provide SUB, Death, Training, Health Premium and similar benefits to members. A retiring participant can use his VEBA balance to pay retiree health premiums until the account is exhausted. Due to the increase in health costs the group made a change 5-6 years ago to begin reimbursing participants for certain out-of-pocket medical expenses (deductibles, co-pays, eyeglasses, etc.) My understanding from an earlier post is that the IRS is using the HRA guidance from June, 2002 as well as Rev. Rul. 2006-36 to disqualify plans that mix the HRA type benefits with traditional VEBA offerings. (Or are they just deeming the medical reimbursements to be taxable?) Q1- Is my understanding of the IRS position correct? Q2- If this is correct, it seems that the problem would be mitigated by running a separate HRA plan (at additional costs) under the same trust umbrella. Agree or disagree? Q3- Any guesses as to the headache and fines involved if the plan reports the problem to the IRS and takes corrective action? The IRS seems to be splitting hairs on this issue. Why if a group can offer the HRA type benefits under a 501©(9) trust would they insist on a separation of medical benefits from the others? Thanks in advance.

Two quick questions... 1. In 2002 the IRS issued a model amendment for use by DB plans pertaining to the minimum distribution requirements....Is there an updated version available that incorporates the changes made by the final regs issued in 2004? 2. My understanding is that DB plans have to be amended to comply with the minimum distribution rules no later than the last day of the plan year beginning in 2005...Is this correct?

This may be stating the obvious, but keep in mind that many multiemployer pension funds have significant unfunded liability. While the employer may be able to walk away from the union upon the expiration of the collective bargaining agreement, the withdrawal liability assessment could be a financial nightmare for the employer.

Does anyone have a case cite on this issue?

Due to administrative error in 1992, retirees received overpayments equal to 5 % of their monthly benefit from that date forward. Error was just recently discovered. The Plan is considering a suit against the former actuary who never caught the mistake. Questions... 1) Can the plan stop the overpayment now, or is there an argument that the benefit has somehow vested? 2) Can plan recoup the overpayments through future reductions in monthly checks (for those who are still alive)? 3) Is the former actuary "off the hook" due to a statute of limitations problem? 14 years is a long time.

Most states no longer recognize common law marriages, therefore my guess would be no; unless of course the person can prove the existence of a valid law marriage in their state of residence. We have seen this come up a couple of times with regard to death benefits under a pension plan...kids versus common law spouse.

To clarify... The CBA only specifies what the contribution rate will be for the Plan. It does not govern or require any specific type of benefit. This is established solely by the joint board of trustees. The plan in question is self funded. There is no true "premium" that is being paid by the plan. The HRA/HSA accounts would not be under the same trust. Many Local Unions that participate in the health plan also maintain a "supplemental" plan. The supplemental plans are jointly trusteed and tend to provide benefits akin to a VEBA...retiree healthcare subsidies, out of pocket expense reimbursement, etc. The converted dollar bank would be maintained by a wholly separate trust. With respect to the individual balances, there is no vesting under the current dollar bank arrangement. Each person has a hypothetical account balance, but cannot use the money for anything other than health premiums.

A multiemployer group health plan with several participating unions is interested in converting their existing "dollar bank" into an HRA/HSA type account that could be used to pay health premiums, out of pocket expenses, etc. For those who are not familiar, a union construction worker will have a set amount of money paid to a health fund for each hour he works. The plan in question puts the contributions into a "dollar bank"--a hypothetical account balance from which deductions are made in the amount of the monthly premium. One question that has arisen about the conversion/establishment of an HRA/HSA is that many of these members already have similar accounts through their local unions. Is there any legal prohibition against an employee having two or more HSA/HRA accounts established in his name?

Update.... We just learned that this plan has, in the past, allowed alternate payees to share in a pro-rata portion of the ancillary disability benefit....although the plan is silent on the issue. To further complicate the issue, the QDRO that has been submitted is a separate interest order that does not appear to grant the alternate payee any portion of an ancillary benefit. Is there any "correct" answer here? It seems the Plan needs to ensure everyone is treated fairly. For example...allow P to keep 100% of the subsidized disability benefit. The alternate payee is awarded a separate interest in the accrued benefit that can commence upon early retirement age. The subsequent spouse is awarded a QPSA and QJSA with respect to the unassigned portion of the accrued benefit. This accomplishes a couple of things...1) the plan is not paying any more than it would have paid in absence of the order; 2) the alternate payee receives the benefit ordered by the court; 3) the new spouse is protected in the event of the death of the participant.

Basic facts are as follows..... Participant (P) was married for about 15 years and divorced his first wife (W) in 1995. The divorce decree awarded W a one-half interest in P's defined benefit plan and ordered a QDRO be drafted. No QDRO was ever forthcoming. In August, 2005, P made application for an ancillary disability benefit with the plan. The administrator noted that a divorce decree had been filed and contacted both P and W concerning the need for a QDRO. Pursuant to the procedures an administrative hold was placed on the portion of the benefit payments that appear to belong to W. P is now remarried to W2. Questions... 1. Can W submit an order that provides for a separate interest? P is in pay status, but only due to disability. The J&S notice is not submitted to a disabled pensioner until he converts to a normal retirement at age 62. Is she limited only to a stream of payment order? (This does not make much sense...if he recovers tomorrow, all benefits would stop...then W would be left in a lurch). 2. Should the plan ignore the fact that P is in pay status and request a separate interest order that is payable upon P's attainment of early retirement age? The intent of the benefit is to assist a disabled pensioner, not to provide a subsidized windfall to the non-disabled ex-spouse. W would still get her portion of the benefits accrued through the date of divorce. 3. Should the plan ask for some sort of hybrid order that gives W a right to a proportionate share of the disability benefits, and a separate interest in the normal accrued retirement benefits? Am I completely off base...?? As indicated in the caption, this situation has me thoroughly confused.

Our plan design provides that if a spouse has coverage available through her employer at a cost of less than $150 per month we will pay only on a secondary basis...regardless of whether she actually chooses to enroll in the other plan. Our plan does not require she enroll in the other plan, nor does it cut her off completely. Instead we act as a secondary payor.