Brian Haynes

A 5% surcharge applies 30 days after the trustees have notified the employer of the Critical Status of the Fund. The DOL has issued a Model Notice for such use. The surcharge increases to 10% for the following plan years. The surcharge ends only when the parties actually adopt a schedule (either the default or alternative schedule). The automatic imposition of the default schedule that occurs when the parties cannot reach agreement is not enough to avoid the surcharge. I note that there is an issue on how surcharges are calculated. Are they based on contributions due 30 days after the employer receives the required notice or on contributions for work performed 30 days after notice? Hope this helps.

I have a restricted stock award where an employee will vest in a certain number of shares in a closely held company at the end of this year after sucessfully completing 10 years of service. Assuming the arrangement is not subject to Section 409A, can the forfeiture period be extended by the end of this year for another 7 years under Section 83 without trigerring taxation? Thanks for the help.

Can anyone make a recommendation for a company that issues buyer's and seller's bonds under Section 4204 of ERISA? I am having trouble finding a company that underwrites such bonds. Thanks. Brian

What Bill said is true. However, I note that a Pension Fund has a duty to conduct a good faith inquiry of the factual circumstances of the applicability of the building and construction industry exemtpion before imposing withdrawal liability. Take a look at Crown Clothing 854 F.Supp. 316 (D.N.J. 1994).

Can a multiemployer health and welfare fund (a 501©(9) VEBA) provide third party administration services to a different health and welfare fund? It seems to me that providing such services is outside the scope of the "benefits" that can be provided under 501©(9) and possibly even under the Taft-Hartley Act. If they can be provided, I assume the receipt of any fees for such servivces would constitute UBTI. Thanks for any input.

I just read your post and have looked at this issue. If you want to discuss, please give me a call. Brian Haynes at 315-218-8197.

Under Section 4203(b) of ERISA, there is an exemption to complete withdrawal liability to an employer in the building and construction industry where the employer ceases to have an obligation to contribute to the multiemployer pension plan and does not continue or resume covered work in the relevant geographic area for 5 years. Let's say an employer ceases its obligation to contribute to the plan in year 1 and in year 2 the plan terminates in a mass withdrawal (say a withdrawal of substantially all the employers during the relevant 3-year period). Is the employer subject to any liability for the mass withdrawal? My thinking is that since there has not been an actual wtihdrawal by the employer (we are still waiting to see if the employer resumes covered work) there has been no "withdrawal" and there is nothing to reallocate any liability to. I do understand that the 5-year ban on covered work is reduced to 3 years, but I believe it is reduced to 3 years only if the reason of the employer's cessation of the obligation to contribute is due to the termination of the plan by mass withdrawal. Maybe the 5-year period is reduced to 3 years even if the emoployer's cessation of the obligation was not due to the mass withdrawal. Any thoughts would be greatly appeciated.

When an employer is willing to pay the withdrawal liability amount in a lump-sum, I have been able to negotiate a discount between 10-15%.

Thanks very much for the comments. I believe a qualified plan is exempt from the debt-financed property rules since it is considered a "qualified organization" under Section 514©(9)©(ii) of the Code. Do you agree?

We represent a bank that is considering lending money to a small profit sharing plan so that the plan can purchase commerical real estate. The bank would hold a first mortgage on the purchased property. The bank is concerned that this may constitute a PT and subject it to liability as a nonfiduciary. Assuming that the bank is not an interested party and assuming that the real estate will be occupied by non-interested parties, is the transaction itself a PT? Should the bank require the trustees of the plan to provide it with a written opinion of counsel that the purchase of real estate and the bank's lending do not constitute a PT? Should the bank also require the trustees to indemnify the bank for any liability? I am assuming that even if the plan's investment in the real estate constitutes a fiduciary breach, this would not expose the bank to any liability. Thanks for the input.

As we all know, the Mental Health Parity Act requires that group health plans, insurance companies and HMOs offering mental heatlh benefits may not set annual or lifetime dollar limits that are lower than any such dollar limits for medical and surgical benefits. However, a plan may limit the number of visits covered or the number of days of coverage. The DOL has taken the position in an audit of an employer's health plan that the plan cannot impose constructive dollar limits on mental health coverage through a combined limit on the number of visits allowed with a fixed dollar reimbursement cap per visit. I believe this is consistent with the position taken by the DOL on its website. It is my understanding that the New York State Insurance Department reads MHPA to only prevent stated annual or lifetime dollar limits and that a per-visit dollar maximum coupled with a limit on the number of allowed visists is permissible. Has anyone had to deal with the DOL on this issue and if so, what was the result? Thanks for your input.

Under ERISA Section 4203(b), a building and construction industry employer incurs withdrawal liability only if it both ceases to have an obligation to contribute to the multiemployer pension plan and continues to perform, in the jurisdiction of the cba that required contributions to the plan, work of the type for which contributions were previosuly required. The requirement that the employer continues to perform work of the type covered by the plan in the geographical jurisdiction of the cba seems to me to pose a problem when there is a difference between the jurisdiction of the cba requiring contributions to the plan and the jurisdiction of the plan itself. Assuming that the jurisdiction of the plan is wider, an employer arguably has a withdrawal when it leaves the jurisdiction of the cba but remains in the jurisdiction of the plan without making contributions. Any thoughts on what the geographical scope should be would be helpful. More particularly, if the cba at issue is a project labor agreement that only covers a particular project in one location this should seem to control so that the employer can perform non-union work 1 mile away at a different project without incurring withdrawal liability. However, the legislative history contains a phrase that says that the mere expansion of the plan's jurisdiction after the obligation to contribute ends should not create a withdrawal. This seems to imply that it is the plan's jurisdiction (covered by all its cbas) controls. Any further thoughts? Thanks!

Independent Association of Mutuel Employees of New York State involved a collectively bargained pension plan where all payments were made directly to the corporate bank trustee (the trustee was in charge of the investment and handling of contributions to the trust). The employer had the exclusive authority to appoint the corporate bank trustee. There was a pension committee composed of three members appointed by the union and three members appointed by the employer. There was also a chairman appointed by the employer to break any tie votes. The pension committee had the authority to pay benefits to participants but handled no funds. Under these facts, the Second Court held that the Taft-Hartley Act requirements did not apply. Under my facts (I started this) I believe Independent Association of Mutuel Employees of New York State is distinguishable since the Pension Committee for the Plan at issue has broad discretionary powers over the Plan, has the authority to issue directions to the corporate trustee (which is only a directed trustee), and in fact directly appoints and controls several Investment Managers who have direct control over the investment of assets in the Plan. The 5th Circuit in Costello v. Lipsitz questioned the reasoning of Mutuel and stated that it found it impossible to approve its simplistic holding that if a trust is wholly funded by the employer it is not governed by the Taft-Hartley Act. A district court in the 6th Circuit criticized Mutel for its suggestion that there is no need for strict compliance with the Taft-Hartley Act unless the employer contributions themselves violate its requirements. See Reinforcing Iron Workers v. Bechtel Power Corp., 463 F.Supp. 643. The Union may have conceded this issue but are now arguing that the appointment of a union employee of the employer and an employee of the union itself would not subject the appointments to the Taf-Hartley Act since these indivudals would not be considered "representatives of the employees." Since the requirement to appoint these individuals would be set forth in the collective bargaining agreement, how can anyone argue that such appointees would not be considered union representatives subject to the Taft-Hartley Act? I understand that these individuals have a fiduciary obligation under ERISA to act soley in the interests of participants, but this should not negate the fact that they are union representatives when the employer has contractually agreed to appoint them as members of the Pension Committee. Any thoughts? Thanks.

An employer maintains a single employer collectively bargained defined benefit pension plan. A Pension Committee is the named fiduciary and plan administer of the plan. Under the plan document, the employer appoints members to the Pension Committee. The union has requested that it be allowed to appoint 1-2 union members of the Pension Committee (which would be a minority of the total members of the Pension Committee). Would this violate the Taft-Hartley Act because the employer does not have exclusive control over the plan or can the union appoint some members provided that the employer still dominates and controls the vote of the Pension Commtitee? The 2nd Circuit's 1968 case, Independent Association of Mutuel Employees of New York State v. New York Racing Association, Inc., 398 F.2d 587 has been crticized by other Circuits. Any help would be greatly appreciated. Thanks.

I would be interested in knowing how long it takes to obtain a ruling request from the IRS re obtaining "church plan" status for a retirement plan? Has anyone submitted a ruling request on this issue? Thanks.