Conflict Between Plan Document and CBAs

[Guest NPWA]

I'll post this here, although the question does not involve a multi--it involves a collectively bargained single-employer plan. This group's wisdom seems most applicable.

We have a situation in which the actual plan document has not been amended to reflect changes to the benefit amounts and other terms that have been agreed to in collective bargaining agreements.

The employer is now bankrupt and member of the controlled group is assuming sponsorship of the plan to avoid very expensive termination liability. The controlled group member will now operate the plan.

I assume the new sponsor has to give effect to the terms agreed to in the cba. Nothing else would seem fair. Are there any concerns about doing so when the plan document does not provide for these terms?

In some instances the provision in the plan document is more participant favorably and in other cases the cba's are more participant favorable, in case that makes a difference.

Any thoughts or suggestions would be very helpful.

Julie

[MGB]

Does the plan document reference the CBA?

I just reviewed an IRS audit of a plan. The CBA is referenced by the plan document. The CBA says that no one may work above X hours per year (overtime restriction that is not in the pension area of the CBA). However, this rule is administered in a lax manner and some participants work more than what the CBA says. The IRS says that the plan should be disqualified (going through a correction program now) because it is not being administered according to the plan terms.

[mbozek]

I would not assume that the new sponsor will do anything voluntarily which will increase the costs. The new sponsor could claim that it was not a signatory to the CBA. You really need to have labor counsel review the CBA and the precedents because this is a matter under both labor law and bankruptcy law (a bkcy ct can abrogate labor contracts of an employer that files for bkcy). Resolving this issue will involve big bucks for legal advice.

[GBurns]

There are some issues here that I am not clear on.

If the employer is now bankrupt, are they continuing under the auspices of the Bankruptcy Court or has it gone out of business? If under the BC , What is the Trustee's directive?

This was a single employer plan, there is no mention of a successor employer, Who will be employing the former employees?

If the employer has gone out of business, then there is no more CBA. If they have not gone out of business and there is no succesor employer, it should mean that they are operating under the BC Trustee and the matter of continuing or negating the CBA and terminating the plan etc etc, rests with the Trustee (or Judge).

If the employer has gone out of business, What will this member of the controlled group be taking over and How was it transferred, asset sale, stock sale ??

Assuming that none of the above matters, there is the issue of the conflict between the PD and the CBA. Other than an IRS audit, the various conflicts will only be settled as they cause problems and get questioned. How a Court will rule is speculative although most seem to be coming out in favor of whatever was the most likely interpretation by the employee. In this case since neither the PD or CBA are usually perused by the employees, there remains the question of what they were told (such as in open enrollment) and how (such as in group meetings and SPDs).