Minimum contribution requirement

[Bill Ecklund]

When a multiemployer plan fails to meet the minimum contribution requirement (MCR), then excise taxes are imposed upon the contributing employers. The taxes start out a 5% of the deficiency, but can grow to 100%. The taxes go to the IRS, so the funding problem still continues. Can the trustees of a multiemplyer plan legally require the employers to contribute more money than what is required in the CBA in order to meet the MCR?

[Effen]

I don't know if they can be "forced", but why would the employer choose to pay twice as much as they need too? If the Plan is deficient, they have to pay the required contribution, plus a potential 100% excise tax. It would seem a pretty poor business decision to choose to pay the excise tax. That said, I know some employers just don't have the cash available.

Have they looked into the various options regarding waivers and amortization extensions? (IRC 412(e), 412(f)) Also, since the deficiency is imminent, did PFEA 04 give them any relief

[Bill Ecklund]

From a practical standpoint, the employer would be better off paying the plan, rather than the excise taxes. I was trying to ascertain if there is anyway that the trustees could legally require the employers to pay the MCR. Timing could be important. If the trustees could force the employers to pay, that payment could be required long before the excise taxes are imposed.

[mbozek]

If the plan is in danger of not meeting the MCR then it would be up to the trustees to make a decision of what course of action to take based upon the documents that govern the plan including the CBA and funding waivers. The trustees cannot increase contributions by employers which are in excess of contractual provisions under the CBA just to prevent the excise tax from applying. The plan trustees need to consult with their counsel as to what their options are.