employer did not disclose employees as union employees

[Guest lindamichals]

a profit sharing plan has been in existance for many years, nursing home, makes a small contribution each year($10K). ER inquiries about changing plan to only include supervisors/owners. In course of our conversation, he says, I do not want to include union employees. The plan has always excluded union ee's! He just never revealed them as such on the census.

Any ideas as to corrections, if any?

Thanks.

Linda Michals

[GBurns]

Why should he have revealed excluded employees on the census?

[WDIK]

GBurns:

I read the initial post differently. The employer included union employees on the census but did not indicate that they were union employees.

[SoCalActuary]

Were these union employees who had bargained on pension benefits?

If the employer was paying into a union based pension plan, you would think (perhaps foolishly) that they knew not to include them in the profit sharing plan.

If the employer had bargained on pensions with the specific agreement to make no pension contribution, then it might have been more likely they forgot.

However, if they did not bargain on pensions, then they do not have any exclusion.

Bottom line issue: does the employer have any written confirmation that pensions were bargained?

[mbozek]

There is something wrong with this story. Employers cannot provide benefits to union employees without negotiating with the union representing the employees. If there has been negotiation then the union emplyees are not included in testing under the emplyer's plan. Providing retirement benefits to union employees without negotiating with the union is a violation of fed labor laws (unless this is a public employer). The only way to provide benefits to union employees without negotiation is if the union has been decertified (in which case the union members would be counted for nondiscriminaton purposes).

[GBurns]

I understood the post as meaning that the union employees did not receve any benefit because they were always excluded.

If as posted "The plan has always excluded union ee's!" whether because they were subject to CBA or some other agreement with the union, they are excluded employees and were never plan participants.

So why would employees who are not plan participants be on the census? Census of what? Eligible employees, participants or of all employees (whether participants or not, ineligible or not)?

Maybe I do not understand what the "census" is??

[SoCalActuary]

The basic problem is the identity of the union employees who were to be excluded.

If I were in charge, I would insist on the employer getting corrected data, going back as far as needed.

Then I would revise the allocations if I found any ineligible employees who received an allocation. If any employees received payouts while ineligible, I would argue for employer duty to 1. try to recover the money, and 2. reimburse the plan for the improper distribution.

However, I would also insist on review of the collective bargaining agreement to see who was covered, whether pensions were negotiated, and whether the exclusion is allowed.

[Guest lindamichals]

Thanks for everyone's input. I will have to ask the employer if pension benefits were bargained for, however, to clear this up. The plan document says to exclude union employees. The yearly census included ALL employee's without any designation as to union status. He is now asking for a plan that excludes union employees, he's had one all along!

He has contributed and paid out benefits to terminated union employees.

SoCalActuary, would you only go back 3 years(limitation statue)? How do you think the IRS/DOL would review this plan if audited?

Thanks.

Linda Michals

[SoCalActuary]

If the union employees were intended to be excluded according to collective bargaining, then you have incorrect plan administration, which probably should go thru CAP to get a proper fix. The union employees who received a distribution depleted plan assets that belonged to other employees.

I would recommend that the remedy is payment to the trust from the employer to reimburse those amounts, with reasonable interest.

Certainly all three open years should be corrected. How far back do you feel comfortable? How many dollars are involved? If the numbers have been small in all years, then the correction is probably much worse than the problem after you count the fees for correction.

IMHO, Talk with your ERISA counsel to get a specific fact-based opinion.