Union Arrangement?

[WDIK]

Is anyone out there familiar with a scenario purported by United Financial Group wherein the rank and file employees of a small business become members of a Chicago union, thereby being classified as collectively bargained employees excludable under the terms of a retirement plan? Some information is available here.

Of course the basis for this approach is to provide small benefits to the rank and file through the union and large benefits to the owner through the corporation. Of course UFG avers that this approach is legitimate, conservative and has passed IRS scrutiny under audit.

I would appreaciate the insightful opinions of the members of these boards.

[JanetM]

Well having union workers does allow you to avoid the issue of covering them under the same plans as management. But how could management force their workers to join a union? Why would folks stay if benefits were minimal?

What would management do if the workers demanded better benefits? You say this is Chicago? My thoughts are now organized crime. The only way you could make it work to managements favor over the long term is if this UFG has some ties to the Union that would be negotiating for these workers.

[david rigby]

What union?

[WDIK]

What union?

National Production Workers Union, Local #707

[Effen]

Well having union workers does allow you to avoid the issue of covering them under the same plans as management

Only if benefits are subject to good faith bargaining. I don't think just belonging to a union, allows the ER to autmatically exclude them from coverage.

[Bird]

The deal is that they go in and give the employees more benefits than they have currently, and they get these benefits by joining the union and bargaining for them. They make sure they get at least what they would get under a safe harbor plan. Plus, some term life and disability. Union dues are $25/month and the employer funds it through a pay raise.

The owner then is free to put in a DB plan without covering anyone else. They require either a 412(i) plan, or a regular DB with 30% in life insurance, or a combination.

I got an e-mail Monday and follow up call yesterday. Suppoosedly they've had 12 audits with no problems.

Everybody's happy, right?

I honestly don't know that it's not legal, if done properly and without coercion. That doesn't mean I don't find it slimy. I can't imagine anyone going through this...wait, I can think of a couple of...dentists...that might jump all over it.

[JanetM]

Still doesn't sit right with me. No warm fuzzy or anything.

[david rigby]

Only if benefits are subject to good faith bargaining.  I don't think just belonging to a union, allows the ER to autmatically exclude them from coverage.

That is what I thought also, until Kirk added this:

http://benefitslink.com/boards/index.php?showtopic=27027

[Lori Friedman]

JanetM, but your little kitten is both warm and fuzzy.

Pax and Effen, the authority is Reg. Sec. 1.410(b)-6(d).

[Effen]

I am frankly SHOCKED that there may be insurance involved. You mean to tell me that an insurance agent may have created this scheme? WOW, unbelievable!

Thanks Lori and PAX for the references. Apparently, the specific benefit does not need to be specifically bargained.

1.410(b)-6(d):

(d) Collectively bargained employees

(1) General rule. --A collectively bargained employee is an excludable employee with respect to a plan that benefits solely noncollectively bargained employees....

(2) Definition of collectively bargained employee

(i) In general. --A collectively bargained employee is an employee who is included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, provided that there is evidence that retirement benefits were the subject of good faith bargaining between employee representatives and the employer or employers. ....

and Kirk's response to PAX's post:

Treasury Regulation Section 1.410(b)-1©(1) provides as follows:

Under section 410(b)(2)(A) and this paragraph, there may be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if the Internal Revenue Service finds that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. For purposes of determining whether such bargaining occurred, it is not material that such employees are not covered by another plan or that the plan was not considered in such bargaining.

The emphasized phrase is often overlooked.

--------------------

Kirk Maldonado

[Demosthenes]

Reading the previous posts, I was wondering why an Employer would institute a union? Why subject themselves to annual collective bargaining, fees for a labor lawyer to represent the Company, greivance processes, collection of union dues etc. etc. simply to slice the benefits pie differently?

Isn't there an easier way to do this? Cross tested plans, DB plans, even SS integrated, would shift the distribution around and would probably be a whole lot less painful than a CBA.

So, cynical fellow that I am, I googled the union rather than UFG. Lo and Behold, what do I find? Lots of stories on the union, not many of which are complimentary.

http://www.rockrivertimes.com/index.pl?cmd...&cat=16&id=9234

Winnebago County Board member Mary Ann Aiello (R-9), who has immersed herself in the issue, said “independent union” means the National Production Workers are not affiliated with any national organization, such as AFL-CIO. She also alleged the National Production Workers is regarded as a union that “caters to the company rather than the workers. ...They’re known as a company union.”

http://www.dailynorthwestern.com/daily/iss.../e-picket.shtml

The picketer, Ian Main, is an organizer from Local 58. The local says workers from G & L Contractors, 7401 St. Louis Ave., are receiving substandard wages. G & L workers are unionized by Local 707 of the National Production Workers Union.

There were planty more stories in a similar vein.

This type of a CBA may technically stay within the regulations, but I have to shave every morning and I prefer to be able to use the mirror.

[JanetM]

I did the same thing and found the same unflattering reports. Lots os hits on NLRB too.

[could be me maybe not]

You say this is Chicago? My thoughts are now organized crime.

Lots os hits on NLRB too.

Hmmm.

[mbozek]

What are the allegations other than the National production workers union is an independent union not affiliated with the Afl-CIO. Producton workers is another name for manufacturing workers who have seen their jobs leave the country because of high labor and benefits cost. Why cant a union bargain for wages and benefits which keep jobs in the US?

[Demosthenes]

A lot of the articles and NLRB filings talked about other unions picketing shops where NPW 707 was the collective bargaining agent, yet the NPW union employees were not earning prevailing wages and benefits. Or where a union was in the process of unionizing a shop when the company brought in NPW as the preferred choice.

Just as some background, in organized labor circles "a company union" is an epithet. It means the the union is just a front for management and can be counted on not to agressively bargain or to work to safeguard the member's interests.

What raises my ire here is the thought of employees paying union dues so that the principals of the company can end up with a bigger piece of the corporate profits. It's kind of like paying the headsman to use a sharp axe.

[david rigby]

What raises my ire here is the thought of employees paying union dues so that the principals of the company can end up with a bigger piece of the corporate profits. It's kind of like paying the headsman to use a sharp axe.

P.T. Barnum was wrong. It's every thirty seconds.

[GBurns]

I question the whole idea of it being a valid union and CBA and look forward to the action that the regulators will take soon.

I cannot imagine how you can have a union for which there was no employee voting, for which there was no ratification and no bargaining therefore no CBA.

I also wonder whether this is a MEWA or a MEP.

I also could not find a M1 on the DoL site and I could not find it as a state MEWA (but maybe I do not have the correct name).

This smells like some of the "Union" health plans that have been closed down by many states over the last few years.

[Bird]

I cannot imagine how you can have a union for which there was no employee voting, for which there was no ratification and no bargaining therefore no CBA.

Supposedly they follow all these steps to make it legal. I don't think the employees would be stupid to vote for it, if they are getting better benefits. I think the employer would be nuts to urge his employees to unionize, but that doesn't make it illegal.

[g8r]

There are several of these types of arrangements floating around. Supposedly, the IRS is looking into these. As pointed out, whether this is legal or not will depend on whether there really is collective bargaining. Generally, the union does have requirements that make this look this look legit. For example, the union will provide a plan, even though, as pointed out, not providing a plan might be o.k., and the employer must implement greivence procedures, etc.

Keep in mind this may be a win-win for unions and employers using these arrangements. Unions are hurting for members and you may find that this technique will be used by the large, long-established "mainstream" unions.

Of course this doesn't pass the "smell" test. But, if these pass muster with the DOL, then there's not much that can be done w/out legislation.

[GBurns]

Bird

It is not the voting for the plan that matters, the employees have to vote for representation by that union first. The Union and the employer cannot enter into any bargaining and any agreement until after voting by the employees to have that union etc.

[Bird]

GBurns, when I said vote for "it" I meant the union (and everything that goes with it).