coverage testing with union employees

[Guest terric]

Scenario

One employer

Plan A- covers all employees including union employees. This plan was set up in addition to whatever plan that union employees may have through their union.

Plan B- covers non-union employees only.

All of the employees in Plan B are in Plan A.

Can I exclude the union employees from the coverage test when combining both plans?

Thank you for any suggestions.

[AndyH]

Probably, but what do you mean by "when combining both plans"? For what purpose are you doing that?

[Guest terric]

I believe I have to test both plans together for 410(b) purposes. The employer wants to make a contribution to Plan B only.

I read in the ERISA outline book that if you have a plan that covers union employees, it is deemed to pass coverage.

I am not certain that the plan that is given as an example in the ERISA Outline Book was set up as a separate benefit aside from a plan that may have been negotiated as a union benefit.

[AndyH]

No, I think you've got things a bit mixed up.

I read in the ERISA outline book that if you have a plan that covers union employees, it is deemed to pass coverage.

No, if the plan ONLY covers union employees (and meets other criteria-bargained in good faith, etc). You can't get a free pass by including one union person. Only part of that plan would get a free pass.

If you have one plan that is non-union and another that has both, you have three plans for testing purposes. The "union" group is treated as if they are in a separate plan.

See 1.410(b)-(6)(d).

And be careful of the word union. Collectively bargained would be more accurate. There sometimes are employees who are subject to a collective bargaining agreement that are not "union". And not all union people meet the collectively bargained exemption.

Hope this helps. I think the cite will explain the testing rules.