Union employees

[Guest Pat Metallic]

An employer has a 401(k) plan that excludes union employees. The employer acquired another company which has some employees (who enjoy the benefits of salary deferrals) who will be forced to go union. They will be enrolled into a collectively-bargained plan which does not allow employee contributions.

The acquiring employer wants to appease them someway by looking for options for them to defer. My thoughts are to amend the plan to allow union employees to participate in the salary deferral component of the plan but not the employer portion. Are there any concerns that I should be aware of? My understanding is that the union employees are tested separately for coverage testing. If no union EEs are HCEs, there should be any testing issues.

[MWeddell]

Is the plan large enough that there is no realistic chance that it will ever become top-heavy? I don't often deal with the top-heavy rules, so my concern may not be well-founded, but that's one thing to consider.

I can't think of other concerns. There'll be some administrative costs for issuing an SMM or revising an SPD and some ongoing administrative costs for distributing enrollment kits to the eligible union employees, but presumably those are obvious to you.

[mbozek]

Before amending the plan you need to discuss your proposal with labor counsel. Employers cannot not offer any benefit to union employees without getting the approval of the collective bargaining agent for the union employees.