New DB Employees

[Guest tintree173]

Our company will buy the assets of an entity which will close on Thursday. The asset purchase agreement (APA) says that we (Buyer) have to follow the applicable collective bargaining agreements (CBA) and allow the new union employees into our DB plan with vesting, service and benefit accrual as provided in the old employer's pension plan - but with an offset for the benefits provided under the prior employer's plan. The CBA specifically references the prior employers DB plan and the APA references the DB plan as well and says we must mirror it (although we are not assuming any liability for the prior employer's plan).

So we essentially have to calculate the benefits of these new union employees pursuant to the terms of the old employer's plan and then subtract out the benefits the employees would receive under the old employer's as of the date of closing - and our plan is responsible for the difference.

Can we simply amend our plan to reference the prior employer's DB plan (by date, etc.) as in effect on the date of close and then state that we will calculate the same way with an offset for benefits provided under the prior employers plan.

Or do we have to draft a separate schedule for these employees that attaches to our plan?

I ask because it seems that it would be Ok to reference the prior plan (easy to determine and no mistakes would be made in trying to convert the entire plan into a schedule just applicable to these employees). However, when we submit for a determination letter - we would have to provide a copy of the prior employer's plan - right?

[Ron Snyder]

Taking the lazy way out won't work well because you will have to reference those provisions (and ONLY those provisions) that are to be incorporated by reference. Otherwise you are incorporating language that could disqualifyyour plan, or change how it operates.

It is likely that the nomenclature between the two plans is dissimilar enough that incorporating various sections (even with definition sections) the result is likely to be confusion.

The best approach is to "interpret" the prior plan provisions into the terminology employed by your plan documents. Any good attorney can handle this for you.

The plan should be forwarded to the employer as well as to the union(s) affected by the change for review. Once all have signed off on the new document, including the grandfathering provisions included, you're home free.

[david rigby]

...no mistakes would be made in trying to convert the entire plan into a schedule just applicable to these employees...

Hahahahahaha. Take the advice from vebaguru.

[Guest tintree173]

Thanks for the replies! The only thing I can't get my mind around is the requirement in the CBA (that we will have to assume all responsibhility under and which requires that we "mirror" the prior employer's pension plan) that incorporates all of the terms of the prior employer's plan (by reference and plan number and says there will be no changes, etc.).

Also, there is no time to go to the union prior to the end of the year.

Is there anything else we can do? If these employees are supposed to be in the plan effective Friday - can we follow the steps you outlined (do a separate schedule and have the union sign off on it) in 2006 as opposed to by Friday? It seems if we do it in 2006 that the employees would be in the plan prior to an amendment allowing them into the plan (e.g., in plan this Friday but amended into the plan in 2006). Thanks again!

[david rigby]

Time to talk to legal counsel.