Workforce Goes Union

[Below Ground]

401(k) Plan does not permit participation of Union Employees, which was not an issue since there was no union. Recently, a large percentage of the workforce goes union. It is understood that going forward Union Employees do not accrue additional contribution under the Plan as an excluded class, but do continue to be credited with vesting service. Furthermore, it is understood that we can't simply pay these people out as unionizing is not a distributable events. The Plan does, however, permit transfer of benefits to another qualified plan provided that person is "fully informed" and elects for the transfer. This would be desirable as 1) the Union Employees want to transfer their benefits to their union plan, and 2) the employer would like to allow them to do so. Does anyone have any thoughts on this situation, or processing of "plan benefit transfers"?

[namealreadyinuse]

You are looking at the elective transfer rules and I would stick with just doing a involuntary spin off of those accounts if you really want to do it.

[Below Ground]

Just so that I understand, we should spin-off the Union Employees into a new plan. Then merge and consolidate that new plan into the existing multiemployer union plan? Makes sense, but does sound convoluted.

Wouldn't we have trouble with the "permanancy issue" of basic qualification for the "temporary" union plan? After all, that plan would not be in existence for very long. I suppose that we could spin-off the remaining non-union employees into a new plan and then merge and consolidate the original plan into the existing union plan. Then it would be the new plan that would continue on.

One issue that could be a problem by bypassing elections under the transfer approach would be potential adverse investment results from the transactions. I think that these transactions would create some costs for member accounts.

Anyway, thanks for your reply. It helped shed some light on the situation by giving a sensible option.