freezing a multi-ER plan

[lexi]

Is it permissible to do the following things to a multiemployer plan:

1) Can a a Taft Hartley multiemployer plan be frozen, so that there are no accruals, while contributions due under the plan are used to decrease the plan's underfunding; and

2) If the plan is frozen, and amounts contributed are used to fund previously accrued benefits, does that still count as "fringes" under Davis Bacon?

are there any provisions in the code or regs that speak on these issues?

thanks in advance for any help you might be able to lend me.

[Effen]

1) yes, in fact you may see more of this with the pending PPA changes. It's an extreme solution, but sometimes you don't have a choice.

2) I don't know nutt'n 'bout no Davis Bacon.

[Bill Ecklund]

You have to be careful in “freezing” the Plan. Under some circumstances, that may constitute Plan termination. The typical arrangement is for the cessation of benefit accruals, but continuation of vesting accruals, until the Plan is financially able to re-start the benefit accruals.

For purposes of determining whether or not contributions are counted for Davis Bacon purposes, one has to look at the prevailing wages (including fringe benefit contributions) in the area. There are specific regulations on what has to be included and what does not have to be included. For example, an employer is not required to make a specific pension plan contribution, where pension plans are required in the area, but is required to pay a wage and fringe rate, which is “prevailing” in the area.

The fact that a participant is not accruing any benefits does not determine whether the fringe benefit contribution is or is not counted as fringes for purposes of Davis Bacon. That determination is made by what is “prevailing” in the area

[Guest S. Nofziger]

Hi all,

First time posting. I have a similar situation to the one discussed in this post. Plan has ceased benefit accruals, but has continued to vest previously accrued benefits. Plan is underfunded and ER has continued contributions.

Bill (or anyone),

Do you have a cite to any specific legal authority or DOL guidance for your statement: "The fact that a participant is not accruing any benefits does not determine whether the fringe benefit contribution is or is not counted as fringes for purposes of Davis Bacon."

Much obliged!

S. Nofziger