HCE and union member

[lexi]

we have several HCEs who are also card-carrying union members. the "office plan" they participate in allows HCEs to participate but excludes union EE. (i don't know anything about the union plan but assume that it would allow these HCE/union members to participate). for some reason, this year they decided they want to start participating in the "union plan."

as far as the "office plan" is concerned, is there anything other than being aware of contribution limits that we need to be thinking about? i went throught the 410(b) regs and 404 regs re disaggregation and deductibility but am not sure if i have explored the universe of worrisome issues. (i am sure i haven't, which is why i woke up at 4:30 this morning.)

do you have any insight(s)?

already a sleep zombie,

lexi.

[masteff]

(i don't know anything about the union plan but assume that it would allow these HCE/union members to participate).

To clarify, they are included in the "office plan" by being HCE despite of union membership, correct? So if they're included the "office plan", then I would expect language in the union plan's eligibility rules that excludes them, either by explicitly naming the office plan, by excluding HCE's or by a catch-all like "and not eligible in another plan of the employer". Despite their desire to be in the union plan, I'd make sure whether or not they are eligible for it at this point.

[lexi]

from what they tell us, they are definitely allowed to participate in the union plan, so we are moving forward under that assumption.

[austin3515]

It seems unusual that a plan would exclude union members other than union members who are HCE's. I'm wondering if the HCE's were never eligible for the office plan to begin with.

IF the office plan simply excludes union employees (without any additional special language about HCE's) I'd say you've got a problem because your union HCE's didn't belong in the Plan in the first place.

What's more, something about that provision smells a little like discrimination. I think it's a coverage issue because the "office plan" needs to disaggregate the union employees for testing. Your only covering HCE union employees so it would be impossible for you to pass coverage. Is the union plan maintained by the union itself or the employer? If it's the former, I'm not sure you can even aggregate the union plan for testing?

So my questions are 1) are you sure the HCE's are allowed in the office plan and 2) who sponsors the union plan?

[lexi]

Austin 3515:

You make some really great points. I am completely perplexed about this situation.

From what I understand (and this information is coming from the HCE/union members), they were part of a union when they were young guys (mainly to get the experience) and have long since left that stage to join the ranks of management. However, for some inexplicable reason (maybe the terms of the union plan have changed?), they would like to start participating in the union plan in addition to the office plan.

And to answer your question, the UNION sponsors the union plan--not the office employer.

i think it's clear that the plans can't be aggregated for 410(b) purposes and if that's the case, there is a problem w/ benefiting only HCEs. However, I was thinking that since the union and office plans can't be aggregated, maybe the office plan forgets about the contributions being made on behalf of the HCEs by their union and just makes sure that 402(g) limits are respected.

At this point, I am not sure what the correction method would be.

[austin3515]

Well wait a minute:

Perhaps if we look at the literal definition of the Union Exclusion that will help-- you mentioned that they have joined the ranks of management. One of the conditions to exclude union employees is always that retirement benefits were the subject of good faith negotiations.

So if these employees were not included in the negotiations then they would not be subject to the exclusion or the mandatory disaggregation.