Rehabilitation Plan Adoption Period

[Guest CinC]

Code Section 432(f)(4) says that during the rehabilitation plan adoption period, the plan sponsor may not accept a bargaining agreement that provides for a reduction or suspension of contributions or the exclusion of younger or new employees. Is it safe to read this as meaning an employer may not during the RPAP bargain for reduced benefits going forward, but may bargain for a complete cessation of contributions - i.e., bargain out of the plan, which of course would trigger wihdrawal liability? If not, what does an employer whose bargaining agreement expires during the RPAP do - bargain to withdraw upon the end of the RPAP?

[JanetM]

Participating employers don't have options. If you adopted the defaut (as apposed to alternative) schedule you froze benefits. You can't bargain to increase those benefits while in rehab. You can bargain to keep benefits at level offered under default schedule (basically this is reduced future accural) You also can't bargain for tiered benefits in the future while the plan remains underfunded. You must put all new hires into MEP.

You could bargain to withdraw - but as you pointed out that will mean (normally) complete withdrawal.

We are participating ER in SMWNPF. The biggest lipstick wearing pig I have ever seen. We are a CG with multiple ER's and locations in the plan. We started doing w/d estimates about 6 years ago, and the numbers have gone from very large to OMG. We are just going to ride along with default schedule for a while and see what happens.

[Guest CinC]

Thanks, Janet. Looks like I wasn't very clear, so let me see if I can explain. The employer is currently deciding how to respond to the presentation of 2 different rehab schedules. One would maintain benefits and one (default) would eliminate adjustable benefits, but would continue accruals under the normal retirement benefit. Since their bargaining agreement has not expired yet, inaction will result in application of the surcharge, but no other immediate consequences.

As far as I can see their choices at this time are to adopt the nondefault schedule or pay the surcharge until their current bargaining agreement expires; there does not appear to be an option to elect the default schedule currently, or at least the fund has not made that evident. If they take no action now, then when the bargaining agreement expires, they can choose between the regular and default schedules, or - and here was my original question - I think they could bargain to withdraw entirely. I'm just trying to make sure that the 432(f)(4) prohibition on "reducing" contributions during the RPAP does not mean they are prohibited during the RPAP from bargaining for an immediate "reduction" to zero (i.e., withdraw). Putting it another way, if the RPAP ends 12/10 and the bargaining cycle ends 12/09, can they withdraw as 12/09 (assuming, of course, the union agrees and they don't choke on the withdrawal liability), or would the withdrawal only be effective after 12/10? Normally I'd find that hard to believe, but these new rules tilt so heavily in favor of the funds that anything seems possible.

You also raise another question. It's my understanding that many multiemployer plans offer different levels of benefits (e.g., $20 times years, 25 times years, etc.), which then have varying pricetags associated with them. Say the employer initially bargained for a certain level, but then things get tough. I assumed the employer could in theory bargain for a lower level of benefits going forward. Does that not happen in the real world? (This is my first experience with multiemployer plans in many years, so pardon me if this is an ignorant question.) And if it could happen, are you saying that is not permitted during the rehabilitation period (not just the RPAP)?

Thanks!