Pre Retirement Distributions from Money Purchase Plan

[Guest JD698]

An employee (before normal retirement age) terminates his/her employment with an employer who, pursuant to a CBA, contributes to a multiemployer money purchase plan, and the plan language provides for distributions upon termination of employment. Would it be problematic if the employee, at a later date:

a. began working for the same contributing employer in a capacity where contributions are not required

or

b. began working for a different contributing employer where contributions are required.

The plan language is generic and just states termination of employment without going into any specifics.

The trustees, pursuant to the plan, can rely on their interpretation of the plan language.

My thought is that in both of the above situations, there was a "termination of employment" and that maybe the plan should be amended to specifically address the above issues.

Any thoughts or ideas?

Thanks.

[Effen]

Since no one responded, I will give my 2 cents.

A lot depends on prior procedures. Since the concept of "termination" is often a foreign concept to unions this type of question comes up a lot. Some figure as long as they are paying dues they are active.

The plans I work on tend to define termination as 0 hours during some period ranging from 6 months to 2 years. This is usually in the document, but in your case some sort of administrative interpretation document might also work, assuming your ERISA counsel agrees.

In your examples, I think A would definitely be a termination, but B would definitely not. In a multi-employer plan participants often work for multiple employers during their career; that is why it’s called a multi-employer plan. Just because you change from one contributing employer to another is definatly not considered a termination of employment unless some predetermined time has passed.

[Guest JD698]

Since no one responded, I will give my 2 cents.

A lot depends on prior procedures. Since the concept of "termination" is often a foreign concept to unions this type of question comes up a lot. Some figure as long as they are paying dues they are active.

The plans I work on tend to define termination as 0 hours during some period ranging from 6 months to 2 years. This is usually in the document, but in your case some sort of administrative interpretation document might also work, assuming your ERISA counsel agrees.

In your examples, I think A would definitely be a termination, but B would definitely not. In a multi-employer plan participants often work for multiple employers during their career; that is why it’s called a multi-employer plan. Just because you change from one contributing employer to another is definatly not considered a termination of employment unless some predetermined time has passed.

Thanks for responding Effen.

I have another question along the same lines. If an employer decides that it no longer wants to contribute to the local's money purchase plan but will be contributing to the international's pension plan, would that be sufficient of a termination for all of the employees to withdraw the monies they have in the local's plan? I believe they can, but it has been suggested that such a withdrawal is violative of the service's rules and could result in the plan losing its qualified status.

Any thoughts???

Thanks.

[Effen]

Obviously they would need to negotiate that through collective bargaining, but my initial reaction would be it isn't a distributable event. They are still covered under the bargaining agreement, and the plan didn't terminate, so what would be the reason for distribution? I tend to think of the members as employees of the union, not a specific employer.

If they cease to have an obligation to contribute, maybe you could argue partial plan termination? They would all need to vest.

You need to involve fund counsel. It has to be their decision.

[david rigby]

Sounds like an opportunity to improve the plan's definition of "termination". Decide/negotiate what is desired, and put it in the document.