Plan for Union Employees

[SMB]

Hoo, boy! Either I'm getting far too set in my ways - or this is really "out there"!

Client (a construction company) is pulling out of a union DB plan. The intitial collective bargaining agreement for this union provides that, in lieu of participating in the union DB plan, the employer will be required to sponsor a DC plan covering the members of this union, which provides for a fixed contribution amount "per hour worked" (i.e., a contributory DC Plan versus the DB plan).

All well and good - EXCEPT the collective bargaining agreement contains the following additional requirements:

(a) If an employee is absent because of illness or off the job injury and notifies the Employer of such absence, the Employer shall continue to make the required contributions for a period of two (2) weeks.

(b) If an employee is injured on the job, the Employer shall continue to pay the required contributions until such employee shall return to work, however, such contirbutions shall not be paid for a period of more tha six (6) months.

© If an employee is granted a leave of absence for any reason other than those set forth in (a) or (b) above, the Employer may collect from said employee, at the employee's option prior to the leave of absence being effective, sufficient monies to pay the required contributions into the Plan during the period of absence. If the employee chooses not to exercise this option, the Employer will not contribute to the Plan on the employee's behalf during the employee's leave of absence.

Am I missing something - or is this a totally ridiculous and unworkable crock of you know what?!

Absent whatever constructive feedback I may receive from my fellow BenefitsLink readers, I am inclined to advise my client to get the CBA revised to provide for a contribution equal to $x dollars per "Hour of Service", as defined by DOL Reg 2520.200b-2(a)(1), i.e. each hour for which an employee is paid or entitled to payment.

I might add that the section of the CBA refers to this as a "401K" plan - with no mention whatsoever of "employee" salary deferral contributions. No clue, or what?!

Thanks for any and all comments.

[Guest Sieve]

It may be unworkable, ridiculous and a crock of we know what (it sure ain't a 401(k)), but an employer paying into a plan on a per-hour basis is certainly nothing new to collectively-bargained plans--DC or DB--and the employer may be used to it. Assuming all employees are NHCEs, then the allocation formula--such as it is--may produce different percentage contribution levels for different employees but will not be discriminatory.

For me, the strangest part is ©, where the employee can take after-tax money, pay it over to the employer, and have it contributed to the plan. Looks like those contributions will be taxed when they come out of the plan--but, they were taxed before they even went into the plan. That I don't understand at all.