Union benefits non union ee

[SheilaD]

This may be a familiar tune -- but I have not heard it before. Employer is an electric shop and has mainly union employees. The owner and his brother have the option of electing to receive union pension benefits but their pay and other issues are otherwise not subject to CBA. (I am told they have this election because they don't work with tools). All other employees are definitely union and have no options.

The owner would like to elect out of union benefits and adopt a 401(k). The brother, who is not highly compensated (no ownership and lower pay) may or may not want to be part of the plan. My problem hinges on not being sure whether the brother is considered a union employee subject to CBA and so can be excluded. If merely opting into the union benefits makes him union then would opting out of them make him not union? Or is he never considered to be union and is merely a person who is allowed to "buy" (or have his employer buy) benefits under the union plan.?

Worse possibility -- are both the owner and his brother considered union because they have the option to elect the union negotiated plan? If so, can I cover some, but not all of the union employees of an employer under a non-union plan? Would I then have to test coverage including all union employees?

I would appreciate any information from people who may have encountered this situation. As a side question -- is this a common scenario?

thanks to any and all.

Sheila

[JanetM]

The language in the Union plan will decide who is and isn't eligible.

[ERISAnut]

The series of events in your question are a little off base, which does make it confusing. You are not electing union benefits. You are electing to be a part of the union. Once you are part of the union, your benefits (of the union you are now part of) has been determined under a collective bargaining process. Therefore, you are a union employee whose benefits are subject to good-faith bargaining.

If you are not part of the union, then you cannot receive the benefit being provided by employees of the union. You are putting the cart before the horse.

[david rigby]

Might be appropriate to review the CBA first, then the plan document.

[SheilaD]

The series of events in your question are a little off base, which does make it confusing. You are not electing union benefits. You are electing to be a part of the union. Once you are part of the union, your benefits (of the union you are now part of) has been determined under a collective bargaining process. Therefore, you are a union employee whose benefits are subject to good-faith bargaining.

If you are not part of the union, then you cannot receive the benefit being provided by employees of the union. You are putting the cart before the horse.

I agree that these circumstances are strange. I've never heard of such a thing before. Does it clarify anything that the owner of the business is a member of a union. He employs other members of that union. As an employer - he sets his own compensation and benefits. Because he does not "work with tools" his companies agreement with the the union allows him (and anyone else in that category) an option as to whether or not to participate in union pension benefits. I'm afraid I don't know enough about unions in general to know whether this helps clarifly the question.

I think I am having trouble with the difference between being a union member, being employed on a union job, and/or being employed on a union job and being able to opt in to their pension plans.

[SheilaD]

The language in the Union plan will decide who is and isn't eligible.

Janet,

It seems that the union plan states that he can elect whether to be eligible or not -- and maybe even having that option makes him a union employee with regards to his own company. I also have an inquiry out to the union.

Thank you

[Guest Sieve]

You can receive union benefits even if not a member of the union and even if you are not subject to the collective bargaining agreement. I do not believe, as stated above, that this is a choice between being in the union or not being in the union--it is a choice of being covered or not being convered by benefits that also are provided to the union. The issue is whether owner, as a union member (as I understand it from the above post), is, IN FACT, subject to the collective bargaining agreement. If not, is he subject to some collective bargaining agreement? Perhaps not, which means he is NOT excludable as a union employee because pension benefits were not the subject of good-faith collective bargaining on his behalf. But, management (even if not a union member) can receive union benefits and participate in a union plan, if the plan so provides--and, many management groups actually want to be covered by benefits that also are provided to union members. Why would the union care, for example, if managmenet also participates in the same health plan that union members are in? Being in the union plan as a management employee, or receiving other union benefits, does not make you a union employee unless you are, in fact, a union member--and you are then (if a union employee) also an excludable employee if your pension benefits were the subject of bargaining (and, this management union employee may not be subject to this particular CBA, so he may not be an excludable employee).

So, there may be disrimination issues to address if the sole HCE is a union member who is not subject to the CBA but is in a 401(k) plan, while a non-union employee (brother)--or another union employee also not subject to the CBA--is not in that plan (because, just by being in the union plan does not make brother a union employee).

[ERISAnut]

Sieve,

The approach I am attempt to take is to look at the specific fact pattern to determine what series of events are taking place before issuing comments on everything that is possible. Sure, there are plans that benefit union and nonunion employees alike; and everyone with ERISA experience knows that these union and nonunion employees are subject to mandatory disaggregation for testing.

I could futher load the post by stating that we are aware the the union exclusion is determined by those employees whose benefits are determined pursuant to collective bargaining in good faith, and the such union plans are exempted from the ACP test.

We should also know that the mandatory disaggregation applies with respect to compensation received while within the respective class (whether union or not). You cannot aggregate within the final class for the year.

But there appears to be another issue here; that is making the actual determination of whether he is truly union.

[Guest Sieve]

ERISAnut -- That's all well and good, but you are, in fact, ignoring the question and the facts posed. For example, you say "You are not electing union benefits. You are electing to be a part of the union." In fact, the OP questioned whether brother would become a union member simply by electing union benefits. So, you ignored the facts of the post, which indicated that he was actually electing benefits rather than union membership. You also said "If you are not part of the union, then you cannot receive the benefit being provided [to] employees of the union." Now you say the opposite: "there are plans that benefit union and nonunion employees alike." Must be nice to always be right . . .

[SheilaD]

You can receive union benefits even if not a member of the union and even if you are not subject to the collective bargaining agreement. I do not believe, as stated above, that this is a choice between being in the union or not being in the union--it is a choice of being covered or not being covered by benefits that also are provided to the union. The issue is whether owner, as a union member (as I understand it from the above post), is, IN FACT, subject to the collective bargaining agreement. If not, is he subject to some collective bargaining agreement? Perhaps not, which means he is NOT excludable as a union employee because pension benefits were not the subject of good-faith collective bargaining on his behalf. But, management (even if not a union member) can receive union benefits and participate in a union plan, if the plan so provides--and, many management groups actually want to be covered by benefits that also are provided to union members. Why would the union care, for example, if managmenet also participates in the same health plan that union members are in? Being in the union plan as a management employee, or receiving other union benefits, does not make you a union employee unless you are, in fact, a union member--and you are then (if a union employee) also an excludable employee if your pension benefits were the subject of bargaining (and, this management union employee may not be subject to this particular CBA, so he may not be an excludable employee).

So, there may be disrimination issues to address if the sole HCE is a union member who is not subject to the CBA but is in a 401(k) plan, while a non-union employee (brother)--or another union employee also not subject to the CBA--is not in that plan (because, just by being in the union plan does not make brother a union employee).

Thank you ... part of my confusion was because I did not know that union plans sometimes allow management to participate in plans whether or not in the union. Your comments clarified matters. If, for both the owner and the brother, pension benefits are not a matter of CBA but of election then it would seem that they are both included in coverage testing. Therefore, in my particular case, the brother would need to be covered. I appreciate your time.