"13th check" contingent on active union membership

[luissaha]

A multiemployer plan that is significantly overfunded is considering paying a "13th check" to current retirees at the end of this year. The labor trustees suggested that to save some money the 13th check should be paid only to retirees who are active members in the union. Apparently, some multiemployer funds have done this, but I see significant issues with making the 13th check contingent upon union membership. This could violate ERISA's exclusive benefit rule and the NLRA as well. Does anyone have any authority on why this should not be done? Any help would be appreciated.

[david rigby]

What does the plan say?

[luissaha]

The plan does not say anything on the subject. We would have to amend the plan to provide for payment of the 13th check. I have a problem with amending the plan to provide for payment of the 13th check to active union members only. I can't find anything exactly on point, but I believe making payment of the 13th check contingent upon active union membership might violate the exclusive benefit rule or possible some provision of the NLRA.

[JanetM]

I am not familiar with any union that allows active union members - defined as those actively working the trade- to continue to collect pension. Normally if retiree returns to union covered employment the pension is suspended.

Does this union group consider active anyone who simply pays dues?

[luissaha]

Yes, sorry for the confusion on this. The retirees I'm talking about are no longer employed in the industry, but still pay union dues. I guess I should refer to them as dues paying union members. It is my understanding that some retirees continue paying dues even though they are not working.

[JanetM]

Other than it smells like 5 day old fish................... I can't cite reg off the top of my head but will do a bit of seaching. Seems like backhanded way to get more money into union bosses pockets. Dangle a possible 13th check and more folks will start paying dues. Why the heck would they pay dues? What kind of benefit do they get in return from the union?

[JanetM]

Okay here is what I found. The Trustees of the plan have a duty of loyalty to all plan participants and not to the participating empoyers or union that named then trustees.

So to require paying of union dues as eligibility for 13th check would breech this duty.

[Effen]

I agree, we went through a similar discussion with one of my clients and the attorney's concluded it should be everyone, or no-one. Anything less would cause them to be exposed for a breech of fiduciary duty.

[Guest Sieve]

Who has the authority to amend this multiemployer plan? Is it the Trustees? If so, do they have a fiduciary duty when making an amendment, or are they acting as a settlor? Normally, of course, an employer usually acts as a settlor when amending a plan, and therefore would have no fiduciary duty when wearing its employer hat and acting as settlor. If the Trustees are acting as Trustees (rather than as a settlor) each and every time the plan is amended, then it would seem to me that they always are subject to fiduciary duty no matter what they do.

[luissaha]

The settlor v. fiduciary function is an interesting issue in this matter. I have seen case law in the multiemployer plan context which holds that when amending a plan the trustees are acting as settlors and not fiduciaries. Therefore, there could be no breach of fiduciary duty when amending the plan to pay a 13th check to dues paying union members because this would be considered a settlor function.

I believe that this decision, however, would expose the Trustees to a possible lawsuit and do not believe it is prudent action to take. I just don't see what the motivivation could be behind this decision other than to increase dues paying members in the union.

[RTK]

Although I have only a passing familiarity with labor law, I do recall that the NLRA prohibits discrimination in a term or condition of employment to encourage or discourage union membership. However, the other thing I recall is that the prohibition applies to employers and agents of the employer and union, and it was not clear if a multiemployer plan would be an agent. Nonetheless, this may be something worthwhile to review.

Also, the Taft-Hartley "sole and exclusive benefit" rule could be at issue and worth reviewing.

[Bill Ecklund]

See ERISA opinion letter 2006-04A and Walling v. Brady 21 EBC 1437. Both deal with settlor/fiduciary issue.

[mal]

There are a couple of case floating around that prohibit differentiation by a plan based on union versus non-union status. One I can recall is Deak v. Masters and Mates Pension Plan. I believe the court found this type of amendment to violate the exclusive purpose rule.