DB Plan: single employer to multi-employer

[JWK]

Employer and union considering moving from single employer DB plan to contributions to multi-employer DB plan. Existing plan assets would be transferred to the multi-employer plan. All benefits (existing and future accruals) would be delivered under the multi-employer plan.

Any references to resources to review pros and cons of proposal? Thanks.

[Effen]

I went through the process a few years ago and didn't find a whole lot of guidance. They are basically trading one liability that they have some control over (plan termination), for another that they don't (withdrawal). In our case the multi was well funded and took the assets & liabilities at face so in essance the ER transfered the PT shortfall to the multi. Then a few years later their w/drawal liability began to grow, but it is still less than what it was. The multi wouldn't give them a seat at the table so they are now feeling pretty helpless as the liability grows.

It can work, just make sure everyone understands the differences in the benefit formulas and that the employer understands how w/drawal liability works so they don't get surprised on the back end if they end up withdrawing.

[JanetM]

Check the funded status of the plan carefully. Find out the number of contributors, depending on the industry this could be under more pressure than some industries. Find out how the benefit accruals relate to contributions of plan and other contributors. (Have seen were accruals aren't always tied to contributions)

Ensure you really want to become a bystander. Once you give the MEP the funds you don't have control over how the fund in run.

IMHO run away fast. In full disclosure - company I work for is contributor to 2 MEPs and the situation gets uglier and more expensive every year.

[Guest jdsmith]

We have been trying to get our clients out of these plans for the past few years. However, the PPA is supposed to make the plans better funded. We'll see. Anyway, I agree with the comment above, run away fast.

Employer and union considering moving from single employer DB plan to contributions to multi-employer DB plan. Existing plan assets would be transferred to the multi-employer plan. All benefits (existing and future accruals) would be delivered under the multi-employer plan.

Any references to resources to review pros and cons of proposal? Thanks.