Defined Benefit Plan

[Guest Buzzman]

Employer has single-employer defined benefit plan for hourly union employees. In 2006, employer verbally agreed with union as part of collective bargaining arrangement to increase contribution amounts by specific dollar amount each month per employee. Due to other matters consuming management's attention, the verbal agreement fell off the radar screen and the plan was never amended to reflect the agreement and the additional contribution amounts were not made. Employer wants to correct this oversight, amend the plan and catch-up on the contributions. Can this be done retroactively without impacting the plan's qualified status.

Any thoughts would be greatly appreciated.

[Mike Preston]

Hard to imagine that it would be a problem. Unless the contributions were so rich as to cause a deductibility problem. Even that is hard to imagine. Amend plan now, call for a current contribution calculated with reference to the missed amounts and then see what happens from there. You haven't said anything about the benefit structure, just the contribution structure, so there are many things unknown that might derail the process, but each of them are somewhat unlikely. But you can't rule them out until you.....rule them out.

[Guest Buzzman]

Hard to imagine that it would be a problem. Unless the contributions were so rich as to cause a deductibility problem. Even that is hard to imagine. Amend plan now, call for a current contribution calculated with reference to the missed amounts and then see what happens from there. You haven't said anything about the benefit structure, just the contribution structure, so there are many things unknown that might derail the process, but each of them are somewhat unlikely. But you can't rule them out until you.....rule them out.

Thanks Mike. I haven't seen the plan yet, so I don't have the details - but wanted to float the main issue to see if there are any potential minefields at first blush.

[david rigby]

The amendment should probably be dated currently, but it can pick up retroactive service.

Don't forget to "catch-up" on any benefits paid in the meantime.

BTW, a verbal agreement is not the ideal documentation. Have the plan's ERISA counsel draft a written agreement at the same time he/she is drafting the amendment?

[Guest Buzzman]

The amendment should probably be dated currently, but it can pick up retroactive service.

Don't forget to "catch-up" on any benefits paid in the meantime.

BTW, a verbal agreement is not the ideal documentation. Have the plan's ERISA counsel draft a written agreement at the same time he/she is drafting the amendment?

Thanks - will do.