Participation in Union Health Plan by ESOP Company

[Guest sjlbenefits]

I have a client in the construction industry with an ESOP. The client would like to participate in a union health plan, but is concerned that this participation would violate the ESOP rules. Is anyone aware of any guidance on this subject? The client currently provides its own health plan to its employees. Any help would be appreciated.

[QDROphile]

There is no guidance because there is no problem under the law and it would be beyond imagination that the plan terms would have anything to do with health benefits other than retiree health benefits. Just to stretch to find something to validate the concern, if the cost of the health benefits left the employer unable to cover required ESOP contributions, the employer could have a problem under the ESOP.

[GBurns]

It might be helpful to both you and the client, if you asked the client to identify the specific rules of concern. Then you would be able to better understand or correct.

[Guest sjlbenefits]

Thank you for your responses. My client was formerly owned by two shareholders. The two shareholders sold their shares back to the company and the sale was conducted by the creation of the current leveraged ESOP. As a result, the company is a 100% owned ESOP. My client is concerned that as a 100% owned ESOP it may not be affiliated with a union health plan for some reason. They cannot identify a rule or a chief reason for their concern, other than that they are a 100% owned ESOP company.

[jpod]

The only thing I can think of, and this is probably a big stretch, is that there is a covenant in the financing agreement for the ESOP transaction that somehow restricts involvement in a multiemployer plan, or requires some notice in advance of such involvement, or says something else which may be the source of your client's confusion.