Default Schedule and Surcharge

[Guest Rocky]

With respect to a plan that is in the red zone, if the default schedule is imposed (as opposed to being adopted as part of a CBA), will the surcharge continue to be assessed?

[Brian Haynes]

A 5% surcharge applies 30 days after the trustees have notified the employer of the Critical Status of the Fund. The DOL has issued a Model Notice for such use. The surcharge increases to 10% for the following plan years. The surcharge ends only when the parties actually adopt a schedule (either the default or alternative schedule). The automatic imposition of the default schedule that occurs when the parties cannot reach agreement is not enough to avoid the surcharge. I note that there is an issue on how surcharges are calculated. Are they based on contributions due 30 days after the employer receives the required notice or on contributions for work performed 30 days after notice? Hope this helps.

[mal]

I would agree with the prior response. The statute requires the bargaining parties to adopt a CBA consistent with the terms of the rehabilitation plan.