Force fund to Develop Rehab Plan or Pay Surcharge

[ERISA25]

Participating employer has received a notice that the plan is in critical status. It is, therefore, obligated to pay a 5% surcharge on the contribution otherwise due to the Plan. I understand that the Plan must adopt a rehab plan within 240 days following the deadline for plan certification, but is there any means by which a participating employer can force the Plan to develop a rehab plan earlier than such time or force negotiation over such rehab plan prior to the imposition of a 5% surcharge. I am curious as to whether there is any way to avoid the 5% surcharge. It seems to me that the employer should review its CBA to see if they have anything in it that would compel mid-term bargaining over the surcharge. Any other ideas or comments?

[Effen]

I think the main reason for the surcharge is to give employers an incentive to re-open the contract. That said, the 5% surcharge is often significantly less than the rehab plan will call for.

I think you need to contact your representitive trustees if you want to move quicker on the rehab plan. They are really the ones in control of the situation.

[Brian Haynes]

Not much you can do to force the Trustees to adopt the RP any sooner. My experience is that most funds will provide the default and alternative schedules sooner than required under the PPA. A few funds will allow you a credit for the 5-10% surcharge if you later adopt the alternative schedule. Check your cba and see if you have any reopener language that will allow you to negotiate over the schedules when provided. Even if there is a reopener, some employers will pay the surchage if it is cheaper than the rates under the schedules or will pay the surcharge for a limited time until their cbas expire so that there is full negotiation over all benefits and wages, not just pension on a reopener. Many unions will voluntarily agree to reopen to avoid surcharges on the employer. In fact, many have reallocated future wages and benefit increases to the pension fund. Make sure any reallocation will be treated by the trustees as the adoption of a schedule and make sure any reopener will not void any no-strike pledge. Good luck.

[ERISA25]

Thank you! very helpful.