After Adoption of Rehab Schedule, Can Employer be Subject to Surcharges?

[Brian Haynes]

On November 17, 2009 there was a discussion in this forum on Section 432(e)(3)(B) of ERISA which provides that the rates provided by the trustees and relied upon by the bargaining parties are to remain in effect for the duration of the collective bargaining agreement, even though the trustees are required to update their contribution schedules yearly. It seems clear to me that if the rates, say under the default schedule, go up after the parties adopt it and while the collective bargaining agreement remains in effect, any such increases in the default schedule rates cannot be imposed on the employer until the agreement expires. However, I have a pension fund that agrees with this conclusion but says it will nontheless impose a 5-10% surcharge on any employers who are not making any additional increased percentage contributions under future revised schedules. This seems like an end run around the inability to impose higher rates on the employer. Any thoughts?

[Bill Ecklund]

On November 17, 2009 there was a discussion in this forum on Section 432(e)(3)(B) of ERISA which provides that the rates provided by the trustees and relied upon by the bargaining parties are to remain in effect for the duration of the collective bargaining agreement, even though the trustees are required to update their contribution schedules yearly. It seems clear to me that if the rates, say under the default schedule, go up after the parties adopt it and while the collective bargaining agreement remains in effect, any such increases in the default schedule rates cannot be imposed on the employer until the agreement expires. However, I have a pension fund that agrees with this conclusion but says it will nontheless impose a 5-10% surcharge on any employers who are not making any additional increased percentage contributions under future revised schedules. This seems like an end run around the inability to impose higher rates on the employer. Any thoughts?

This is nothing that would come from the PPA. The purpose of the surcharge was to encourage the parties to the CBA to adopt a schedule. Once that is done, the schedule is fixed by law for the term of the CBA. Any scheme for increased contributions, such as you are referring to, would have to be authorized by the CBA or the trust agreement.

[Brian Haynes]

Thanks Bill. I agree totally. I will push back on this issue and ask for any authority given to the Trustees to impose a 5% surcharge after a schedule is adopted and effective by the parties. There are so many unanswered questions on how the PPA is to be implemented. Too bad we never got technical corrections.