Member Contributions?

[Guest jfreeborn]

Has anyone heard of a mulit-employer plan, which either requires or allows the union members to contribute to the actual pension fund? I have had a couple client say they swear they paid into the pension plan, but I think they are confusing union dues with pension contributions. Any thoughts?

[Bill Ecklund]

I am assuming that you are referring to a defined benefit multi-employer pension plan. It is very common to have union members make contributions to a defined contribution plan such as a 401-K plan. Although there is nothing illegal about having participant contributions to a defined benefit plan, no plan that I have ever run across allows it. In fact most specifically have language prohibiting member contributions. The reason is that it becomes increasingly complex to figure out how to tax the benefits when they are received if, in fact, there are after tax member contributions included in the plan. In effect the members do contribute in the sense that in negotiations there may be increases in pension contributions with offsetting decreases in wages. Sometimes the CBA will contain language that requires a decrease in wages if there is a legally mandated increase in contributions.

[Effen]

Since the particpants know how much of their package goes into the pension plan, they often consider that to be their contribution, which in a way it is, but it is treated as employer dollars.