Plan Merger pros and cons

[AndyH]

Sponsor has two frozen union plans, each with about 350 participants.

Looking to develop pros and cons of a merger. Each plan about 80% funded. No 436 restrictable benefits.

Pros including one valuation, one audit, one Trust, resulting fee savings.

Cons include need to pay estimated PBGC premium filings, perhaps additonal PBGC reporting, record keeping requirements of merger, IRS merger filing and documentation.

Anybody willing to add or elaborate?

[Andy the Actuary]

Suspect that bargaining agreements would require approval from all unions involved. Confusion might arise as different compensation/service computation periods, eligibility for early, normal, disability, and death benefits, vesting service crediting, vesting schedule, standard forms of payment, distribution options, etc. between the two plans. If one plan subject to possible restrictions and the other is not, then combining plan may cost more to cure restrictions. If one or both plans frozen 9/2005, then be sure amendment doesn't eliminate 436 grandfather. Make sure that non-prescribed actuarial assumptions still make sense.

[jpod]

Who is responsible for investment decision-making/supervision in each plan? If Union reps are involved with each plan, might not be workable or even politically correct to have a mixed marriage.

[AndyH]

Who is responsible for investment decision-making/supervision in each plan? If Union reps are involved with each plan, might not be workable or even politically correct to have a mixed marriage.

Single employer plan run solely by management so I don't see that as an issue, but thanks for raising it.

[jpod]

I assumed it was a single E plan but sometimes if you're negotiating yourself out of a multiemployer plan the union may insist that it be represented on board of trustees or investment committee.

[AndyH]

Suspect that bargaining agreements would require approval from all unions involved. Confusion might arise as different compensation/service computation periods, eligibility for early, normal, disability, and death benefits, vesting service crediting, vesting schedule, standard forms of payment, distribution options, etc. between the two plans. If one plan subject to possible restrictions and the other is not, then combining plan may cost more to cure restrictions. If one or both plans frozen 9/2005, then be sure amendment doesn't eliminate 436 grandfather. Make sure that non-prescribed actuarial assumptions still make sense.

Again, no 436 issues but the possible benefit provision differences would be a headache for HR and for the actuary, good points, thanks. Don't know if they outweigh the possible fee savings though.

[frizzyguy]

I assumed it was a single E plan but sometimes if you're negotiating yourself out of a multiemployer plan the union may insist that it be represented on board of trustees or investment committee.

This is a DB plan, would a union really care if their benefits are guaranteed about what kind of investments the plan uses?

[Andy the Actuary]

I assumed it was a single E plan but sometimes if you're negotiating yourself out of a multiemployer plan the union may insist that it be represented on board of trustees or investment committee.

This is a DB plan, would a union really care if their benefits are guaranteed about what kind of investments the plan uses?

Unions will care about anything the bargaining agreement empowers them to care about.

[david rigby]

Another con: at-risk testing under 430(i).