DB Converstion to Money Purchase

[Saiai]

Is there any reason an employer participating in a multiemployer pension plan couldn't convert its contribution structure to a defined contribution (money purchase) arrangement?

[My 2 cents]

Just wondering - what control would an employer participating in a multiemployer plan have over that plan? Wouldn't the collective bargaining agreement have to be followed? Unilateral action by a participating employer isn't permitted, is it?

The employer would not just be able to take its prior contributions out of the fund. If the employer chose to pull out of the collective bargaining agreement (assuming that were possible), wouldn't there be the potential for withdrawal liability?

[Effen]

I am not sure what you are asking. Lots of multiemployers have DC plans.

Through the bargaining process they can allocate contributions any way they see fit, however, even a frozen DB plan may still require contributions, so you probably couldn't just shift all Employer contributions from the DB into the DC.

[Andy the Actuary]

As long as my cronies are weighing in, here's my 3 cents worth.

(1) Can't get out of a multi-employer plan without potentially paying a withdrawal liability, which may be heavy.

(2) The understanding is that liabilities for benefits accrued stay with the ME plan whether or not the Employer withdraws. In short, if you froze benefits, the employer would still be on the hook for contributions or worse if he withdrew..

(3) Suppose I'm wrong, that you can get out and liabilities and money moves. The defined benefit feature would still have to be preserved. So, this would mean starting a mirror individual DB plan and then terminating such plan with the option of rolling the lump sum to the new DC plan. In short, a conversion of a DB plan subject to Title IV to a DC plan is a plan termination.