Union Plan Allocation Conditions

[John Feldt ERPA CPC QPA]

Are there special rules that might apply to a collectively bargained plan for allocation condition purposes?

In this takeover plan, the collective bargaining agreement was found to have required that the match be allocated on a monthly basis and that the participant work 120 hours in a month to get the match for that month. This would exceed the annual 1,000 hour DOL rule that typically applies.

[Kevin C]

We have a similar issue with a prospect's union plan with a weekly profit sharing allocation that requires 28 hours in the week to receive the PS contribution for that week. i contacted an ERISA attorney at our document provider and his response was that there is no clear guidance on the issue, but he has always taken the position that you can not require more than 1,000 hours in a year as an allocation condition in a DC plan. He interprets §2530.200b-1(b) as preventing an allocation requirement of more than 1,000 hours in a DC plan. Rev. Rul. 76-250 seems to imply that you can require more than 1,000 hours in a DC plan. There is also the possibility that the IRS could treat it as a disguised service based eligibility requirement since it would effectively prevent a part-time person barely over 1,000 hours from ever receiving an allocation.

I wonder how common this type of provision is for union plans?

[K2retire]

Most likely the people negotiating the contract were oblivious to the ERISA requirements.

Could you require the weekly or monthly hours until such time as the participant reaches 1000 hours, then include them retroactively for the year? It would be an operational nightmare, but if someone terminated before reaching 1000 hours, it could have the desired impact.

[ESOP Guy]

Are you dealing with building trade unions by chance? The little I worked with them then tended to have provisions like you are describing because the union employee could work for contractor A for a week and then contractor B for a week. They all pay benefits into a Taft-Hartley plan. So they compute everything on a weekly basis and make the company pay that way to keep the accounting simple. You work the guy for a week you pay that week's wages and benefits. As K2retire said they weren't even thinking ERISA when the contract was being written.

[Kevin C]

I don't know about John's situation, but mine is a single employer plan covering food and commercial workers union employees.