Collective bargaining agreement and plan document

[30Rock]

What happens when a collective bargaining agreement differs than the terms of the plan document? Possibly the CBA was amended to provide a different match and employer contribution and the plan document was not amended accordingly, which I think can happen often. Some pre-approved documents have a check box to defer to the CBA. However, if the plan does not have this provision, which takes precedence? The plan or the CBA?

 

[ERISAAPPLE]

I assume the CBA is better.   The general rule is the CBA will control.  The plan needs to be amended to conform with whatever was bargained with the union.  The employer can't amend a plan - or fail to amend a plan - and then expect the union to roll over and accept it.  

[MoJo]

I would disagree with ERISAAPPLE.  The plan document governs the plan.  The CBA governs the relationship between employer and employee.  The CBA may call for benefits to be provided, but it is a contractual obligation of the employer's to figure out how to accomplish it.  If the plan does not reference the benefits promised in the CBA in such a way that it becomes part of the plan documents, the employer is in breach of the CBA, but the plan document should still govern the plan.

It is fixable, however....

[CuseFan]

Agree w/MoJo, can't violate plan because CBA says something different, but should amend plan to comply with CBA to avoid labor issue. Need to check how far back the difference goes and how plan has been administered - to determine if a simple amendment now will be sufficient or maybe an EPCRS filing is warranted.

[Peter Gulia]

Without disagreeing with Mojo or CuseFan, perhaps ERISAAPPLE suggests an employer might prefer to amend, if needed, the plan's document so both the employer meets its contract and labor-relations obligations and the plan's administrator can meet its responsibility to administer the plan according to the plan's governing document.

 

[Larry Starr]

Just to be clear:

1) The plan document rules (takes precedence) when different from anything else; not the CBA.

2) The plan document needs to be changed to meet the terms of the CBA. The attorneys involved in the CBA (both sides) are at fault for not making sure that happened (IMHO).

3) 30Rock: Why didn't you tell us the specifics of the years involved; that would have an impact on how you deal with any years where the CBA was not met.

[Luke Bailey]

Agree with those who say plan doc governs for plan qualification purposes, but would point out that that does not affect the fact that if the plan doc gives less and you follow that (which in theory you must for IRS qualification), you have a breach of the CBA.

If (as is likely) this goes back to a year before the current plan year, you need to go to VCP, which will likely be sympathetic. This is not one of the plan doc fixes that qualifies for self-correction under 2016-51.

[30Rock]

Thanks Luke, I agree. They are stuck between a rock and a hard place right!

[ERISAAPPLE]

The original question was which takes precedence.  It is not just a breach of contract, as MoJo suggests.  It is a violation of the National Labor Relations Act.  ERISA does not preempt the NLRA, so the plan will not take precedence anymore than it would take precedence over a violation of Title VII if the plan were to discriminate on the basis of race or sex. 

Let's put it this way.  Why don't you go to the union and tell them you can't make the contribution required by the CBA because the plan document doesn't allow for the contribution.  When you do, you will learn pretty quickly which takes precedence.

If the plan doesn't have the correct language, the sponsor will have to fix it.  That said, I am confident a good attorney could find something in the plan that could be used to avoid VCP.    

[MoJo]

15 hours ago, ERISAAPPLE said:

The original question was which takes precedence.  It is not just a breach of contract, as MoJo suggests.  It is a violation of the National Labor Relations Act.  ERISA does not preempt the NLRA, so the plan will not take precedence anymore than it would take precedence over a violation of Title VII if the plan were to discriminate on the basis of race or sex. 

Let's put it this way.  Why don't you go to the union and tell them you can't make the contribution required by the CBA because the plan document doesn't allow for the contribution.  When you do, you will learn pretty quickly which takes precedence.

If the plan doesn't have the correct language, the sponsor will have to fix it.  That said, I am confident a good attorney could find something in the plan that could be used to avoid VCP.    

I disagree completely.  The CBA and the  NLRA is enforceable against the employer - NOT against the plan.  The employer has an issue - and SHOULD HAVE amended the plan to account for the provisions of the CBA, but the CBA does not work to amend the plan, and the NLRA can only penalize the employer for failing to abide by the terms of the CBA.

Like I said originally, it is fixable.... But it must be fixed - the CBA doesn't "fix it" automatically.

And no, I wouldn't go to the union and say we can't make the contribution.  I would go to the union and say the plan inadvertently wasn't amended, we are doing so, seeking a VCP remedy to retroactively do so, and will make all CBA required contributions with earnings adjustments.

And frankly, I have done so before....

As for as a good attorney finding a way to do so without a VCP, I doubt it.  The fix requires an RETROACTIVE amendment - and there is but one way to do that - and that's through a VCP filing - PERIOD.

[david rigby]

1 hour ago, MoJo said:

... The CBA and the  NLRA is enforceable against the employer - NOT against the plan.  

No expert I, just a question.  What if the CBA states that the plan document is part of the CBA?  Is that enough to document the "amendment"?

[MoJo]

7 minutes ago, david rigby said:

No expert I, just a question.  What if the CBA states that the plan document is part of the CBA?  Is that enough to document the "amendment"?

I've seen people "try" this - but, you then have labor provisions cluttering up a plan document, and plan provisions cluttering up the labor provisions.  As a lawyer - I would never recommend that, as it is a recipe for disaster. What happens when you need to make a regulatory amendment to the plan that doesn't affect the labor contract?  If the two are one, you need union approval.  What if you have non-union people in the plan?  What about a regulatory audit of the plan - which now would implicate the CBA "as a plan document" and maybe inconsistent, non-compliant, or otherwise troublesome.  What if you change the CBA i a way that inadvertently affects the plan or it's operation?

And then, why would you want the NLRB looking over your plan provisions?  You already have the IRS and EBSA doing so....  Why would you want the IRS and EBSA looking over your CBA provisions?

Generally a bad idea (IMHO)....

[ERISAAPPLE]

Again, clearly the CBA takes precedence.  Even Mojo admits the contributions must be made to the plan, notwithstanding the plan language.  The union would not sue the plan to cause the employer to make contributions.  The union would sue the employer to cause the employer to make the contributions.  The plan fiduciaries will have no authority to deny those contributions.  If those fiduciaries go to the IRS, the DOL, or even to court on behalf of the plan, and try to argue the contributions can't be made because the plan doesn't allow the contributions, the plan will lose.  Even if the employer refuses to amend the plan to allow the contributions, the plan will still lose.  Even if the employer blows up the plan and makes it a non-qualified plan, the plan will still lose.  No matter how you slice it or dice it, and even if you try to make Julian fries out of the plan document, the plan will always lose in this scenario, and the CBA will always win.  There is no scenario under which the plan could deny the contributions required by the CBA on the basis of the language in the plan document.  In my book that means the CBA takes precedence.    I guess it all depends on how you define precedence.

[MoJo]

1 hour ago, ERISAAPPLE said:

Again, clearly the CBA takes precedence.  Even Mojo admits the contributions must be made to the plan, notwithstanding the plan language.  The union would not sue the plan to cause the employer to make contributions.  The union would sue the employer to cause the employer to make the contributions.  The plan fiduciaries will have no authority to deny those contributions.  If those fiduciaries go to the IRS, the DOL, or even to court on behalf of the plan, and try to argue the contributions can't be made because the plan doesn't allow the contributions, the plan will lose.  Even if the employer refuses to amend the plan to allow the contributions, the plan will still lose.  Even if the employer blows up the plan and makes it a non-qualified plan, the plan will still lose.  No matter how you slice it or dice it, and even if you try to make Julian fries out of the plan document, the plan will always lose in this scenario, and the CBA will always win.  There is no scenario under which the plan could deny the contributions required by the CBA on the basis of the language in the plan document.  In my book that means the CBA takes precedence.    I guess it all depends on how you define precedence.

You  are TOTALLY are off base on this.  The CBA OBLIGATES the EMPLOYER to do that which is necessary to accomplish what benefits are required under the CBA.  The CBA DOES NOT change the plan - only the employer does.  While OBLIGATED to do so, if the employer does NOT do so, they are in violation of the CBA - but the plan says what the plan says.  The CBA does NOT amend the plan - only the employer can do that.  They are OBLIGATED to do so, but people fail to do that which they are OBLIGATED to do all the time.  That's why we have courts....

The union can enforce the terms of the CBA through the NLRB or court and MAYBE can get a court to "order" the employer to change the plan, but until and unless the plan is actually amended, the plan terms govern the terms of the plan operation, and the plan fiduciaries have to abide by the terms of the plan - and not the CBA.  Clearly violating the terms of the CBA would cause liability to the employer (on many fronts), but a court is NOT empowered to mandate that the CBA change the terms of the plan.  A court can order "specific performance" (essentially the opposite of "restraining order") to amend the plan - which is exceedingly rare, and can use it's powers of contempt to enforce that order, or a court can award "damages" but the court cannot mandate that the plan (which is it's own entity separate from that of the employer) do something it's terms do not allow it to do.

FIX IT.  It isn't hard - and frankly, we seek retroactive amendments fairly often through the VCP program.  NEVER will we violate the terms of the plan as written though - REGARDLESS of what non-plan documents have mandated the employer to do.

 

[QDROphile]

I agree with Mojo, for what it is worth.  Unless the plan, by its express terms, incorporates terms of the CBA, the plan stands alone and its terms control plan matters.

[jpod]

What the heck is the difference?  We know what the resolution is here:  amend the plan to conform to the CBA and make contributions (plus earnings, if applicable) accordingly.  Next step is VCP, which will be a slam dunk absent bad facts which we don't know about.  Having to make this fix and go through VCP is simply the medicine the employer needs to swallow - or its lawyers if there was malpractice involved - for screwing up.

[MoJo]

20 minutes ago, jpod said:

What the heck is the difference?  We know what the resolution is here:  amend the plan to conform to the CBA and make contributions (plus earnings, if applicable) accordingly.  Next step is VCP, which will be a slam dunk absent bad facts which we don't know about.  Having to make this fix and go through VCP is simply the medicine the employer needs to swallow - or its lawyers if there was malpractice involved - for screwing up.

'ZACTLY!

The point is, the CBA does not operate to change the terms of the plan as written!

[ERISAAPPLE]

Under no circumstances would the language of the plan document control if the CBA requires a contribution, but the plan does not allow for the contribution.  I don't see how that can mean the plan takes precedence.  The bottom line is that, regardless of what the plan provides, the employer and the plan's fiduciaries will be required by law to comply with the CBA.  The employer will be required to make the contributions, and the plan's trustee/fiduciaries will be required to accept the contributions on behalf of the plan.   If the employee handbook says the employer will not discriminate against black women, but the plan document were to say black women are not allowed to accrue a benefit, would you say the plan document takes precedence over the handbook?  That would be silly.  It is the same thing here.  Just as the plan document cannot say the plan will violate Title VII, it also cannot say the plan will violate the NLRA.  Such a clause would be null and void.  ERISA, and the requirement to follow the terms of the plan document, do not allow plans or their fiduciaries to violate other federal laws.  Any such language in the plan is void.   The employer's failure to amend the plan only causes the plan to be disqualified, which could lead to other union remedies, but it does not alter the legal duty of the fiduciaries to accept the contributions on behalf of the plan.  If the trustee were to refuse the contribution by relying on a wooden rule that it must follow the plan's terms,  not the NLRA, and the union were to lose money as a result, I am confident a judge would find the trustee breached its fiduciary duties and therefore personally liable for those losses.      

[jpod]

Please stop.

[MoJo]

13 minutes ago, ERISAAPPLE said:

Under no circumstances would the language of the plan document control if the CBA requires a contribution, but the plan does not allow for the contribution.  I don't see how that can mean the plan takes precedence.  The bottom line is that, regardless of what the plan provides, the employer and the plan's fiduciaries will be required by law to comply with the CBA.  The employer will be required to make the contributions, and the plan's trustee/fiduciaries will be required to accept the contributions on behalf of the plan.   If the employee handbook says the employer will not discriminate against black women, but the plan document were to say black women are not allowed to accrue a benefit, would you say the plan document takes precedence over the handbook?  That would be silly.  It is the same thing here.  Just as the plan document cannot say the plan will violate Title VII, it also cannot say the plan will violate the NLRA.  Such a clause would be null and void.  ERISA, and the requirement to follow the terms of the plan document, do not allow plans or their fiduciaries to violate other federal laws.  Any such language in the plan is void.   The employer's failure to amend the plan only causes the plan to be disqualified, which could lead to other union remedies, but it does not alter the legal duty of the fiduciaries to accept the contributions on behalf of the plan.  If the trustee were to refuse the contribution by relying on a wooden rule that it must follow the plan's terms,  not the NLRA, and the union were to lose money as a result, I am confident a judge would find the trustee breached its fiduciary duties and therefore personally liable for those losses.      

The difference, APPLE, is that the violation of the NLRA is a violation by the EMPLOYER, and not by the plan.  The NLRA can hoild the EMPLOYER accountable for the failure, but not the plan.  The fiduciaries of the plan are OBLIGATED to adhere to the terms of the plan - not the terms of the NLRA, and unless you can point to a provision in the NLRA that says ERISA plan fiduciaries can be held accountable for ignoring NLRA provisions and a CBA, I will continue to advise my clients who are fiduciaries to pay EXCLUSIVE attention to the terms of the plan.

Been doing so for over 30 years now.....

[Luke Bailey]

I would like to add a couple of things that I don't think have been covered. First, as far as I know, the IRS's position is that the CBA is not part of the plan doc, and therefore you have a qualification (not a labor law) problem if you follow the CBA and it is inconsistent with the plan doc. I can't off-hand recall a regulation or ruling (there may be a court case) that specifically says that, but I believe it is the IRS's position and that would be the most straight-forward reading of 1.401(a)-1 written plan document requirement.

Second, in my experience, the provisions of CBAs dealing with retirement benefits, if they deal with a single employer plan, are almost always written too broadly to actually be administered without being embodied in plan language that adds details, like what "pay" means, what the applicable entry date is, etc.

[Mike Preston]

Some pre-approved plans now have a dove-tail provision that incorporates the terms of the CBA as a specifier to the allocations.

[ERISAAPPLE]

30 minutes ago, MoJo said:

The difference, APPLE, is that the violation of the NLRA is a violation by the EMPLOYER, and not by the plan.  The NLRA can hoild the EMPLOYER accountable for the failure, but not the plan.  The fiduciaries of the plan are OBLIGATED to adhere to the terms of the plan - not the terms of the NLRA, and unless you can point to a provision in the NLRA that says ERISA plan fiduciaries can be held accountable for ignoring NLRA provisions and a CBA, I will continue to advise my clients who are fiduciaries to pay EXCLUSIVE attention to the terms of the plan.

Been doing so for over 30 years now.....

It appears you would advise the trustees not to accept the contribution, even if offered, until the plan is amended.  I would recommend they accept the contribution, if offered, even before the plan is amended, given that the plan must by law be amended retroactively anyway.  That is really where the rubber would hit the road here.  I believe the contribution could be a plan asset, regardless of the terms of the plan.  You appear to think it is not.  

Let's change the assumptions.  I originally assumed the CBA is better, and said the "general rule" is the CBA takes precedence.  Just as ERISA doesn't allow plan fiduciaries to violate the NLRA, the NLRA does not allow the CBA to violate ERISA.  For example, if the CBA were to require an accrued benefit be reduced, the plan would take precedence.   

 

[MoJo]

Just now, ERISAAPPLE said:

It appears you would advise the trustees not to accept the contribution, even if offered, until the plan is amended.  I would recommend they accept the contribution, if offered, even before the plan is amended, given that the plan must by law be amended retroactively anyway.  That is really where the rubber would hit the road here.  I believe the contribution could be a plan asset, regardless of the terms of the plan.  You appear to think it is not.  

Let's change the assumptions.  I originally assumed the CBA is better, and said the "general rule" is the CBA takes precedence.  Just as ERISA doesn't allow plan fiduciaries to violate the NLRA, the NLRA does not allow the CBA to violate ERISA.  For example, if the CBA were to require an accrued benefit be reduced, the plan would take precedence.   

 

First, any such contributions can NEVER be plan assets unless the plan itself defines them as contributions requires (or authorized to be made. Second, nothing - and I MEAN NOTHING in the NLRA can bind, in any way shape or form ERISA fiduciaries to anything (unless it's a Taft-Hartley plan).  the NLRA governs the relationship between employers and employees, NOT the operation of ERISA covered plans.  While in many cases the individuals who represent the employer are the same ones who are fiduciaries of the plan, they do not have to be - and even if they are, the respective legislation (the NLRA or ERISA) ONLY governs what their obligations are when wearing the appropriate hate.

You seem not able to grasp the concept that when an EMPLOYER is obligated to do something under the NLRA, there is NOTHING that obligates plan fiduciaries to disregard their obligation under ERISA  to abide by the terms of the written PLAN documents.  The employer and the plan are distinct and separate entities for enforcement of distinct and separate pieces of federal legislation.

As discussed ad nauseum above - the ONLY mechanism the NLRA provides is against the EMPLOYER and not the plan - and the courts or the NLRB (or the DOL) may be able to force the employer to amend the plan - but until and unless the employer complies - the plan document governs the plan operation and non-authorized contributions cannot be made to it.

The fix is easy.  VCP it and seek a retroactive amendment and make the participants whole.  No other way to do it.

[MoJo]

28 minutes ago, Mike Preston said:

Some pre-approved plans now have a dove-tail provision that incorporates the terms of the CBA as a specifier to the allocations.

I agree but "dove-tail" isn't the word I would use.  Some plan documents may indicate that the benefit formula for collectively bargained employees is that which is contained in the CBA, as same may be modified from time to time.  Such an approach does solve the problem the OP indicated - but it does cause additional headaches - in that who monitors the plan for changes in the CBA?  How specifically do you reference the CBA (union, date signed, etc. - which becomes important especially if you have more than one union - or another union comes into being).What if changes to the CBA cause a benefit formula to be violative of some provision of the Code or ERISA inadvertently?

My "preference" is for "one" document to be self contained to eliminate a potential conflicts - but you still have a monitoring requirement to maintain labor harmony.

[Mike Preston]

A dove-tail provision will cure most of the issues being raised in this thread.  If you sprinkle a little fairy dust on top (the ability of the Plan Administrator to resolve ambiguities) my guess is that 99.44%+ of the issues can be dealt with.

[jpod]

I've seen that dove-tail concept in pre-approved plans, but it makes me nervous, fairy dust notwithstanding.  Much better to have ERISA counsel or some benefit plan advisor involved in negotiating the pertinent terms of the CBA, and then amend the plan document as appropriate.

[Luke Bailey]

Good to know about the pre-approved plan docs, and it makes sense in some ways, but I think jpod's comment above is accurate and describes what is likely the surer (albeit more resource- and cost-intensive) practice.

[Mike Preston]

Did you mean somebody else?

[Larry Starr]

17 hours ago, ERISAAPPLE said:

It appears you would advise the trustees not to accept the contribution, even if offered, until the plan is amended.  I would recommend they accept the contribution, if offered, even before the plan is amended, given that the plan must by law be amended retroactively anyway.  That is really where the rubber would hit the road here.  I believe the contribution could be a plan asset, regardless of the terms of the plan.  You appear to think it is not.  

Let's change the assumptions.  I originally assumed the CBA is better, and said the "general rule" is the CBA takes precedence.  Just as ERISA doesn't allow plan fiduciaries to violate the NLRA, the NLRA does not allow the CBA to violate ERISA.  For example, if the CBA were to require an accrued benefit be reduced, the plan would take precedence.   

 

If the contributions are made to the plan (trustees do not "accept" or "not accept" contributions; the employer makes them and the trustee invests them and the plan administrator administers them) then they MUST be allocated in accordance with the PLAN document, regardless of what the CBA says.  I suggest if you actually give your "advice" in writing, the employer could have a cause of action against you so I hope your E&O is paid up!  You are simply wrong about a retroactive amendment.  Contributions to the plan belong to the participants under the plan under the language of the plan.  You cannot just "remove" properly allocated contributions that were allocated under the plan language.  The correction would conceivably require ADDITIONAL contributions to bring everyone up to the minimum amount they should have had, but those who got too much under the prior language might not have that removed without it being an impermissible forfeiture.  You are on dangerous footing here.  Please re-read your last sentence: you very possibly are recommending that an accrued benefit be reduced.

[ERISAAPPLE]

15 hours ago, Larry Starr said:

If the contributions are made to the plan (trustees do not "accept" or "not accept" contributions; the employer makes them and the trustee invests them and the plan administrator administers them) then they MUST be allocated in accordance with the PLAN document, regardless of what the CBA says.  I suggest if you actually give your "advice" in writing, the employer could have a cause of action against you so I hope your E&O is paid up!  You are simply wrong about a retroactive amendment.  Contributions to the plan belong to the participants under the plan under the language of the plan.  You cannot just "remove" properly allocated contributions that were allocated under the plan language.  The correction would conceivably require ADDITIONAL contributions to bring everyone up to the minimum amount they should have had, but those who got too much under the prior language might not have that removed without it being an impermissible forfeiture.  You are on dangerous footing here.  Please re-read your last sentence: you very possibly are recommending that an accrued benefit be reduced.

There is no question a trustee can reject a contribution.  A trustee accepting the res of the trust has been a fundamental principle of trust law since trusts have existed.  Most trust agreements, somewhere, say something to the effect that the trustee agrees to accept the res.  If the contribution were to result in a PT, the trustee would have a duty to reject the contribution.  A trustee could not blindly accept the plan sponsor's parking lot, or a doctor's medical equipment used in the sponsor's practice, as a contribution and just hold it as trust property while the plan sponsor's employees use the property for the business.  The trustee would be required to reject the contribution.   Even if the contribution were cash, such as the proceeds of an ESOP loan that does not meet the exemption, the trustee would have a duty to reject the cash.   

Language in the plan document that violates federal law is void.  If the plan language says a same-sex spouse is not a spouse entitled to a QJSA, that language is void and the fiduciaries cannot follow it just because the plan says it.  If the plan language says a woman is required to contribute more for an annuity because women have a longer life expectancy, that language is void as a violation of Title VII, and cannot be enforced by the fiduciaries just because the plan says it.  If the language says the plan must violate the NLRA, that language is void. 

The original question was which takes precedence.  Everyone agrees the contribution required by the CBA must somehow or someway be made to the plan (again, if the CBA provides a bargained-for benefit that is greater than the plan's benefit).  To me, that means the CBA, not the plan, takes precedence.   Once more, I guess it depends on how you define "takes precedence."  

 

 

[Larry Starr]

On 2/10/2018 at 11:56 PM, ERISAAPPLE said:

There is no question a trustee can reject a contribution.  A trustee accepting the res of the trust has been a fundamental principle of trust law since trusts have existed.  Most trust agreements, somewhere, say something to the effect that the trustee agrees to accept the res.  If the contribution were to result in a PT, the trustee would have a duty to reject the contribution.  A trustee could not blindly accept the plan sponsor's parking lot, or a doctor's medical equipment used in the sponsor's practice, as a contribution and just hold it as trust property while the plan sponsor's employees use the property for the business.  The trustee would be required to reject the contribution.   Even if the contribution were cash, such as the proceeds of an ESOP loan that does not meet the exemption, the trustee would have a duty to reject the cash.   

Language in the plan document that violates federal law is void.  If the plan language says a same-sex spouse is not a spouse entitled to a QJSA, that language is void and the fiduciaries cannot follow it just because the plan says it.  If the plan language says a woman is required to contribute more for an annuity because women have a longer life expectancy, that language is void as a violation of Title VII, and cannot be enforced by the fiduciaries just because the plan says it.  If the language says the plan must violate the NLRA, that language is void. 

The original question was which takes precedence.  Everyone agrees the contribution required by the CBA must somehow or someway be made to the plan (again, if the CBA provides a bargained-for benefit that is greater than the plan's benefit).  To me, that means the CBA, not the plan, takes precedence.   Once more, I guess it depends on how you define "takes precedence."  

 

 

These are all straw man arguments; there is no parking lot being contributed, no employer securities.  There is a check being sent in just like they employer always does.  The trustee will accept that as always. In fact, it is unlikely to even pass through the trustee as the employer writes the check to the funding agency for deposit into the account (like, Fidelity, Merrill Lynch, etc.).  There is no language in this plan that violates any federal law (another straw man argument not germane to this case).  The issue is clearly if a CBA external to a plan can change the terms of the plan.  Barring any language in the plan that incorporate by reference (and we know this one DOES NOT), the answer is a clear cut NO.

And I don't agree that everyone agrees the contribution required by the CBS must somehow be made to the plan. The employer can go back to the union and renegotiate to make up the missed contribution  by cash payments to the participants if the parties agree.  So, no matter how you define "takes precedence", the CBA does NOT do so with regard to the plan.  Not no way, not no how.

[jpod]

Larry, I think most of us agree with your analysis, but isn't the most practical solution (path of least resistance?) to just contribute as required, amend retroactively, and go through VCP?  As previously noted I believe VCP relief is a slam dunk here.

[MoJo]

1 hour ago, jpod said:

Larry, I think most of us agree with your analysis, but isn't the most practical solution (path of least resistance?) to just contribute as required, amend retroactively, and go through VCP?  As previously noted I believe VCP relief is a slam dunk here.

Ditto, but in a slightly different order.  Our policy would be to do a "prospective only" amendment to stop the bleeding and be good going forward,  Then prep and file the VCP with a retroactive amendment to cure the period before the prospective amendment.  Then wait....

I agree it should be a slam dunk....

[Larry Starr]

The concern with the proposed fix is that allocations of the incorrect contributions cannot be taken away; thus, a retroactive fix will potentially require total contribution larger than required by the CBA. If that is ok with everybody, fine with me too! :-)

[ERISAAPPLE]

If I were doing this from a blank slate, assuming the client can get the amendment authority together in a timely fashion (board, committee, etc.), assuming also contributions are late and the CBA provides a larger contribution, and finally assuming I have perused the plan document and found nothing I could hang my hat on to justify a contribution without a retroactive amendment, I would have the plan sponsor amend retroactively and make the corrective contribution with earnings and then submit for VCP, essentially all at the same time.   If someone were to balk, I would make the retroactive amendment contingent on the receipt of a compliance statement.  If MoJo were the trustees counsel and therefore they would not accept the contingent amendment, I would just tell the client to make it retroactive and tell the client not to worry whether the IRS would approve it.  A lot of how you approach this would depend on the client's relationship with the union.  

[MoJo]

On 2/13/2018 at 2:53 PM, ERISAAPPLE said:

If I were doing this from a blank slate, assuming the client can get the amendment authority together in a timely fashion (board, committee, etc.), assuming also contributions are late and the CBA provides a larger contribution, and finally assuming I have perused the plan document and found nothing I could hang my hat on to justify a contribution without a retroactive amendment, I would have the plan sponsor amend retroactively and make the corrective contribution with earnings and then submit for VCP, essentially all at the same time.   If someone were to balk, I would make the retroactive amendment contingent on the receipt of a compliance statement.  If MoJo were the trustees counsel and therefore they would not accept the contingent amendment, I would just tell the client to make it retroactive and tell the client not to worry whether the IRS would approve it.  A lot of how you approach this would depend on the client's relationship with the union.    

The reason I wouldn't do what you say is that it is CLEAR that ONLY a very specific subset of amendments can be made retroactive WITHOUT a VCP filing and approval from the IRS.

My team and I know what retroactive amendments are allowed absent a VCP filing, and we would be committing malpractice to advise a client to do something CLEARLY not allowed.

Personally, I would not risk my licenses to practice law on such a basic error, and neither would my team members (which include 5 other ERISA attorneys, a former IRS agent and a former DOL senior investigator).

Sorry ERISAAPLE - things have to be done correctly or you run consequences.  Clients have consequences (a disqualification event, a fiduciary breach by not following the terms of the plan (your retroactive amendment not being authorized unless and until the iRS says so),  and I could go on.

The fix is so simple - and the VCP really is a slam dunk - just do it right and don't worry about it.  I would also proffer that regardless of the current relationship with the union, "doing it right" will be better than winging it....

[ERISAAPPLE]

12 minutes ago, MoJo said:

The reason I wouldn't do what you say is that it is CLEAR that ONLY a very specific subset of amendments can be made retroactive WITHOUT a VCP filing and approval from the IRS.

My team and I know what retroactive amendments are allowed absent a VCP filing, and we would be committing malpractice to advise a client to do something CLEARLY not allowed.

Personally, I would not risk my licenses to practice law on such a basic error, and neither would my team members (which include 5 other ERISA attorneys, a former IRS agent and a former DOL senior investigator).

Sorry ERISAAPLE - things have to be done correctly or you run consequences.  Clients have consequences (a disqualification event, a fiduciary breach by not following the terms of the plan (your retroactive amendment not being authorized unless and until the iRS says so),  and I could go on.

The fix is so simple - and the VCP really is a slam dunk - just do it right and don't worry about it.  I would also proffer that regardless of the current relationship with the union, "doing it right" will be better than winging it....

I said I would submit it to VCP.  I have submitted many retroactive amendments to the IRS through VCP contingent on IRS approval.  They have approved them every time, often without comment.  

[Luke Bailey]

My experience is the same as ERISAAPPLE, at least in a case like this where what you are asking for is ratification of having given more money, on a uniform and consistent basis, to NHCEs, based on a CBA.

[MoJo]

14 hours ago, Luke Bailey said:

My experience is the same as ERISAAPPLE, at least in a case like this where what you are asking for is ratification of having given more money, on a uniform and consistent basis, to NHCEs, based on a CBA.

I too have submitted MANY retroactive amendment requests to the IRS - but NEVER act on those amendments until approved.  It may be disallowed and that creates a much, much bigger issue.  The problem isn't what you "know" but rather what you don't - and whether or not the IRS decides to take a closer look at the plan as part of the review (which they don't do often, but do do on occasion).  Couple that with the increase time it takes to get a response, and you potentially have contributions going into a plan that you will not necessarily be able to get back out, or to reallocate if necessary.

Especially considering that there is a list of "permissible" retroactive amendments (within the remedial amendment period), the implication (very clearly) is that if it isn't on the list, it's not allowed unless and until the IRS grants relief....

 

[AFFIS]

I probably wasn't clear in what I asked.  The union agreed to a collective bargaining agreement with the employer that will reduce pensions for those already retired or disabled.  In other words they voted to throw former (retired) employees under the bus to raise their salaries and the employer was happy to reduce his benefit cost.  Let's say for instance the pension that the beneficiary has been drawing for the last 5 years is $4,000 per month and that is the benefit amount in the current Plan document.  Some retirees have used letters verifying their income to acquire mortgages etc and the income was represented as "for life"  Starting in Jan. vested retirees who are currently drawing their pensions will be required to report what they receive from Social Security and there will be an offset of that amount deducted from their pension checks.  For instance the retiree draws $2,000 from SSA, or SSDI then his $4,000 pension will be reduced by half, and his total income which was $6,000 between SSA/SSDI and the pension will be reduced by 1/3.  Retirees  have no vote.  Isn't there a remedy when current employees/union members and their former employers reduce that which was previously bargained for? I should add the Plan is jointly administered by the employer and the union, and I believe it's considered a Taft Hartley Plan.  Both the employer and the union agreed in a new 2020 CBA to deduct the amount of a retirees SSA benefit from his pension as defined in the 2011 CBA.  I thought years of service equalled accrued income and that it couldn't be taken away or reduced unless the company files to amend because of a hardship, which isn't the case.  The funding level is green.  The deductions for those on pensions apparently offset the raises for current employees so both the union and employer decided to take from those who no longer have a vote.  Shouldn't there be a way to force a grandfather clause so that it impacts the people who bargained for that and not the retirees who bargained for something else.

 

On 2/7/2018 at 11:46 AM, MoJo said:

I would disagree with ERISAAPPLE.  The plan document governs the plan.  The CBA governs the relationship between employer and employee.  The CBA may call for benefits to be provided, but it is a contractual obligation of the employer's to figure out how to accomplish it.  If the plan does not reference the benefits promised in the CBA in such a way that it becomes part of the plan documents, the employer is in breach of the CBA, but the plan document should still govern the plan.

It is fixable, however....

 

On 2/6/2018 at 9:12 PM, ERISAAPPLE said:

I assume the CBA is better.   The general rule is the CBA will control.  The plan needs to be amended to conform with whatever was bargained with the union.  The employer can't amend a plan - or fail to amend a plan - and then expect the union to roll over and accept it.  

 

[AFFIS]

On 2/10/2018 at 11:56 PM, ERISAAPPLE said:

There is no question a trustee can reject a contribution.  A trustee accepting the res of the trust has been a fundamental principle of trust law since trusts have existed.  Most trust agreements, somewhere, say something to the effect that the trustee agrees to accept the res.  If the contribution were to result in a PT, the trustee would have a duty to reject the contribution.  A trustee could not blindly accept the plan sponsor's parking lot, or a doctor's medical equipment used in the sponsor's practice, as a contribution and just hold it as trust property while the plan sponsor's employees use the property for the business.  The trustee would be required to reject the contribution.   Even if the contribution were cash, such as the proceeds of an ESOP loan that does not meet the exemption, the trustee would have a duty to reject the cash.   

Language in the plan document that violates federal law is void.  If the plan language says a same-sex spouse is not a spouse entitled to a QJSA, that language is void and the fiduciaries cannot follow it just because the plan says it.  If the plan language says a woman is required to contribute more for an annuity because women have a longer life expectancy, that language is void as a violation of Title VII, and cannot be enforced by the fiduciaries just because the plan says it.  If the language says the plan must violate the NLRA, that language is void. 

The original question was which takes precedence.  Everyone agrees the contribution required by the CBA must somehow or someway be made to the plan (again, if the CBA provides a bargained-for benefit that is greater than the plan's benefit).  To me, that means the CBA, not the plan, takes precedence.   Once more, I guess it depends on how you define "takes precedence."  

The Trustees are representatives from the Union and Employer.  I'm certain the Plan document will be amended to reflect the CBA. The company isn't in trouble and funding is in the green range.  I understand how current employees will be bound by the terms they agreed to through their union but I don't understand how they could bargain away accrued income paid in by retired former employees who had negotiated a completely different CBA and are now collecting their pensions that will soon be reduced.