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.