401k Plan- Union Workers

[coleboy]

A safe harbor 401k plan was set up believing that it was for just the owner and his employee. The enrollment meeting was done by the broker. We now find out that it was the intention of the owner to set up the plan as part of the Union contract.

The owner apparently is the only non-union employee. It's been many years since I've worked on a plan with union employees. Are they able to have a safe harbor plan with a the basic match? Does the union's contract specify the eligibility requirements, match,etc.?

How should I proceed?

[Larry Starr]

You need a copy of the negotiated agreement between the employer and the union. If done correctly (not always the case), the parameters of the plan should be in the contract.  Sometimes, the plan is drafted as part of the negotiations and attached to the contract and referenced by the contract.

If the plan covers only the union employees and none of them are HCEs, why have a safe harbor plan?  But yes, there is no prohibition on a plan that covers only union employees from being a SH format plan.

Now, as usual, we don't get enough information (people like to make us guess, I guess!).

You say the plan was set up just for the owner AND HIS EMPLOYEE. What does that mean? Is this a two man business with one employee being a union employee?  Are there other employees?  It it's just that one, are you going to set up a plan JUST for the one, or do you want to include the non-union owner?  The answers to these questions could change how the plan would be designed.

[coleboy]

Thanks Larry. We were originally told that there were only 2 employees. It was discovered at the enrollment meetings that there were other (10 or so) employees who were union. You are so right about never getting enough information! Our salespeople only seem to care about getting the sale. (Oops! That was my inside voice talking!)