Include ONE union employee in PS/401k Plan

[imchipbrown]

Employer is asking if he can include Union Office Manager in his 401k/PS Plan.  Knee-jerk reaction is NOOO!  I think he has 20+ other Union plumbers.  Would like  any other opinion.

[ESOP Guy]

I once had an ESOP that only allowed just the union foreman into the ESOP. 

It can be done.  I believe there are issues with making sure the collectively bargaining agreement allows you to do it.  But as a matter of retirement law I believe it can be done.   The great thing is you don't have to do discrimination and coverage tests often times for the union group. 

[Larry Starr]

ESOP Guy is correct.  You can exclude all the usual "union" employees EXCEPT a named individual, but you do need to make sure that does not violate your collective bargaining agreement.  If you want to do this, get it in writing from the union that they have no objection. 

[msmith]

Is the Office Manager a Union member? Most Taft-Hartley plans I have seen have Office workers that are not in the union.

[Ebplans]

The answer is YOU ABSOLUTELY MAY NOT allow this one union member in the plan UNLESS the bargaining unit has provided for such a benefit in the bargaining agreement that covers these folks.  If you let him in and the bargaining agreement does not permit it, you have engaged in an unfair labor practice. Letting the one employee in without negotiating the benefit is a forbidden union "busting" technique. 

This is also the reason why every non-collectively bargained plan of any sort should exclude collectively bargained employees.

My limited experience is that the bargaining unit will not likely permit one member in and not the others.

Bill

William D. Roberts
Attorney
ebplans@hallrender.com | vCard | @hallrender on Twitter

Hall, Render, Killian, Heath & Lyman, P.C.
603 Munger Avenue, Suite 350 | Dallas, TX 75202
D: (502) 568-9364 | C: (502) 314-6667 | F: (214) 615-2001

[Larry Starr]

On 8/10/2018 at 10:57 PM, Ebplans said:

The answer is YOU ABSOLUTELY MAY NOT allow this one union member in the plan UNLESS the bargaining unit has provided for such a benefit in the bargaining agreement that covers these folks.  If you let him in and the bargaining agreement does not permit it, you have engaged in an unfair labor practice. Letting the one employee in without negotiating the benefit is a forbidden union "busting" technique. 

This is also the reason why every non-collectively bargained plan of any sort should exclude collectively bargained employees.

My limited experience is that the bargaining unit will not likely permit one member in and not the others.

Bill

William D. Roberts
Attorney
ebplans@hallrender.com | vCard | @hallrender on Twitter

Hall, Render, Killian, Heath & Lyman, P.C.
603 Munger Avenue, Suite 350 | Dallas, TX 75202
D: (502) 568-9364 | C: (502) 314-6667 | F: (214) 615-2001

Bill: as noted above, I completely agree that you must secure union agreement or you can have a problem. However, it is amazing how some unions work. Not all of them are the teamsters (who I have sat on the other side for negotiations and it generally isn't fun).  Some unions are pretty casual and while they clearly could complain about an unfair labor practice, we have recommended to clients that they get approval ex-post facto of these situations and I have seen unions just say "sure".  Surprising, but that does not appear all that uncommon.  

One comment on your note about making sure that non-collectively bargained plans exclude union employees.  It is actually inappropriate to put the union exclusion language in every plan that does  not cover union employees where the employer has no union (and I don't think that is what you meant but some might take it that way).  Some advisors think that such a provision should go into every plan just to "discourage" union possibilities.  The problem is that  the "union exclusion" REQUIRES that retirement benefits had to be the subject of good faith negotiations between the employer and union reps and if there is no union, then there obviously have been no negotiation and having the union exclusion in such a plan is actually inappropriate.   Just FWIW.

[Ebplans]

Mr. Star, I respectfully disagree with your analysis and position.  An unfair labor practice is an unfair labor practice.  Today it may not be an issue but tomorrow the union may make it one.   I also don't know about appropriateness.  I don't get paid to give appropriate advice.  

[Larry Starr]

49 minutes ago, Ebplans said:

Mr. Star, I respectfully disagree with your analysis and position.  An unfair labor practice is an unfair labor practice.  Today it may not be an issue but tomorrow the union may make it one.   I also don't know about appropriateness.  I don't get paid to give appropriate advice.  

That's Starr with two "r's", but nevermind..... :-)

I wish I knew exactly which analysis and position you disagreed with since, as far as I can tell, we agree on most of the items.  If you are talking about putting a union exclusion in every plan, even if there is no union, then you are certainly free to do so and the IRS will most likely never bother you.  That doesn't make it right.  Our analysis on this issue was from 1976 or 1977 when we (at that time, Connecticut General) were setting up thousands of ERISA plans under the new law.  This item was one I researched, wrote the opinion, and then it went off to corporate legal (the guys who got paid the BIG BUCKS) for review; it came back with full concurrence.  One of our corporate lawyers was one of the lawyers who helped write ERISA (even his license plate said ERISA!).

The requirement that to exclude union employees requires good faith bargaining should make it obvious that you can't exclude them UNLESS you have bargained in good faith, and if you don't even have a union, how can you say you have met that provision which is a REQUIREMENT to use the union exclusion?  A plan with a union exclusion with a BAD FAITH negotiation (say, a corrupt union officer) is not a valid union exclusion.

So, what is it that you disagree with?  

And, are you saying you get paid to give INAPPROPRIATE advice?  Maybe I don't understand those last two sentences, but somehow I don't think that's what you mean.

[Peter Gulia]

 

On the secondary question about whether one writes documents routinely to state an exclusion:

 

Might a mainstream check-the-boxes document state a close-enough expression that doesn’t offend either of the views described above?

 

Here’s what an adoption-agreement form of an IRS-“preapproved” document (licensed by CCF/FtWilliam.com) states:

 

The term “Eligible Employee” shall not include:

. . . .

{   }  Any Employee who is included in a unit of Employees covered by a collective-bargaining agreement, if retirement benefits were the subject of good-faith bargaining, and if the collective-bargaining agreement does not provide for participation in this Plan.

 

That text doesn’t state accurately what IRC § 410(b)(3)(A) sets as a not-to-be-counted category.  But could a plan’s administrator interpret the paraphrase, the whole text, and the context to find an exclusion only if all conditions in IRC § 410(b)(3)(A) are met?

 

And could using something like the quoted text be close-enough for both points brothers Roberts and Starr raised?

 

If there is a unit, a collective-bargaining representative, a sufficient negotiation, and a sufficient collective-bargaining agreement, a plan’s administrator might interpret the exclusion to exclude those that labor-relations law calls an employer not to provide an unnegotiated benefit to. 

And if less than all the conditions are met, a plan’s administrator might interpret the exclusion to exclude no one.

 

Because the mass-production documents are designed to be not-wrong for many potential situations, sometimes they might state enough of the questions to be asked to help orient a careful administrator.

[Larry Starr]

15 hours ago, Fiduciary Guidance Counsel said:

 

On the secondary question about whether one writes documents routinely to state an exclusion:

 

Might a mainstream check-the-boxes document state a close-enough expression that doesn’t offend either of the views described above?

 

Here’s what an adoption-agreement form of an IRS-“preapproved” document (licensed by CCF/FtWilliam.com) states:

 

The term “Eligible Employee” shall not include:

. . . .

{   }  Any Employee who is included in a unit of Employees covered by a collective-bargaining agreement, if retirement benefits were the subject of good-faith bargaining, and if the collective-bargaining agreement does not provide for participation in this Plan.

 

That text doesn’t state accurately what IRC § 410(b)(3)(A) sets as a not-to-be-counted category.  But could a plan’s administrator interpret the paraphrase, the whole text, and the context to find an exclusion only if all conditions in IRC § 410(b)(3)(A) are met?

 

And could using something like the quoted text be close-enough for both points brothers Roberts and Starr raised?

 

If there is a unit, a collective-bargaining representative, a sufficient negotiation, and a sufficient collective-bargaining agreement, a plan’s administrator might interpret the exclusion to exclude those that labor-relations law calls an employer not to provide an unnegotiated benefit to. 

And if less than all the conditions are met, a plan’s administrator might interpret the exclusion to exclude no one.

 

Because the mass-production documents are designed to be not-wrong for many potential situations, sometimes they might state enough of the questions to be asked to help orient a careful administrator.

Peter,

I think that language would work; I think it gets around the issue of "putting it in the plan to discourage unionization". Unlike the standard "union employees not covered" language, this is conditional language and looks like it avoids the problem we identified with outright exclusion when there is no CBA in force. Thanks.