Multiemployer reciprocity/suspension of benefits

[Linda]

Under a dollars follows the man reciprocity agreement, can transferred hours be treated as Section 203(a)(3)(B) service (i.e., the basis for a suspension of a retiree’s pension from the home plan)?

[KJohnson]

For post-normal retirement age, look at the preamble to 2530.203-3. Although it is slightly ambiguous, it appears that DOL rejected suggestions by commentators that reciporictiy agreements could be used to define the "industry and "geographical area covered by the plan" for purposes of post-normal retirement age suspensions.

For suspensions prior to normal normal retirement age, a multi can suspend for anything it wants according to the DOL reg. But watch out. I believe that the IRS has informally taken the position that DOL's suspension of benefits regs were pre-REA and that 411(d)(6) now "trumps" suspension of benefits rules. The IRS may take the view that instituting any new suspension of benefits requirements, even if they are consistent with the DOL regs, could be the elimination of an optional form of benefit.

[This message has been edited by KJohnson (edited 05-23-2000).]

[Linda]

KJohnson, thanks for the cite to the preamble to the regs. I was not aware of the discussion in the preamble so reference was very helpful.

Despite the preamble, do you know if it is a more or less normal practice for the recipient plan to treat as its geographic area the locations of the employers from which contributions are transferred?

[KJohnson]

I don't know, but here are some thought for what they are worth.

My guess, is that some large funds would suspend as soon as they saw a contribution "hit" the system without regard to whether it orginated directly or through reciprocity. Also, most money follows the man reciprocity agreements recite that the away fund is merely a conduit to the home fund and the contribution is actually being "made" to the home fund. (There are 411(d)(6) reasons for this as well, you don't want the participant to "accrue" a benefit in the away fund). I think this would be support for suspension. Also, ignoring the language in the preamble, it would seem that the actual definition of "geographic area" in the regulation itself would support suspension.

On the other hand, the language in the preamble indicates that this was not DOL's intent. Also, there is a PBGC opinion letter that states that an employer who contributes via a reciprocity agreement is not an "employer" maintaining the "home fund" at least for withdrawal liability purposes. Although this is clearly not determinative, PBGC did not want to "boot strap" employers into withdrawal liability through a reciprocity agreement, and I am not sure whether DOL would want to "boot strap" participants into suspension.

Also, conceptually, if you look at the legislative history, it would seem that one of the major purposes of suspension was to keep retirees from taking work away from younger individuals in the bargaining unit. This whole idea of "preservation of work" for other employees in the unit largely disappears when an individual goes to another part of the country and works as a "traveller"

I had this come up once, but the Plan document in question actually defined "geographic area". Thus, I advised the Fund that they could not suspend based on the Plan language even though there was at least an argument that a suspension would be permitted under the regs.