Excluding Union employees from testing

[dmb]

I'm looking at a plan currently with pro-rata allocation.  Plan includes both union and non-union employees.  Employer is considering giving different allocations to union and non-union.  If union employees are eligible for plan and allocation, can they still be excluded from 410(b) and 401(a)(4) as statutory exclusions?  Thanks.

[Kevin C]

First of all, what the union employees get is determined by the CBA.  The definition of collectively bargained includes a requirement that retirement benefits were subject to good faith bargaining.

For testing, start with the definition of Plan in 1.410(b)-7.  Under 1.410(b)-7(c)(4), if a plan covers more than one disaggregation population, you are required to treat the portion of the plan covering each disaggregation population as a separate plan.  Under -7(c)(4)(ii)(B), if the plan has both non-collectively bargained and collectively bargained employees, the collectively bargained employees are a disaggregation  population. If there are multiple CBAs, the employees under each one are separate disaggregation populations.  So, the union group is treated as a separate plan, or plans.  1.410(b)-2(b)(7) says that a plan covering only collectively bargained employees satisfies 410(b).  It also says the mandatorily disaggregated portion covering collectively bargained employees satisfies 410(b).  Then, go to 1.401(a)(4)-1(c)(5), where it says a collectively bargained plan that automatically satisfies 410(b) under 1.410(b)-2(b)(7) is treated as satisfying 401(a)(4).

So, collectively bargained employees are disaggregated and their portion of the plan automatically satisfies 410(b) and 401(a)(4).