mandatory automatic enrollment count - includes union ee?

[AlbanyConsultant]

I'm not seeing anything specifically on this, so maybe that's my answer, but...

Company with 7 regular full-time employees and 5 full-time union employees.  Are they considered "normally employing" enough people to trigger mandatory automatic enrollment, or do we get to not count the union employees (presuming their retirement benefits are properly subject to their collective bargaining agreement)?  Thanks.

[Peter Gulia]

The statute’s exception refers to whether “the employer maintaining the plan normally employed more than 10 employees.” I.R.C. (26 U.S.C.) § 414A(c)(4)(B).

Here’s the Treasury’s proposed interpretative rule: https://www.govinfo.gov/content/pkg/FR-2025-01-14/pdf/2025-00501.pdf.

To count the number of employees the employer “normally employed”, the proposed interpretation cross-refers to 26 C.F.R. § 54.4980B–2/Q&A–5.

I see nothing that excuses from the count employees covered by a collective-bargaining agreement.

But a plan’s sponsor or administrator might want its lawyers’ advice about whether one should interpret an implied delay of § 414A’s tax-qualification condition if implementing an automatic-contribution arrangement now would breach a currently effective collective-bargaining agreement or otherwise violate labor-relations law.

Until the applicability date of an effective final rule, one might rely on a reasonable interpretation of the statute.

Even if a consultant otherwise is comfortable providing advice about tax law, one might be reluctant to advise about tax law that’s affected by labor-relations law.

This is not advice to anyone.

[AlbanyConsultant]

Thankfully, this plan is not going to cover the union employees.  So while I understand the possible issue with putting that on a union employee when it's not in their contract, that isn't my problem (at least, not today).

I came to the same eventual conclusion - if nothing says I can't count them, then I have to count them, even if they're not eligible for the plan.  I suppose it is similar to having a class exception (that meets 410b) - they are still employees even if you're not offering the plan to them.

Thanks!