Multiemployer Plan - Change in Contract Holder - Does That Participants Eligible for Distribution?

As noted in the title, I am dealing with a multiemployer 401k plan.  We are going through a situation where the employer contract holder is changing and we are being asked whether this should be treated as a severance event for impacted participants making them eligible for a distribution.

Our plan document notes that if a participant is deemed to be separated from covered employment, defined as quitting, discharge, or layoff, the participant is entitled to a distribution.  The plan document notes that there is no separation benefit if at the time of application for payment the participant is employed by his employer.

Any assistance appreciated.  My initial thought is that the answer is no, but it would be great to have some statute/regulation/case law to use to support the provided answer.

On 12/13/2022 at 12:00 PM, MEP said:

the employer contract holder is changing

MEP, I think you need to define how it is changing. Has another company bought the employer's stock? Bought its assets? Changing in some other way?

I haven't seen the CBA, bridge agreement, ect, but it relates to the Contract Act of 1965 which deals with federal contractors furnishing services to federal agencies.  New employer won the bidding.  Everything is otherwise remaining the same.  I'm thinking the Same Desk Rule is applicable here.  

One might reread the governing documents’ definitions of, and provisions about, a severance from covered employment.

Even if a worker was severed from a former employer that no longer participates under the multiemployer plan, might the worker now be employer by another participating employer?

Under many multiemployer plans, covered employment often refers to employment with any participating employer. Likewise, many multiemployer plans treat a participant as not retired or severed until one is severed from all participating employers.

But this is merely a surmise. The answers are in the documents governing the plan asked about.

MEP, Sounds like a new employer has the contract but will be adopting the plan so the employees will continue to be covered. I agree with Peter.

Sorry for the delay, with the holidays and taking time off.  One of the reasons for my present issue is that the plan document is not crystal clear on this.  The key wording is summarized below (it is mostly verbatim if you take out the initial wording for the two sentences), as noted above:

Our plan document notes that if a participant is deemed to be separated from covered employment, defined as quitting, discharge, or layoff, the participant is entitled to a distribution.  The plan document notes that there is no separation benefit if at the time of application for payment the participant is employed by his employer.

Most of my experience with ERISA is with industrial/construction union funds where you see a ton of union member movement between employers, so I am familiar with provisions dealing with participants working with other participating employers.  I am a bit surprised our plan document does not appear to cover this circumstance.  Historically, we have not treated this circumstance as a severance event for impacted participants, meaning that they are not eligible for a distribution.

Thanks again for your comments.