401(k) and Union Plan

Employer sponsored a 401(k) that allowed union employees to participate.

About 5 years ago ( approx), the Union started their own 401(k) Plan.  Union employees now participate under the Union Plan.

Several of the union employees have a balance in the original plan.

Question,

1. Can the current plan spin the union employees out to their Union Plan?

2. Union employees want access to their funds in the original plan, want to transfer to Union or maybe take a distribution.

3. The Union employees are treated as ineligible class and therefore are not eligible for a distribution ( not 59 1/2, not terminated).

Trying to figure out  a way to get the funds to the Union plan and they can take funds as allowed under that plan.

thoughts??

As Paul I suggests: Beyond whatever ERISA and the Internal Revenue Code call for, labor-relations law might require that this be done under collective bargaining or some other labor-relations process. During a collective-bargaining agreement’s term, an employer doesn’t change terms or conditions of employment without the union’s assent.

And this might need three parties’ assent or accord. A retirement plan is a person separate from the employer or employee organization that establishes or maintains the plan.

While there often is some overlap between a labor union’s executives or other employees and a retirement plan’s trustees, it is not necessarily the same people. And even if is, the roles and responsibilities differ. Further, if the union-oriented plan is a multiemployer plan, it might have some trustees elected or appointed by employers.

It would do little for an employer and a labor union to agree on a spin-off if the transferee plan might not accept the transfer. Some union-oriented retirement plans evaluate not only that the transfer would be proper, but also that it would be practical in the circumstances. (I’ve seen a union’s retirement plan reject a plan-to-plan transfer when that transferee’s recordkeeper disliked the data feeds that would come from the transferor’s recordkeeper.)

I don’t say that any of this is difficult to do. (In my experience, it’s easy—except for getting the recordkeepers to play nice.) Rather, everyone should seek to follow the processes to do it right.

On 3/14/2024 at 6:53 PM, Paul I said:

If the union employees have not met the requirements to be able to take an in-service distribution, the employer can work with the union to coordinate a trust-to-trust transfer of accounts from the employer plan to the union plan.  Part of that coordination may involve amending one or both plans to have provisions facilitating this approach.  The union can decide what provisions in the union plan will be applicable to the balances received into the union plan.

The key point is making this happen is between the employer and the union, and is not directly between the employer and the union employees.

On 3/14/2024 at 6:25 PM, 52626 said:

Thanks for the response.

The Union Plan has agreed to take the funds as a trustee to trustee transfer.

Here is the glitch, the recordkeeping states these individuals are still actively employed and can not be transferred to the union plan.  they claim the employer could provide a Board Resolution termination the union employees from he plan and allow them to take their funds.

The employer pays the wages for the union employees, but they are covered under the union plan.  What prevents the Employer of the non union plan of just transferring the balances to the union plan??