collectively bargained employees plan exclusion

We are working with a machine shop that has two unions plus office staff.  Benefits are collectively bargained with the 2 unions.  One union allows the employees to contribute to that unions 401k plan.  The other union however does not have a union 401k plan.  But regardless, since all benefits are collectively bargained, both unions can be CBA excluded for the 401k plan for the office workers.  Even though the one union does not have access to a 401k plan.  Do you agree?

The Internal Revenue Code § 401(a)(4) and § 410(b)(3)(A) exclusions refer to “employees who are included in a unit of employees covered by an agreement [that] the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that retirement benefits were the subject of good[-]faith bargaining between such employee representatives and such employer or employers[.]”

So, before a § 401(k) plan’s administrator decides to run coverage and nondiscrimination testing without the second union’s covered workers, one might read the collective-bargaining agreement.

A collective-bargaining agreement that follows labor-relations norms typically has some chapter, article, or section with a heading that uses the word “retirement”. Or if you don’t see something like that, look for a sentence saying what topics the parties considered.

It can be okay that a covered worker has no access to a plan with an elective-deferral arrangement if the worker is covered by some retirement benefit. That might be a union, multiemployer, multiple-employer, or single-employer defined-benefit plan.

But if a collective-bargaining agreement says nothing about which retirement plan the covered workers participate in and lacks a recital that the parties bargained over retirement benefits, a tax practitioner might not assume the § 401(a)(4) and § 410(b)(3)(A) exclusions until “there is evidence that retirement benefits were the subject of good[-]faith bargaining[.]”

Peter makes some great points, which brings up an interesting question I have for our group - in your experience, have you any plans with union covered employees that are excluded that have been audited where the agent (IRS or DOL) requested and reviewed the CBA to verify that retirement benefits were subject to good faith bargaining? Curious.

CuseFan - not the IRS or DOL, but the NLRB showed up and claimed a ULP against an employer that excluded the union from its retirement plans. We tried to explain to the NLRB that barring collectively-bargained employees from retirement plans is standard plan language, but they wouldn't back down. It was cray-cray (technical legal term when dealing with the NLRB)

Jaded, thank you for sharing the information.

About the situation for which the National Labor Relations Board asserted an unfair labor practice:

1)    Did the collective-bargaining agreement provide for the union-covered workers to participate in a multiemployer plan or a union plan?

2)    Did the collective-bargaining agreement provide, expressly, that the union-covered workers are excluded from the employer’s plans?

3)    If neither #1 nor #2, did the collective-bargaining agreement at least recite that retirement benefits had been considered in the bargaining?