Union participants after the plan is changed to exclude union employees

When we took over this 401(k) plan, union employees were not excluded, but the plan sponsor wanted us to exclude them when we restated the plan document, so we did on a prospective basis.

What happens when a union employee goes non-union, and then switches back to union status?  Can he defer from that new union pay because he was grandfathered?  Or because he switched to an ineligible class after the amendment date, can he not defer any longer?  Thanks.

Once a person becomes union, he is no longer eligible for the plan (that is until he is non-union again).  There is, typically, no grandfather provision when you amend a plan to exclude a class, but you should actually read the plan.  Many times, the answer depends on what you actually amended the plan to say.

Remember, plan participation is not a protected right under 411(d)(6); which means that you can amend the plan, prospectively, to exclude anyone.  As long as you continue to meet nondiscrimination and other rules, you're fine. 

Good Luck!

4 hours ago, AlbanyConsultant said:

When we took over this 401(k) plan, union employees were not excluded, but the plan sponsor wanted us to exclude them when we restated the plan document, so we did on a prospective basis.

What happens when a union employee goes non-union, and then switches back to union status?  Can he defer from that new union pay because he was grandfathered?  Or because he switched to an ineligible class after the amendment date, can he not defer any longer?  Thanks.

The specific information needed is "what did you write in the plan" with regard to the question you are asking.  If you were clever, you would have dealt directly with that issue and could have gone either way.  While I most likely would have written it so that once you were no longer union, you were no longer grandfathered and if you later because union, you were like any other non-grandfathered employee who went to the union; you were no longer a participant.

So, this is a clear case of having to RTFD and see what it says;  specifically, you will have to see how the grandfathering language was written.

You could word the amendment to grandfather in the union employees, but if you do that make sure it is OK with the CBA as well as the OK with the Plan Sponsor. Allowing union employees to participate but not others could be a big no-no with the union that collectively bargains benefits for its members.

I believe it is "typical" to exclude the union employees both existing and prospective when such an amendment is executed. Though I could be wrong as my experience with union employees in or out of plans is limited.

The problem is that I restated, not amended, so there was no specific language about this particular change (meaning I didn't put any in the adopting resolution).  But I went back to the doc provider (Datair), and they confirmed that their doc reads such that the employee would not be able to continue deferring after moving back to the union at a later date.

Here's the kicker.  I called the client to explain all this, and he listened very patiently before asking why I had gone through all this trouble: didn't he send me the amendment that changed the eligibility to exclude union employees that was effective right before they bought their first company that had union employees two years ago?  Why, no, in fact, that hadn't been provided to us.  Well, he's going to look for it and get it over to me now.  So this is all moot for this plan.

But thank you all for your insight, anyway!