Employees unionize, match not bargained

An employer has a group of employees that are will become union members, the collective bargaining agreement begins mid-year. The calendar year 401(k) plan provides a safe harbor match. The union has negotiated to be eligible for deferrals in the plan and for some nonelective contributions, but no match.

Can the plan be amended mid-year to exit safe harbor just for the union employee group only, to reflect the bargaining that occurred, but still keep safe harbor status for 2019 for the rest of the plan, the non-union portion?

You can amend the plan to allow for the CBA folks and leave the rest to be tested separately, yep.

Treas Reg §1.401(m)-1(b)(2):

Quote

(2) Automatic satisfaction by certain plans. Notwithstanding paragraph (b)(1) of this section, the requirements of this section are treated as satisfied with respect to employee contributions and matching contributions under a collectively bargained plan (or the portion of a plan) that automatically satisfies section 410(b). See §§1.401(a)(4)-1(c)(5) and 1.410(b)-2(b)...

See also Treas Reg §1.401(m)-1(b)(4)(iv) on disaggregation for portions of plans that are collectively bargained.

Perhaps it's only a small point, but the thread title and the original post might be misleading.  According to the OP, the bargaining agreed to deferrals "but no match".  I read that as the CBA employees are not eligible for a match.  The title says "match not bargained", which is (IMHO) a different matter.  Just a request to be cautious with your wording, especially because it may affect the responses.

Did you verify that the plan doesn't already exclude collectively bargained employees?  I typically put that exclusion in a document even if the employer doesn't currently have union employees. 

The question deals with a mid-year amendment to a safe harbor plan.  While union employees could have been excluded from the plan (or from the safe harbor), the safe harbor rules prohibit certain types of mid-year amendments.  These rules are in 1.401(k)-3(e)(1) and additional exceptions are described in Notice 2016-16.  Unfortunately, the notice says that mid-year amendments to narrow the group currently eligible for the SH contribution are prohibited (III.D.2).  The regs have a provision that allows reducing or suspending the SH contribution mid-year (1.401(k)-3(g)), but under the situation described, I don't see how the plan could remain SH for the year.

Based on prior discussions, if the plan provides a benefit to union employees that was not included in the CBA, there would be labor law issues. 

The bargaining was to drop the match for the union and replace it with a nonelective so the union employees would not be required to defer. So the match was bargained for, and it was not wanted by the union.

In the document we have, when the "union" exclusion is applied, the exclusion only allows union employees to be excluded if they bargained in good faith regarding retirement benefits AND that such bargaining does not require coverage under the plan. So even if that was marked, in this case, they would not be excluded from the plan overall, but if that provision is used, then perhaps they become excluded from the safe harbor match when this contract begins?

Our VS document has similar language.  The collectively bargained employee exclusion can be applied separately for deferrals, match and/or nonelective portions of the plan.  If the plan currently excludes them from all sources, I would read the fail-safe type language in our document to say they are included in the portion(s) of the plan that the CBA says they are in.  Of course, you should check with your document provider/ERISA attorney.

If the plan doesn't already exclude collectively bargained employees, you are in uncharted territory and need an  ERISA attorney.