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EP Team Audit (EPTA) Program - EPTA Compliance Trends & Tips - Multiemployer Plan Trends

In addition to the Common Trends outlined above, multiemployer plans have unique characteristics that impact daily plan operation. EPTA audits have focused on issues in connection with participation agreements, conflicts among plan documents, participation by non-collectively bargained employees and actuarial adjustments.

Plan fails to follow or does not have a participation agreement for each participating employer and procedures in place to properly monitor eligibility

Sixth Highest Failure Found in all Multiemployer Plans

  • Involves non-collectively bargained employees where the collective bargaining agreement ("CBA") is not followed. Similarly, involves certain CBA employees who are not participating yet CBA requires their participation.

  • These agreements can be in the form of a side agreement, contained within the CBA or provided for within the plan document itself. The failure to properly define or follow the plan’s eligibility and participation requirements causes qualification issues.

  • Administrators and Plan Sponsors should ensure that eligibility requirements of the plan document and CBA are consistent and followed. 

  • Trust fund's advisors have been auditing contribution records back a decade or more and finding inconsistencies. 

Conflict between Plan Document and Other Agreements (Collective Bargaining Agreement, Joinder Agreement, Participation Agreements, Plan documents and Trust documents)

Ninth Highest Failure Found in all Multiemployer Plans

  • Involves failure by plan sponsor to review documents for inconsistency between the documents. 

  • Examples of plan sponsor failures are: 
  1. The benefit formula in the plan is different from the CBA;

     
  2. The plan eligibility provisions in the plan are inconsistent with participation agreement; or 

  3. The CBA promises benefits that are not incorporated into the plan (or vice versa). 
  • Plan sponsors and administrators should coordinate changes to CBA with plan document. 

  • Plan sponsors must be vigilant to eliminate errors caused by disconnection between the union, employers and the trustees as to which employees should be covered in the plan. 

  • Plan sponsors and administrators should determine that correct information has been sent to the trust fund relating to compensation and other matters, such as dates of hire, participation in the CBA and other important data. 

Issues Relating to Participation by Non-Collectively Bargained Employees in Multiemployer Plans 

This issue involves CBA multiemployer plans covering a limited number of non-CBA employees employed by various employers.

  • Eligibility between CBA employees and non-CBA employees not always administered consistently.

  • Satisfying the coverage and discrimination rules of IRC sections 401(a)(4) and 410(b) may be difficult given the small number of non-CBA employees and that they tend to be higher paid.

  • Government contracts routinely require certain mandated benefits for CBA and non-CBA employees under the same plan. 

    • Employers sometimes have separate benefit programs for employees (of other divisions or other controlled group members) not participating in the government contract and under the CBA plan. The qualified separate line of business rules may not always be readily satisfied. Rev. Proc. 93-41 provides an exception for governmental contractors if an administrative scrutiny exemption application request is made, but the Service has read that exception narrowly.

    • Due to cutbacks, government contracts are freezing defined benefit plans for certain "incumbent" employees, with new employees receiving only a profit sharing or money purchase plan contribution. Eventually, satisfying IRC section 414(r) may prove challenging. 

    • Also, an employer (or entities under common control with such employer under IRC section 414) may maintain other qualified plans and should carefully coordinate the CBA benefit plans with such other retirement plans. 

Failure to actuarially adjust monthly benefits for years when benefits were suspended 

Third Highest Failure Found in All Multiemployer Plans

The required actuarial adjustments or interest adjusted back payments are not being paid to participants whose retirement benefits first commence after the Normal Retirement Date as stipulated in the plan. This issue tends to be more prevalent when plans have normal retirement ages that are less than 65 because many participants are unaware of their eligibility to receive these benefits at this earlier age and thus fail to apply for their benefits.

Administrators should ensure that all missed payments due to the delayed commencement of benefits are restored and that these payments are increased by the appropriate interest factor.

Page Last Reviewed or Updated: 19-Sep-2013