Introduction to Multiemployer Plans
Definition of a Multiemployer Plan
(ERISA Secs. 3(37) and Sec. 4001(a)(3))
A multiemployer plan is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as "Taft-Hartley plans".
Multiemployer Plan Coverage
There are about 1,510 active multiemployer defined benefit pension plans, covering about 10.1 million participants. Many of these participants are employed by small companies in the building and construction industries. Other industries with significant numbers of workers covered by multiemployer plans are:
- entertainment (film, television and theater),
- retail food
- garment manufacturing
- mining, and
- trucking and maritime
Control of Multiemployer Plans
Most plans are jointly administered and governed by a board of trustees, with labor and management equally represented. The members of the board of trustees of a multiemployer plan are either elected or appointed to their positions. Typically the contributing employers or an association to which they belong determine how the management trustees will be selected. Similarly, the union determines how the labor trustees are selected. Regardless of who elects or appoints a trustee, the trustee is required to act in the sole and exclusive interest of the plan and its participants.
In a multiemployer plan, the board of trustees typically makes decisions about what plan benefits will be. The bargaining parties negotiate a contribution rate and the trustees translate that rate into a benefit. Decisions to increase benefits or change the plan are also typically made by the board of trustees. In some industries (especially mining and segments of trucking), employers and unions fix the benefit levels through collective bargaining. In addition, the costs of administering a plan are paid from plan assets.
Multiemployer plans are subject to many of the vesting, accrual, and minimum participation rules that apply to single-employer plans. However, there are differences in plan design. Most multiemployer plans are "unit benefit" plans that offer a specified dollar-amount benefit per month multiplied by years of credited service. (Some plans offer a choice of enhanced benefits to employees whose employers agree to pay higher contributions.)
In addition, multiemployer plans offer portability - participants retain service if they switch employment from one sponsoring employer to another. Further, many plans in the same industry (e.g. trucking) offer reciprocity whereby an employee who moves from one area of the country to another can transfer credit between regional plans.
In multiemployer plans, the amount of the employer's contribution is set by a collective bargaining agreement that specifies a contribution formula (such as $3 per hour worked by each employee covered by the agreement) and further provides that contributions must be paid to the plan on a monthly basis. If an employer is delinquent, ERISA § 502(g) permits the plan to sue and obtain the delinquency, plus interest, liquidated damages and its attorney fees. This is a major difference between single and multiemployer plans.
ERISA has one set of investment rules that generally apply to all defined benefit plans. Plan assets must be invested prudently and solely in the interests of participants.
Termination of Multiemployer Plans
(ERISA Sec. 4041A) There are two types of multiemployer plan terminations – mass withdrawal and plan amendment. A mass withdrawal termination occurs when all employers withdraw or cease to be obligated to contribute to the plan. A plan amendment termination occurs when the plan adopts an amendment that provides that participants will receive no credit for service with any employer after a specified date, or an amendment that makes it no longer a covered plan. Unlike single-employer plans, multiemployer plans continue to pay all vested benefits out of existing plan assets and withdrawal liability payments. PBGC’s guarantee of the benefits in a terminated, multiemployer plan – payable as financial assistance to the plan – only starts if and when the plan is unable to make payments at the statutorily guaranteed level. See Insolvent Plans and General Duties of a Plan Sponsor of a Terminated Multiemployer Plan.