A Primer for Multiemployer Plan Trustees
NECA Labor Relations Conference
San Antonio, Texas
October 12-14, 2009
Presented by:
Robert A. West
Partner, Haynes Benefits PC
Types of Plans
 Pension Plans
 Defined benefit plans
 Defined contribution plans
 Health Plans
 Indemnity
 HMO/PPO
 HRS
 HSA/HDHP
 Joint Apprenticeship and Training Committee
Plans (JATC)
Plan Formation
 Legal Entity
 The Trust is the legal entity (compare a
corporation or LLC)
 The Trust may sue and be sued
 Governing Body – Board of Trustees
 Liability – Board of Trustees
Plan Formation
 Governing Documents
 Trust Document
• Compare to a corporation’s bylaws or
an LLC’s operating agreement
• Who appointed, how appointed (and
by whom) and how removed
• Meetings, quorums and decisions
• Binding arbitration provisions
Plan Formation
 Governing Documents
 Plan document
• Describes the benefits offered by the
Plan (and paid from the Trust Fund)
– Describes how the amount of the
benefits are determined
– Defines the form in which the
benefits are paid
– Provides when benefits are paid
• Also defines eligibility and vesting
provisions
Plan Formation
 Governing Documents
 Collective bargaining agreement
• Compare to articles of incorporation –
the “enabling” document
• Specifies rate of contributions
Plan Formation
 Governing Documents
 Participating Agreement
• Binds each employer to the terms and
conditions of the Plan and Trust
• Only the trustees may change these
terms—conditions, changes or
exceptions promised by either the local
union or NECA chapter are
unenforceable
Plan Formation
 NECA and IBEW’s role
 Implement collective bargaining
agreement’s creation of the Plan & Trust
 Act as “settlors” (creators) of the Trust
agreement
 Negotiate contributions to the Plan
 Appoint and remove trustees
 But no authority to bind the trustees or to
enter into unilateral agreements with
contractors
Plan Formation
 CBA-NECA-IBEW-Trustees-Trust-Plan
document
 CBA authorizes creation of Plan and Trust
 NECA/IBEW create the Trust fund and
appoint trustees
 Trustees have sole responsibility for, and
authority over, the trust fund and the
benefits offered under the Plan
Plan Formation
 CBA-NECA-IBEW-Trustees-Trust-Plan
document
 Trust document provides mechanism for
trustees to operate the trust fund and
authorizes trustees to create the plan
 Trust fund holds plan assets (contributions
and investments)
 Plan document specifies benefits –
eligibility, vesting and distributions
Applicable Laws and Enforcement Agencies
 ERISA – U.S. Department of Labor (DOL) and
Pension Benefit Guaranty Corporation
(PBGC)
 Internal Revenue Code – Internal Revenue
Service
 Taft-Hartley
 Ancillary Laws
Applicable Laws and Enforcement Agencies
 Ancillary Laws
 Health Insurance Portability and
Accountability Act (HIPAA) – U.S.
Department of Health & Human Services
 Family Medical Leave Act (FMLA) – DOL
 Americans with Disabilities Act (ADA) –
Equal Employment Opportunity
Commission (EEOC)
 Title VII – EEOC
Applicable Laws and Enforcement Agencies
 Ancillary Laws
 Uniformed Services Employment and
Reemployment Rights Act of 1994
(USERRA) – DOL
 Pension Protection Act of 2006 (PPA)
 Heroes Earnings Assistance and Relief Act
of 2008 (HEART Act)
Taft Hartley
 Mandates that any payments made by an
employer for employee benefits under a
multi-employer plan must meeting the
following rules:
 Contributions must be made into a trust
for the sole benefit of employees
 The trust must be jointly trusteed by an
equal number of management and labor
representatives
 The trust agreement must provide a
binding arbitration mechanism
Taft Hartley
 What Taft Hartley does and does not
provide:
 It enables labor organizations and
management representatives to create
employee benefit plans for the benefit of
organized labor (and provides the general
framework in which those benefits must
be provided – i.e., a trust, jointly trusteed,
and mandatory arbitration)
Taft Hartley
 What Taft Hartley does and does not
provide:
 Taft Hartley does not specify fiduciary
requirements or coverage, vesting,
nondiscrimination or funding
requirements – these provisions are
dictated by ERISA and the Internal
Revenue Code
ERISA (Employee Retirement Income
Security Act of 1974)
 ERISA provisions applicable to all Taft Hartley
pension and welfare benefit plans
 Covered by federal law
 Federal law preempts any state law
provisions
 Right to sue and be sued
 Fiduciary duties
 Prohibited transactions*
*Internal Revenue Code has similar provisions
ERISA (Employee Retirement Income
Security Act of 1974)
 ERISA provisions applicable to all Taft Hartley
pension and welfare benefit plans
 Participant communications (Summary
Plan Description and other required
participant notices)
 Claims procedures
 Governmental reporting obligations (Form
5500)*
*Internal Revenue Code has similar provisions
ERISA (Employee Retirement Income
Security Act of 1974)
 ERISA provisions applicable to all Taft Hartley
pension and welfare benefit plans
 Obligation to collect employer
contributions
 Trust fund/plan assets
 Bonding obligations
ERISA (Employee Retirement Income
Security Act of 1974)
 ERISA provisions applicable to pension plans
only
 Eligibility*
 Vesting*
 Pension Benefit Guaranty Corporation
provisions
 Funding obligations*
 Withdrawal liability
 QDROs*
*Internal Revenue Code has similar provisions
ERISA (Employee Retirement Income
Security Act of 1974)
 ERISA provisions applicable to health plans
only
 COBRA (continuation of health care
benefits)*
 Qualified Medical Child Support Orders
 Health Insurance Portability and
Accountability Act (special enrollment
rules and eligibility and benefit
nondiscrimination rules)
*Internal Revenue Code has similar provisions
Internal Revenue Code (“I.R.C.”)
 IRC Provisions applicable to all Taft Hartley
pension and health and welfare plans
 Non-taxability of trust earnings (VEBA)
 Deductibility of employer contributions
 Eligibility requirements †
 Non-discrimination requirements (“highly
compensated” versus “non-highly
compensated” employees)
 Prohibited transactions†
 Governmental reporting obligations†
†ERISA has similar provisions
Internal Revenue Code (“I.R.C.”)
 IRC Provisions applicable to all pension plans
 Vesting†
 Funding†
 Pre-tax employee elective contributions
(401(k) only)
 Benefit limitations
†ERISA has similar provisions
Internal Revenue Code (“I.R.C.”)
 IRC Provisions applicable to all pension plans
 Qualified Joint and Survivor Annuity
requirements
 Required Minimum Distributions and
distribution restrictions
 Rollover rules
Internal Revenue Code (“I.R.C.”)
 IRC Provisions applicable to health and
welfare plans
 COBRA†
 Non-taxation of benefits received
 Non-taxation of value of premium paid by
employer
 Cafeteria plan rules (Section 125) for pretax treatment of employee contributions
†ERISA has similar provisions
Other Applicable Laws
 Pension Plans
 ADEA (age discrimination)
 USERRA (military service)
 HEART Act (military service)
Other Applicable Laws
 Health Plans
 HIPAA Portability (special enrollment)
 HIPAA Non-discrimination (benefits)
 HIPAA Privacy (non-disclosure of personal
health information)
 HIPAA Security (electronic security
procedures)
 Americans with Disabilities Act (disability
discrimination)
Other Applicable Laws
 Health Plans
 Title VII (maternity/gender discrimination)
 Family Medical Leave Act (medical leave)
 USERRA (military service leave)
 Mental Health Parity
 Medicare
 Womens Health and Cancer Rights Act
 Newborn and Mothers Health Protection
Act
 Wellstone Act
Critical Documents
 All Plans
 Trust Agreement
 Plan document
 Participation agreement
 Collection policy
 Investment policy
 Reciprocal agreements
 Summary Plan Description
Critical Documents
 All Plans
 Service provider agreements (such as
third party administrator, investment
managers and other providers)
 Fidelity bond
 Fiduciary liability Insurance (including a
non-recourse policy purchased by the
individual trustee or by the Chapter)
Critical Documents
 Pension Plans
 QDRO procedures
 Loan procedures (401(k))
Critical Documents
 Health and Welfare Plans
 COBRA procedures and notices
 FMLA procedures
 Qualified Medical Child Support Order
procedure
 Reinsurance (or stop loss) policy
 HIPAA Privacy policy and procedures
 HIPAA Security policy and procedures
The Players and their Roles
 Trustees
 The Plan fiduciaries
 Sole authority and responsibility for
defining benefits, calculating required
contributions, collecting contributions,
investing Plan assets (or selecting an
investment manager), selecting other
professional advisors, managing the Plan
and making benefit determinations
The Players and their Roles
 Trustees
 If any responsibility has been delegated,
duty to monitor the performance of the
professional to whom the delegation has
been given
The Players and their Roles
 NECA-IBEW
 Agree in the CBA to establish a plan of
benefits and trust
 Create the original trust agreement
(“settlors” of the trust)
 May reserve authority to amend the trust
agreement
 Appoint trustees and their successors
The Players and their Roles
 NECA-IBEW
 Neither organization may agree to
(i) special conditions for individual
employers (e.g., agreeing to special
contribution exclusions outside the labor
agreement); or (ii) specified benefits for
employees. Only the trustees have this
authority
The Players and their Roles
 NECA-IBEW
 If either organization asserts authority (or
neglects trustee appointment or removal
authority), the organization may become
a fiduciary
The Players and their Roles
 Third party administrator
 Handles the day to day administration of
the Plan
 Includes collecting contributions,
processing QDROs, making benefit
payments, etc.
 No independent authority
The Players and their Roles
 Actuary/consultant
 Assists trustees in defining benefits
 Determines the funding costs and funding
requirements for those benefits
 May provide Plan documents
 No independent authority
The Players and their Roles
 Investment Manager
 Invests Plan assets and selects investment
choices (pursuant to an investment policy)
 Has independent authority and fiduciary
responsibility for this responsibility (but
trustees remain liable for due diligence in
selection, performance, retention of the
investment manager)
The Players and their Roles
 Investment Monitor
 Assists trustees in oversight of Investment
Manager (and monitors investment
manager’s performance against financial
industry benchmarks).
 No independent authority
The Players and their Roles
 Attorney
 Advises the trustees as to legal
requirements under ERISA, the Code and
general fiduciary responsibilities
 Drafts and reviews Plan documents and
procedures
 Drafts/reviews provider agreements,
insurance policies, etc.
 Advises trustees concerning collection
actions and brings such actions
The Players and their Roles
 CPA
 Performs the annual audit
A Trustee’s Eleven Commandments
 Do not deal with the assets of the Plan in
one’s own interest (e.g., arranging interim
financing for a favorite general contractor).
 Read and follow the terms of the trust
agreement
 Read and follow the terms of the Plan
 Insure the Plan is properly funded
A Trustee’s Eleven Commandments
 Do not take instructions from the business
manager (or the Chapter manager)
 Invest prudently and utilize due diligence in
selecting investment managers
 Engage an investment monitor
 Exercise due diligence in selecting/retaining
Plan consultants, administrators and legal
counsel
A Trustee’s Eleven Commandments
 Accept guidance from the professional
advisors you have selected (or replace them
or obtain second opinions)
 Collect unpaid contributions
 Make certain that fiduciary liability policy
premiums are paid
Q&A