Tag Archives: MEP

6th Circuit Says Girl Scouts Trapped in Hotel California-Style MEP

That hotbed of ERISA litigation, the U.S. Court of Appeals for the 6th Circuit, released another ERISA opinion on Oct. 23, 2014, which brings to mind that line by the Eagles:

“You can check-out any time you like,
But you can never leave!”
- Hotel California, The Eagles

According to the 6th Circuit, in Girl Scouts of Middle Tennessee v. Girl Scouts of the U.S.A., No. 13-6347 (6th Cir., Oct. 23, 2014), the Girl Scouts of the United States of America (GSUSA) sponsor a multiple employer defined benefit plan which any of the regional Girl Scout independent councils can join by signing a Voluntary Participation Agreement.

In 1974, the Girl Scouts of Middle Tennessee, Inc. signed the agreement and joined the GSUSA’s multiple employer plan (or “MEP”).

In 2005, GSUSA reorganized their 312 regional councils, merging and combining regional councils until there were 112 councils remaining. For plan purposes, this reorganization resulted in GSUSA merging councils who were not part of the plan into councils who had joined the plan, making approx. 1,850 nonparticipating employees eligible to receive a lifetime pension annuity benefit under the plan without having previously contributed into the plan.

In 2006, GSUSA amended the plan to add an early retirement benefits.

According to the Girl Scouts of Middle Tennessee, the GSUSA plan started 2007 with a surplus of $150 million in assets, but due to these amendments, by the end of 2011, the GSUSA plan was underfunded by $340 million, resulting in a net decrease in plan assets of approx. $500 million in less than 5 years.

In 2009, GSUSA amended the plan to require the regional councils to arbitrate any disputes over nonpayment or withdrawing from the plan.

In Feb. of 2011, the Girl Scouts of Middle Tennessee notified the GSUSA that they were invoking the language in the plan document which allowed adopting councils to withdraw from the plan by: (1) forming a spin-off plan; (2) transferring the assets and liabilities attributable to that council’s employees to another qualified plan; (3) obtaining the express consent of GSUSA to leave the GSUSA plan; and (4) arbitrate before withdrawing (the Girl Scouts of Middle Tennessee dispute whether GSUSA’s amendment in 2009 which required adopting employers to arbitrate before withdrawing from the plan was a valid amendment).

The reason the Girl Scouts of Middle Tennessee wanted to leave the GSUSA MEP was a classic one – at the end of 2010, the Girl Scouts of Middle Tennessee were one of only 18 councils in the plan with a positive balance, and GSUSA was planning on increasing plan contribution rates for the regional councils from 3% in 2009 to 10% in 2012 to cover the shortfall, with the possibility of a 16% contribution rate by 2023.

When the GSUSA told the Girl Scouts of Middle Tennessee that they could not withdraw from the plan, the Girl Scouts of Middle Tennessee filed a lawsuit in 2012 against GSUSA, requesting:

    1. a declaratory judgment that the Girl Scouts of Middle Tennessee are not obligated to continue to participate in the GSUSA plan in perpetuity, and may withdraw from the plan;
    2. a declaratory judgment that GSUSA is required to spin-off the assets and liabilities attributable to the Girl Scouts of Middle Tennessee’s employees;
    3. a declaratory judgment that GSUSA’s unauthorized amendments to the Plan are not binding on the Girl Scouts of Middle Tennessee; and
    4. a declaratory judgment that GSUSA is required to indemnify the Girl Scouts of Middle Tennessee for any liability resulting from a distressed termination of the GSUSA plan.

The Girl Scouts of Middle Tennessee also asked for an accounting of the financial condition of the plan and for injunctive relief restraining GSUSA from collecting or seeking to enforce contributions from the Girl Scouts of Middle Tennessee which would be used for new participants in the plan or to provide early retirement benefits granted by the 2006 amendment to the plan.

The GSUSA filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for relief, which the district court granted, and the 6th Circuit agreed.

The 6th Circuit said that, as an employer in a multiple employer plan, the Girl Scouts of Middle Tennessee concede that they have no valid cause of action under ERISA, and therefore the Court said that there is no jurisdiction for the Girl Scouts of Middle Tennessee to pursue claims under ERISA. Thus, while the Girl Scouts of Middle Tennessee may want to check out of the GSUSA multiple employer plan, they can never actually leave the plan as an additional adopting employer.

Govt Accountability Office Releases Report on Multiple Employer Plans

The Government Accountability Office (GAO) has released their report on Multiple Employer Plans. Officially, it is the Report to the Chairman, Committee on Health, Education, Labor, and Pensions, U.S. Senate on Private Sector Pensions: Federal Agencies Should Collect Data and Coordinate Oversight of Multiple Employer Plans.

The GAO says they did this study because:

“millions of U.S. workers lack access to employer-sponsored pension plans and that some small businesses, which offered plans at lower rates than large businesses, may be deterred by the cost of plan administration. MEPs, a type of pension plan maintained by more than one employer, have been supported as an option that could expand coverage by lowering administrative costs. For this report, GAO examined (1) the characteristics of private-sector MEPs, (2) the advantages and disadvantages of MEPs and how their perceived advantages are used to market them, and (3) how IRS and Labor regulate MEPs.”

The report is an interesting read because it does a good job summarizing the MEP industry at this point in time, and discusses the issues caused by lack of coordination between the IRS and the Dept. of Labor in regulating MEPs, including how the DOL issued two recent advisory opinions finding that open MEPs are not single employer benefit plans under Title I of ERISA, while the IRS has found at least one open MEP, operating since 2003, qualified for preferential tax treatment.

In the report, the GAO makes 3 recommendations:

    1. the DOL lead an effort to collect data on the employers that participate in multiple employer plans;
    2. the DOL and IRS formalize their coordination with regard to statutory interpretation efforts with respect to multiple employer plans; and
    3. the DOL and IRS should jointly develop guidance on the establishment and operation of multiple employer plans.

The GAO notes that agencies generally agree with the GAO’s recommendations.

On a personal note, I’ve found one of the issues with trying to analyze the 5500 data on MEPs is that the plans are not great about marking the correct box on Line A of Form 5500 identifying the plan as a multiple employer plan. Form 5500 Line A contains 4 choices – a multiemployer plan; a single employer plan; a multiple employer plan; or a DFE.

Another option for identifying multiple employer plans might be through the IRS’ determination letter program. Rev. Proc. 2007-44 assigns multiple employer plans to Cycle B, which means that the plans are required to restate onto an updated plan document by Jan. 31, 2013. Even though it is not required, most, if not all, multiple employer plans will also file a determination letter application with the IRS, asking the IRS to review their plan document to ensure that it meets the IRS requirements for a Cycle B plan document stated in IRS Notice 2011-97. Maybe the first step toward coordinating efforts between the DOL and IRS when it comes to multiple employer plans is for the agencies to compare the plans which identify themselves as a MEP on Form 5500 with the number of plans which identify themselves to the IRS as a MEP when filing a determination letter application.

IRS Updates Determination Letter Procedures for Multiple Employer Plans

After the Dept. of Labor issued Advisory Opinion 2012-04a, the IRS quietly updated the determination letter application procedure for multiple employer plans. On June 5, 2012, in updated section 7.11.7 of the Internal Revenue Manual, which expressly supersedes IRS Quality Assurance Bulletin 2007-1, the IRS explains the Rev. Proc. 2007-44 remedial amendment cycle for multiple employer plans.

In Rev. Proc. 2007-44, the IRS assigned all individually designed multiple employer plans to Cycle B. In this update, the IRS notes that the first Cycle B submission period opened Feb. 1, 2007 and closed Jan. 31, 2008. The second cycle B submission period, commonly known as B2 or Bsquared, opened Feb. 1, 2012 and will close Jan. 31, 2013, which may be the reason behind the IRS issuing this update.

In IRM 7.11.7, the IRS states that a determination letter application can be filed in the name of the lead plan only, or in the name of the lead plan plus some or all of the participating employers. IRM 7.11.7. defines a “lead plan” as “the plan submitted by the Lead Employer”. A “Lead Employer” is defined as “the employer who sponsors the multiple employer plan”. A “participating employer” is “any employer that participates in the multiple employer plan”.

If a determination letter application is submitted without a lead plan, the IRS will return it accompanied with a 1012 letter and a refund of the user fee. The 1012 letter will instruct the representative submitting the application to resubmit it, this time including a copy of the lead plan.

Multiple Employer Plans and the Affordable Care Act

Now that the U.S. Supreme Court has found most of the Affordable Care Act constitutional, it creates an interesting dilemma for the Dept of Labor. One of the key provisions of the Affordable Care Act establishes multiple employer plans which employers can utilize to provide health care benefits to their employees.

When the Dept. of Labor issued Advisory Opinion 2012-04A on May 25, 2012, it said that although the multiple employer plan requesting the Advisory Opinion “appears to provide benefits described in ERISA section 3(2), to be an employee pension benefit plan, it must also be established or maintained by an employer, an employee organization, or both.”

ERISA section 3(5), 29 U.S.C. 1002(5), defines the term “employer” as:

(5)The term “employer” means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.

ERISA section 3(4), 29 U.S.C. 1002(4), defines the term “employee organization” as:

(4)The term “employee organization” means any labor union or any organization of any kind, or any agency or employee representation committee, association, group, or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning an employee benefit plan, or other matters incidental to employment relationships; or any employees’ beneficiary association organized for the purpose in whole or in part, of establishing such a plan.

The Affordable Care Act does not contain an amendment to either ERISA sections 3(4) or 3(5). As of May 25, 2012, the DOL said, in Advisory Opinion 2012-04A, that it has issued no regulations interpreting ERISA section 3(5). Hopefully, those regulations will be coming soon.

In a footnote, there are rumors that the DOL has been meeting with representatives of multiple employer plans over the last month since Advisory Opinion 2012-04A was released. A check of the Federal Register revealed no meeting notice as required by the Government in the Sunshine Act, 5 U.S.C. 552b so I doubt that this rumor is true. Even if the DOL wanted to meet with representatives of multiple employer plans, there is no registry for multiple employer plans other than the IRS’ list of multiple employer plan who have requested a determination letter pursuant to Rev. Proc. 2007-44 during Cycle B. The first Cycle B ended Jan. 31, 2008, and we are currently in the next Cycle B (it ends Jan. 31, 2013), so the IRS will not have even a workable list of multiple employer plans until Jan. 31, 2013 at the earliest.

Congress Considering Change to ERISA 3(2) for Multiple Employer Plans

When the Dept. of Labor released Advisory Opinion 2012-04A – Multiple Employer Plans on May 25, 2012, addressing whether the Dept. of Labor would view a multiple employer plan as a single employee pension plan within the meaning of ERISA section 3(2) where multiple unrelated employers adopt the Plan to provide retirement benefits to their employees, the DOL said that “it has been the Department’s consistent view that where several unrelated employers merely execute identically worded trust agreements or similar documents as a means to fund or provide benefit, in the absence of any genuine organizational relationship between the employers, no employer group or association exists for purposes of ERISA section 3(5).” In making this determination, the DOL exercised its authority to interpret ERISA. The DOL does not have the authority to make changes to ERISA, Congress does.

Congress is considering changing ERISA section 3(2). Section 14 of the H.R. 1534, the Small Businesses Add Value for Employees Act of 2011 (SAVE Act of 2011) adds this paragraph to ERISA section 3(2):

‘‘(C) A plan, fund, or program shall not fail to be treated as an employee pension benefit plan solely by reason of the plan, fund, or program being established or maintained by two or more employers whose only relationship is participation in the same plan, fund, or program. This subparagraph shall only apply to a plan, fund, or program that provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.’’.

The SAVE Act of 2011 also creates a new type of plan – the Multiple Small Employer Plan – effective for years after Dec. 31, 2011. Section 13 of H.R. 1534 says:

(a) In General. Paragraph (11) of section 401(k) of the Internal Revenue Code of 1986 is amended by adding the following at the end thereof:

    (E) MULTIPLE SMALL EMPLOYER PLAN.
      (i) IN GENERAL- In the case of a plan described in clause (ii)–
        (I) the amount described in subparagraph (B)(i)(I) shall be $10,000, in lieu of the amount in effect under section 408(p)(2)(A)(ii),
        (II) such $10,000 amount shall be adjusted as described in section 408(p)(2)(E)(ii) except that the base period taken into account shall be the calendar quarter beginning July 1, 2011,
        (III) subclause (II) of subparagraph (B)(i) and clause (ii) of subparagraph (B) shall not apply, and
        (IV) section 414(v) shall not apply.
      (ii) PLAN DESCRIBED- A plan is described in this clause if the plan satisfies the following requirements:
        (I) Such plan satisfies the requirements of this paragraph, as modified by clause (i).
        (II) The plan is described in section 413(c).
        (III) The plan includes a qualified automatic contribution arrangement, as defined in paragraph (13), except that subparagraph (D) of paragraph (13) shall not apply and the qualified percentage shall be determined by reference to subclauses (I), (II), (III), and (IV) of paragraph (13)(C)(iii).
        (IV) The plan does not permit any participant or beneficiary to receive or maintain a loan from the plan.
        (V) The plan does not permit hardship distributions described in paragraph (2)(B)(i)(IV) except to the extent any such distribution is deemed, under regulations prescribed by the Secretary, to be on account of an immediate and heavy financial need of the employee and necessary to satisfy an immediate and heavy financial need of the employee.
        (VI) The plan is maintained pursuant to a model plan document published by the Secretary.

(b) Simplification.

    (1) MODEL PLAN- Within one year of the date of the enactment of this Act, the Secretary of the Treasury shall publish a model plan that may be used to satisfy the requirement of subclause (VI) of section 401(k)(11)(E)(ii) of the Internal Revenue Code of 1986.
    (2) PROTECTION AGAINST LOSS- Within 120 days of the date of the enactment of this Act, the Secretary of Labor shall amend Department of Labor Regulation section 2550.404c-5(e)(4)(iv)(B) so that, in the case of a plan described in section 401(k)(11)(E) of such Code `four years’ shall be substituted for `120 days’.
    (3) CLARIFYING DUTIES AND REDUCING BURDENS- Within one year of the date of the enactment of this Act, the Secretary of Labor shall–
      (A) publish rules clarifying the extent to which the fiduciary duties of a participating employer and of a named fiduciary with respect to a plan described in section 401(k)(11)(E) of such Code are limited to prudently selecting and monitoring the provider of such plan and the services, fees, and investment options available from such provider, and
      (B) prescribe interim final regulations providing simplified means by which plans described in section 401(k)(11)(E) of such Code may satisfy the requirements of sections 102, 103, and 105 of the Employee Retirement Income Security Act of 1974.
    (4) ELIMINATION OF DISINCENTIVE TO POOLING- Not later than one year after the date of the enactment of this Act, the Secretary of the Treasury shall prescribe final regulations under which a plan described in section 413(c) of such Code may be treated as satisfying the qualification requirements of section 401(a) of such Code despite the violation of such requirements with respect to one or more participating employers. Such rules may require that the portion of the plan attributable to such participating employers be spun off to plans maintained by such employers.

The SAVE Act of 2011 was introduced by Rep. Ron Kind (WI) on April 14, 2011 and is currently pending before the House Subcommittee on Health, Employment, Labor, and Pensions.

Free Webinar June 5, 2012 About DOL Advisory Opinion on Multiple Employer Plans

Today kicks off Multiple Employer Plan month. Every day in June, I’ll be writing about some aspect of multiple employers plans.

If you left the office early last Friday for Memorial Day weekend (May 25, 2012), you may have missed the Dept. of Labor releasing Advisory Opinion 2012-04A – Multiple Employer Plans. Like all advisory opinions, it addresses a specific question posed to the DOL by a specific person or organization. In this case, the question posed to the DOL in Advisory Opinion 2012-04A was whether the DOL would view a program as a single “employee pension benefit plan” within the meaning of ERISA section 3(2) where multiple unrelated employers adopt the plan to provide retirement benefits to their employees.

After the DOL released Advisory Opinion 2012-04A last Friday, there has been a lot of opining about what it means and what impact it will have on multiple employer plans, in particular on “open” multiple employer plans. I thought it would be interesting to hear opinions from experts who actually work with multiple employer plans every day and who are very knowledgeable in this area, so I’ve asked Bob Toth, Ary Rosenbaum, Herbert Whitehouse, and Terrance Powers to speak about multiple employer plans and Advisory Opinion 2012-04A at a free live web event on June 5, 2012 from 2pm to 2:50pm ET, and they agreed.

If you would like to attend, just sign-up at our website.

If you are attending to earn 1 ERPA CPE credit, and have a PTIN number, please make sure to include your PTIN number with your registration. The IRS’ new system allowing ERPA CPE providers to directly report attendance information at seminars/webinars requires us to include the PTIN number for ERPAs who have PTIN numbers.

Dept. of Labor Issues Advisory Opinion on Open Multiple Employer Plan

Today, the Dept. of Labor issued Advisory Opinion 2012-04A about whether an “open” multiple employer plan is “a single ‘employee pension benefit plan’ within the meaning of ERISA section 3(2) where multiple unrelated employers adopt the Plan to provide retirement benefits to their employees”.

The request was made by Robert J. Toth, Jr. on behalf of 401(k) Advantage LLC. Bob writes his own blog about multiple employer plans, so I will wait to comment on this Advisory Opinion until Bob has a chance to.

Has the Dept. of Labor Taken a Stand on Open MEPs?

Little did Jamila Minnicks know the firestorm she would start when she wrote a memorandum asking the U.S. District Court for the District of Idaho to remove Matthew Hutcheson from exercising authority or control over one of the plans he served as fiduciary or trustee for, and asking the court to appoint an independent fiduciary to wrap up the plan. For those of you who have not been following the Matthew Hutcheson situation, he was a fiduciary for a number of plans who has been criminally charged with wire fraud and misappropriating pension funds and is currently awaiting trial on those charges. For those of you who do not know Jamila Minnicks, she is a Trial Attorney with the Plan Benefits Security Division of the Dept. of Labor. When there are allegations of missing pension funds due to criminal activity, it is normal for the Dept. of Labor to work with federal prosecutors to secure any pension funds which may be at risk, including asking a court to removing the existing fiduciaries and trustees and replacing them with independent fiduciaries.

It is also normal for a trial attorney to file a Memorandum in Support of an application for a temporary restraining order (TRO). In most courts, an application for a temporary restraining order is a pre-formatted form which doesn’t provide adequate space to explain to the judge why the court should issue the temporary restraining order, so the trial attorney will write a separate Memorandum in Support containing the reasons why the court should issue the TRO. In Matthew Hutcheson’s case, Jamila Minnick was able to give the court 25 pages of reasons why Matthew Hutcheson should be removed as a fiduciary, including:

“For these reasons, the relief sought herein is necessary because Defendant Hutcheson, who has been separately indicted by the United States, in part, for his criminal activity in connection with his improper acts, remains to this day a fiduciary with control over the Plans. Thus, the Secretary respectfully requests that this Court immediately appoint an independent fiduciary with exclusive authority and control over RSPT, the Plans, and their assets and remove Defendants Hutcheson and HWA from all authority and control over RSPT, and Plans, and their assets.”

Notice that the government says “authority and control over RSPT, the Plans, and their assets”. Just like in plan documents, when a word is capitalized in a trial brief, it usually has a specific definition. In the Memorandum of Support, the word “Plans” is capitalized and is used to designate when the trial attorney is referring to the individual plan sponsors within RSPT who had money misappropriated from their plan assets. The first paragraph of the Memorandum in Support creates this distinction between the individual plan sponsors and the trust holding the plan assets with:

“Plaintiff Hilda L. Solis, Secretary of the United States Department of Labor (“the Secretary”), respectfully submits this Memorandum in Support of her application for a temporary restraining order (1) prohibiting Matthew D. Hutcheson and Hutcheson Walker Advisors, LLC from exercising authority or control over the Retirement Security Plan & Trust (“RSPT), the assets it holds for ERISA-covered plans (the “Plans”), and the Plans and (2) appointing an independent fiduciary with exclusive authority and control over RSPT, the assets it holds for ERISA-covered plans and the Plans. The Secretary also seeks an order to show cause why a preliminary injunction should not be granted.”

This distinction is important because, later within the 25 pages of reasons why Matthew Hutcheson should no longer be permitted to have authority or control over plan assets, the trial attorney uses the word “Plans”. It is this use of the word “Plans” in the Memorandum in Support which seems to be the spark that has lit a bonfire of rumors about multiple employer plans because of the way the trial attorney uses the word “Plans” in 4 sentences within the Memorandum’s 25 pages. Those 4 sentences have been latched onto and quoted as official guidance issued by the Dept. of Labor which, depending on who you hear the rumor from, either prohibits all multiple employer plans, or prohibits some multiple employer plans, or adds language to Internal Revenue Code section 413(c) requiring all sponsors of multiple employers plans to share some type of commonality. As we go through those 4 sentences, keep in mind that a Memorandum in Support of [an] Application for a Temporary Restraining Order and For an Order to Show Cause why a Preliminary Injunction Should not be Granted is just that – a memorandum supporting a request for a TRO filed with a trial court. It can not add language to the Internal Revenue Code (only Congress can do that). It cannot change Treas. Reg. 1.413-2 (only the IRS can do that). And it is not official guidance from the Dept. of Labor.

Criminal cases start with indictments, so let’s start with Matthew Hutcheson’s indictment. The indictment says:

“18. The G Fid Plan, the RSPT, and the NRSP are all Multiple Employer Plans (“MEP’s”). Unlike single-employer plans or traditional multi-employer plans, MEP’s are intended to serve as a retirement plan that can be adopted by numerous employers notwithstanding that there is no common ownership or affiliation among the adopting employers.”

For those latching onto random sentences about multiple employer plans contained within the court filing in the Matthew Hutcheson case, this sentence provides all the proof they need that no common ownership or affiliation is required among adopting employers of a multiple employer plan. This sentence in the indictment is also contrary to the first sentence in the second paragraph of the Factual Background section contained in the Memorandum in Support, which says:

“In fact, RSPT was not a single ‘multiple employer plan’ pursuant to ERISA. This is because there was no commonality of employment-based interest among the participating employer sponsors of the plans apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a “group” or “association” of employers as required to be a single plan covering multiple employers for purposes of ERISA section 3(5), 29 U.S.C. section 1002(5). Thus, RSPT failed to qualify as a single “pension plan” for purposes of ERISA section 3(2), 29 U.S.C. 1002(2), since it was not established or maintained by an “employer” for purposes of that section.”

For half of the multiple employer plan community, the indictment contains the correct statement that “no common ownership or affiliation among the adopting employers” is required of multiple employer plans.

For the other half of the multiple employer plan community, the Memorandum in Support contains the correct statement that “because there was no commonality of employment-based interest among the participating employer sponsors of the plan apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a group or “association” of employers as required to be a single plan covering multiple employers”, RSPT was not a single ‘multiple employer plan’.

Because they contradict each other, both statements cannot be simultaneously true. Or is it possible that the sentence about commonality and RSPT is being misread because of the way the first paragraph in the Memorandum in Support distinguished between RSPT and the Plans. Either way, neither one is official guidance from the Dept. of Labor, the IRS or Congress about what type of commonality is required among plan sponsors of multiple employer plans.

The reason I say what type of commonality is required is because all plan sponsors of multiple employer plans share some type of commonality. Whether it is a common plan design, a common investment strategy, a common geographical location, a common membership in a trade association, or a common business plan involving leasing of employees, all plan sponsors in multiple employer plans share some type of commonality or they would not have been motivated to join together in a multiple employer plan. Whether the Dept. of Labor decides it is more important that plan sponsors share a common membership in a chamber of commerce before they can join together in a multiple employer plan, or whether the Dept. of Labor decides it is more important that plan sponsors share a common investment strategy and plan design before they can join together in a multiple employer plan, is still to be seen and will not happen in any of the pleadings filed by the government in the criminal case involving Matthew Hutcheson.

On the other hand, if the government keeps flip-flopping on this point in the Matthew Hutcheson criminal case, the criminal case against Matthew Hutcheson may go away. If the government can’t agree on whether RSPT was a multiple employer plan or not, how can they explain to a jury of non-retirement plan professionals how RSPT, or the Plans, operated in a way that allowed Matthew Hutcheson to misappropriate their pension funds.

Today in ERISA History

April 18, 2007 – The IRS releases Quality Assurance Bulletin FY-2007 No. 1 on Multiple Employer Plans: Determination Procedures. It supersedes the Quality Assurance Bulletin on Multiple Employer Plans which the IRS released on June 4, 2004.

In QAB FY-2007 No. 1, the IRS addresses unique issues encountered by the IRS when processing determination letter applications for multiple employer plans, such as only the lead plan in the application submitting Form 2848 instead of each plan sponsor submitting its own Form 2848 or situations where Form 5300 is signed for multiple employers by one representative.

Today in ERISA History

April 3, 2008 – The IRS issues Quality Assurance Bulletin FY-2008 No. 1 on Multiemployer Plans: Determination Procedures. It discusses how the IRS treats auxiliary documents, such as collective bargaining agreements, participation agreements, side agreements, and reciprocity agreements, for multiemployer plans who have submitted a determination letter application. It also discusses a variety of issues encountered by multiemployer plans, such as plan language, incorporation by reference, vesting, participation, and nondiscrimination.

Code section 414(f) defines a multiemployer plan as “a plan –

    (A) to which more than one employer is required to contribute,

    (B) which is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and more than one employer, and

    (C) which satisfies such other requirements as the Secretary of Labor may prescribe by regulation.”

Code section 413(b) describes how certain qualification and other rules apply to collectively bargained plans. Those rules are similar, but separate and distinct from Code section 413(c) which applies to multiple employer plans.