Addressing COVID-19 Impacts on Multiemployer Plans

September 22, 2020

COVID-19 has had a devastating effect on many businesses leaving them unable to contribute to their health and welfare funds.  While it is incumbent on plan trustees to meet their fiduciary responsibilities in managing multiemployer funds, there must also be a reasonable approach taken during this pandemic period. Without dismissing their fiduciary duties including: acting solely in the best interest of the fund participants and beneficiaries, acting prudently and in compliance with the Employee Retirement Income Security Act (ERISA), and managing plan assets for the purpose of benefits and at reasonable costs, there should be consideration given to employers facing dire financial circumstances due to the pandemic.  The following are some guidelines to think about:

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  1. Consider this an emergency situation and recognize it’s appropriate to provide some relief to employers in order to help them through their financial crisis so that they will ultimately be able to provide their plan contribution.
  2. Review the fund’s collection policy to determine the course of action to take when addressing an employer’s inability to make a plan contribution.  As appropriate, it may be wise to develop a special addendum specific to the pandemic (or any other unexpected crisis with widespread economic implications) that allows for a “grace” period for those unable to make their plan contributions.  Do so in accordance with the Department of Labor’s requirement that funds maintain written policies for the collection of delinquent employer contributions.
  3. Document any failures to pay and/or actions taken with regard to extending special consideration to employers unable to make their contributions.  It is imperative for these struggling employers to maintain records of incoming revenues and operating cash flow. Employers should be expected to provide monthly reports updating plan trustees on their financial circumstances.
  4. Other solutions, which trustees may consider offering to employers unable to make their plan contributions, such as suspension of installment plans, welfare eligibility extensions, and a waiver of liquidated damages.

It is important that a team be established to make sure all contributions are collected during the pandemic period. The fund’s third party administrator, legal counsel and auditor should be included in this team. Members should be in regular contact to assess the fund’s ongoing ability to collect its contributions during the crisis period. This team also should be charged with making recommendations as to any changes that should be considered relative to the fund’s overall administration during this period.