Understanding Multiemployer Plans

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Welcome to the International Foundation’s informational resource on multiemployer plans. The purpose of this page is to describe multiemployer plans and explain their structure and use.

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What is a multiemployer plan?

A multiemployer plan is an employee benefit plan maintained under one or more collective bargaining agreements to which more than one employer contributes. These collective bargaining agreements typically involve one or more local unions that are part of the same national or international labor union and more than one employer. If the multiemployer plan is a "Taft-Hartley" plan, the plan sponsor is a joint board of trustees consisting of equal representation from labor and management; these trustees are responsible for the overall operation and administration of the plan. The board of trustees is generally the “named fiduciary” and allocates or delegates the administrative functions to persons or entities with expertise regarding the particular function. (Note: Some industries, such as the sports industry, have multiemployer plans that are not Taft-Hartley plans. They involve contributions from several employers and one or more collective bargaining agreements, but they do not have trust funds governed by a joint board of labor and management trustees.) How Does a Multiemployer Health Fund Work thumbnail image

 Who is helped by multiemployer plans?

Workers: Multiemployer plans provide benefit security for participants and beneficiaries through pooling of risk and economies of scale for employees in a unionized workforce covered by the plan. They also provide portability of certain benefits and eligibility for those employees who move from employer to employer within the industry covered by the plan. As a result, multiemployer plans often enable eligibility to be transferred from employer to employer or job to job which can avoid interruptions in coverage that would apply without this portability.

Employers: Multiemployer plans also help employers with a union workforce in the affected area and industry by making available coverages on a more economical basis due to a pooling of risk and economies of scale.

Which industries use this type of plan?

Multiemployer plans are often found in industries and geographic areas where several employers are covered by collective bargaining agreements with one or more participating local unions and covered members could work for several of those employers during their career. Examples of these industries include construction, arts and entertainment, retail stores, transportation, service (including lodging and health care workers), mining and communication.

What are the advantages of multiemployer plans?

  • Mobile employees earn and retain their benefits when working for various participating employers.
  • Centralized administration increases benefits and/or reduces participating employer costs.
  • Risk and resources are pooled.
  • The operation and administration functions are transferred to persons or firms specializing in those areas.
  • Experienced trustees and administrators reduce administrative costs.
  • Self-funded multiemployer health plans provide uniform administration through the preemption of burdensome state and local mandates.
  • Stabilized benefit costs among participating employers reduce competition for workers.
  • As larger entities, multiemployer plans have access to investment and consulting advice which would be cost prohibitive for smaller plans.
  • Negotiated coverages replace complex nondiscrimination tests applicable to noncollectively bargained groups.
  • Multiemployer pension plans pay lower Pension Benefit Guaranty Corp. (PBGC) premiums.
  • Reciprocity agreements negotiated between multiemployer plans in different geographic locations allow employees covered under their home plan to temporarily work in the jurisdiction of another multiemployer plan and still receive credit for that work. For example, a reciprocity agreement allows an employee in the construction industry to remain continuously employed and to receive benefits even if work in his or her home location is not readily available.
  • Benefits are provided tax-free to workers and beneficiaries.
  • Employer contributions to multiemployer benefit plans are tax deductible.

What types of benefits can be provided through this type of plan?

Multiemployer plans offer the same types of employee benefits that individual companies provide for their employees, including:

  • Health care benefits
  • Pension benefits
  • Life insurance
  • Unemployment benefits
  • Accident insurance
  • Occupational illness/injury benefits
  • Training and education (including apprenticeships and educational scholarships)
  • Pooled vacation, holiday and severance benefits
  • Financial assistance for housing
  • Child care centers
  • Disability/sickness insurance
  • Legal services

How many multiemployer pension plans are in existence? In terms of assets, how extensive are multiemployer plan holdings? How many participants are covered by multiemployer plans?

As of 2021, there were:

  • 2,420 multiemployer pension plans (1,355 defined benefit pension plans and 1,065 defined contribution pension plans) (Note: In many cases, a multiemployer defined contribution plan is offered as a supplement to a defined benefit plan, rather than as a replacement plan.)
  • 16,103,000 participants and beneficiaries in multiemployer plans (11,377,000 in defined benefit plans and 4,726,000 in defined contribution plans)
  • $952 billion in assets held by multiemployer plans ($717 billion in defined benefit plans and $234 billion in defined contribution plans).

Source: Private Pension Plan Bulletin, 2021 data, U.S. Department of Labor, September 2023.

How many multiemployer welfare plans (i.e., non-pension plans) are in existence? How many participants are in this type of plan?

As of 2021, there were:

  • 1,513 multiemployer health plans (53 "health benefits only" plans and 1,460 "health and other benefits" plans)
  • 5,160,000 participants in multiemployer health plans (149,000 participants in "health benefits only" plans and 5,011,000 participants in "health and other benefits" plans)

Source:  Group Health Plans Report, 2021 data, U.S. Department of Labor, September 2023.

Do multiemployer plans provide retiree medical coverage?

Provision of retiree medical coverage by multiemployer plans is more common than provision of these benefits by individual employers. In a survey conducted in 2022, 67% of multiemployer health and welfare plans provided pre-65 retiree health care benefits and 52% provided health insurance coverage for post-65 retirees.

Source:  Employee Benefits Survey 2022, International Foundation of Employee Benefit Plans.

What is a multiple employer welfare arrangement (MEWA)? Is this the same as a multiemployer plan?

A MEWA is an arrangement to offer or provide medical benefits to employees of two or more employers that is not maintained pursuant to collective bargaining with those employers. Unlike a multiemployer plan, a MEWA does not provide a negotiated obligation to fund coverages as exists under a collective bargaining agreement and a MEWA is not administered by a board of trustees consisting of representatives from the participating employees and employers. As a result of inadequate funding of benefit promises by MEWAs prior to 1983, Congress passed special legislation whereby a MEWA that is not fully insured is subject to state standards designed to better provide funding for benefit promises. Typically, a MEWA will involve employers who are members of a professional, trade or business association that offers as a member service medical coverage to association members. Finally, ERISA compliance requirements can flow through to individual employers of a MEWA; ERISA compliance for multiemployer plans stays at the trust fund level.

Is a multiemployer plan the same as a multiple employer plan or a multiple employer trust?

No. Multiple employer plans are pension plans maintained by two or more employers for the purpose of pooling plan assets to reduce administrative costs and for advantageous investing. They involve separate accounts for each employer. Because they do not involve a collective bargaining agreement they are not the same as multiemployer plans.

How are multiemployer plans funded?

Multiemployer plans are funded primarily by employer contributions, as specified in collective bargaining agreements, and by investment earnings. In situations where employees contribute to the cost of coverage, arrangements are available for pre-tax employee contributions.

What is the legal authority for multiemployer plans? What is the legal authority for employer contributions to multiemployer plans and their governance structure?

Multiemployer plans are authorized and defined by ERISA Section 3(37), 29 U.S.C. §1002(3)(37).

The National Labor Relations Act of 1935 (NLRA), as amended by the Labor-Management Relations Act of 1947 (also known as the Taft-Hartley Act), authorizes employer contributions to multiemployer plans and provides the governance requirements for these plans. The NLRA states that employers cannot give money or anything else of value to employee representatives (individuals or unions). The law, however, permits employers to contribute money into a joint trust if it is established for the sole and exclusive benefit of employees and their dependents.

What are the legal requirements under the Taft-Hartley Act for multiemployer plans?

  • Employers’ contributions must be held in trust for the purpose of paying benefits to employees and their dependents.
  • Only the types of benefits listed in Question 5 above can be provided.
  • The detailed basis for the employers’ contribution payments to the trust fund must be specified in a written agreement.
  • Labor and management must be equally represented in the administration of the joint trust fund, with an established procedure to resolve deadlocks.
  • The trust fund must be audited annually.
  • A separate trust fund must be established to hold contributions for pensions or annuities. Pension fund money cannot be commingled with welfare fund (e.g., health care, unemployment, disability, vacation) money.

How are multiemployer plans governed?

Multiemployer plans are governed by a board of trustees with equal representation from labor and management; an equal number of employer and employee representatives are appointed as trustees. The trust document states how many trustees will govern the plan and how they are appointed or elected.

Are multiemployer plan trustees considered to be fiduciaries? What does this mean?

Generally, the trust agreement for a multiemployer plan names the joint board of trustees as the named fiduciary which has discretion regarding the operation and administration of the trust. The agreement also authorizes the trustees to delegate certain of those functions to persons or firms with expertise to perform the functions. As fiduciaries of the multiemployer plan, the trustees on the board must act for the sole and exclusive benefit of the participants and beneficiaries when serving in their role as Trustees. An individual who serves as a union trustee or employer trustee is not acting as a fiduciary when acting in his or her union or employer role even if the matter can affect the plan, provided that such individual is not exercising any authority or responsibility as a trustee when serving in the union or employer role.

Can trustees determine what benefits are provided?

The trust agreement generally provides how the benefits provided by the multiemployer plan are to be determined. Many multiemployer plan trust agreements give the board of trustees the authority to determine the plan design and level of benefits. Alternatively, the trust agreement may provide that the collective bargaining agreement will describe the plan design and benefits and, in those cases, the board of trustees is given the authority to collect sufficient contributions to fund the benefits.

Are multiemployer pension plans covered by the Pension Benefit Guaranty Corporation (PBGC)?

Yes. Multiemployer defined benefit pension plans are covered under their own termination insurance program with the PBGC.