Expert Advice: Beware of PLA Multiemployer Pension Plan Mandates

0 June 29, 2009  Uncategorized

PLAs often require contractors to participate in union multi-employer pension programs mandated via applicable union collective bargaining agreements referenced in PLAs .  Contributing to multi-employer pension plans is problematic for nonunion contractors for a variety of reasons highlighted here.

An interesting article by Chang, Ruthenberg and Long Employee Benefit Attorneys warns employers about the problems with contributing to mult-iemployer pension plans due to potential withdrawl liability (“Cautions To Employers Considering A Multiemployer Plan“).

While the article does not address withdrawl liability specific to PLA mandates, it concludes with sound advice and recommends steps contractors should use to evaluate whether a contractor should become party to a multi-employer pension plan. recommends contractors take these same steps when evaluating whether to sign a PLA.

Unfortunately, when mandated by government entities, PLAs typically force contractors to participate in multi-employer pension plans as a condition of performing taxpayer-funded construction contracts even if these pension plans are in terrible financial shape.

Government officials considering PLAs should investigate or require disclosure about the health of pension plans before requiring bidders to comply with multi-employer pension plan mandates typical in most PLAs.

Or better yet, they should ensure that the PLA does not force contractors to pay into union multi-employer pension plans, which can result in potential withdrawl liability, increased costs to nonunion contractors and the all but certain loss of benefits earned by nonunion employees during the life of a PLA project.

Of course, governments would be better served abandoning any coercive PLA mandates and letting contractors and the free market determine whether a PLA is the best way to deliver a project safely, on-time and on-budget to taxpayers. Nothing would prevent contractors from voluntarily executing a PLA or paying into multi-employer pension plans. Firms would gladly do so if it provided them with an advantage against other competitors or it improved the quality of their product.

Of course, special interests need assistance from their pals in government to compete in a free market, if not obtain an outright monopoly, so that is why construction trade unions prefer PLA mandates as opposed to choice and freedom in the marketplace.

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