Multiemployer plans: Overview, definition, and example
What is a multiemployer plan?
A multiemployer plan is a retirement or benefit plan created through an agreement between multiple employers and a labor union. These plans are common in industries where employees move between companies, such as construction, trucking, and hospitality. Employers contribute to the plan on behalf of their employees, and the plan is managed by a board of trustees.
For example, a unionized electrician working for different contractors can continue earning pension benefits under the same multiemployer plan, regardless of which company they work for.
Why is a multiemployer plan important?
Multiemployer plans help provide stable benefits for workers who frequently change jobs within the same industry. Instead of losing retirement or healthcare benefits every time they switch employers, employees remain covered under a single plan.
For businesses, these plans simplify benefit administration and allow companies to offer competitive benefits without having to set up their own retirement or health plans. However, employers should be aware that they may have ongoing financial obligations, including potential withdrawal liability if they leave the plan.
Understanding multiemployer plans through an example
Imagine a group of trucking companies that all participate in the same pension plan for unionized drivers. Each company contributes to the plan based on hours worked by their employees. A driver who moves from one participating company to another remains covered under the same pension plan, accumulating benefits without disruption.
Another example is a group of hotels that use the same union-negotiated health insurance plan for their employees. A hotel worker can switch jobs from one hotel to another and still retain health coverage under the same multiemployer plan.
An example of a multiemployer plan clause
Here’s how a contract might reference a multiemployer plan:
“The Employer agrees to contribute to the [Name of Plan], a multiemployer pension plan, on behalf of eligible employees in accordance with the applicable collective bargaining agreement.”
Conclusion
A multiemployer plan allows workers to keep their benefits even when switching employers within the same industry. It helps businesses attract skilled employees while reducing the burden of managing benefits independently. However, employers should carefully review their obligations before joining or leaving such a plan to avoid unexpected liabilities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.