The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in California is representative of a common inquiry regarding types of plans with similar names. The advisor asked:
“I’ve heard the terms ‘multiemployer plan’ and ‘multiple employer plan;’ is there a difference?”
- Yes, there is a difference, and knowing the distinction is important. The two terms are often confused.
- A multiemployer plan refers to a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as "Taft-Hartley plans” [(ERISA §§ 3(37) and 4001(a)(3)]. Multiemployer plans must comply with the qualification rules under IRC §414(f).
- Multiemployer plans allow employees who move among employers within unionized industries - such as trucking, construction and grocery-store chains - to participate in the same retirement plan negotiated under either separate or common collective bargaining agreements.
- For in-depth guidance on multi-employer plans, please refer to the IRS’ Internal Revenue Manual, Part 7, Chapter 11, Section 7.11.6.
- In contrast, a multiple employer plan is a plan maintained by two or more employers who are not related under IRC §414(b) (controlled groups), IRC §414(c) (trades or businesses under common control), or IRC § 414(m) (affiliated service groups). Multiple employer plans must comply with the qualification rules under IRC §413(c).
- The Department of Labor provided some important guidance on the treatment of multiple employer plans in Advisory Opinion 2012-04A.
- For in-depth guidance on multiple employer plans, please refer to the IRS’ Internal Revenue Manual, Part 7, Chapter 11, Section 7.11.7.
The terms multi- and multiple employer plans are often confused. Knowing the difference is important as they refer to two completely different types of plans that involve more than one employer.
The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.
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