One of the issues that multiemployer benefit funds must be concerned with is how the spread of COVID-19 may affect the ability of signatory employers to contribute to pension and health and welfare funds.
Multiemployer benefit plan trustees must fulfill their fiduciary responsibility to their plan participants and beneficiaries by collecting contributions that are owed, but they also must recognize the difficulty employers may be having if they are forced to cease or curtail operations, said attorney Travis Ketterman, GBA. In a recent International Foundation webcast, Ketterman, a partner at McGann, Ketterman & Rioux in Chicago, Illinois, reviewed actions trustees may need to consider as they assess the impact of COVID-19 on their contributions and collection efforts.
In collections, trustees have the following fiduciary duties:
- Act solely in the interest of the fund participants and beneficiaries
- Hold and deal with plan assets for the exclusive purpose of benefits and defraying reasonable costs of plan administration
- Act prudently
- Act in accordance with plan documents that comply with the Employee Retirement Income Security Act (ERISA).
Investments and the collection of contributions are the two sources of income for multiemployer benefit funds. “Unfortunately, you’ve seen the news every day. We’re on a wild ride, and our investment assumptions can’t be guaranteed, so those of us on the collections team must step up and make sure we are doing our very best to ensure that the contributions that are owed to our funds are coming in in an efficient and effective manner,” Ketterman said.
Trustees should not act in haste in responding to the COVID-19 crisis and make sure any actions they take are properly documented. A fiduciary’s role in an emergency situation is to provide relief to signatory employers to help them get through this crisis so that they can ultimately make their contributions.
[Related Reading: Multiemployer Considerations in the Time of COVID-19]
Trustees should first turn to their fund collection policy for guidance on how to respond to the effects of the spread of the coronavirus. “This is always your guidebook,” Ketterman said.
The Department of Labor (DOL) requires funds to maintain written policies for the orderly collection of delinquent employer contributions. According to Ketterman, those requirements remain the same. “You may change those procedures, but you have to reference them, and you have to abide by what those procedures are,” he said.
Rather than rewriting their whole collection policy to address an emergency like COVID-19, Ketterman suggested that funds may want to consider adopting an addendum. This standalone document would set forth relief that would be provided through the crisis and include a sunset provision.
Collection Issues to Consider
One of the first problems faced in collection efforts is getting monthly contribution reports from employers. “It is so vital to get those reports monthly because from those reports we will know how many of our participants are continuing to work. We’ll understand the work levels, and we’ll understand the income that should be coming in.”
Ketterman recommended that funds make any type of relief provided to employers, such as waivers of liquidated damages (LDs) or suspension of installment payment plans, conditioned on the employers providing those reports. Funds also should consider deeming reports that are submitted 15 days after the normal deadline as timely to increase the likelihood of receiving the reports, he said.
Relief for Employers
Relief that funds may consider providing to employers during the crisis include:
- A waiver of liquidated damages previously assessed
- Suspension of installment plans
- Welfare eligibility extensions.
[Upcoming Webcast: Update on Labor and Employment Law | April 14, 2020]
The Collection Team and COVID-19
The collection team is an important part of ensuring that contributions are collected in an efficient, effective manner and is especially important in a time of crisis, Ketterman said.
The collection team typically includes the administrator and/or fund office staff, attorney, auditor and during a time of crisis, union and/or employer representatives for the purposes of discussing job status.
Ketterman recommended that the collection team convene on a conference call to address emergency relief being considered and implemented, COVID-19 challenges affecting the team’s day-to-day work and ideas the team is developing for trustees. The team should also discuss whether their industry has been deemed “essential” in the current environment, how to function within changing guidelines and how the industry as a whole is being affected by the pandemic.
Payroll Audits in a Shutdown World
The collections team will have to address the issue of payroll audits during the crisis. Many payroll audits are conducted on site, but this will likely not be possible during the COVID-19 crisis. Funds will have to consider how they may need to change their audits and how employers may respond.
One of the issues that must be addressed is the electronic submission of documents, also called desk audits. A major concern is whether the auditors can provide a secure portal so that employers can safely transmit financial information.
Some employers may not want to send the records because of corporate policy or technology problems. Some may ask for a field audit at a later date, and some may simply refuse an audit.
Communication is key in these instances, Ketterman stressed. Funds need to pursue an active dialog with employers to obtain the necessary records and have follow-up questions answered. Funds need to work to distinguish what is an outright refusal, what is a request to delay and what is a logistical problem.
Employers “can’t simply refuse it and they can’t ignore us, but at the same time we have to have some compassion for what’s going on.”
[Related Reading: Multiemployer Trustee Boards: 15 Takeaways From a New Survey]
Watch the webcast on-demand now: COVID-19: Emerging Collection Issues for Multiemployer Plans. Free to International Foundation and International Society members.
Find more resources here:
- Visit the International Foundation Coronavirus (COVID-19) Resources page
- Catch up on the latest COVID-19 and the workplace issues from Word on Benefits
- Tune in to live or on-demand webcasts, including these upcoming:
- Global Economic Outlook | April 8, 2020
- Coronavirus and On-Site Clinics: What Plan Sponsors Need to Know | April 9, 2020
- Update on Labor and Employment Law | April 14, 2020
Kathy Bergstrom, CEBS
Senior Editor, Publications, at the International Foundation
The latest from Word on Benefits: