Masonry Magazine September 1963 Page. 4
An Independent Consulting Firm Discusses
Joint
Labor-Management
Benefit Plans
This is the first of two articles by the staff of Hewitt Associates, Libertyville, Illinois. Hewitt Associates is an independent actuarial and consulting firm providing services to pension, welfare, vacation and other employee benefit programs. This first article will discuss health and welfare. The second will deal with pension plans.
Copyright 1963, Hewitt Associates.
In recent years collective bargaining in certain industries and particularly in the building trades has in many instances resulted in agreements to set aside a part of the total compensation package in trust funds, to provide health and welfare, pension, and vacation and holiday benefits. Usually, a health and welfare fund is the first to be established.
This article is intended to give negotiators and trustees of health and welfare plans an overall view of some of the alternatives that are available in key decision areas. We shall describe the usual steps involved in setting up and maintaining a health and wefare plan.
Negotiating the Health and Welfare Plan
The first step in establishing a health and welfare plan is negotiating the appropriate contract provisions. This should be done with the guidance of legal counsel. Essentials should be set out in the collective bargaining agreement so that it is clear the plan will be established without future negotiations between the bargaining parties on such questions as benefits or financing medium. The following is a checklist of those items which usually appear in the collective bargaining agreement:
Direction that a health and welfare fund be established
Contribution rate
Date contributions are to begin
Direction that the employer representatives and union representatives will concur, before contributions begin, in a trust agreement which will delegate the responsibility for establishing and maintaining the health and welfare plan to a joint board of trustees.
Direction that the trust agreement will conform to all applicable provisions of Federal labor law.
Penalty rate for delinquent contributions (if such penalty is agreed to by parties)
Federal labor law requires that contributions for pensions must be paid to a separate trust. Therefore, the first item to be clearly set out is that a health and welfare plan is to be established. In some cases there are also written into the contract the general categories of benefits that the negotiating parties intend to provide such as death, accidental death and dismemberment, disability income, hospital, medical and surgical; the direction that participants are to receive all of these and that their dependents are to receive hospital, medical, and surgical benefits is also often included.
It is also appropriate that there be an understanding the trust agreement be concurred in only by the representatives of the employer group and union. The complexity of the trust, because of Federal and state legal requirements and other somewhat complicated provisions, can create considerable confusion, possible misunderstandings and unnecessary delay if approval by the entire membership of the union or employer group is required.
The placing of a penalty provision in the collective bargaining agreement helps assure that collection of contributions can lawfully be made. A penalty provision actually benefits the majority of employers who make regular contributions in that it helps to control those who may be competing with participating employers without paying the required contribution to the health and welfare fund.
Designing the Trust Agreement
Between the date the collective bargaining agreement is accepted by both parties and the date contributions begin, a trust agreement is prepared by legal counsel and concurred in by the employer representatives and union representatives. It is possible to hold money in escrow until contributions begin, but only a board of trustees can make any decisions with regard to this money.
The trust agreement must conform to Federal labor law requirements as well as trust law requirements. Federal labor law requires among other things equal representation from labor and management, an annual audit of the fund, and provisions for arbitration in case of a deadlock.
The size of the board of trustees is of great importance for the future operations of the plan. No specific number is required by law. However, it can be said that a small board will function more efficiently than a large one. Also, the larger the board, the greater the chance that misinformation will be circulated to employers and employees. It would appear that where one union is involved, a board of four or six members is ideal.
The right of trustees to make independent decisions is also of importance. The areas in which trustees must make decisions, such as administration procedures, eligibility rules and benefits, reserve levels, financing benefits, investment of reserves, and communication, are not appropriate for mass decision making. Going back to the employer association or union to get acceptance defeats the purpose.