Benefit Plan Policies: Collection Policy

Larry Beebe, CPA

In this series, we are reviewing the written plan policies needed to help your benefit plan stay compliant and operate most effectively. For a full list of the necessary policies and why your plan should implement them, click here.

Multiemployer employee benefit plans have unique issues when it comes to employer contributions. In addition to the high number of different employers that may participate in a plan, employers often contribute at different rates, perhaps for different classes of employees, all according to Collective Bargaining Agreements that have different effective dates. These unique issues call for a specific written collection policy.

A collection policy helps ensure that the collection actions taken by your plan are timely and uniform. Establishing a collection policy and following it helps trustees prove that they are exercising their fiduciary duty of collecting all contributions due to the trust fund.

Your plan’s collection policy should contain the following items:

  • Audit Policy. This policy should detail how contributing employers are selected for payroll audits and the frequency of those audits.
  • Mistaken Contribution Policy. Many plans limit refunds for mistaken contributions to a one-year period. In health and welfare plans, a refund is usually not provided when the participant has already received the benefit.
  • Rate of Employer Contributions. This section should include an explanation of these rates, as well as a time frame for when employer contributions become delinquent.
  • Delinquent Contribution Monitoring Committee. Your policy should include details for the formation of this committee, which is often comprised of one trustee from labor and one from management, the plan administrator (or his/her representative), the plan’s collection attorney and the plan’s payroll auditor.
  • Time Frames. Specify the time frames for monitoring and taking action on delinquent contributions, as well as time frames for referring delinquent employers to the trust fund attorney for collection action.
  • Automatic Charges. Automatic charges should be imposed for liquidated damages, interest and plan expenses for collecting delinquent contributions.
  • Surety Bonds. These are used to guarantee contributions payments.

For more information on developing this, and other important plan policies, please see Collecting Employer Contributions and Payroll Auditing, both published by the International Foundation of Employee Benefit Plans.

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