What Happens to Assets in a Multiemployer Employee Benefit Plan When Some Employers Withdraw and Set Up a New Plan (91-610)

In 1947, Congress enacted the Taft-Hartley Act, which was designed to curb perceived abusive conduct by organized labor. One of Congress's concerns in 1947 was mismanagement of union-sponsored pension plans. Taft-Hartley made it illegal for an employer to transfer money to a union pension plan unless eight conditions (set forth in section 302(c)(5)) were satisfied.At the time of Taft-Hartley's enactment, probably the most fundamental change was that a pension plan could not be run solely by trustees appointed by the union. Instead, there had to be an equal number of trustees appointed by employers and by the union. (Taft-Hartley also requires that an impartial umpire decide questions in the event of gridlock; often employee benefit plans meet this requirement through the appointment of a neutral trustee, who essentially serves as the tie-breaker.)The Local 144 Nursing case is concerned with a different 302(c)(5) requirement: that the plan be administered for the sole and exclusive benefit of employees and their families. A number of courts have found that this section gives federal courts jurisdiction over multiemployer plans to correct "structural defects" in the plan (for example, an arbitrary and capricious decision by the plan trustees to adopt vesting requirements that only two percent of plan participants will ever satisfy).In 1974, Congress expressly federalized the law of employee benefit plans through the adoption of the Employee Retirement Income Security Act ("ERISA")