The Taft-Hartley Act of 1947, along with the Wagner Act, enacted 12 years prior as part of the “New Deal,” laid the foundation for the current collective bargaining process as it relates to the formation, funding and administration of employee benefit plans. But, the way in which Taft-Hartley achieved this goal was not in a pro-union manner.

In addition to outlawing what are known as “secondary boycotts” (picketing activity that actually works), Taft-Hartley also made it illegal for employers to give money or “anything of value” to labor unions or to a union officer. Unless covered by an exception in Taft-Hartley, such payments are now a federal crime.

However, Taft-Hartley has an exception for contributions from an employer to a collectively bargained employee benefit plan. The Act provides that these contributions must be held in a trust and cannot be used by either the Union or the Employer for non-benefit related purposes. Further, the Act also requires that any such Employer contributions made to a trust can only be done so through “a written instrument” that details the basis of the contribution.

The Taft-Hartley Act also establishes the legal structure through which a collectively bargained benefit plan must be administered. Here the Act provides that the Trust must be governed by a Board of Trustees (or similar body). This Board must have equal representatives from the Union and the Employer. The trustees are not to profit from the trust; also, they are not paid to serve and must carry out their duties in the sole interest of the participants.

The trustees determine the rules and regulations of the trust – those that have not been decided for them by Congress. (e.g., the trustees determine the eligibility rules for participation in the trust, but these rules must also be consistent with other federal laws such as ERISA and COBRA.)

Taft-Hartley benefit funds rely exclusively on the collective bargaining agreement’s terms for their funding. Funding for the trust is generally derived in the first instance from Employer contributions. These employer contributions are then pooled together so that the Trustees may grow the assets through investing. And, of course, Taft-Hartley provides that the assets of the trust can only be used for the benefit of the participants (the employees on whose behalf the Employer contributions are made).

Once the Employer contributions are collected by the trust, they become the sole property of the trust. They do not belong to the employer, the union, or the employee. These assets, along with any investment gains, belong to the trust itself and cannot be expended except as provided for in the trust document and federal law.

Under both Taft-Hartley (and ERISA, another federal law governing employee benefit plans), the trustees are charged, as fiduciaries, to dispense the assets in accordance with the purpose of the trust and in a fiduciary prudent manner. This means that the trustees of a Taft-Hartley Fund usually employee professionals to help them manage the investments of the trust. The trustees may also engage other professionals, such as attorneys, plan administrators, and accountants, to advise them in the various areas of trust operation. In fact, it would be imprudent not to hire professionals to guide them.

There are several forms a Taft-Hartley plan can take. The most common are (a) Pension Plans and (b) Health & Welfare Plans. Here at Local 47, both the AFM Pension Plan and the Local 47 Health & Welfare Plan are Taft-Hartley entities.

Because the trustees are volunteers, having careers elsewhere, they may hire a staff or third party administrator to conduct the daily operations of the trust. VERY INTERESTING; BUT WHAT DOES THIS MEAN TO ME?

1) There are strict regulations as to who may contribute to a Taft-Hartley trust: – only employers who have entered in a “written instrument” that prescribes the basis of contributions may legally contribute to a Taft-Hartley plan (this writing can be a Collective Bargaining Agreement and/or a Participation Agreement).

2) A trust fund’s primary source of revenue to pay premiums comes from the employers who have agreed, through collective bargaining, to make contributions to the plan.

3) Sufficient contributions must be received from the employer in order to pay for the liabilities of the trust: generally these are the benefits provided and the trust’s operating expenses.

4) If the trust does not receive enough contributions from the Employer to cover its benefit and operating costs, the trustees must do some, or all of the following, so long as the following choices are consistent with the trust agreement and/or other federal law:
   (1) reduce benefits;
   (2) change the eligibility rules; and/or
   (3) require the employee to pay a portion of the cost.

Unfortunately, the current economic environment has had a nation-wide negative effect on Taft-Hartley plans, including the Professional Musicians Local 47 and Employers’ Health and Welfare Fund (the Fund). But, the Fund has, for the most part, been able to weather the storm and keep benefits and eligibility levels constant.

However, other Taft-Hartley plans have been treated much harsher by the current economy. Many Taft-Hartley plans – especially pension plans – have had to make difficult choices about benefits over the past decade.

The Trustees of the Fund realize that this is a difficult time, but they are charged with the fiduciary duties imposed on them through Taft-Hartley and ERISA. In this sense, the Trustees of the Fund shall continue to watch the economic landscape and take those prudent steps necessary to protect the Fund and the benefits its delivers. After all, the Fund has no control over which, or how many jobs are reported to Local 47, it only has control over managing the contributions that it receives.