Taft-Hartley (Multiemployer Pension) Plans

Taft-Hartley plans, also known as multiemployer pension plans, are retirement benefits established through collective bargaining agreements between labor unions and multiple employers. These plans allow workers across different companies within the same industry to participate in a shared retirement system, offering portability and pooled resources. Named after the Taft-Hartley Act of 1947, they are designed to provide financial security for employees while ensuring fair contributions from employers.

You can also work with a financial advisor to help you navigate everything related to your finances so that you can properly plan for the future.

What Is a Taft-Hartley Plan?

A Taft-Hartley plan is a type of multiemployer pension plan that operates under the oversight of a board of trustees made up equally of labor union and employer representatives. This joint governance structure ensures that both parties have a say in managing the plan’s assets and benefits, creating a balance between worker needs and employer contributions.

According to data from the U.S. government agency Pension Benefit Guaranty Corporation (PBGC) there are about 1,400 of these plans in the U.S. with 10 million participants. These plans usually cover workers in the construction, service, manufacturing, mining and trucking and transportation industries, as well as the entertainment industries.

How a Taft-Hartley Plan Works

Contributions to the plan are made by participating employers based on negotiated agreements, rather than directly by employees. Workers benefit from the portability of their pensions, as they can continue accruing benefits even if they switch jobs within the same union-covered industry.

Taft-Hartley plans are subject to regulations under the Employee Retirement Income Security Act (ERISA), which sets standards for funding, benefit protections and fiduciary responsibilities. This framework helps ensure that the plans remain financially sound and capable of delivering promised benefits to participants and their families.

Participants of these plans also have to keep in mind vesting and participation guidelines, much like a traditional pension plan. However, multiemployer plans usually provide a set monthly benefit amount for participants, based on years of qualified service, though participants can opt for additional benefits by an increased contribution.

Who Benefits the Most from Taft-Hartley Plans?

In short, the workers benefit the most from Taft-Hartley pension plans. This is because multiemployer plans give employees of smaller companies and those within unions access to pension plans. This is in part due to the ability to pool resources and spread risk. Think of it as economies of scale for retirement benefits.

These pension plans also benefit those who move from job to job, which can be more likely in the aforementioned industries. This allows employees to move their pension plan from one employer to the next, therefore maximizing their pension benefits well into retirement.

Pros and Cons of a Taft-Hartley Plan

There are various pros of retirement plans that include Taft-Hartley pension programs. As mentioned, these plans take advantage of pooled resources, which in turn helps offer the best possible benefits to those enrolled. Those benefits include cheaper administration costs and superior investment opportunities.

Taft-Hartley plans also allow employees to transfer benefits from employer to employer, as long as both employers are participants in the same plan. And finally, these plans offer tax-free benefits to those enrolled, as well as tax-deductible employer contributions.

Meanwhile, the PBGC serves as a federal safety net for participants in Taft-Hartley plans. If a plan becomes insolvent and cannot meet its obligations, the PBGC steps in to provide partial benefit guarantees.

But like anything, these plans are not without their downsides. Taft-Hartley plans have in recent years seen an increase in inactive participants and orphaned workers – people who work for companies that no longer participate in the plan but still are entitled to some benefits from the plan.

However, the PBGC guarantees are subject to caps, and the coverage may not fully replace lost benefits. Furthermore, market downturns, changes in demographics and reduced contributions from struggling employers can all lead to underfunded plans.

Bottom Line

Taft-Hartley plans give employees of smaller companies and those within unions access to pension plans. They also offer portability. For example, they allow an employee to transfer his or her pension benefits from one employer to the next as long as both employers are in the same plan. These plans usually provide a set monthly benefit amount for participants based on years of qualified service.

Tips for Retirement

Consider talking to a financial advisor about your plan for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
As you properly plan your finances for retirement, it’s important to make sure you have planned for enough income to sustain your lifestyle during those years. You can use SmartAsset’s free retirement calculator to help you know how much to save.