Payroll audits of participating employers in multi-employer plans help to ensure that employees who are performing covered work as defined in the collective bargaining agreement are correctly classified and all contributions are properly remitted. Normally, auditor access to payroll data is a condition of the Union’s Collective Bargaining Agreement. Payroll audits, performed periodically on contributing employers, help Trustees fulfill their fiduciary responsibilities. Common findings include underreporting hours and improper remittances of contributions. Union members’ benefits are affected by these reporting deficiencies. Potential consequences of improper reporting can include welfare plan ineligibility and incorrect credits for pension benefits. Discrepancies could go unnoticed until the member needs their benefit and finds they are ineligible. A representative group of employers, as determined by the Plan Trustees, should be audited each year. Plan Trustees should consider putting contributing employers on a three or four year payroll audit cycle.
Union trustees should review employer’s remittance history and frequency to identify potential candidates for a payroll audit based on first-hand knowledge of issues from the field. Examples of potential candidates for audit are contributing employers who have not renewed their collective bargaining agreement and employers who are experiencing financial difficulties. Each situation could potentially motivate an employer to withhold contributions. Late remittances or a history of inaccuracies can also serve as “red flags” to trustees. Union trustees could provide information to the Plan administrator that could be useful during the Payroll audit. Payroll audits will not always reveal reporting inadequacies but can serve as an important tool in securing all required contributions on behalf of union members.
Plan administrators should consider distributing “are you alive” confirmations to active pensioners when Form 1099-Rs are mailed. Sending letters to pensioners can help to ascertain that they are still alive and that pension payments are being made and cease in accordance with Plan provisions. Several professional services are available to assist in this process and can often be a useful tool in ensuring that pensioner information is accurate.