NLRB Finds Company Did Not Violate Bargaining Agreement by Changing 401(k) Match Formula

The National Labor Relations Board (NLRB) has determined that a company did not violate the terms of a collective bargaining agreement (CBA) by changing the employer match formula for its 401(k) plan.

According to the NLRB’s decision and order, the complaint alleges that on or about January 1, 2018, the employer unilaterally modified the CBA by implementing a 401(k) contribution matching structure that differed from the one specifically negotiated and memorialized in the CBA. The complaint says the CBA contains a provision that stipulates the plan sponsor will match “no less than 100% for each employee dollar contributed to individual accounts up to 5% maximum contribution.”

History of the Plans

According to the decision, the employer, YP Holdings, maintained a 401(k) plan for its employees prior to its acquisition in 2017 by Dex Media Holdings. The plan, effective August 24, 2015, stated that, generally, YP Holdings would contribute a matching contribution of 80% of basic deferrals made by participants who were not eligible bargaining unit participants and 67% of basic deferrals made by eligible bargaining unit participants. Eligible participants were allowed to contribute an amount up to 6% of their compensation.

The NLRB noted that an employee who was not a member of the bargaining unit who contributed 6% of his or her compensation would have received a 4.8% match maximum. An employee who was a member of the bargaining unit would have received a 4.02% maximum.

Later, YP Holdings created a new 401(k) program for its employees effective July 1, 2016. Under the 2016 plan, basic deferrals were changed to include pre-tax, after-tax and Roth options, but the match formula didn’t change. However, on September 16, 2016, YP Holdings and the employee union entered into a memorandum of agreement (MOA) that said, “The company 401(k) matching rate for all bargaining unit employees will be no less than 100% for each employee [deferral] contributed to individual accounts up to 5% maximum contribution.”

On June 30, 2017, Dex Media Holdings Inc., acquired YP Holdings, and the NLRB filing says the company assured the union that all of its CBAs remained in place and that the company’s obligation to bargain with the union remained unchanged.

A restated 401(k) plan became effective January 1, 2018. The summary plan description (SPD) stated that the company would make a matching contribution equal to 100% of the first 3% of eligible pay participants contribute plus 60% of the next 3% of eligible pay they contribute. The NLRB noted in its decision that this formula works out to a 4.8% match for employees contributing 6% of pay.

The NLRB’s Decision

The NLRB noted that there is no evidence that YP Holdings ever actually provided a 5% match of bargaining unit employees’ contributions to its 401(k) plan. In addition, it found that the record evidence conclusively establishes that a 5% match was never agreed to in bargaining. Evidence of negotiations shows that the union’s bargaining team initially proposed a match of 6% of deferrals and later a match of 5% of deferrals, but both of these proposals were rejected by the company.

According to the NLRB’s decision, the head of the union’s bargaining team for the 2016 MOAinitially testified that when she received a “redlined” version of the contract from YP Holdings, it was her, “understanding that employees got a 5% match.” But, on cross-examination, she admitted that the company rejected the 5% match during negotiations.

Not only did the NLRB find that a 100% match of up to 5% of deferrals was never agreed to, it also found that the attorney for the union did not establish that any change occurred with regard to the amount YP Holdings matched employee contributions under the 401(k) plan.

“The general counsel’s evidence only established that the respondent [i.e., the employer] did not follow the language in the post-ratification version of the MOA in matching employee contributions. As I have found, however, the language in the post-ratification version of the MOA was not what was agreed to by the parties during bargaining,” the NLRB’s decision says. “Even disregarding that finding, the evidence offered by the respondent compels me to find that no change occurred. The testimony and exhibits clearly established that, since 2016, the respondent and its predecessor matched employee contributions to their various retirement savings plans at a maximum of 4.8%. There was no evidence that the respondent or its predecessor ever matched employee contributions to their 401(k) plans at 5%.”