Difference Between Single-Employer & Multi-Employer Pension Plans

Single-employer and multi-employer pension plans are retirement plans provided for some workers. A single-employer plan is available to participants from only one employer, while the multi-employer plan has participants from multiple employers. Both plan types are pensions, which are investment funds that provide regular payments to former workers in retirement.

Arrangement

The single-employer pension plan is instituted in an individual business to help provide for its employees in retirement. Meanwhile, multi-employer plans link businesses together in a common pension fund to provide for their employees. The multi-employer arrangement often is made among private businesses in a similar field, such as construction, that have agreements with the same labor union. The multi-employer plan is formed out of a collective bargaining agreement between the businesses and the union. In both single-employer and multi-employer cases, employees typically become eligible for pension benefits at certain milestones. Also, pensions in both cases are used as part of a package of benefits for employees that include other elements, such as vacation days and health insurance.

Flexibility

The multi-employer pension plan works to benefit workers who move between jobs but stay within a single industry. Multi-employer plans allow workers to maintain their pension account when they switch jobs from one employer to another when both employers are part of the same pension plan. In this way, workers can continue to contribute to the funding of their pension and receive contributions from an employer into the same pension account even as they change jobs over the course of their career. Single-employer pension plans only allow for workers to build their share in a plan while they remain with that particular employer.

Employer Makeup

The employers that provide single-employer pension plans tend to be big companies with large pools of workers. These are the employers that have the resources to arrange a dedicated pension plan for their employees and also have enough workers to make it feasible to raise the funds to create a significant pension investment fund. In contrast, multi-employer plan participants tend to be small businesses with relatively modest numbers of workers. For these businesses, it makes sense to pool their resources. They also have workers who change jobs within the industry frequently, making it difficult for the workers to build equity in a pension fund without the flexibility to take the fund with them.

Employer Minimum Contributions

Single-employer plans overlap with multi-employer plans in some of the aspects of the investment fund itself and the employer participation. For instance, both plan types follow a federal law that requires for employers to make minimum funding payments to their plans. In both cases, if an employer fails to make the minimum contributions, then it faces a 10 percent tax on the amount that it fell short. However, multi-employer plans also face the possibility of being sued for late payments. According to the Pension Benefit Guaranty Corp., the trustees of a multi-employer plan can choose to sue a participating employer that fails to pay its contributions on time, recovering the missing funds, interest, liquidated damages and attorney fees.

About the Author

Tom Gresham is a freelance writer and public relations specialist who has been writing professionally since 1999. His articles have appeared in "The Washington Post," "Virginia Magazine," "Vermont Magazine," "Adirondack Life" and the "Southern Arts Journal," among other publications. He graduated from the University of Virginia.