The purpose of the "Guidelines for Participation in the Sprinkler Industry Trust Funds" is to assist you, as an Employer, in understanding the requirements for reporting and making contributions to the Sprinkler Industry Trust Funds. This publication reflects the rules that are effective as of January 1, 1996. The rules, summarized in Section 12, are the result of IRS requirements. You should review Section 10 of this publication for the special participation rules regarding sole proprietors, partners, stockholders, officers and/or their relatives.

If you have any questions regarding your reporting responsibilities you may contact the Fund office, the National Fire Sprinkler Association, or the Local Union with which you entered into a Collective Bargaining Agreement. The toll-free number for the Fund office is (800) 638-2603.

Sincerely,

THE BOARD OF TRUSTEES

As an Employer signed to a Sprinkler Industry Collective Bargaining Agreement, you are obligated to make certain fringe benefit payments on behalf of the Employees who work under the Agreement.

An Employer's obligation to make contributions is not determined on the basis of whether an Employee is a member of a Sprinkler Local Union, but whether the Employee performs work which is covered under the terms and conditions of the Collective Bargaining Agreement. Credit is earned for eligibility purposes in both the Welfare and Pension Funds in the same manner whether or not the Employee is a member of a Sprinkler Local Union.

Contributions made on behalf of members of other U. A. Local Unions whose Welfare and/or Pension Funds have signed reciprocal agreements with the Sprinkler Industry Funds will have those contributions forwarded to the appropriate home fund of that Employee.

The Trustees will accept an Employer into the Funds only after a copy of the Collective Bargaining Agreement (or other acceptable participation agreement) is filed with the Fund office. Any contributions made prior to the receipt of the Collective Bargaining Agreement (or participation agreement) will be placed in an escrow account, with no credit given to the Employees, until the Collective Bargaining Agreement (or participation agreement) is filed with the Fund office. In the event no written agreement is signed, contributions will be returned to the Employer in accordance with the rules of the Funds.

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1. Building Trades


National Automatic Sprinkler Industry Welfare Fund
National Automatic Sprinkler Industry Pension Fund
Sprinkler Industry Supplemental Pension Fund
National Automatic Sprinkler Local 669 U. A. Education Fund (Apprentice Fund of N.Y. is not administered by this Fund office)


2. Metal Trades


National Automatic Sprinkler Metal Trades Welfare Fund National Automatic Sprinkler Metal Trades Pension Fund

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The Trust Funds are established under federal law and are approved as tax exempt organizations. Each of the Pension Plans has satisfied the requirements to be a "qualified" plan under the Internal Revenue Code. Each Fund is established under a separate Agreement and Declaration of Trust which is available upon request from the Fund office. In signing the Collective Bargaining Agreement or in making contributions to the Trust Funds, you have agreed to be bound by the Agreement and Declaration of Trust of each Fund covered by your Collective Bargaining Agreement or for which you have made contributions.

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The Trustees have established standard reporting requirements and procedures for all Employers. After you become a party to a Sprinkler Collective Bargaining Agreement, you will receive a blank remittance report form. Complete instructions are printed on the reverse side of that form. You are to complete the report following the instructions and headings on the form. Your contributions are due in the Fund office no later than the 15th of the month following the month in which the work was performed.

The following month you will receive a new report form from the Fund office. The new month's form will show the name of your company, the month which the report covers, and will list the Employees you reported for the prior month. Your task thereby is reduced to writing the total hours worked for each Employee, adding and/or deleting Employees and totaling and calculating the contribution to each Trust Fund. A separate check should be made payable for each Trust Fund.

Contributions are due for all hours of work covered by the Collective Bargaining Agreement. Even when a Collective Bargaining Agreement provides for premium time, time and one-half or double time, contributions still are made on an hour for hour basis. For example, for an Employee who works 180 hours during a month, contributions are to be made on 180 hours even though 20 of those hours were paid at the time and one-half rate.

If your Employees work within the jurisdiction of more than one Local Union, a separate report is required for work performed within each Local Union's jurisdiction. In addition, a separate report form must be prepared for each class of Employees for which the Collective Bargaining Agreement requires a different rate of contribution or contributions to be made to a different set of Trust Funds or for a classification, such as apprentices, which may be bargained out of one or more of the Funds. For example, the Collective Bargaining Agreement to which a hypothetical Employer is signatory requires contributions to the NASI Welfare and Pension Funds and to the SIS Pension Fund. The Collective Bargaining Agreement calls for contributions on first and second period apprentices to be made only to the NASI Welfare Fund. That Employer should complete one report showing only first and second period apprentices and a separate report with all other Employees included. You should check the Collective Bargaining Agreement or Agreements under which you contribute to determine any special contribution rates for certain employees or exclusion of certain classifications, such as apprentices, from some of the Funds.

If, for any reason, you do not have a regular remittance report form, the Fund office will accept a manual or computer generated report in the standard format with the proper number of copies.

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The Trustees are charged by federal law with the responsibility to collect all money due to the Trust Funds. ALL REMITTANCE REPORTS AND PAYMENTS FOR WORK COVERED BY THE COLLECTIVE BARGAINING AGREEMENTS ARE DUE IN THE FUND OFFICE WITHIN FIFTEEN (15) DAYS AFTER THE END OF EACH CALENDAR MONTH. If an Employer's report is not received in the Fund office within fifteen days after the end of each calendar month, the following will occur:

• The Employer will be advised that the Fund office has not received his report and contribution for that month;



• The Local Union will be advised of the delinquency; and



• Liquidated damages and interest may be assessed.

When an Employer is two months delinquent:

• The Employees will be advised that your delinquency will cause their eligibility under the Welfare Plan to terminate; and



• The delinquency will be referred to the Fund's attorneys for collection.

If the Trustees determine that allowing the continued participation of an Employer will cause uncollectible contribution debts to the Funds, the Trustees may terminate the participation of the Employer. This action will stop the accrual of any benefits but will not affect any action to enforce the Collective Bargaining Agreement or to collect contributions and liquidated damages due the Funds.

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Contributions and completed reports for covered work are due in the Fund Office on or before the 15th of each month following the month in which the work was performed. Interest will be assessed on late paid contributions at the rate of 12% per annum. If contributions are more than 60 days late, the following liquidated damages will be imposed in addition to the interest:

The Trustees of the NASI Funds reserve the right to discontinue or modify this procedure at any time they deem necessary. An Employer may appeal the assessment of liquidated damages by writing to the Trustees. Such an appeal should include an explanation of any circumstances which the Employer believes contributed to the delinquency.

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If a delinquency continues for 60 days, the Funds' attorneys become involved in the collection process. Despite the dates for assessing liquidated damages in Section 6, if the Funds find it necessary to file a law suit against a delinquent employer, or a claim on a company's performance bond, or any other type of legal action to collect the amounts due, the Funds will assess liquidated damages and interest in accordance with Article VI, Section 5 of the Agreements and Declarations of Trust. This Trust Section provides that an employer who does not pay the amounts required by the Collective Bargaining Agreement on time will be obligated to pay liquidated damages as follows:

• If payment is not received in the Funds Office by the 15th of the month, 10% of the amount is assessed.



• An additional 5% is added if payment is not received in the Funds Office by the last working day of the month in which payment was due.



• An additional 5% is added if payment is not received by the 15th of the month following the month in which payment was due.

Therefore, if a legal action is filed, a greater amount of liquidated damages will be assessed sooner than described in Section 6. When the attorneys become involved in the collection process, the amount owed the Funds will include not only contributions and liquidated damages, but also the Funds' attorneys fees, court costs, and interest at the greater of 12% or the highest rate permitted by law. The Funds may take legal action earlier than 60 days at the discretion of the Trustees. The legal remedies the Trustees may employ include lawsuits, mechanics liens, Miller Act claims, and claims against your bond(s).

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The Trust Agreement(s) provide for the Trustees to designate a qualified representative to conduct an audit of the payroll and wage records and any other pertinent records of any Employer in order to permit the Trustees to determine whether an Employer is making full payments to the Trust Funds. All information furnished to the Trustees' representative will be held in confidence and will only be used for the proper administration of the Trust Funds.

The cost of such audits are usually borne by the Trust Funds. In the event a substantial discrepancy is revealed by the audit, the Trustees may add the cost of the audit to the contributions and liquidated damages due. If the Funds must sue to enforce an audit, the cost of the audit and any other costs and attorneys' fees will be added to the amount due.

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Once contributions are made to the Funds, they may be returned to an Employer, in the Trustees' discretion, only upon the Employer's written request and only if the Employer conclusively demonstrates that the contributions were made in error. In determining whether the contributions were made in error and whether a refund will be made, the Trustees will consider all circumstances, including the period of time that has elapsed since the contributions were made. Any costs incurred by the Funds in correcting the Employer's error, including administrative and computer costs and benefits paid in reliance on the Employer's erroneous contributions, will be deducted from any amounts refunded. Pension credits based on the erroneous contributions will be canceled. In accordance with the rules of the Internal Revenue Service and the Department of Labor, interest will not be paid to the Employer on the erroneous contributions.

It is very important that Employers carefully review contributions and reports to the Funds to avoid erroneous payments. The Funds rely on the accuracy of Employer reports to credit Employees for eligibility for medical and pension benefits. Any errors must be reported to the Funds promptly.

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1. Definitions


Federal law requires that the Trust Funds be "for the sole and exclusive benefit of Employees." For purposes of participation in these Funds, an individual will be considered to be an Employee and must participate in the Funds if he or she is employed by an Employer for wages under a Collective Bargaining Agreement which requires contributions to be made to the Funds on his or her behalf.

Certain categories of persons who have an ownership interest in an Employer or who have a special relationship to an Employer may be considered Employees for purposes of participation in the Trust Funds. If such persons participate in the Funds, the Employers of persons in these categories must contribute to the Funds in accordance with the rules described in this Section 10. If such persons are non-collectively bargained employees, their Employers must comply with the requirements in Section 12. The categories subject to these rules are:


• A person who has an ownership interest in an incorporated Employer (hereafter referred to as "Owner" or "Stockholder").



• A person who is an officer of or is otherwise involved in the management of an incorporated Employer (hereafter referred to as an "Officer").



• A person who is a relative; that is, a child, stepchild, spouse, parent, brother, sister, son-in-law, father-in-law, or other relative as determined by the Trustees in specific cases, of a stockholder or officer, or a sole proprietor or partner of an unincorporated Employer (hereafter referred to as a "Relative").



2. Rules on Initial, Continuing and Termination of Eligibility for Officers, Stockholder and their Relatives



1. Eligibility to Participate



• NASI Welfare Fund: An Owner or an Officer or Relative who works in Covered Employment will be eligible to participate in the NASI Welfare Fund on the first day of the fifth month following four consecutive months of payment of the monthly Plan coverage payments made to the Fund on his behalf. See Section 10(c), entitled "Payment of Contributions; Amount of Contributions" for an explanation of the monthly Plan coverage payments.
  
  However, if a Stockholder, Officer or Relative established initial eligibility for Welfare Fund participation working under a Collective Bargaining Agreement and is eligible based on work under a Collective Bargaining Agreement at the time he or she becomes a Stockholder, Office or Relative, that individual will be eligible as a Stockholder, Officer or Relative on the first of the month after his or her employer makes the first monthly Plan coverage payment.
  
  A Stockholder, Officer or Relative who established initial eligibility for Welfare Fund participation working under a Collective Bargaining Agreement but is no longer eligible based on work under a Collective Bargaining Agreement at the time he or she becomes a Stockholder, Officer or Relative will be eligible as a Stockholder, Officer or Relative on the first of the month after his or her employer makes the first monthly Plan coverage payment if the first Plan coverage payment is for a month within twelve (12) months from the date his eligibility is terminated.
  
  An Employer may petition the Trustees to accept the participation of a Relative (other than a spouse of a corporate stockholder or officer) under the same terms as unrelated Employees performing work under the Collective Bargaining Agreement. However, the Relative must work exclusively in a job classification covered by a Collective Bargaining Agreement. The burden is on the Employer to establish the type of work performed by the Relative and the Trustees may require the Employer and the appropriate Local Union to submit documentation concerning the type of work performed by the Relative.



• NASI Pension Fund and SIS Pension Fund: An Owner or an Officer or Relative who works in Covered Employment will be initially eligible to participate in the NASI Pension Fund and the SIS Pension Fund under the same terms as Employees performing Covered Employment under the Collective Bargaining Agreement



• A Sole Proprietor or Partner in an unincorporated business is an Employer by law and may not participate in the Trust Funds. However, his Employees who are covered by the Collective Bargaining Agreement must be reported to the Funds and contributions must be made to the Funds on behalf of these Employees as required by the Collective Bargaining Agreement.



• However, any Employee who is married to one of the Owners of an unincorporated business and who files a joint Federal Tax return with that spouse which includes the operation of the business may not participate in the Trust Funds. All other Relatives of Sole Proprietors or Partners of unincorporated businesses are subject to the rules of this Section.



2. Conditions of Eligibility to Participate for Officers, Stockholders or Relatives



• The Employer of an Officer, Stockholder or Relative as defined in (1) above, who is or will be participating in the Funds must, as a condition for participation, sign a Participation Agreement and must agree to maintain records for at least 7 years -- the current year plus the prior six years -- to document the total hours worked by each Officer, Stockholder or Relative, a description of the type of work performed and the amount of each type of work, including the total hours of work in Covered Employment.



• The Employer of an Officer, Stockholder or Relative as defined in (1) above, who is participating in the Funds must contribute to all of the Funds to which contributions are required for collectively bargained employees under the applicable collective bargaining agreement.



• The Owner of an unincorporated business, whose spouse is an Employee participating in the Funds, must annually submit the separate tax returns filed by the Owner and his or her Employee spouse.



• If an erroneous overpayment is made to the Funds, the contributions may be refunded, after the deduction of the costs of correcting the error and the deduction of benefit payments made based on the erroneous overpayment. Pension credits based on the erroneous overpayment will be canceled as set forth in Section 9 of this document.



3. Retiree Self-Pay -- Continuation of Coverage Under the Welfare Plan


An Eligible Retiree, who participated in the Welfare Fund as an Officer, Stockholder or Relative, has the right to continue certain benefits, provided the Eligible Retiree makes the self-payment as required by the Board of Trustees and meets the other requirements under Articles III and V of the Welfare Plan. For example, one of the current requirements under Article III of the Plan is that the minimum number of hours must be reported on the individual's behalf in a period immediately before his retirement. The current Plan document must be consulted for a complete list of the eligibility requirements for Retiree coverage.


4. Termination of Coverage Under NASI Welfare Plan


Coverage for an Owner, Officer or Relative who is eligible for Plan coverage will terminate on the first day of the month following the last month for which the monthly Plan coverage payment was received. Such coverage may terminate earlier under Section 10(c), entitled "Payment of Contributions; Amount of Contributions", below, in the event of a delinquency.



3. Payment of Contributions; Amount of Contributions


All remittance reports and NASI Pension and SIS contributions and NASI Welfare Plan monthly Plan coverage payments are due in the Fund Office no later than the fifteenth day of each calendar month for the following month's coverage.

For example, in order for an Owner, Officer or Relative to receive coverage under the Welfare Plan for February, the monthly Plan coverage payments for February must be received in the Fund Office by January 15th. If the Employer does not submit any payment for the Employees who are participating as Officers, Stockholders or Relatives, the coverage of these Employees will terminate on the last day of the month preceding the month for which the monthly Plan coverage payment is late; under the above example, coverage for the Owner, Officer or Relative would terminate on January 31st.

If the Employer is delinquent in making payments on behalf of its bargaining unit Employees, the participation of the Employees who are Officers, Stockholders or Relatives will terminate on the last day of the month in which the delinquent contribution payment is due for all Trust Funds -- the NASI Pension, SIS Pension and NASI Welfare Funds.

If coverage terminates due to a late payment, the coverage may not be reinstated unless the payment of all amounts due, including all contributions, monthly Plan coverage payments, liquidated damages, interest, attorneys' fees, auditors' fees and costs which may be due, is made prior to the expiration of the grace period established by the Trustees. The grace period expires thirty days following the date the contributions are due (the fifteenth day after the end of each calendar month). The Trustees may change or eliminate this grace period at any time without prior notice.

The contributions to the NASI Pension Plan and the SIS Pension Plan are made at the established rates hourly rates for those Funds stated in the applicable Collective Bargaining Agreement or Agreements. Contributions to the NASI Welfare Fund for these categories of Employees are not made on an hourly basis. The Trustees have established a monthly Plan coverage payment which applies to each of these Employees regardless of the number of hours the Employee works. The monthly Plan coverage payment is designed to approximate the actual cost of providing the medical benefits. The Trustees may change the amount of the monthly Plan coverage payment at any time.

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1. No Written Agreement


Under the Taft/Hartley Act, the basis for contributions made to a Trust Fund must be in writing. If contributions are received, by the Fund office has no written basis for accepting the contributions, the checks are to be promptly cashed in an escrow account pending receipt of the written basis for the contributions. In most cases, the collective bargaining agreement between the Local and the Employer is the written basis for the contributions. In addition to a collective bargaining agreement, one of the following documents can be an acceptable written basis for accepting contributions.


• special project agreement



• participation agreement



• stipulation



• declaration on a Contribution Report form



2. Out of Order Contributions
   
   Delinquent employers will, sometimes, skip one or more months of contributions and make contributions for a later month. For the Welfare Fund, an Employer reporting contributions in one month, could extend employee eligibility for four additional months. If the Welfare Fund accepted contributions "out of order", an employer could adversely select against the Welfare Fund by only making contributions once every four months or only when certain employees required health care. Moreover, employees who are on the Contribution Report form for months an employer chooses to contribute while those employees who worked during the delinquent months could be left without benefits. To prevent such adverse selection against the Fund and against participants, the Trust Funds have adopted a uniform eligibility rule that contributions will not be accepted out of order. All out of order contributions will be escrowed until contributions are received on the delinquent months. Absent payment of delinquent contributions, the Welfare Fund will only remove "out of order" contributions from escrow in the following circumstances:
   
   
   • In the event an Employer declares bankruptcy, the Fund will take moneys out of escrow for periods prior to the bankruptcy and apply them to the months for which they were made. However, the Funds' escrow policy will still apply to all post-bankruptcy petition contributions and delinquencies.
   
   
   
   • In an Employer agrees to settle its delinquency with the Funds and the corporate shareholders personally guarantee the settlement, contributions will be taken out of escrow and applied to the months for which they were made. In addition, all Employees will be given credit for months in which contributions were not received, but the Employer did submit a Contribution Report Form. If the Employer subsequently breaches the settlement agreement, all benefits payable to corporate shareholders and their families will be offset against amounts personally guaranteed by the shareholders.
   
   
   
   • All "out of order" contributions will be removed from escrow twenty-four months after they were placed in the escrow account.
   
   
   
   • All "out of order" contributions will be removed from escrow when a debt is found to be uncollectible.
   
   
   When SIS Pension contributions are placed in escrow because they are out of order or incomplete, SIS Pension contributions are removed from escrow and credited to employees when possible, by the end of the calendar quarter in which they are placed in escrow.
   
   The Trust Funds will apply this escrow policy based on the jurisdictions of the Local Unions. Thus, if an employer has submitted "out of order" contributions in one Local's jurisdiction, but is current in another Local's jurisdiction, the Trust Funds will only escrow contributions for the jurisdiction with which the Employer is delinquent.
   
   
3. Incomplete Reports or Contributions


In the event the Fund Office receives contributions but not reporting forms (or for any reason the Fund Office cannot determine the individuals and hours to credit) checks will be cashed and held in escrow until reports or other needed information is received.

If an Employer makes contributions that are substantially incomplete, the contributions will be held in escrow until they are substantially complete. If an Employer pays contributions on only a portion of his Covered Employees, contributions for all Funds and all Employees will be held in escrow.

When the Fund Office has reason to believe that contribution checks will "bounce", these checks are placed in escrow. Once it is reasonably certain that the checks have cleared, contributions are removed from escrow and applied to the Funds.

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1. Rules on Initial, Continuing and Termination of Eligibility for Office Employees



1. Eligibility to Participate


All Office Employee of a Sprinkler Local Union (officers and employees) affiliated with the United Association are eligible to participate in the Sprinkler Industry Funds. An Office Employee participates in a Plans if his or her Local Union-Employer signs a Participation Agreement with that Fund covering that Office Employee's classification.

NASI Welfare Fund: All officers and employees of the Local Union who are full time Employees and who are not covered by another health benefit plan must participate in the NASI Welfare Plan. The Local Union may decide who it considers to be a full-time Employee for this purpose as long as it does so on a reasonable and consistent basis. The classifications of Employees covered and the names of the Employees must be attached to the Participation Agreement signed by the Local Union. An Office Employee covered by the Participation Agreement will be eligible for benefits from the Welfare Fund on the first day of the month following 15 days of full-time employment with the Local Union and provided that contributions are made on the Employee's behalf.

NASI Pension Fund and SIS Pension Fund: All officers and employees of the Local Union are eligible to participate in the Plans. The employees covered must meet IRS requirements (See Section 12). However, under current rules and conditions, the Local Union may decide who it will cover. The Local Union may choose to cover all of its employees or only some of its employees. This is a change from the previous rule. However, the employees covered or excluded must be based on reasonable classifications. The IRS takes the position that Employees may not be covered or excluded based on part-time status. However, the NASI Pension Plan does require that an Employee must complete 950 for which the Employee is paid within a twelve (12) consecutive month period before he or she is covered by the Plan. The SIS Plan requires that a Local Union Employee who earned his or her first hour for the Local Union on or after January 1, 1993, participates in the Plan only after completing 1000 hours for which the Employee is paid. The classifications of Employees covered and the names of the Employees must be attached to the Participation Agreement signed by the Local Union.


2. Continuation of Coverage Under the Welfare Plan -- Retiree Self-Pay


An Eligible Retiree, who participated in the Welfare Fund as an Office Employee, has the right to continue certain benefits, provided the Eligible Retiree makes the self-payment as required by the Board of Trustees and meets the other requirements under Articles III and V of the Welfare Plan. Consult the current Plan document for a complete list of the eligibility requirements for Retiree coverage.


3. Termination of Coverage Under NASI Welfare Plan


Coverage for an Office Employee who became initially eligible for coverage in this Plan under the terms of a collective bargaining agreement will terminate after the last day of the fourth month following the last two consecutive months in which the Employee worked 80 or more hours of Covered Employment, with at least one hour in the second of those two months. Coverage for an Office Employee who became eligible for coverage in this Plan under a participation agreement will terminate on the earlier of the last day of the month in which the Employee no longer satisfies the eligibility requirements under the Plan or the last day of the month in which employment terminates. Eligibility will terminate if the Local Union does not make contributions to the Welfare Fund on the Employee's behalf.


2. Payment of Contributions; Amount of Contributions


As with the contributions due for collectively bargained Employees, NASI Pension Plan and SIS Plan contributions are due in the Fund Office on the 15th of the month following the month in which the work was performed.

For the Welfare Fund, contributions at the established rate are due for covered Office Employees for each hour paid by the Local Union. For hourly paid employees, the hours contributed on are the hours paid by the Local Union. For salaried employees, the hours are forty (40) hours per week.

For the NASI Pension Fund, contributions at the established rate are due for covered Office Employees for each hour paid by the Local Union. For hourly paid employees, the hours contributed on are the hours paid by the Local Union. For salaried employees, the hours are forty (40) hours per week.

For the SIS Pension Fund, contributions are made for Office Employees at either a fixed amount per hour paid or on the basis of a percentage of the Employee's compensation as provided in the Agreement between the Local Union and the Trustees. Either the hourly contribution rate or the percentage of compensation must be uniform for all Employees of the Local Union who participate in the SIS Pension Fund. If hourly contributions are made, the hours contributed on are the hours paid by the Local Union. If contributions are made as a percentage of pay, the pay on which the contributions are based is the Employee's compensation from the Local Union reported on the Employee's W-2 form for the year. Whether contributions are made hourly or based on pay, the contributions for an Employee in each year may not be more than 25% of that Employee's compensation for that year.

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This section applies ONLY to Employers who contribute to the NASI Pension Plan, the NAS Metal Trades Pension Plan and/or the SIS Pension Plan for Employees who are not covered by a collective bargaining agreement. This includes Local Union Employees.

The Internal Revenue Service has issued regulations which establish rules governing the coverage of non-collectively bargained Employees in qualified pension plans such as these Plans. These rules, referred to as the IRS "coverage" and "nondiscrimination" rules, provide that if an Employer contributes to a collectively bargained plan on behalf of Employees who are not in a collective bargaining unit, the "non-collectively bargained Employees" of the Employer must separately meet these IRS requirements without taking bargaining unit Employees into account. This means that if you cover any non-collectively bargained Employees in any one of these Plans, the IRS coverage and nondiscrimination rules with respect to each Plan will be applied to your non-collectively bargained Employees. The portion of the Plans covering collectively bargained Employees automatically satisfies both the IRS coverage and nondiscrimination requirements.

There are special rules for collectively bargained plans which permit most non-collectively bargained Employees to be treated as bargaining unit Employees for purposes of the IRS requirements. If the special rules apply and an Employee is treated as a collectively bargained Employee, the complicated IRS rules described in (b) and (c) do not apply.

1. Special Rules for Multiemployer Plans


After the initial identification of non-collectively bargained Employees by the Employer, the Plan can apply special rules for multiemployer plans which permit Employees who would otherwise be non-collectively bargained Employees to be treated as collectively bargained Employees for purposes of these regulations. The effect of this is that the complicated IRS rules described in (b) and (c) below will not apply. To take advantage of the special rules, the following conditions must be met:


• The non-collectively bargained Employee must be or have been covered by the NASI Pension Plan, the NAS Metal Trades Pension Plan and/or the SIS Pension Plan, as applicable, as a member of the bargaining unit.



• The collective bargaining agreement or a participation agreement or other agreement must provide for the non-collectively bargained Employee to participate in the NASI Pension Plan, the NAS Metal Trades Pension Plan and/or the SIS Pension Plan, as applicable.



• The non-collectively bargained Employee must be employed by a participating Employer, a Local Union or the applicable Pension Plan.



• The special rules must be applied to all Employees on a reasonable and consistent basis for a Plan Year.



• The total number of non-collectively bargained in the NASI Pension Plan, the NAS Metal Trades Pension Plan or the SIS Pension Plan (determined before the special rules are applied) is not more than 5% of the total Employees covered by the applicable Plan.



If the Plan wishes to take advantage of the Bargaining Unit Alumni Rule, the Plan must perform some limited testing to determine that the 5% limit on non-collectively bargained Employees is not exceeded. The minimum coverage and nondiscrimination rules described below would apply to non-collectively bargained Employees who do not qualify to be treated as collectively bargained Employees under the special rules for multiemployer plans.


2. IRS Coverage Regulations -- When the Special Rules Do Not Apply


The IRS regulations require that the coverage by a Plan of non-collectively bargained Employees of each Employer must meet one of two tests. The non-collectively bargained group will pass the first test (called the "Percentage Test") if the percentage of non highly paid Employees covered by a Plan is at least 70% of the percentage of highly paid Employees covered by the Plan. The highly paid Employees are identified primarily based upon salary amount and their officer or owner status. Since the salary figures are adjusted each year, the technical definition of "highly compensated" Employee has not been included in these guidelines; however, the Fund Office will provide this definition upon written request.

If the coverage by one of these Plans (or any other Plan) of your non-collectively bargained Employees does not pass the first test, all the Plans of the Employer must be combined to pass the second test. This second test requires complicated mathematical calculations.

For purposes of this test, the non-collectively bargained employees of each Employer are divided into "rate groups" based on rate at which the Employees earn benefits under these Pension Plans. Benefits earned under other pension plans of the Employer are also included. The rate is expressed either as a dollar amount or as a percentage of Employee's compensation. Each rate group must include enough lower paid employees to met the Percentage Test described above.

An Employer may exclude some Employees from consideration for purposes of these coverage tests. As we have explained, these rules apply only to your non-collectively bargained Employees in these Plans -- bargaining unit Employees are not considered when these tests are performed. In addition, an Employer may exclude from consideration any non-collectively bargained Employee who has not satisfied the service requirements for participation in the Plan being tested, provided that the Employer does not contribute on any other non-collectively bargained Employee who has not satisfied the service requirements. The service requirements are a specified number of hours of service in the 12-month period from the Employee's date of hire or in any calendar year. The service requirements are 950 hours for the NASI Pension Plan and the NAS Metal Trades Pension Plan and 1000 hours for the SIS Pension Plan.

A group of non-collectively bargained Employees may not accrue (earn) benefits under these Pension Plans when the coverage requirements are not met for that group. Therefore, if an Employer contributes to one or more of these Pension Plans on behalf of any non-collectively bargained Employees and the Employees covered do not meet the IRS tests for one or more of the Plans, the non-collectively bargained Employees will not accrue a benefit under that Plan for any year in which the coverage rules are not met. In addition, if the coverage of non-collectively bargained Employees violates IRS coverage rules, the Plan's "tax qualified status" may be lost. If this happens, the Employer may not be able to deduct some of his contributions to the affected Plan. Also, the value of highly paid Employees' vested accrued benefits under the affected Plan will no longer be protected from taxation but will be included in the Employees' income. Finally, if a Plan does not enforce these rules, the Plan's income could be taxed. IRS rules provide that a violation of these rules by one Employer could jeopardize the entire Plan.


3. IRS Nondiscrimination Regulations


The IRS nondiscrimination regulations require that benefits, rights and features provided by a Plan must not discriminate in favor of highly compensated Employees.


4. Compliance Requirements


The Plans have adopted rules applicable to Employers of non-bargaining unit Employees to assure that the Plans comply with these new IRS requirements. These procedures are attached to these guidelines as Appendix C.


5. Conclusion


These rules are very complicated. The following points will help to clarify their application:


• The coverage rules are established by federal law and by IRS regulations and not by the Plans and their Trustees.



• These rules apply only to qualified pension plans. The NASI Pension Plan, the NAS Metal Trades Pension Plan and the SIS Pension Plan are qualified pension plans and are subject to these rules.



• These rules do not apply to welfare plans or apprentice plans.



• These rules apply to an Employer only if that Employer contributes to the NASI Pension Plan, the NAS Metal Trades Pension Plan or the SIS Pension Plan on behalf of one or more non-collectively bargained Employees.



• These rules apply to all qualified pension plans, not just collectively bargained plans, and they will also affect any qualified pension plans that Employers may have for their staff.



REMEMBER, THESE RULES DO NOT APPLY TO BARGAINING UNIT EMPLOYEES OR AFFECT THE PARTICIPATION OF BARGAINING UNIT EMPLOYEES IN ANY WAY.

We recommend that you review this summary and the requirements of the law with your own attorney or pension advisor.

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