There are several special rules that apply to union employees when doing coverage testing under IRC 410(b). The most significant of these rules is that if a plan covers only union employees, the plan is deemed to pass coverage testing. See IRC 1.410(b)-2.
If a plan does not cover union employees but there are union employees in the controlled group, the union employees are excludable when doing a coverage test for the non-union plan. This means that the union employees are excluded from both the numerator and denominator when doing the IRC 410(b) coverage test for the non-union employees.
If a plan covers both union and non-union employees, the portion covering union employees is mandatorily disaggregated from the portion of the plan covering non-union employees. If there are multiple union plans due to multiple collective bargaining agreements, each union plan is mandatorily disaggregated. See IRC 1.410(b)-7(c)(4)(ii)(B).
Sometimes an employee’s status changes from union to non-union (or vice versa) mid-year. If an employee changes status mid-year, he is treated as a union employee for the hours he was a union employee and a non-union employee for the hours he was non-union employee. See IRC 1.410(b)-6(d)(2)(i). In the alternative, an employer can choose to treat employees with status changes as union or non-union for the entire year on a uniform basis as long as there is no discriminatory effect. See IRC 1.410(b)-7(c)(4)(i)(C).