Short answer: a Taft-Hartley health fund is a health and welfare plan for union members that several employers pay into under their collective bargaining agreements. It is run by a board of trustees with equal numbers of union and employer representatives, and it is funded by contributions, usually a set amount for every hour an employee works. Because the plan belongs to the fund rather than any one employer, workers keep their coverage as they move between contributing employers.
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Key takeaways
- The contract sets the contribution. The collective bargaining agreement fixes what each employer pays, usually per hour worked.
- The fund sets the benefits. Trustees decide plan design, eligibility rules and reserves, as ERISA fiduciaries.
- Hours earn coverage. Most funds use hour banks, so coverage follows hours worked across employers rather than one job.
- Employers still have duties. Accurate monthly reports, on-time payment and payroll audits are the contributing employer’s job.
Where the name comes from
The Labor Management Relations Act of 1947, known as the Taft-Hartley Act, made it unlawful for an employer to pay money to a union except in narrow cases. One of those cases, in section 302(c)(5), is a trust fund for employee benefits that is jointly administered by union and employer trustees. Every union health and welfare fund in the country is built on that exception, which is why the plans carry the name.
The same structure is used for pension, annuity, training and vacation funds. This article covers health and welfare funds only.
How the money and the coverage flow
- The contract sets the rate. The collective bargaining agreement states how much the employer contributes for each covered employee, usually per hour worked, sometimes per week or per month.
- The employer reports and pays. Each month the employer sends the fund office a remittance report listing covered employees and hours, with payment.
- The fund credits hours. The fund office posts the hours to each member’s account.
- Hours earn eligibility. Once a member has enough hours in a period, coverage starts, usually for a later month. This lag gives the fund time to receive contributions before it pays claims.
- The fund pays claims. Claims are paid from the trust, often through a third-party administrator, with stop-loss or an insured arrangement for part of the risk in some funds.
Hour banks: why coverage survives a layoff
Construction and other project-based trades have uneven work. Most funds deal with that through an hour bank: hours worked above the monthly requirement are banked and drawn down when work slows, so a member stays covered through a short layoff or a winter. When the bank runs dry, members can usually self-pay for a period, and COBRA applies after that.
The rules, including how many hours are needed, how many can be banked and how long they last, are set by each fund’s trustees and appear in its summary plan description.
Taft-Hartley fund vs single-employer group health plan
| Taft-Hartley health fund | Single-employer group plan | |
|---|---|---|
| Who runs it | Joint board of union and employer trustees | The employer |
| Who sets benefits | Trustees | The employer, with its carrier or administrator |
| How it is funded | Negotiated contributions, often per hour | Premiums or claims, split between employer and employees |
| Portability | Coverage follows the member across contributing employers | Coverage ends when the job ends, subject to COBRA |
| Main law | ERISA, plus the Taft-Hartley Act rules for the trust | ERISA, plus state insurance law if fully insured |
What contributing employers are responsible for
- Accurate remittance reports. Every covered employee and every covered hour, as the agreement defines them. Misclassifying workers or hours is the most common source of disputes.
- Paying on time. Late contributions carry interest and liquidated damages under ERISA, plus the fund’s legal fees if it has to sue to collect.
- Payroll audits. Funds routinely audit contributing employers’ payroll records against their reports, often looking back several years.
- Coverage for everyone else. Non-union office staff, managers and owners are not covered by the fund and need their own plan. See non-union benefit coordination.
Withdrawal liability, the large bill an employer can face when leaving a union pension plan, applies to multiemployer pension plans, not to health and welfare funds.
Taft-Hartley funds and the ACA employer mandate
A contributing employer with 50 or more full-time employees, including full-time equivalents, is still an applicable large employer under the ACA. IRS relief that has been in place since the 2014 employer mandate regulations treats the employer as having offered coverage to a union employee when it is required to contribute to a multiemployer plan for that employee under a collective bargaining agreement, and the plan offers affordable, minimum value coverage to full-time employees and their dependents.
Employers using the relief report it on Form 1095-C with code 2E on line 16. The relief covers union employees only; non-union full-time employees still need an offer from the employer’s own plan. Penalties for a failed offer are $3,340 per full-time employee under section 4980H(a) and $5,010 under 4980H(b) for 2026, rising to $3,780 and $5,670 for 2027. See ACA employer penalties explained.
Taft-Hartley funds in Michigan
Michigan remains more unionized than the country as a whole: 13.0% of Michigan workers were union members in 2025, about 566,000 people, against 10.0% nationally, according to the state’s analysis of Bureau of Labor Statistics data. Multiemployer health funds are concentrated in the building trades, but also serve manufacturing, trucking, food service and public-sector bargaining units.
Michigan repealed its right-to-work law in 2023, with the repeal taking effect in February 2024, which allows union security clauses in private-sector contracts again. Like all multiemployer plans, Michigan funds are governed by federal ERISA rather than state insurance law.
Frequently asked questions
What is a Taft-Hartley health fund?
A Taft-Hartley health fund, also called a multiemployer health plan or union health and welfare fund, is a jointly trusteed benefit fund established under the Labor Management Relations Act of 1947. It provides health benefits to union members and their dependents, funded by contributions from multiple employers under collective bargaining agreements.
Who governs a union health and welfare fund?
A board of trustees with equal representation from participating employers and the union. Trustees are ERISA fiduciaries and must act solely in the interest of participants and beneficiaries, including on plan design, investments and administration.
How do union members qualify for coverage?
By working enough covered hours for contributing employers. Each fund sets its own hour requirement, lag period and hour bank rules, which appear in the fund’s summary plan description.
Can a non-union employer join a Taft-Hartley health fund?
Generally no. Participation is tied to a collective bargaining agreement that requires contributions. A few funds allow limited participation for non-bargaining employees of contributing employers, under the terms of the fund’s trust agreement.
Do Taft-Hartley funds satisfy the ACA employer mandate?
They can. IRS relief treats a contributing employer as offering coverage to union employees if it contributes under a collective bargaining agreement and the fund offers affordable, minimum value coverage to full-time employees and dependents. Non-union employees still need a separate offer.
Is there withdrawal liability for a union health fund?
No. Withdrawal liability applies to multiemployer pension plans. Leaving a health and welfare fund ends the contribution obligation under the terms of the bargaining agreement, but it does not create a withdrawal liability bill.
Contributing to a union fund?
CFH Insurance Consultants is an independent employee benefits firm, founded in 2007. We are licensed insurance brokers, and for proper coverage of an account we work in teams of five: an account executive, an account manager, a plan analyst, customer service and IT. We help contributing employers check their contribution schedules against the agreement, reduce delinquency and audit risk, and build the right coverage for non-union staff alongside the fund. See our Taft-Hartley and multiemployer benefits work. Send us your renewal, call 248.370.8853, or book a 30-minute call.
Related reading: Contribution schedule review · Delinquency risk review · Construction employee benefits · Group retiree medical benefits
This article is general information, not legal advice. Fund rules vary; the trust agreement, plan document and collective bargaining agreement control. Questions about a specific fund belong with its administrator and ERISA counsel.
Unhappy with your current broker? Switch to CFH. Your employees won’t notice. You will.
Related reading: What Is an HMO? How HMO Health Plans Work, in Plain English · Vaccine coverage in employer health plans for 2027 · Cybersecurity for employer health plans: HIPAA, vendors and breach readiness
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