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Published: January, 2010; Vol 6, Num 8


Economic Crisis Invites Investigation:

Merger Considerations Challenge Trustees

Perhaps nothing challenges a trustee’s “unwavering duty to complete loyalty to the beneficiary of the trust” (U.S. Supreme Court) as consideration of a merger with another fund. 

Mergers can be fundamental tests of fiduciary responsibility because the prospective situations are fluid and, in some ways, contradictory. Moreover, mergers are sometimes assessed in the context of financial crisis, when all-round consideration can be constrained by impending demands and time limitations.

The basic premise of merger consideration is potential consolidation and reconfiguration of every aspect of two or more funds’ administration. Two or more groups of trustees, administrators, attorneys, financial consultants, eligibility rules, benefit plans, collection mechanisms…indeed, if a merger is successful, two or more of everything must be made into one.

A merger presents a host of choices and forces hard, definitive decisions that may affect the livelihoods of fund employees, the structures of Laborers’ benefits packages and the long-range stability of the contemplated fund itself. Successful consideration of mergers requires extra focus and preparation from every trustee, but the starting place always remains the same: the best interests of the trust’s beneficiaries must be the trustees’ only concern.

Trustees can be assured that they are fulfilling their fiduciary responsibility if they make sure their decisions can be explained as the “right thing to do” for the Laborers and family members for whom the health and welfare fund was established. While, for instance, a merger could significantly erode the “personal touch” currently provided by a small, local fund whose administrator and staff know everyone in the local union, this loss can be justified if a merger will allow the fund to sustain a benefit package that otherwise is in jeopardy due to diminishing participants or shrinking reserves.

Competing interests are part of every merger consideration, and, inevitably, different trustees will value various interests differently. Votes are seldom unanimous, but each trustee must be able to justify his or her position on the basis of the members’ or participants’ interests. If they can do so, despite the differences in perspectives and votes, no violation of fiduciary responsibility will occur.

A good place to start in consideration of a possible merger is with the LHSFNA’s Health Promotion Division. Division Director Mary Jane MacArthur has assisted several LIUNA health and welfare funds with merger assessments by framing the questions and options for consideration by trustees of the relevant funds. Once a framework is established, trustees can consider the perspectives and opinions of various constituencies with less worry of succumbing to undue influence from one source or another. Inevitably, negotiation will be part of the process; give and take will occur on virtually every front. In the end, once a decision is made, trustees can minimize criticism and avoid possible charges of breeching their trustee duty by directing a comprehensive educational campaign that clearly explains the rationale of the merger and what it means in practical terms for fund participants.

As many trustees realize, a prolonged recession with high unemployment, particularly in construction, could severely pinch some LIUNA health and welfare funds. In such conditions, mergers may become more attractive despite their complexity and potential contentiousness. Though hard work by trustees is required to achieve a successful merger, the return on the investment may be a stable, productive fund that serves Laborers for decades to come. If so, trustees will certainly have properly exercised their fiduciary responsibility.

This is another article of the LHSFNA’s trustee education series. We welcome your feedback and questions. Email us at

[Steve Clark]