diff --git a/CHANGES.txt b/CHANGES.txt
index 5700ed144..4c8f945d4 100644
--- a/CHANGES.txt
+++ b/CHANGES.txt
@@ -5,6 +5,8 @@ November 17, 2012
 * .tokens files goes in output dir like parser file.
 * added check: action in lexer rules must be last element of outermost alt
 * properly check for grammar/filename difference
+* if labels, don't allow set collapse for
+  a : A # X | B ;
 
 November 11, 2012
 
diff --git a/tool/playground/T.g b/tool/playground/T.g
index 0b958ddc1..129d86b9c 100644
--- a/tool/playground/T.g
+++ b/tool/playground/T.g
@@ -1,3 +1,8 @@
 grammar T;
-s : EOF ;
 
+s : A # X
+  | B
+  ;
+b : A # Y
+  | B{}
+  ;
diff --git a/tool/src/org/antlr/v4/parse/BlockSetTransformer.g b/tool/src/org/antlr/v4/parse/BlockSetTransformer.g
index 7862f009b..d5cf6607c 100644
--- a/tool/src/org/antlr/v4/parse/BlockSetTransformer.g
+++ b/tool/src/org/antlr/v4/parse/BlockSetTransformer.g
@@ -65,7 +65,7 @@ boolean inLexer = Character.isUpperCase(currentRuleName.charAt(0));
 	GrammarTransformPipeline.setGrammarPtr(g, $tree);
 }
 	:	{inContext("RULE")}? // top-level: rule block and > 1 alt
-		^(BLOCK ^(ALT setElement[inLexer]) ( ^(ALT setElement[inLexer]) )+)
+		^(BLOCK ^(alt=ALT {((AltAST)$alt).altLabel==null}? setElement[inLexer]) ( ^(ALT setElement[inLexer]) )+)
 		-> ^(BLOCK<BlockAST>[$BLOCK.token] ^(ALT<AltAST>[$BLOCK.token,"ALT"] ^(SET[$BLOCK.token, "SET"] setElement+)))
 	|	{!inContext("RULE")}? // if not rule block and > 1 alt
 		^(BLOCK ^(ALT setElement[inLexer]) ( ^(ALT setElement[inLexer]) )+)