Company Owes $1.7 Million for Union-Mandated Withdrawal

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A rubber company must pay a $1.7 million withdrawal liability assessment for withdrawal from a multiemployer pension plan, a federal court ruled.

The company claimed that it was not subject to the assessment because its withdrawal from a multiemployer pension plan was union-mandated. The court found that such a withdrawal does not provide the company with a federal claim for equitable relief under ERISA.

The company pointed to a Pension Benefit Guaranty Corporation's report dealing with union-mandated withdrawals, which found that such withdrawal occurs when a union voluntarily disclaims its status representing a group of employees and the relevant pension plan refuses to accept the continued contributions submitted by the employer.

Although the report stated that union-mandated withdrawals were rare and did not justify the creation of special rules, the report also offered three methods for calculating liability in these instances in case Congress decided that special rules were appropriate. Congress has not acted on the report or amended ERISA to account for union-mandated withdrawals.

The rubber company claimed that the arbitrator failed to use the PBGC's alternate method for calculating withdrawal liability when an employer's withdrawal resulted from union action. Under this method, the company argued that its liability totaled only $312,000.

According to the court, ERISA includes a comprehensive scheme for determining withdrawal liability. That scheme includes several specific exceptions that reduce withdrawal liability in certain circumstances, “but an exception for union-mandated withdrawals is not among them,” the court said.

For more information, see Compensation and Benefits Library's “Collectively Bargained Multiemployer Pension Plans” chapter.

To contact the editor on this story: Michael Trimarchi at

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