Hostess Brands Is Latest Case Highlighting Funding Challenges of Multiemployer Plans

Recent efforts by Hostess Brands Inc. to use bankruptcy to discharge withdrawal liabilities totaling nearly $2 billion highlight a persistent and serious problem for multiemployer plans, a retirement industry official told BNA.

Employers such as snack food maker Hostess have tried using bankruptcy to avoid their withdrawal obligations, to the detriment of multiemployer plan participants, their beneficiaries, and the employers that continue to contribute to those plans, Randy G. DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP), said in a Nov. 20 interview.

NCCMP made that same argument in an amicus briefthat it submitted in February to the U.S. Bankruptcy Court for the Southern District of New York in the Chapter 11 bankruptcy case In re: Hostess Brands Inc. More recently, Hostess announced Nov. 16 that it had decided to seek bankruptcy court permission to shut down its operations and liquidate its business in the wake of a bakers' union strike, and that request was approved by a bankruptcy judge Nov. 21, the company said.

In the case of Hostess, the employer's withdrawal liabilities are “enormous,” and it should not be permitted “just to dump those on its competitors,” DeFrehn said.

Withdrawal liability refers to the statutory obligation of an employer that contributes to a multiemployer plan to pay off its share of benefit obligations before it withdraws from the plan. Hostess has withdrawal liabilities associated with 42 multiemployer plans, according to the Pension Benefit Guaranty Corporation.