Multiemployer Pension Plan Lowers Threshold That Triggers Partial Withdrawal Liability Payments
The United Food and Commercial Workers International Union (“UFCW”) National Pension Fund (which, according to its website has over 500 contributing employers and over 100,000 active participants) has adopted a new rule effective as of the plan year ending on June 30, 2014 which increases the risk that a participating employer will unknowingly create a partial withdrawal liability obligation for itself.
An employer participating in any multiemployer pension plan needs to be aware of when a reduction in force may trigger a partial withdrawal (which obligates the employer to make withdrawal liability payments on top of the contributions already being made). In short, ERISA § 4205(a) sets forth three scenarios for a partial withdrawal, including the 70% Decline Rule (the other two scenarios, which are not discussed further here, involve the “partial cessation of the employer’s contribution obligation” in the context of either a facility take-out or a bargaining unit take-out). Under the 70% Decline Rule, a partial withdrawal can occur when the employer’s contribution base units decline by at least 70% and remain at or below that level over a three-year testing period.
However, under the seldom utilized ERISA § 4205(c), a multiemployer pension plan that covers mostly employees in the retail food industry may be amended to provide that a partial withdrawal is triggered by only a 35% decline in contribution base units instead of a 70% decline. This is the provision that the UFCW National Pension Fund has taken advantage of, and which may ensnare some of its unsuspecting participating employers.