Compliance

Multiemployer Plan Member Has No Claim Against Rehabilitation Amendment

WestRock RKT Company claims that the amendment violates ERISA because “critical status [multiemployer plans] with valid rehabilitation plans may not unilaterally impose on employers contribution requirements necessary to avoid an [accumulated funding deficiency].”

By Rebecca Moore editors@plansponsor.com | May 17, 2017
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A federal appellate court has agreed with a lower court ruling that an employer participating in a multiemployer plan has no cause of action to file suit regarding the multiemployer plan sponsor’s rehabilitation plan amendment.

The 11th U.S. Circuit Court of Appeals notes that under the original U.S. Code Section 1132 of the Employee Retirement Income Security Act (ERISA)—titled “civil enforcement”—there was no cause of action for an employer. However, the Pension Protection Act (PPA) amended that section to create special funding rules for multiemployer plans that were at risk of not being able to meet their distribution commitments. One of those rules was that a plan in “critical status” had to adopt a rehabilitation plan, which forces the plan sponsor, employers, and employees to take action to improve the financial outlook of the fund.

The Board of the Pace Industry Union-Management Pension Fund adopted a rehabilitation plan in 2010. Two years later, the Board amended the fund’s rehabilitation plan to include a provision requiring an employer that withdraws from the fund to pay a portion of the fund’s accumulated funding deficiency.

The new section in the PPA includes a cause of action for employers in certain scenarios related to these special funding rules—that amendment created Section 1132(a)(10), which states that a civil action may be brought by an employer if the plan sponsor fails to update or comply with the terms of the funding improvement or rehabilitation plan in accordance with the requirements of Section 1085, which lays out the rules for plans in critical or endangered status.

WestRock RKT Company claims that the amendment violates Section 1085 because “contribution rate schedules must be provided to the bargaining parties” and “critical status [multiemployer plans] with valid rehabilitation plans may not unilaterally impose on employers contribution requirements necessary to avoid an [accumulated funding deficiency].” The court found that the procedure WestRock cites for contribution rate schedules is inapplicable because it arises out of Section 1085(e)(3)(A)(i), but only Section 1085(e)(3)(A)(ii) is implicated in the case. Further, there is no explicit restriction saying the board cannot charge withdrawing employers for their share of the accumulated funding deficiency.

The court noted that WestRock does not allege that the board failed to meet any of the requirements of Section 1085. And WestRock does not cite to anything else in the statute that suggests an employer has a role to play when the plan sponsor enacts reasonable measures under that section.

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