Compliance

Employer May Withdraw From Multi-Employer Plan in Critical Status

By Rebecca Moore editors@plansponsor.com | August 22, 2012
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August 22, 2012 (PLANSPONSOR.com) - The Pension Protection Act (PPA) does not bar an employer from withdrawing from a multi-employer pension plan that is in critical status, a court has ruled.

The 2nd U.S. Circuit Court of Appeals noted that about this issue, the PPA itself is silent, so it turned to the question of “congressional intent.” Writing for the majority, Circuit Judge John M. Walker, Jr. said the statute appears to assume withdrawals in these circumstances by revising the calculation of withdrawal liability where the pension plan withdrawn from is in critical status.   

Specifically, the PPA provides that calculations of an employer’s withdrawal liability should not take into account 1) contribution surcharges imposed automatically once a pension plan enters critical status, or 2) benefit reductions required by a rehabilitation plan.   

According to the court opinion, in enacting the PPA, Congress also amended other portions of the Employee Retirement Income Security Act (ERISA) dealing with withdrawal and withdrawal liability without the slightest indication that it intended to abrogate employers’ ability to withdraw from pension plans in critical status.