The 2nd U.S. Circuit Court of Appeals upheld a district court ruling that HOP Energy was not exempt from withdrawal liability under the Multi-Employer Pension Plan Amendments Act (MPPAA) because the purchaser of HOP’s New York City operating division lacked an obligation to contribute “substantially the same number of contribution base units” to the pension fund post-sale as HOP had contributed pre-sale.
The asset purchase agreement between the two companies stated that the purchasing company shall make contributions to the Local 553 Pension Fund for substantially the same number of contribution base units for which HOP had an obligation to contribute with respect to the operations covered by the pension fund. However, the agreement included a caveat that said: “Notwithstanding the previous sentence and except as otherwise provided in Section 12.1, nothing in this Section shall impair or limit the Purchaser’s right to discharge, lay off, or hire employees or otherwise to manage the operations of the Business, including the right to amend, revise or terminate any collective bargaining agreement currently in effect and, as a consequence, reduce to any extent the number of contribution base units with respect to which [the purchasing company] has an obligation to contribute to any plan.”
The appellate court agreed that the purchasing company had an obligation to contribute to the fund at the same base unit rate, but it said the purchaser had no obligation to maintain substantially the same number of base units. Therefore, the sale did not qualify HOP for an exemption from withdrawal liability.
The court opinion further explained that nothing in the union-employer agreements in the record [those between Local 553 and the purchasing company] require[d] the purchaser, in respect to the operations of HOP to keep a certain number of employees, whether from the purchaser’s ranks or HOP’s, on the payroll to achieve a contribution base unit level that would remain substantially the same as HOP’s pre-sale.The opinion in HOP Energy, LLC v. Local 553 Pension Fund is here.
« Russell Releases Corporate Pension Finance Handbook