PPT for 5/18 WEB Presentation on Multiemployer Plan Liability

1. New York | New Jersey | Washington, D.C.
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
WITHDRAWAL LIABILITY
The Great Imposition on Contributing Employers
Presented by:
Gary S. Young, Esq., Partner
Chair, Employee Benefits & ERISA Group

2. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
A Disturbing Report
The Multiemployer Pension Plan Amendments Act of
1980 (MPPAA) made profound changes in the way
the federal government insures and regulates private
pension plans covering employees of more than one
employer. The Congress enacted the changes
because of fears that, without them, the federal
insurance program could incur billions of dollars in
losses, and over a million plan participants could
lose their benefits.

3. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
A Disturbing Report
This “solution” solved nothing and only shifted this
looming liability away from the government over to
the contributing employers who were left
defenseless to the excesses of union and the
trustees of such plans.

4. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employment Law Requirements
• Among its many theoretical protections, the
Employee Retirement Income Security Act of 1974
(ERISA) guaranteed (“insured”) within limits those
participant benefits not funded by plan assets
(unfunded) when a plan terminated.
• Until the passage of the MPPAA, Employers that
contributed to multiemployer plans had limited
liability for unfunded benefits.

5. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Common Employer Mistakes
• Under the initial ERISA regime, amounts not
recovered from employers were to be financed from
annual premiums paid to the program by ongoing
plans.
• To strengthen the government’s weak insurance
plan, the MPPAA limited the circumstances under
which the program could assist plans in paying
guaranteed benefits and raised the premium rate to
generate revenues for providing such assistance.

6. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employee Terminations
• Even at the time that ERISA was passed in 1974, Congress
knew that the underfunding of “Multiemployer Plans” was a
problem in need of fixing.
• The failure of the Studebaker union-negotiated employee
pension plan was cited by Congress as the need and
justification for the passage of ERISA.
• ERISA formally defined terms of art in the laws of pensions.
Terms such as “defined benefit plan’ and defined
contribution plan” became law.

7. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employee Terminations
As of September 30, 2014, which was published just
before the most recent attempt by Congress to
address the endemic problems of multiemployer
plans, the bitter fruits of the MPPAA failures were
detailed:
• the present value of multiemployer non-
recoverable future financial assistance of
$44,190 million consists of 53 insolvent plans
($1,506 million);

8. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employee Terminations
• 61 terminated plans not yet insolvent but probable
($1,756 million), and
• 30 ongoing plans which are projected to exhaust
plan assets within 10 years and are classified as
probable ($40,928 million).

9. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employee Terminations
• At the same time, the multiemployer plan
insurance fund held less than $2 billion in assets.
• A study conducted by the PBGC in 2013
concluded that there was a 50% probability that
the fund would be exhausted within 10 years and
close to a certainty that it would run out by 2026.

10. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Employee Terminations
• These figures do not begin to tell the story of
countless employers that contributed every dime
that they agreed to under governing collective
bargaining agreements only to find that their share
of unfunded liability was massive.

11. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
Definition of a Multiemployer Plan.
• (ERISA Secs. 3(37) and 4001(a)(3)) A
multiemployer plan is a collectively bargained
plan maintained by more than one employer,
usually within the same or related industries, and a
labor union. These plans are often referred to as
"Taft-Hartley plans."

12. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
• Until the adoption of the MPPAA, multiemployer
plans were regarded as being defined
contribution plans for employers. That is,
employers went to the bargaining table and
negotiated the rate of contribution into these
plans.

13. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
• When it came to the level of benefits to be
provided, the actuarial assumptions adopted, the
investment of trust assets and the administrative
expenses of the plans, these matters were left to
the unions with no employer input and weak
employer/trustee oversight under Taft-Hartley.

14. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
To strengthen the plans’ financing and protect the
program, the MPPAA was adopted which:
(1) increased employer contribution requirements
to help ensure that plans accumulated enough
assets to pay for unfunded benefits, and

15. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
(2) made employers, unless relieved by special
provisions, liable for their share of unfunded plan
benefits when they withdrew from the plans. The
latter served to discourage withdrawals and the
shifting of liabilities back to the trust.

16. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
For many years, Employers had little or no knowledge
of the status of the plans to which they contribute, as
such information lies hidden and largely unread in
Form 5500s filed with the IRS and U.S.DOL.
Transparency has improved with the advent of
electronic filing, but in the absence of understanding
actuarial assumptions and calculations, even such
disclosures hardly enlighten.

17. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
Contributing employers, when faced with massive
withdrawal liability assessments, are frequently
shocked to learn that they have absolutely no
recourse for union trustee waste and
mismanagement.

18. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
Consider the case of DiGeronimo Aggregates v.
Zemla, 763 F.3d 506 (6th Cir. August 14, 2014)
where the court found that:
• although the employer had standing under ERISA to
sue the plan trustees for negligence, this right was
limited to trustee actions that violated the purposes
of ERISA, which is “to promote the interests of
employees and their beneficiaries in employee
benefit plans.”

19. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
• Similarly, the court found the employer’s claim that
the plan trustees negligently managed the plan,
thereby causing the employer to suffer an increased
withdrawal liability, did not run afoul of the purpose
of the MPPAA — which it found was to protect
multiemployer plan beneficiaries by providing
contributing employers with an incentive to remain
in financially unstable plans rather than
withdrawing.

20. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
Acknowledging that its negligence claim is not
authorized by any section of ERISA, the employer
urged the court to use its lawmaking powers to create
a new negligence claim in favor of employers that
participate in multiemployer plans.

21. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
The court noted that previously it has held its
authority to create federal common law in this area is
restricted to instances in which:
• (1) ERISA is silent or ambiguous;
• (2) there is an awkward gap in the statutory
scheme; or
• (3) federal common law is essential to the
promotion of fundamental ERISA policies.

22. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
The appellate court found ERISA is not silent about
who holds a claim against trustees for negligent
management of plan assets:
• participants and beneficiaries do.
• By omission, employers do not.

23. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
“We are reluctant to tamper with an enforcement scheme
crafted with such care because Congress has expressly
defined who may challenge a trustee’s plan management
decisions and a contributing employer is not included in that
definition, even after the enactment of the MPPAA which
created the possibility of large withdrawal liability,” the 6th
Circuit said in its opinion.
“Had Congress intended to create a negligence cause of
action in favor of contributing employers against trustees, it
certainly knew how to do so.”

24. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
The appellate court also found its recognition of a
new negligence cause of action will not close an
awkward gap in the statutory scheme “because there
is no gap to close.”
The court said it presumes that Congress deliberately
omitted this remedy because the trustees’ plan-
management duties flow to participants and
beneficiaries, not contributing employers.

25. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Law’s Provisions and Recommendations of
Actions to be Taken
Finally, the 6th Circuit decided that a holding that
trustees of a multiemployer plan owe contributing
employers a duty of reasonable care regarding plan
management is not essential to promote the
fundamental policy of ERISA—ensuring that private-
sector workers would receive the pensions that their
employers have promised them.
“The same can be said regarding the fundamental
policy of the MPPAA,” the court added.

26. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
An employer that withdraws from participation in a
multiemployer plan may do so either in complete
withdrawal - or - partial withdrawal.
If the plan has unfunded vested benefits allocable to
the employer, the plan will assess withdrawal liability.
The plan determines the amount of liability, notifies
the employer of the amount, and collects it from the
employer.

27. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
Complete withdrawal of an employer (ERISA Sec.
4203)
A "complete withdrawal" occurs when the employer
(including all controlled group members) permanently
ceases to have an obligation to contribute to the plan
or permanently ceases all covered operations under
the plan. (Special withdrawal liability rules apply to
plans and employers in certain industries, such as
construction or entertainment.)

28. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
Complete withdrawal of an employer (ERISA Sec.
4203) – (continued)
If all or substantially all employers withdraw
completely from a plan, the plan experiences a mass
withdrawal.

29. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
Partial withdrawal of an employer (ERISA Secs.
4205, 4206 and 4208)
To ensure that employers who gradually reduce their
contributions to a multiemployer plan do not escape
withdrawal liability, ERISA has rules under which a
partial cessation of the employer's obligation to
contribute could trigger liability.

30. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
Partial withdrawal of an employer (ERISA Secs.
4205, 4206 and 4208) – (continued)
A partial withdrawal occurs when there is:
• A decline of 70% or more in the employer's
"contribution base units" (CBUs), or
• A partial cessation of the employer's obligation to
contribute.

31. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Types of Withdrawal
Partial withdrawal of an employer (ERISA Secs.
4205, 4206 and 4208) – (continued)
First Test, a CBU is the unit by which the employer's
contribution is measured (for example, hours worked,
tons of coal mined, containers handled).
The 70% decline is measured by a formula in ERISA
that looks at the employer's CBUs over a period of
time.

32. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Partial Withdrawal
Partial withdrawal of an employer (ERISA Secs.
4205, 4206 and 4208) – (continued)
Second Test, the "partial cessation" is designed to capture such
things as:
• A situation in which an employer is obligated to contribute to
the plan under more than one bargaining agreement, and one
of the agreements expires, but the employer continues to
perform work in the jurisdiction of the agreement without
making contributions for the work, or

33. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Partial Withdrawal
Partial withdrawal of an employer (ERISA Secs.
4205, 4206 and 4208) – (continued)
• A situation in which an employer ceases to contribute for one
or more of its facilities, but continues to perform work at the
facility for which the obligation ceased.
The amount of liability for a partial withdrawal is based on the
liability for a complete withdrawal liability, calculated under a
formula in the law.

34. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
If all of the contributing employers withdraw, the plan is
terminated in a mass withdrawal. If substantially all of
the employers withdraw, there is a non-termination
mass withdrawal.

35. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Liability for employers withdrawing within the plan year
in which a mass withdrawal occurs will be calculated
under the normal rules, except none of the relief
provisions discussed below (such as the de minimis
reduction or the 20-year cap) would apply. Also, certain
benefit reductions and suspensions apply.

36. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
In addition, employers who withdrew during the three
years prior to the mass withdrawal are presumed to be
part of the arrangement or agreement and are treated
as if they had withdrawn in a mass withdrawal.
The PBGC has issued regulations describing the
various administrative steps the plan must take if a
mass withdrawal occurs.

37. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Special rules for certain industries (ERISA Secs.
4203, 4205, 4211, 4216, 4219 and 4220)
In recognition of differing conditions in various
industries, ERISA has a series of special industry
rules. These rules modify the conditions under
which a complete withdrawal occurs or when the
employer is liable in the case of a partial withdrawal.

38. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Special industry rules are provided for the
following industries:
• Building and construction
• Entertainment
• Trucking, household goods moving, and public
warehousing
• Retail food

39. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
In addition, in other industries not covered by the
special statutory rules, Congress gave PBGC the
authority to craft rules comparable to the
construction and entertainment industry rules if the
industry has "construction-like" characteristics and if
these rules do not pose a significant risk to PBGC's
multiemployer insurance program.

40. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Asset sales (ERISA Secs. 4225 and 4204)
• Withdrawal liability of certain employers who sell
all or substantially all of their operating assets or
are insolvent is limited by ERISA Sec. 4225.
• A withdrawal does not occur because of a
cessation of contributions that results from a sale
of assets to another employer, provided the sale
meets certain conditions (ERISA Sec. 4204).

41. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability
(ERISA Secs. 4201, 4202, 4206, 4209, 4211 and
4219)
An employer's share of withdrawal liability is based on
its allocated share of the plan's unfunded vested
benefits (UVBs).

42. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
The amount of the share will depend on:
 the date or dates that the plan's assets and
liabilities are valued,
 the actuarial assumptions and methods used to
value the assets and benefits, and
 the allocation method chosen by the plan.

43. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
The law has various allocation formulas that a plan can
use for determining an employer's withdrawal liability. In
addition, other methods can be used, subject to PBGC
approval.

44. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
The two basic types of allocation methods described in
the law are:
 The direct attribution method, which requires
tracing of the UVBs attributable to the employer's
employees, and
 The pro rata method, which allocates liability in
proportion to the employer's share of the
contributions over a specified period.

45. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
ERISA provides a direct attribution formula and three
pro rata formulas.
The plan must determine the amount of withdrawal
liability and demand payment as soon as practicable
after a withdrawal occurs.

46. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
Sometimes it is not easy to determine whether the
employer has withdrawn or is merely delinquent in
making its contributions;
ERISA permits a plan to request information from the
employer to determine if a withdrawal has occurred.

47. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
Calculation and payment of withdrawal liability -
(continued)
The employer must begin paying its withdrawal liability
within 60 days after receiving a demand for payment
from the plan.
This liability is payable quarterly, unless the plan adopts
another payment period.

48. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Mass Withdrawal of all or Substantially all Employers
The law contains a number of special relief provisions
to soften the impact of withdrawal liability. Among them
are:
1. a de minimis reduction (a rule that generally
reduces small withdrawal liability obligations);
2. a 20-year payment cap;
3. a credit for a prior partial withdrawal; and
4. a limitation on liability under ERISA Sec. 4225.

49. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Arbitration of Withdrawal Liability Disputes (ERISA
Sec. 4221)
Any dispute between an employer and a multiemployer
plan involving withdrawal liability must be submitted to
arbitration, and the law sets up a procedure under
which the arbitration must be conducted.

50. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
The Pension Protection Act was signed into law on
August 17, 2006, and was the most comprehensive
reform of the nation’s pension laws since the enactment
of ERISA.
Among other things, it established new funding
requirements for defined benefit pensions plans, and
multiemployer plans in particular.

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June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
Prompted by the default in recent years of several
large defined benefit pension plans and the
increasing deficit of Pension Benefit Guaranty
Corporation (PBGC), in January 2005 the Bush
Administration advanced a proposal for pension
funding reform, which was designed to increase the
minimum funding requirements for pension plans
and strengthen the pension insurance system.

52. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
The Pension Protection Act of 2006 divided plans
into four categories, depending on their current and
projected future financial condition. The categories
have come to be associated with colors:
• “non-problematic” (green zone),
• “endangered” (yellow zone),
• “seriously endangered” (orange zone) and
“critical” (red zone).

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June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
Plans that are not in the green zone must adopt
programs to improve their funding, termed “funding
improvement plans” (for yellow and orange zone
plans) or “rehabilitation plans” (for plans in the red
zone).

54. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
Improvements may be accomplished by:
• increasing employer contributions,
• cutting future benefit accruals or,
• for plans in critical status, reducing early
retirement and death benefits (even with respect
to past benefit accruals, a cutback that is not
ordinarily permitted by ERISA).

55. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
As the years have passed, it has become painfully
clear that these “solutions” have not succeeded.
Some commentators think that the law actually
made matters worse by discouraging new
employers from signing up for multiemployer
pension plans.

56. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
In any event, they did not resolve two fundamental
problems:
1. the steady decline in union membership, which
has reduced the contribution bases of many
multiemployer plans, and
2. the tendency during periods of prosperity, such as
the tech boom of the late 1990’s and the housing
boom of the early 2000’s, to increase benefits to
levels that have turned out to be unsustainable.

57. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
On December 19, 2014, Congress, again,
attempted to address the unresolved (and
worsening) problems of multiemployer plans
when it passed the Multiemployer Pension
Reform Act of 2014 (MPRA ’14).

58. New York | New Jersey | Washington, D.C.
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1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
MPRA’14 has two relevant parts:
The first part doubles the premiums that
multiemployer pension plans must pay for PBGC
insurance and makes permanent, with
modifications, the funding rules enacted by the
Pension Protection Act of 2006, which were
scheduled to sunset at the end of the current year.

59. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
MPRA’14 has two relevant parts:
The second part allows multiemployer plans in
severe financial distress to reduce participants’
accrued benefits temporarily or permanently.
Except for “systemically important” plans, these
reductions will have to be approved by a vote of
participants.

60. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
MPRA’14 has two relevant parts:
Also included are measures to facilitate mergers of
troubled plans into sounder ones and the partition
of potentially insolvent plans.
For many plans, those remedies may prove more
feasible than benefit reductions.

61. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
The MPRA ‘14 goes further than its predecessors
by making it possible, in some instances, to reduce
benefits that accrued in the past, including even
those in pay status.
This dramatic step was largely prompted by fears
for the PBGC’s multiemployer insurance program,
which extends financial assistance to plans that
become unable to pay benefits when due.

62. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
The PBGC “lends” money to these insolvent plans
(without much expectation of repayment) to
enable them to provide a guaranteed level of
benefits, currently $11.00/month plus 75% of the
accrued benefit above that level, multiplied by the
participant’s years of credited service under the
plan, but limited to $35.75/month times years of
credited service.
For example, a participant with 30 years of
service could receive, at most, $1,072.50/month.

63. New York | New Jersey | Washington, D.C.
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1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
Though these guarantees are relatively modest –
for comparison, the maximum guaranteed benefit
for a 65-year- old participant in a terminated single
employer plan is around $5,000 a month – the
multiemployer insurance program’s resources fall
far short of prospective liabilities.

64. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
What should contributing employers do?
• Know what your withdrawal liability is.
• Write to the Pension Fund and ask for the
calculation of liability, including the annual
payment that would have to be made.
• It would be wise to enlist the aid of a pension
attorney and a pension actuary as these
calculations often present flaws or worse.

65. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
What should contributing employers do?
• Obtain the Form 5500 each year and study its
contents. The Schedule MB is very revealing
as it will tell you the real story of what is
happening.
• Look for evidence of abuse; consider the costs
that the union incurs in running the plan.

66. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
The Pension Protection Act of 2006
What should contributing employers do?
• Consider withdrawal as a negotiations goal.
• Sitting on your hands and not knowing the
story should not be an option.

67. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
Assessment of Wage & Hour Compliance
QUESTIONS?

68. New York | New Jersey | Washington, D.C.
June 17,2013
1100 Valley Brook Avenue, P.O. Box 790, Lyndhurst, NJ 07071-0790 Phone: 201-896-4100 Fax: 201-896-8660 www.scarincihollenbeck.com
About Our Speaker
Gary S. Young concentrates his practice on ERISA, employee benefits, and
executive compensation as a member of Scarinci Hollenbeck’s Corporate
Transactions and Business Law Group. Gary's clients include private, non-profit,
and governmental employers. Gary began his legal career 38 years ago as a labor
law specialist, and he soon developed broad experience in ERISA. His practice
experience extends to every area of ERISA plans (qualified, non-qualified and
welfare benefit) and he advises clients on all aspects of plan design and
compliance.
Gary has extensive experience with all aspects of benefits work, including the
design, qualification and drafting of qualified plans, corporate mergers and
acquisitions and plan transfers, mergers and terminations, fiduciary matters,
executive compensation, nonqualified deferred compensation arrangements, IRC
409A compliance and ERISA related litigation. Gary's practice includes
representation of clients in matters with the Internal Revenue Service, Department
of Labor and other governmental agencies.
Gary earned his JD from Brooklyn Law School and his BA from the University of
Pennsylvania.
Gary S. Young, Esq.
Partner, Scarinci Hollenbeck
Chair, Employee Benefits & ERISA Group
1100 Valley Brook Avenue
Lyndhurst, NJ 07071
Phone: 201-806-3383
gyoung@scarincihollenbeck.com
Gary S.Young