Employee Benefits & Executive Compensation Blog

The View from Proskauer on Developments in the World of Employee Benefits, Executive Compensation & ERISA Litigation

District Court Holds Employer “Expelled” From Plan May Not Have Effected a “Withdrawal”

In Central States v. Wingra, No. 21-cv-3684, 2023 WL 199360 (N.D. Ill. Jan. 17, 2023), the district court held that an employer expelled from a multiemployer pension plan may not owe withdrawal liability because the permanent cessation of the employer’s obligation to contribute was not voluntary.  While the court subsequently limited the decision as being for discovery purposes only (see Central States v. Wingra, No. 21-cv-3684 (N.D. Ill. Mar. 17, 2023)), the court allowed the employer to assert its challenge in the district court, rather than in arbitration, because the employer plausibly alleged that its expulsion from the plan was in bad faith.


The plan expelled the employer because it was transferring work to non-union workers.  The plan assessed the employer over $58 million in withdrawal liability and filed suit to collect when the employer refused to pay.  The employer counterclaimed, alleging that its expulsion from the plan was arbitrary and capricious, and sought discovery on that basis.  The plan objected to the employer’s discovery requests, arguing that the employer waived its defenses by not timely commencing arbitration to challenge the plan’s withdrawal liability assessment, making the requested discovery irrelevant.

The Court’s Decisions

The court disagreed with the plan, holding that the employer never effectuated a “complete withdrawal” in the first place.  The court relied on the dictionary definition and common usage to conclude that the term “withdrawal” presupposes a voluntary act by the employer, and analogized the term to a general’s “retreat” or an employee’s “retirement,” both of which require a conscious decision by the actor.  In considering the definition of “complete withdrawal” in 29 U.S.C. § 1383(a)(1), which defines the term to mean “when an employer permanently ceases to have an obligation to contribute under the plan,” the court opined that the definition clarifies when a withdrawal is “complete,” not when a “withdrawal” occurs.  In reaching its decision, the court parted ways with other decisions in which district courts held that “voluntariness” has no bearing on whether an employer is deemed to have effected a “withdrawal.”  Having concluded that the employer did not “withdraw” within the meaning of the statute, the court held that the employer retained its defenses to the assessment and was entitled to the requested discovery.

While a subsequent motion for reconsideration was denied, the court clarified that its interpretation of the term “withdrawal” was for discovery purposes only, and that the parties would have an opportunity at summary judgment to argue whether there was a “withdrawal” within the meaning of the statute.  The court also clarified that the employer’s right to the requested discovery was predicated on its counterclaim, which the court reasoned equitably tolled the time for it to commence arbitration.

Proskauer’s Perspective

While the court clarified its decisions as being limited to discovery, employers are likely to rely on these decisions to argue that they do not owe withdrawal liability in other instances where their obligation to contribute ceased because of reasons beyond their control, such as where a union disclaims representation, the bargaining unit is decertified, the employer’s principal client terminates its relationship, or where there is a precipitous decline in the industry or the economy.  Employers may also seek to avoid the arbitration process altogether by alleging bad faith by the plan so they can dispute the basis for imposing withdrawal liability in district court.  Whether other courts will employ the same reasoning as in Wingra remains to be seen.

Tax Court Decision Interprets Profits Interest “Safe Harbor” under IRS Rev. Proc. 93-27

The Tax Court’s May 3, 2023, decision in ES NPA Holding, LLC v. Commissioner (T.C. Memo 2023‑55), upholding a taxpayer’s position to characterize a partnership interest as a profits interest under the “safe harbor” of IRS Revenue Procedure 93-27 (as clarified by IRS Revenue Procedure 2001-43), provides helpful guidance to issuers of profits interests, including private equity funds and other investment partnerships and their portfolio companies. Continue Reading

Latest ERISA Developments on the IRA Rollover Fiduciary Rules, the DOL’s QPAM Exemption Amendment Proposal and the DOL’s ESG Rules

In addition to the excitement of the upcoming outdoor concert season, Proskauer’s lawyers are anxiously awaiting VERY different forms of entertainment:

  • the next installment of the never-ending saga of U.S. Department of Labor (“DOL”) guidance on who is considered an investment advice fiduciary, including whether the fiduciary standard applies to advice on whether to take a rollover;
  • finalization of the DOL’s QPAM Exemption amendment proposal; and
  • resolution of court challenges to the DOL’s final “ESG” rules.

We discussed these developments at ERISAFest 2023.  If you missed it, feel free to reach out to your Proskauer contact for a recording, and be sure to sign up next year!

Continue Reading

Fifth Circuit Stay Reinstates Preventive Services Mandate—For Now

On Monday, the U.S. Court of Appeals for the Fifth Circuit issued an administrative stay of enforcement of the district court decision in Braidwood Management Inc. v. Becerra.  Readers of our earlier blog (found here) will remember that in Braidwood, the district court enjoined enforcement of the preventive services mandate for “A” or “B” items and services recommended by the United States Preventive Services Task Force (“USPSTF”) on or after March 23, 2010.  If the district court decision stands, this means that non-grandfathered plans would not have to cover these services without cost-sharing.  However, as a result of the Fifth Circuit stay issued on May 15, non-grandfathered health plans will continue to be subject to the mandate for these services for the time being.  All other preventive care requirements for health plans remain in place.

Continue Reading

Seventh Circuit Affirms Discretion Over Who Gets Severance Benefits

A recent Seventh Circuit decision affirms the principle that an ERISA severance plan can reserve to the employer discretion over who is eligible for severance benefits.  The case is Carlson v. Northrop Grumman Severance Plan, No. 22-1764, __ F.4th __, 2023 WL 3299703 (7th Cir. May 8, 2023). Continue Reading

Here We Go Again: Prescription Drug Reporting Due by June 1st

“Didn’t we just do this?” might be the first question asked by many health plan sponsors and administrators when gearing up to complete 2022 prescription drug reporting by June 1, 2023.  The answer to that question is both “yes” and “no.”  Yes, because group health plans were required to complete prescription drug reporting for the 2020 and 2021 reference years by January 31, 2023. No, because the agencies released revised instructions for reporting 2022 year data—meaning the reporting exercise for 2022 may be a little different than the last go-around. Continue Reading

Dismissal Streak Continues in BlackRock Target Date Fund Litigation

A third district court has dismissed with prejudice a complaint alleging that defendants breached their fiduciary duties under ERISA by offering 401(k) plan participants the option to invest in BlackRock LifePath Index Target Date Funds (the “Funds”).  Beldock v. Microsoft, Case No. 22-cv-1082 (W.D. Wash. Apr. 24, 2023).  Although the outcome of the court’s ruling here is consistent with earlier decisions, the rationale underlying the Beldock decision arguably goes further than in prior rulings, thus providing additional food for thought.

Continue Reading

Preventive Care in a Post-Braidwood World: Agencies Release Guidance on Preventive Services Coverage Requirements

The Departments of Labor, Treasury, and Health and Human Services (the “Departments”) recently released guidance for group health plans on required preventive services coverage.  The guidance was issued in response to a federal district court decision in a case called Braidwood Management, Inc. v. Becerra that enjoined enforcement of the preventive services mandate for items and services with an “A” or “B” rating from the United States Preventive Services Task Force (“USPSTF”) on or after March 23, 2010. The Departments issued this guidance to clarify the current scope of the preventive services mandate in light of the court’s decision.

Continue Reading

Understanding Recent Litigation on Medication Abortion: A Guide for Health Plan Sponsors

Last Friday, the United States Supreme Court stayed a federal district court order that suspended  the U.S. Food and Drug Administration’s approval of the drug mifepristone, which is used as part of a two-drug regimen to induce abortion.  This decision means that mifepristone will remain available subject to current FDA dispensation guidelines while the appeal of the district court’s decision proceeds through the U.S. Court of Appeals for the Fifth Circuit (and potentially the Supreme Court).  Although the Supreme Court’s decision returns mifepristone access to the status quo for the time being, it creates a number of questions for employers and other benefit plan sponsors with respect to abortion coverage in group health plans, which we discuss below.

Continue Reading

Update: Big Headline, Small Impact – Legislation Ends COVID-19 National Emergency

Important Update: Based on informal comments from the U.S. Department of Labor, it appears that the tolling of benefit plan deadlines will end on July 10, 2023, as described in our earlier blog on this subject, notwithstanding the legislation that was signed on Monday ending the COVID-19 National Emergency on April 10th. As explained in our blog below, the April 10th termination of the National Emergency technically means that under the current rule, the tolling period ends a month earlier (on June 9th).  However, it appears that the agencies are contemplating changing the rule so that it will still end on July 10 as previously scheduled. Check back here for updates as we await a formal announcement from the U.S. Department of Labor.

On Monday, April 10, 2023, President Biden signed legislation passed by Congress ending the COVID-19 National Emergency.  Since this legislation appears to have an immediate effect, the National Emergency will end one full month prior to the May 11, 2023, date on which the Biden Administration and the Department of Health and Human Services had previously announced that they intended to jointly end the COVID-19 National Emergency and the Public Health Emergency.

What does this mean for employee benefit plans? 

Not a whole lot.  As we noted in our prior blog on the end of the emergency periods (found here), there are a number of benefit coverage mandates that were adopted in response to the COVID-19 pandemic.  These mandates include, for example, in-network and out-of-network coverage of COVID-19 testing and vaccinations without cost sharing, as well as coverage of over-the-counter tests.  However, these coverage mandates are tied to the existence of the Public Health Emergency, not the National Emergency.  The legislation signed yesterday by President Biden changed only the expiration date of the National Emergency – it did not change the scheduled May 11, 2023, end date of the Public Health Emergency.  Therefore, those mandates will end on May 11, 2023, as previously scheduled, unless the Administration announces another change.

Then what does change?

The only benefit plan mandate tied to the COVID-19 National Emergency is the requirement to toll participant deadlines for making COBRA and special enrollment elections, filing claims and appeals, and making COBRA premium payments until sixty days after the end of the COVID-19 National Emergency (referred to as the “Outbreak Period”).

Had the COVID-19 National Emergency ended on May 11, 2023, as previously scheduled, the Outbreak Period would have ended on July 10, 2023.  Since this emergency ended on April 10, 2023, the Outbreak Period will instead end on Friday, June 9, 2023.

This change means that plan administrators will not be required to toll benefit plan deadlines after June 9, 2023.  So, the benefit plan deadlines previously tolled during the COVID-19 National Emergency will start to run after that date.

Takeaway for plan sponsors

As noted in our prior blog, plan sponsors and administrators should consider whether and how to communicate with participants about the end of the tolling period.  Any election forms or other communications referencing the tolling period should also be updated to reflect its expiration.


This website uses third party cookies, over which we have no control. To deactivate the use of third party advertising cookies, you should alter the settings in your browser.