Multiemployer Plans

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As previously discussed, the Pension Benefit Guaranty Corporation (the “PBGC”) issued final regulations in July 2022 for plans that receive special financial assistance (“SFA”) under the American Rescue Plan Act of 2021 (“ARPA”).  Among other things, the regulations imposed special withdrawal liability rules on plans that receive SFA – including a phase-in period for…

A hotly debated (and litigated) issue for multiemployer pension plans in recent years has been the appropriate interest rate to determine a multiemployer pension plan’s liabilities when calculating the plan’s underfunding for withdrawal liability purposes.  The Pension Benefit Guaranty Corporation (the “PBGC”) is now poised to end the debate.  The PBGC proposes to allow multiemployer…

Plan trustees often look to settle ERISA fiduciary breach claims brought against them as a way to put the past behind them.  Assuming there is enough fiduciary liability insurance coverage available to pay the proposed settlement sum, the trustees may be prepared to put aside their desire to vindicate themselves for a challenged course of conduct, avoid the risks of a horrific outcome that exceeds insurance coverage limits—potentially causing them to use personal assets to satisfy a judgment against them—and move on.  Unfortunately, however, ERISA is structured in a manner that creates obstacles to achieving the goal of “complete peace.”

Contributing employers to multiemployer plans were relieved by the Treasury Department’s interim guidance stating that they will not be subject to the employer shared responsibility payments under the Affordable Care Act (“ACA”) with respect to employees for whom they contribute to a multiemployer plan that provides minimum value, offers dependent child coverage and is affordable.  (See our blog posting here.)  Since relief is provided for all employees for whom contributions are made to a multiemployer plan, regardless of whether coverage is offered, the question of whether an employee is full-time is largely irrelevant to the relief.  That led many employers to believe mistakenly that they do not have to determine the full-time status of these employees, allowing these employers to avoid the administrative complications associated with tracking employees who, in many industries, are variable hour employees.  Unfortunately, this belief is not well-grounded.

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), requires trustees of multiemployer pension and benefit funds to collect contributions required to be made by contributing employers under their collective bargaining agreements (“CBAs”) with the labor union sponsoring the plans. This is not always an easy task—often, an employer is an incorporated entity with limited assets or financial resources to satisfy its contractual obligations. In some instances, an employer will resort to filing for bankruptcy to obtain a discharge of its debts to the pension or benefit funds.

In a distinct trend, federal courts have found that, depending on the text of the underlying plan documents, unpaid employer contributions due under a CBA may be viewed as plan assets, such that the representatives of an employer who exercise fiduciary control over those plan assets can be held individually liable for the unpaid amounts (together with interest and penalties) under ERISA. These cases will no doubt help plan trustees and administrators collect monies owed to the plan. They also should serve as cautionary warnings to contributing employers to ensure that they fully understand the obligations that they are undertaking when they agree to contribute to ERISA funds pursuant to CBAs.

On March 5, 2014, the Department of Health and Human Services released a Final Rule addressing, among other things, transitional reinsurance fees payable in the 2014 through 2016 benefit years.

By way of background, under the Affordable Care Act (“ACA”), a transitional reinsurance fee applies to most group health plans. The transitional reinsurance fee is a temporary per capita fee charged to health insurance issuers and third party administrators of self-insured plans that is to be used to help stabilize premiums for coverage in the individual market. The fee is $63 and $44 per covered life for 2014 and 2015, respectively. (The fee for 2016 has not yet been announced.)

Of particular note is that the Final Rule exempted self-insured and self-administered plans from the transitional reinsurance fee for the 2015 and 2016 benefit years. This exemption could apply to any self-insured and self-administered plan, but it is generally perceived that larger multiemployer plans are most likely to satisfy these requirements.

On July 24, 2013, the U.S. Court of Appeals for the First Circuit ruled in Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund (No. 12-2312, 2013 WL 3814984) that a private equity investment fund was engaged in a “trade or business” under ERISA, and, therefore, could be part of…

In Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, 2012 WL 5197117 (D. Mass. Oct. 18, 2012), a federal district court in Massachusetts concluded that a private equity fund was not a “trade or business” subject to the imposition of withdrawal liability and thus was not responsible for paying the withdrawal liability owed by one of its portfolio companies that had completely withdrawn from a multiemployer pension fund.[1]  In so holding, the court rejected a Pension Benefit Guaranty Corporation (“PBGC”) Appeals Board opinion letter that reached the opposite conclusion, finding the PBGC’s analysis “unpersuasive” and “incorrect as a matter of law.” If adopted by other courts, this decision could significantly limit a multiemployer pension fund’s ability to assess and collect withdrawal liability against companies that are owned and operated by private equity funds.