Multiemployer Withdrawal Liability (ERISA §§4201–4225)

A1.Complete withdrawal

Part 10, ch. 1, § A1

A complete withdrawal occurs when an employer (1) permanently ceases to have an obligation to contribute under the plan (CBA expiration/termination, decertification, negotiated exit), or (2) permanently ceases all covered operations, even if some contribution obligation technically continues. Statute: ERISA §4203(a). The employer is then liable for its allocable share of the plan's unfunded vested benefits (UVBs) (Part B). Liability attaches to the "employer" — construed as the entire controlled group (Part D).

A2.Partial withdrawal

Part 10, ch. 1, § A2

A partial withdrawal occurs on (1) a 70% contribution decline — the employer's contribution base units (CBUs) in each year of a 3-year testing period do not exceed 30% (exactly 30% counts) of the average of the two highest years in the 5 years preceding the testing period — or (2) a partial cessation of the contribution obligation: the employer ceases its obligation under one but not all CBAs while continuing the same type of work in the CBA's jurisdiction (or transferring it to another location or to an entity owned or controlled by the employer), or ceases its obligation at one but not all facilities while continuing work at the facility. Statute: ERISA §4205. Partial liability is the complete-withdrawal amount times a fraction reflecting the decline, with abatement/credit rules for later years and for a subsequent complete withdrawal. Statute: ERISA §§4206, 4208; Final reg: 29 C.F.R. Parts 4206, 4208. When the §4206(b) prior-partial-withdrawal credit is applied — before or after the 20-year cap — is now a circuit split (B3).

A3.Industry exemptions — construction, entertainment, trucking

Part 10, ch. 1, § A3

• Building and construction: if substantially all the employer's obligated employees perform work in building and construction, and the plan primarily covers building-and-construction employees (or is amended to apply the rule), a complete withdrawal occurs only if the employer ceases its contribution obligation but continues (or resumes within 5 years) the same type of work in the jurisdiction of the CBA without a renewed obligation (3 years, not 5, for a plan terminated by mass withdrawal). Partial-withdrawal rules are correspondingly narrowed. Statute: ERISA §4203(b), §4208(d)(1). Construction plans generally must use the presumptive allocation method (B1); since 2007 they may adopt the free look (A4).
• Entertainment: the construction-style rule applies to an employer obligated to contribute for entertainment-industry work performed primarily on a temporary or project-by-project basis, in a plan that primarily covers entertainment employees. The test asks whether the employer continues or resumes covered-type work within the jurisdiction of the plan (the statute substitutes "plan" for "collective bargaining agreement"). Statute: ERISA §4203(c).
• Trucking/moving/warehousing: this is a plan-level test. Where substantially all of the contributions required under the plan are made by employers primarily engaged in long- and short-haul trucking, household goods moving, or public warehousing, an employer obligated primarily for that work that does not continue to perform work within the plan's jurisdiction withdraws only on permanent cessation of the obligation (or of covered operations) plus either PBGC's determination that the cessation substantially damaged the plan's contribution base or the employer's failure to post a bond/escrow equal to 50% of the withdrawal liability. PBGC may not make its damage determination more than 60 months after the cessation. Statute: ERISA §4203(d). Practitioner consensus as to the exemptions' scope questions — "substantially all" (≈85%) and "same craft/jurisdiction" are heavily litigated.

A4.Free look, de minimis, and non-events

Part 10, ch. 1, § A4

• Free look (§4210): a plan may adopt a provision letting a new employer withdraw without liability if the employer first had an obligation to contribute after September 26, 1980; had it for no more than the lesser of 6 consecutive plan years or the plan's vesting period; contributed less than 2% of all employer contributions each year; and has never used the free look before. The plan must also apply the Code §411(a)(3)(E) reduction to the employer's employees and meet an 8-to-1 ratio of assets to benefit payments (measured for the year before the employer joined). Construction plans may adopt it: the Pension Protection Act of 2006 repealed the construction-plan exclusion for withdrawals on or after January 1, 2007. Statute: ERISA §4210, as amended by Pub. L. 109-280 — verify the plan actually adopted it; the details are plan-specific.
• De minimis (§4209): the allocable UVB share is reduced by the lesser of ¾% of plan UVBs or $50,000, phasing out dollar-for-dollar above $100,000 (a plan may amend to $100,000/$150,000); no de minimis on mass withdrawal.
• Not withdrawals (§4218): an employer that ceases to exist because of a change in corporate structure described in §4069(b) (a mere change in identity, form, or place of organization; a liquidation into a parent; or a merger, consolidation, or division) or a change to an unincorporated form, if the change causes no interruption in contributions or in the obligation to contribute; and a suspension of contributions during a labor dispute. Statute: ERISA §§4218, 4069(b). Closing one facility while the obligation continues elsewhere is not a complete withdrawal, because §4203(a) requires cessation of the obligation or of all covered operations, but it can be a partial withdrawal (A2).