Multiemployer Plan Withdrawal Liability Can Be Trap for the Unwary
"The [Seventh Circuit recently held] that a bright-line 'categorical' rule applies when a property owner in common control with a withdrawing employer leases property to that employer: the leasing activity is categorically a trade or business within the meaning of Section 4001(b)(1). The court justified its categorical rule because it is unlikely that leasing to a commonly-controlled withdrawing employer would ever be a truly passive investment. It is more likely that the goal is to split up the withdrawing employer's assets. Categorically labeling this activity a trade or business prevents businesses from shirking ERISA obligations by fractionalizing operations into separate entities." (McGuireWoods LLP)

Another Business Owner Caught by Withdrawal Liability
"The Seventh Circuit ... declared a bright-line rule that where the owner of a withdrawing business leases property to that business, the leasing activity qualifies as a trade or business. If that trade or business is owned personally by the owner of the withdrawing business, the leasing activities and the withdrawing business would be aggregated under the controlled group rules and both would be responsible for the withdrawal liability assessment. In this case, ... the business owner personally was responsible for the $3.6 million withdrawal liability." [Central States Southeast and Southwest Pension Fund v. Nagy, No. 11-3055 (7th Cir. Apr. 22, 2013)] (Leonard, Street and Deinard)

District Court Limits Collection of Withdrawal Liability Against Private Equity Funds
"If other courts adopt the district court's analysis in the Sun Capital Partners' case, then the PBGC Advisory Opinion will cease to serve as a vehicle for holding private equity funds liable for withdrawal liability. However ... the district court's decision turned on the role that the Sun Funds played with respect to the operation of the Employer. The funds were found to be acting as passive investors and were not involved in the active management or operation of the company. Implicit in the court's decision is that if a private equity fund's activities cross the threshold from passive investing to active management of an enterprise, then the private equity fund may be engaging in a trade or business for controlled group purposes." (Proskauer's ERISA Practice Section Blog)

[Official Guidance] Text of PBGC Proposed Submission of Information Collection for OMB Review; Comment Request; Data to Study Multiemployer Plan Guaranty Program
"PBGC is researching the effects of potential changes to its multiemployer program. PBGC's objective is to quantify the effect of potential policy proposals on multiemployer plans that are or could enter critical status with respect to projected dates of insolvency, amount of financial assistance that PBGC would be required to provide, and the benefit changes plan participants would experience. To assist in this research PBGC intends to request that OMB approve a survey of multiemployer pension plans, their actuarial service providers, and their stakeholders, including unions and relevant professional and trade organizations.... This information collection would be voluntary on the part of respondents and any information provided in response to this request would not be used for any PBGC enforcement activities." (Pension Benefit Guaranty Corporation)

Another Scary Withdrawal Liability Case Imposes Personal Liability on Owner of Withdrawing Company
"If the owners of the withdrawing business also own the real estate from which the withdrawing company does business, those owners are very likely to be personally liable for the withdrawal liability amount. This case also establishes that because Nagy worked as an independent contractor to an unrelated business, his work as an independent contractor (essentially as a sole proprietor) also qualified as an unincorporated 'trade or business' that triggered personal liability." [Central States, Southeast and Southwest Pension Fund v. Nagy, No. 11-3055 (7th Cir. Apr. 22, 2013)] (James E. Arnold & Associates, LPA)

Can Multiemployer Pensions Build a 21st Century Plan?
"In the four years since the financial crisis, the National Coordinating Committee for Multiemployer Plans (NCCMP) ... has been working to create solutions to the problems besetting multiemployer pensions. ... The first set of recommendations looks at how to strengthen the multiemployer pension system already in place.... The second area of concern deals with the 5 to 10 percent of red-zone multiemployer plans that are deemed 'deeply troubled'.... [B]ut it is the commission's third recommendation -- for new structures to deliver future pension benefits -- that offers truly forward-thinking solutions." (Institutional Investor)

[Guidance Overview] Proposed Rule on the ACA's 90-Day Waiting Period Provides Flexibility for Multiemployer Plans
"In order to implement the rule, [multiemployer] plan sponsors should ... [1] Review the eligibility requirements for each of the fund's plan options. [2] For funds that measure work based on hours worked (rather than earnings), determine the length of the eligibility period and the lag period. If the lag period exceeds 90 calendar days and/or the eligibility period plus the lag period exceeds 13 months, review options for revising the eligibility and/or lag periods, and the potential impact on fund operations and costs." (Segal)

Teamsters Pension Crisis Sapping Hoffa's Support, Power
"The Central States Pension Fund, which serves Teamsters members across the country and which also happens to be 'deeply troubled,' has joined the Teamsters in lobbying for the new legislation. Insiders believe that the Fund plans to make across-the-board pension cuts. The Teamsters' unwillingness to allow companies to move Teamsters members out of the fund and into more secure retirement plans has enraged Teamsters members and sparked backlash against Hoffa." (The Daily Caller)

[Official Guidance] Handout for IRS April 23 'Defined Benefit Update' Phone Forum (PDF)
Topics include: Regulatory Update; Section 415 issues; Hybrid plan issues; Multiemployer Report. (Internal Revenue Service)

Seventh Circuit Finds Company Owners Personally Liable for $3.1 Million Withdrawal Liability Assessment
"The Messinas owned and leased several residential properties adjacent to Messina Trucking and leased commercial property to Messina Trucking from which it conducted its operations.... [T]he property was held by the owners in their personal capacities and not in corporate form. Therefore, the owners in their unincorporated landlord 'trade or business' have been rendered personally liable for the withdrawal liability. The owner's personal assets are now at risk, including assets that are unrelated to the property used for company operations." [Central States Southeast & Southwest Areas Pension Fund v. Messina Products, LLC, Nos. 11-3513 & 12-1333 (7th Cir. Feb. 8, 2013)] (McDermott Will & Emery)

GAO Report to Congress on Multiemployer Pension Plans Recommends Timely Action on Structural Reforms
"The new GAO report, which closely follows the PBGC and NCCMP reports released earlier this year, may help fuel Congressional interest in reforming the laws affecting multiemployer plans." (Segal)

Text of GAO Report: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies
"GAO examined (1) actions that multiemployer plans in the weakest financial condition have taken to improve their funding levels; (2) the extent to which plans have relied on PBGC assistance since 2009, and the financial condition of PBGC's multiemployer plan insurance program; and (3) options available to address PBGC's impending funding crisis and enhance the multiemployer insurance program's future financial stability." (U.S. Government Accountability Office)

Developments of Interest to Sponsors of Multiemployer Health Plans, Second Quarter 2013 (PDF)
Articles include: Trend and CPI; ACA Proposed Regs on Employer Shared Responsibility; What Health Plan Sponsors Are Doing to Manage Costs: Selected Strategies; Key Trends, Developments and Statistics. (Segal)

Companies Withdrawing from Teamsters' Plan Amid Fears Over Pension Funding
"Investment losses during the financial crisis and hard times for trucking companies that pay into the Teamsters' Central States Funds have sapped the fund of money it uses to pay promised benefits. With just 60 cents of assets for every $1 in obligations, the Teamsters pension fund is considered in 'critical' status by the [PBGC]." (The Wall Street Journal)

IRS Cycle D Retirement Plan Filings: Gearing Up for Round Two
"In accordance with the Internal Revenue Service (IRS) determination letter program, [tax-qualified retirement] plan documents are submitted to the IRS for a renewed determination of their qualified status under the Internal Revenue Code (IRC) every five years, on the schedule labeled Cycle D. The second Cycle D will start less than a year from now, on February 1, 2014,... To prepare for the second Cycle D, trustees should take the following steps: Address 'loose ends' from the first Cycle D (or E).... Identify all plan amendments needed and made since the last filing.... Consider the need for a VCP filing.... Review and update amendment procedures.... Locate other filing-related documents.... Determine who will prepare the plan restatement.... Determine the preparation timing.... Determine if nondiscrimination testing should be performed." (Segal)

New Report Recommends Strategies for Strengthening Multiemployer Pension Plans (PDF)
"It is important to note that the recommendations [of the National Coordinating Committee for Multiemployer Plans] are not a plea for financial assistance. Rather, they are a road map of additional tools that can be used to address the current system's deficiencies and that would result in fewer failed plans. In fact, they could retain billions of dollars in liabilities within the private sector that might otherwise become the responsibility of the PBGC." (Segal)

[Guidance Overview] The 4 'W's of Withdrawal Liability
"[This article provides] a discussion of what withdrawal liability is, business activity that can trigger it and actions that can make a business owner personally liable for the liability. Also provided are steps employers can take to avoid being surprised by a withdrawal liability assessment or the amount of that assessment." (Quarles & Brady LLP)

[Guidance Overview] IRS Clarification Spells Relief for Employers Contributing to Multiemployer Health Plans
"[T]he revised regulations relax the initial eligibility requirements for certain employees, at least during the 2014 calendar year. With this revised transition relief, an employer participating in a multiemployer plan could avoid a penalty for collectively bargained employees even if the multiemployer plan coverage does not begin within three months of the employee's date of hire -- as long as coverage is offered to those individuals who meet the multiemployer plan's eligibility provisions." (Seyfarth Shaw LLP)

Prime ERISA Areas for Supreme Court Review (PDF)
"This article focuses on four distinct areas of ERISA litigation that are in need of clarification by the Supreme Court during the current or upcoming terms. They involve the evidence to be considered in a benefits denial claim under the de novo standard of review; the standard of review in a breach of fiduciary case where a profit sharing plan invests in employer stock that is declining in value (the so-called 'stock drop' cases); an employer's modification or termination of retiree health care benefits in collective-bargaining contexts in light of the terms of the employee benefits plan and the collectively bargained agreement; and the plan administrator's enforcement of subrogation clauses under a health care plan." (Prof. Kathryn J. Kennedy, The John Marshall Law School, in the Tax Management Compensation Journal)

Webcast and Testimony at Senate Hearing on Multiemployer Pension Plans
The linked page is an archived webcast of the March 5 hearing, which was entitled "Challenges Facing Multiemployer Pension Plans: Reviewing the Latest Findings by PBGC and GAO." Includes links to written testimony. (Subcommittee on Heath, Employment, Labor and Pensions, Committee on Education & the Workforce, U.S. Senate)

[Opinion] Rep. David Roe's Statement at Hearing on 'Challenges Facing Multiemployer Pension Plans'
"[O]ne out of every four plans is in 'red zone' critical status, experiencing immediate and significant funding problems. Only 39 percent of participants are active employees ... [and] there is a 90 percent chance the PBGC's multiemployer insurance program will be insolvent in less than twenty years." (U.S. House Committee on Education and the Workforce)

Personal Exposure to Withdrawal Liability: Beware of 'Business Activities'
"When employers who contribute to a multiemployer defined benefit retirement plan cease to have a contribution obligation, they can be assessed withdrawal liability, which can be a very big number ... It usually stays with the business and is not a personal liability for the owners. But it can be if they are not careful." (Fox Rothschild LLP)

[Official Guidance] Text of GAO Testimony on Private Pensions: Multiemployer Plans and PBGC Face Urgent Challenges
"This testimony provides information on (1) recent actions that multiemployer plans in the worst financial condition have taken to improve their funding levels; and (2) the extent to which plans have relied on PBGC assistance since 2009, and the financial condition of PBGC's multiemployer plan insurance program." (U.S. Government Accountability Office)

Strategies for Strengthening Multiemployer Pension Plans
"The Commission's recommendations ... [include] proposals to strengthen the current multiemployer system ... [and] proposals intended to foster new and innovative plan designs[.]" (Segal)

Survey Results: Multiemployer Pension Plans' 2012 Zone Status
"Between 2011 and 2012, the percentage of plans in the green zone decreased slightly to 60 percent (from 63 percent in 2011). In contrast, the percentages of yellow-zone and red-zone plans increased slightly over that period, from 13 to 14 percent and 24 to 26 percent, respectively. The average PPA '06 funded percentage for the surveyed plans was 84 percent in 2012, which represents a slight decrease from 87 percent in 2011." (Segal)

Seventh Circuit Holds Individuals Personally Liable for the Corporation's Withdrawal Liability from Multiemployer Pension Plan
"While passive investors are not trades or businesses for these liability purposes, the Seventh Circuit Court of Appeals, citing a prior opinion, held that renting property to a withdrawing employer is 'categorically' a trade or business. It was undisputed that the Messinas rented property to their closely-held corporation; therefore, the Messinas were personally liable to the pension plan for the company's withdrawal liability." (Haynes and Boone, LLP)

[Opinion] A Plan to Safeguard Multiemployer Retirement Security, Protect Taxpayers and Spur Economic Growth (PDF)
"For the limited number of plans that, despite the adoption of all reasonable measures available to the plans' settlors and fiduciaries, are projected to become insolvent within certain prescribed time frames, the Commission recommends that limited authority be granted to plan trustees to take early corrective actions, including the partial suspension of accrued benefits for active and inactive vested participants, and the partial suspension of benefits in pay status for retirees.... [Further,] the Commission recommends the enactment of statutory language and/or promulgation of regulations that will facilitate the creation of new plan designs that will provide secure lifetime retirement income for participants, while significantly reducing or eliminating the financial exposure to contributing employers." (National Coordinating Committee for Multiemployer Plans)

Recently Released PBGC Reports Focus on Multiemployer Plans
"This Bulletin summarizes the key points in three reports to Congress on the approximately 1,500 multiemployer defined benefit pension plans covered by the PBGC. The reports signal that the PBGC's multiemployer program has problems." (Segal)

[Guidance Overview] The ACA Employer Mandate and the Unionized Workforce
"[Code section 4980H, the employer mandate,] is geared towards companies that sponsor the 'single employer' health plans in which their employees participate. These employers have control over plan design, costs, and waiting periods, and may make adjustments to their plans as need be to satisfy 4980H. 4980H does not fit so well with many employers that employ union workers.... In the preamble to the recently proposed 4980H regulations, the Internal Revenue Service acknowledged some of these unique features by providing a transition rule to apply to Multiemployer Plans through 2014." (Mintz Levin)

PBGC Predicts Solvency Trouble for Multiemployer Plans
"PBGC projects a 36-percent probability its multiemployer pension insurance program will be insolvent by 2022 and a 91-percent chance of insolvency by 2032, with existing premium levels and economic conditions. These high levels of potential insolvency are attributed to the deterioration of a few large multiemployer plans. PBGC is expected to collect $1.3 billion in premiums from multiemployer plans over the next decade. However, the agency estimates its potential new obligations could increase by $37.6 billion." (Thompson SmartHR Manager)

[Guidance Overview] Form 990 Schedule R Reporting for Multiemployer Health and Welfare Plans: Changes for 2012
"For the 2012 reporting year, multiemployer health and welfare plans need to identify only the legal names and federal tax classifications of employers who contribute to the plan. This represents a change from 2011, in which the IRS required reporting of each contributing employer's address, federal employer identification number (EIN), primary activity, legal domicile and direct controlling entity, in addition to legal name and federal tax classification." (Lindquist LLP)

Sunset of PPA Rules in 2014 Creates Confusion for Multiemployer Pension Plans
"According to a study conducted by the DOL, IRS and PBGC, about 68% of multiemployer pension plans were in critical or endangered status, and thus subject to additional funding rules, in the 2009 plan year ... As a result of the sunset provision, multiemployer pension plans must consider the plan's circumstances in 2014 to determine which funding rules apply. The DOL, IRS and the PBGC have identified a number of technical issues that may make this determination difficult." (Bloomberg BNA)

PBGC Warns of Trouble for Multiemployer Program
"[T]he agency says although the timing is uncertain, currently it is at risk of not having the tools to help sustain multiemployer plans or the funds to continue to pay benefits beyond the next decade under the multiemployer insurance program. The multiemployer program has a deficit of $5.2 billion as of Fiscal Year 2012, the result of liabilities of $7.0 billion and assets of $1.8 billion. Because the multiemployer program has only a small base of assets, the program's large negative net position carries a substantial risk of exhaustion of multiemployer fund assets in the foreseeable future." (PLANSPONSOR.com)

[Opinion] Workers at Risk in Crumbling PBGC Program
"Today, upon the release of three separate Administration reports on the private sector defined benefit pension system, Ways and Means Committee Chairman Dave Camp (R-MI) criticized the Obama Administration for failing to bring forward a plan to protect the pensions of American workers.... The FY 2012 single-employer program liabilities of $112.1 billion and assets of $83.0 billion result in a net deficit of $29.1 billion. The average (mean) and median projected results for FY 2022 are deficits of $29.9 billion and $32.5 billion respectively." (U.S. House Ways and Means Committee)

[Opinion] U.S. House Committee Leaders Respond to Reports on Multiemployer Pension System
"Bipartisan leaders on the U.S. House Education and the Workforce Committee responded today to three reports on the nation's multiemployer pension system. The reports provide a broad examination of the challenges facing the pension system responsible for providing retirement benefits to more than 10 million individuals." (U.S. House Committee on Education and the Workforce)

[Official Guidance] PBGC Insurance of Multiemployer Pension Plans: Report to Congress, as Required by ERISA (PDF)
"Every five years, PBGC is required under section 4022A(f)(1) of ERISA to review its multiemployer insurance program, to determine the premiums needed to maintain the current guarantee levels and whether the guarantee levels may be increased without increasing the premiums. The report notes that Congress will need to review broader changes to multiemployer plans prior to the sunset of certain provisions of the Pension Protection Act of 2006, and suggests that changes to the PBGC program and premiums be considered as part of that review." (Pension Benefit Guaranty Corporation)

[Official Guidance] Multiemployer Pension Plans: Report to Congress, as Required by Pension Protection Act of 2006 (PDF)
"Despite the substantial improvement in plan assets since the market crisis of 2008, however, certifications of plans' funded status for the 2011 plan year -- showing 60% of all plans to be in 'green' status -- likely overstate the extent of plans' financial health. This is due to the significant effect of PRA 2010 funding relief, which increased plans' funded percentages (e.g., by allowing plans to spread the recognition of asset losses over ten years) and delayed projected funding deficiencies (e.g., by extending certain amortization periods and reducing minimum required contributions).... Data available through November 2012 indicate that 52% of participants are in moderately or severely distressed plans (plans in endangered, seriously endangered, or critical status under PPA)[.]" (Pension Benefit Guaranty Corporation)

[Guidance Overview] Proposed ACA Rule on Employer Penalty Addresses Application to Multiemployer Plans
"The proposed rule recognizes the unique role and structure of multiemployer plans and adopts an approach that should give contributing employers an incentive to continue their contributions to multiemployer plans. The multiemployer portion of the rule is proposed to be transitional through 2014, so further guidance will be necessary." (Segal)

The 2013 Market for Insurance to Protect Multiemployer Plan Fiduciaries (PDF)
"Although 2013 is expected to be another challenging year for trustees of multiemployer plans that are purchasing or renewing insurance coverage, there is also some good news to report. This [article] presents an overview of the 2013 market for each of the following types of insurance that provide protection for multiemployer plan fiduciaries: Fiduciary liability insurance, Fidelity bonds, Cyber liability insurance, and Employment practices liability insurance. While pricing will remain important, for many clients the main focus in 2013 will be coverage options." (Segal)

Developments of Interest to Sponsors of Multiemployer Health Plans, January 2013 (PDF)
Articles include: ACA Compliance News; What Multiemployer Health Funds are Doing to Manage Costs: Selected Strategies; Health Plan Cost Trends. (The Segal Group, Inc.)

Collective Bargaining Agreement Allowed to Apply Alternate Method for Calculating Contributions When Employer Fails to Provide Records
"When an employer fails to provide to multiemployer plan funds the necessary records to calculate employer contributions, the funds may utilize an alternative calculation method contained in the collective bargaining agreement without running afoul of the requirement that damage awards be calculated with 'reasonable certainty,' the U.S. Court of Appeals in New York City ... has ruled." [Cement and Concrete Workers v. Metro Foundation Contractors, Inc. (2d Cir.)] (Wolters Kluwer Law & Business)

PBGC Calls for Legislation to Help Sustain Multiemployer Pension Plan System
"According to [PBGC Director Joshua] Gotbaum, two years ago only about a third of multiemployer plan participants were in plans that reportedly were in the financially sound 'green' zone. Today, Gotbaum said that the majority of participants are in plans that are recovering. Without changes, however, some plans will be unable to avoid insolvency. Gotbaum claimed that part of the problem is that the multiemployer system has not been rethought in 30 years, and that any solution -- in addition to necessitating higher premiums -- will involve changes to the multiemployer system in general." (Littler Mendelson LLC)

[Opinion] Text of Testimony by PBGC Director Before Congress on the Multiemployer Pension System (PDF)
"After all the events of the past decade, the financial health of these plans varies widely. The majority are recovering, in part by relying on the tools and authorities provided to plans under the Pension Protection Act of 2006 (PPA) and subsequent legislation, as the economy and the financial markets improve. Some plans, however, lack the necessary economic base and will not, absent changes, be able to avoid eventual insolvency. As a result, PBGC's multiemployer insurance program will need a fresh look." (Pension Benefit Guaranty Corporation)

Statement of U.S. Rep. Phil Roe at Hearing on 'Challenges Facing Multiemployer Pension Plans: Evaluating PBGC's Insurance Program and Financial Outlook'
"Provisions in the law governing multiemployer pensions will expire in two years, which means Congress has an important opportunity to study the system, assess its strengths and weaknesses, and pursue solutions that support workers without discouraging participation in the voluntary pension system. To do this successfully, we need the facts as quickly as possible." (U.S. House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions)

Legacy Advisor Benefit Plans, Winter 2012-13 (PDF)
Articles in this issue include: FASB Update Regarding Employer's Participation in Multiemployer Plan Now Effective; News Prohibited Transactions and Plan Expenses Notice of Expiration: Temporary Unlimited Coverage for Noninterest-Bearing Transaction Accounts; New Audit Standards for 2012; and DOL Taking Close Look at Apprenticeship and Training Funds. (Legacy Professionals LLP)

[Opinion] Making Obamacare Work May Require the President's Executive Authority
"The incomplete Affordable Care Act does not address the participation of the multiemployer plans in health care reform. The answer to this and other gaps in the legislation is for the president to use his executive authority to fix them." (Law.com)

Massachusetts District Court Finds Investment Funds Not Liable for Portfolio Company's Underfunded Pension Liability
"This ruling comes as welcome news to private equity funds that (either together or through related funds) own 80% or more of a portfolio company with underfunded pension liabilities or withdrawal liability, and is a matter of concern for the Pension Benefit Guaranty Corporation ... and multiemployer pension plans seeking to assert liability on these funds." [Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, Civ. Action No. 10-10921-DPW (D. Mass. Oct. 18, 2012)] (Proskauer Rose LLP)

The Real Reason Unions Are Targeting Wal-Mart: Pensions
"[T]he United Food and Commercial Workers International Union, which organized Black Friday's 'strikes' outside [Wal-Mart] stores, has a serious problem. Its pension funds are failing. Most are in critical status (defined as less than 65 percent funded) or in endangered status (less than 80 percent funded), according to the union's own reports to the U.S. Labor Department. Without an infusion of new cash, they will not be able to pay all their obligations to future retirees. That's why the UFCW seeks to sign up 1.4 million Wal-Mart employees -- to inject fresh money into its failing plans." (The Examiner)

[Opinion] Hostess Brands Is Latest Case Highlighting Funding Challenges of Multiemployer Plans
"Recent efforts by Hostess Brands Inc. to use bankruptcy to discharge withdrawal liabilities totaling nearly $2 billion highlight a persistent and serious problem for multiemployer plans ... Employers such as snack food maker Hostess have tried using bankruptcy to avoid their withdrawal obligations, to the detriment of multiemployer plan participants, their beneficiaries, and the employers that continue to contribute to those plans[.]" (Bloomberg BNA)

8th Circuit: Employer Not Entitled to Restitution of $548K in Overpaid Contributions
"The employer mistakenly paid the contributions to the funds for work performed by its employees on projects that were outside the jurisdiction of the applicable collective bargaining agreement. The employer ceased making any CBA-required contributions after the funds determined that the employer was not entitled to credit for the overpayments.... [The Court of Appeals for the Eighth Circuit] determined that the employer demonstrated that it mistakenly made the overpayments but failed to demonstrate that restitution was equitable." [Greater St. Louis Construction Laborers Welfare Fund v. Park-Mark Inc., No. 11-3746, (8th Cir., 11/23/12)] (Bloomberg BNA)

IRS Letter Ruling Addresses Deductible Contribution Limit for Two DC Multiemployer Plans
"The limit on deductible contributions under Code Sec. 404(a)(3)(A) to two defined contribution multiemployer plans was to be applied by aggregating the compensation of the employees who were beneficiaries under both plans as if all such employees were employed by a single employer under Code Sec. 413(b), taking into account only those employees who had allocations other than elective deferrals, according to an IRS letter ruling." (Wolters Kluwer Law & Business)

[Opinion] Ding Dong, the Pension is Dead
"What [the Multiemployer Pension Plan Amendments Act of 1980] created was a bankruptcy machine that leaves employers participating in underfunded Multiemployer Defined Benefit Plans little other choice. Hostess was paying $22 million in contributions annually into This Dead Plan and wanted out. What they would have found is a draconian barrier called withdrawal liability which places the entire burden for making up shortfalls on employers who were silly enough not to jump ship earlier and allows the union very favorable terms for calculating this liability.... In this rigged game folding up was the only sensible option." (Burypensions)

Multiemployer Plan Erred by Not Using Actuary's 'Best Estimate' of Funding Shortfall to Compute Withdrawal Liability
"A multiemployer plan violated ERISA when it chose not to use its actuary's 'best estimate' of the plan's funding shortfall for purposes of calculating withdrawal liability, the U.S. Court of Appeals in Chicago (CA-7) has ruled. The Seventh Circuit upheld an arbitrator's conclusion that use of an alternative calculation method overestimated an employer's share of withdrawal liability by just over $1 million." (Wolters Kluwer Law & Business)

PBGC Director Says New Regs Needed for Multiemployer Plans
"Speaking at [a recent conference, PBGC Director Joshua] Gotbaum noted that active employees are now the minority in multiemployer plans. On average, active employees account for 40% of the multiemployer plan population, and in some plans the proportion of active employees is as low as 10%." (PLANSPONSOR.com)

New Planning Possibilities for Private Equity Funds to Protect Against Unfunded Pension Liabilities of Portfolio Companies
"[Private equity, or 'PE'] funds should evaluate their operations and contractual relationships to determine if such operations and relationships are comparable to those outlined by the court in the Sun Capital Partners case. In addition, PE funds may wish, when possible, to structure future investments across multiple funds with each fund owning less than 80 percent of the portfolio company in order to minimize risk of pension liability." [Sun Capital Partners III L.P. v. New England Teamsters and Trucking Industry Pension Fund, D. Mass., No. 1:10-cv-10921-DPW, 10/18/12] (McDermott Will & Emery)

Proskauer ERISA Litigation Newsletter, November 2012
"[The] lead article reviews the recent decision in Janese v. Fay, in which the Second Circuit held that the trustees of multiemployer plans act in a non-fiduciary capacity when amending the plans they administer.... [The] second article looks at the impact of the [ACA] on benefits claims under ERISA ... [and] considers two open issues that are likely to result in litigation: the fiduciary status of independent review organizations (IROs) established by the ACA, and the standard of judicial review applicable to those IROs." (Proskauer Rose LLP)

Investment Funds Not Liable for Portfolio Company's Multiemployer Pension Plan Withdrawal Liability
"The Massachusetts U.S. District Court ruled there was no liability because the investment funds are not 'trades or businesses' for purposes of ERISA's joint and several liability rules. This is the first court to address this issue since the PBGC Appeals Board ruled that an investment fund could be engaged in a trade or business." (Haynes and Boone, LLP)

Upcoming Compliance Deadlines for Multiemployer Retirement Plans
"Amendments might be required for plans that have made discretionary changes, plans that recently received a determination letter, or plans that have Puerto Rico participants. In addition, defined benefit plans are reminded about the Summary Report required by Section 104(d) of [ERISA]." (The Segal Group, Inc.)

Second Circuit Allows Employer to Withdraw from Multiemployer DB Plan After Plan Entered Critical Status
"Although there is no explicit statement in the PPA of an employer's right to withdraw, the court found that the statute did appear to assume that there would be withdrawals in these circumstances by revising the calculation of withdrawal liability when the plan withdrawn from was in critical status. Specifically, ERISA Section 305(e)(9) provides that the calculations of an employer's withdrawal liability should disregard contribution surcharges imposed automatically once a plan enters critical status and benefit reductions required by a rehabilitation plan." [Trustees of the Local 138 Pension Trust Fund v. F.W. Honerkamp Co. Inc. (2d Cir.)] (Wolters Kluwer Law & Business)

Hodgson Russ Employee Benefits Developments, October 2012 (PDF)
Articles include: Guidance Provided on Geographic Diversification and Single Property Transactions; Final Regulations Issued on Use of Corporate Aircraft for Entertainment; Multiemployer Pension Plan's Critical Status Does Not Preclude Employer Withdrawal; Retirees Are Not Entitled to Lifetime Benefits; and Liquidated Damages Due on Accelerated Withdrawal Liability. (Hodgson Russ LLP)

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