Brian Haynes

Section 4225(a) requires that there be a bona fide sale of all or substantially of the "employer's" assets in a arms'-length sale to an unrelated party. Where you have another member of the selling and signatory employer's control group (here a company that owns the building that was leased to the signatory employer), must there be a sale of assets of both the signatory operating company and the related real estate company for Section 4225(a) to apply? I think the issue is whether under ERISA the concept that all companies in the control group are deemed to be the same employer applies to Section 4225(a) so that all companies in the control group must be sold. I have not found any precedent for this but this does not sound correct to me. If any one has any thoughts, they would be most appreciated. Thanks.

I have a client that is a closely held business that sold all of its business assets related to its union business and was assessed withdrawal liability by a pension fund. We argued that the asset sale limitation under Section 4225(a) limited the assessment to 30% of the company's liquidation or dissolution value. The fund is taking the position that the company is not entitled to this limitation because it did not sell "all or substantially all of its assets" as required by Section 4225(a). Of course, the company did not sell its cash and A/R but also did not sell its minority stock ownership in a different closely held company (it would be very difficult to sell this minority interest to anyone). Based on this, the Fund is saying that since Section 4225(a) on its face requires a sale of "all or substantially all of the assets," the limitation does not apply. If the company had sold its minority stock interest in the other company it would have sold more than 85% of all its assets. Even without this stock sale, the company did sell 100% of its operating business assets. I have researched this and could only find one older arbitration case where the arbitrator held that non-operating business assets should be excluded in determining whether all or substantially all of the company's assets have been sold. Does anyone have any experience with this? Thanks in advance.

Thank you.

Under the proposed SECURE Act, RMDs will be limited to a 10-year pay-out for noneligible beneficiaries. A life expectancy pay-out will still be available for eligible beneficiaries (spouse, minor children, disabled individuals, chronically ill individuals and those not more than 10 years older than the IRA Owner). I am having trouble determining whether the current RMD rule that provides that if a non-individual beneficiary is named (estate, charity or non-look through trust), and if the IRA Owner dies before his/her required beginning date, then post-death RMD payments must be distributed within 5 years. Under the SECURE Act, would this 5 year pay-out rule be increased to 10 years if a non-individual is the beneficiary? Thanks.

On behalf of a client, I received the same MUA. The fund at issue wanted to take advantage of the MPRA provision which allows a fund heading towards critical status to affirmatively elect Red Zone status preemptively. This fund apparently did this so it could eliminate some early retirement type subsidies and then the next year, it will go back into endangered status and will not make the same election. I advised my client to go ahead and sign to avoid the 5/10% surcharges.

As a general rule, shares of stock can be sold to a buyer without triggering withdrawal liability. This is considered a mere corporate change and does not result in liability provided the corporation remains obligated to contribute to the pension fund. If the sale of stock is consummated with a principal purpose to evade or avoid withdrawal liability, the pension fund can argue under Section 4212(c) of ERISA that the transaction was an asset sale that results in withdrawal liability. There are a number of cases under Section 4212(c) that involve stock sales. Check your Collective Bargaining Agreement and any Participation Agreement with the pension fund to determine what the notification obligations are regarding the sale.

I represent an employer that contributes to a multiemployer pension fund. The fund wants to utilize Revenue Procedure 2010-52 and submit an application to the IRS for a 10-year amortization extension. In connection with that application, the fund is asking my client to send directly to the IRS certain financial information about the employer. My client is concerned about maintaining confidentiality of its financial information (it is closely held) and wonders whether it should decline to provide the information so that the fund enters critical status where the trustees have some better options for addressing the funding shortfall. Does anyone have any thoughts on this? Thanks. .

We know that if a pension fund has had a mass withdrawal termination, employers must pay their withdrawal liability payments without the benefit of the 20-year cap on payments (redetermination liability). Such employers are referred to as "infinity payers" and may have to continue making payments for decades. However, it is my understanding that there is a practical limitation on the length of the infinity payments. This occurs when the pension fund no longer has any living participants and beneficiaries so that there are no longer any pension payments being made and no reason for the associated pension trust to continue. Upon such trust termination, it is my understanding that employers no longer have to continue making withdrawal liability payments. Does anyone have any authority that confirms this understanding? I am having trouble finding it athough it makes sense and several actuaries so believe. Thanks.

Just an additional after-thought: Although somewhat unclear under the case law, be careful if the contributing employer and the subcontractor are considered either a "joint or single employer" under the labor laws. If this is the case, the work by the subcontractor (being performed without an obligation to contribute to the pension fund) may be attributed to the employer and Section 4203(b) may have been violated.

My client received a notice and demand for withdrawal liability. The notice states that the employer can either pay off the assessment in a lump sum payment (made within 10 days of receipt of the Fund's notice) or commence making interim payments in January of 2015. My client wants to negotiate a lump sum payment. My concern is that if a lump sum is not paid within the 10 day period specified by the Fund, is the employer harmed by having to negotiate a lump sum payment with some interest accruing? My thinking is that interest does not start accruing until the first interim payment is due in January of 2015 so that the employer should have until that time to negotiate and pay a discounted lump sum amount. I understand that Section 4219©(4) allows an employer to pay off the liability without penalty, but with accrued interest, if any. Any thoughts on why the Fund states that the lump sum must be paid in 10 days? Thanks.

It is my understanding that it is also possible to go to federal district court and ask the judge to appoint an employer trustee. In extreme cases and as a last resort, union trustees have resorted to this procedure.

Funds seem to vary on whether they can waive and release any future mass withdrawal liability claims. Some Funds take the position that it would violate public policy to waive a future contingent liability event that is to be statutorily imposed (especially when not supported by additional consideration). Some Funds allow such a waiver but will do so only if the employer pays an additional amount to support that wavier. For example, a lump-sum settlement for a complete withdrawal made without the benefit of any 20-year cap or for an additional negotiated amount. All in all, most Funds will not release such claims but it is always worth trying to obtain.

Check Watsonville Frozen Food, 877 F.2d 1415 and Wisconsin UFCW Unions, 348 F.Supp.2d 1005.

As wel know, the Central States Pension Fund Trustees have adopted a hybrid method for calculating withdrawal liability which for current contributing employers, allows them to pay their liability now and switch to the direct attribution method. I am familar with this change. However, it is my understanding that the Trustees amended their hybrid method at the end of November 2012 to provide some new rules as to how a mass withdrawal event impacts those employers who have elected the hybrid method, Is anyone familar with this change. I assume it is a favorable result, in line with the Trustees' desire to encourage employers to switch to the direct attribution method. Any help would be most appreciated.

Thank you. I have also posted my question in his Column.

If there is a parent company A that owns 100% of the stock of B and where B then owns 100% of the stock of C, it is clear that A,B and C are all members of the same control group as a chain of parent-subsidiaries. If there is a reorganization where the stock of C is distributed out to the 40 shareholders of A (I think this is referred to as a split-off?), at the end of the transaction you will have A still owned by the same 40 shareholders and C will be owned individually by the same 40 shareholders. I believe that this would be considered a mere change in form with no withdrawal liability trigger. Am I correct in my belief that A and C will not be members of the same control group after the reorganization since they are no longer parent-subsidiaries and are not a brother-sister group since (assuming this is correct) 5 of the 40 shareholders (even assuming the application of the attribution rules) do not own at least 80% of A or C? Thus, after the reorganization C will not be potentially liable for A's future withdrawal liability? I understand that a pension fund may argue that the transaction has a principal purpose to evade or avoid liability. Does the exclusion of certain interests in determining brother-sister groups apply under Regulation 1.414©-3© so that if any of the 40 shareholders of A and C are employees of either A or C and their stock is subject to restriction on the employee's right to dispose of the stock which run in favor of A or C (assuming that the same 5 or fewer shareholders own at least 50% of A and C)? If one of the shareholders of A and C is not a person (for example, is a corporation) is that interest likewise excluded in making the brother-sister determination. Thanks for your help, it has been a while since a had to dive so deeply into the control group rules.

This is my take on the answer to your question. If a Fund goes into "reorganization" status (approaching insolvency) contributing employers may be liable for additional required minimum contributions above the rehab schedules. I note that the draft NCCMP proposal regarding what should happen when the PPA sunsets in 2014 has a proposal that provides that if a Fund goes into reorganization, the employers should be insulated from additional contributions if the Fund is in critical status (just like employers are protected from AFD liability if the Fund is in critical status). If the Fund becomes insolvent (does not have the cash to pay benefits) benefits must be reduced to the maximum PBGC amount and this generally should help employer contribution levels in the future. However, with insolvency, often comes a mass withdrawal where employers are faced with significant exposure. Since the PBGC guarantee is so low, the union does not usually want to continue having part of the wage package allocated to pension contributions. Hope this helps.

I would agree that a default schedule may not reduce adjustable benefits. The PPA seems pretty clear to me on that. The only exception may be when the Fund Trustees have determined that based on all available reasonable measures the Fund cannot move out of critical status in the required 10 or 13 year period so that they are merely forestalling insolvency. When that occurs, the default and alternate schedules are usually quite different than in the normal course.

Assuming you have a building and construction industry pension fund and that the employer at issue is a qualifying construction employer, under Section 4208(d)(1) of ERISA, the employer is liable for a partial withdrawal only if the employer has a continuing obligation to contribute to the pension fund and continues doing what was previously covered work under the collective bargaining agreement in the relevant geographic area. The legislative history states that for such liability, the employer must change its work mix from union to non-union covered work. The non-construction industry facility take-out rule for partial withdrawals does not technically apply in the construction industry (although the facts causing a violation of the faciltiy take-out rule may be enough to trigger a construction industry partial withdrawal). Gordon stated that the pension fund assessed withdrawal liablity due to a "permanent cessation of contributions on behalf of some or all bargaining unit employees." He does not indicate whether previously covered union work was continued on a non-union basis. If it was, this may mean that there was etiher a facililty or bargaining take-out partial withdrawal for non-construction pension funds. These take-out provisions are technically inapplicable. In any event, as long as the employer (or any other member of its control group) did not continue on with the prior union covered work on a non-union basis (for any reason), the employer should not have triggered partial withdrawal liability in the construction industry. I assume the time period to arbitrate the withdrawal liability assessment has passed. If so, I would still argue to the trustees that under the case law, the trustees of the pension fund had a fidicuary obligation to determine whether the construction industry partial withdrawal liability rule applied before making the assessment and they did not do so. I would also argue that the assessment is not statutorily permissible (assuming that no work was continued on a non-union basis) and should be rescinded. Not sure these are winning arguments but I would make them. If the pension fund later assesses liability for a complete withdrawal, you may be able to contest the prior partial withdrawal liability in that context (if there is no complete withdrawal because no work was continued on a non-union basis then there can be no prior partial withdrawal under the same or similar facts). Hope this helps.

Assuming that a parent company has two subsidiaries, A and B and that A's stock is sold to an unrelated buyer and is exempt from withdrawal liability under 4218(l) and later on in the Pension Fund's same plan year the assets of B are sold to a different unrelated buyer under Section 4204, provided the transactions are otherwise properly treated as separate (and there was no principal purpose to evade or avoid liability), does the fact they occur in the same plan year give the Pension Fund an argument that they should be treated together so that a complete withdrawal somehow occurs.? To the extent they are truly separate and occur in separate plan years I feel pretty good about no liability (each transaction will have soley triggered the relevant liability but for the statutory exemption) but wondered if there is an additional problem if both transactions occur in the same plan year. I understand that it makes it harder to argue that the transactions are separate but in fact they are. Thanks.

My understanding as welll. It is my understanding that if a pension fund goes into reorganization status, there is a statutory formula that determines whether contributing employers have to put in additional contribution amounts. The protection from AFD and excise taxes for critical status plans under the PPA probably does not apply.

A client wants to establish a collectively bargained voluntary separation plan and I am concerned that it may be considered a pension plan under ERISA since Fort Halifax will not apply. The client is a college and wants to provide a one-time lump-sum payment to an employee who voluntarily terminates employment after 20 years of service and between the age of 55 and 62. If the employee is involuntarily terminated then no benefit is paid. I feel pretty good that the voluntary vs involuntary distinction is ok under Fort Halifax since there is not a "for cause" determination. However, I am concerned that the time period for which the payment is offered is problematic since it will be in a collective bargaining agreement that will last for 3 years. I could provide a window say of 30 days in each of the 3 years but I am not sure that helps enough. I would appreciate any ideas. Thanks. I am aware of the 409A and 457(f) issues.

Any ideas on how to provide a voluntary separation pay plan under Section 457(f)? I have a College for a client that wants to negotiate with its union to provide a one-time lump-sum payment to an employee that decides to voluntarily terminate employment with 20 years of service with the College and between the ages of 55 and 62. Putting aside the Fort Halifax ERISA issue, if the arrangment is not considered a bona fide severeance pay plan when the IRS issues its final guidance, how can the College offer such a benefit without causing taxation when an eligible employee reaches the age of 55 but decides not to terminate employment? Notice 2007-62 talks about potential exceptions for window programs and collectively bargained separation pay plans. Does anyone think this type of arrangement might fall within one of these potential exceptions? If not, do you think it is likely the final guidance will grandfather collective bargaining voluntary separation play plans? Thanks for your help. This is not my main field of expertise and need some guidance.

Just a follow up thought - A pension fund may argue that the buyer of the assets is a "successor employer" making it liable for any unpaid withdrawal liability of the seller, even though the buyer's own withdrawal liability amount is based on its own contribution history.

Does anyone know whether Amendment to IAS 19 requires an employer to disclose an estimate of withdrawal liablity for participation in a multiemployer pension plan? The International Accounting Standards Board released this Amendment in June of 2011. I can't quite tell if a withdrawal liability amount must be disclosed or just a description of potential withdrawal liability or wind-up liabilities. Thanks for your help.