Withdrawal

[Randy Watson]

Can the trustees of a multiemployer plan force a withdrawal of all employers, thus triggering withdrawal liability? Do the employers have the right to refuse this forced withdrawal imposed by the trustees?

[JanetM]

The SMW multiemployer plan has language saying they can terminate, modify, suspend or amend the plan at any time by vote of board of trustees. Would imagine just about all the multis have the same language.

[Effen]

Plans which are in serious financial problems can have a "mass withdrawal". I believe the Trustees could initiate this. Basically, the plan is terminated and each employer is allocated a portion of the termination liabiltiy. There are pros/cons for a mass withdrawal, but the biggest difference is that the w/drawal liability is based on termination rates. This can cause the w/drawal assessments to increase dramatically if the fund was using funding rates to determine the w/drawal amounts. There is also a look back rule that allows the fund to re-calculate and re-asses employer who have w/drawn during the last few years. Also, I don't think the 20 year rule is applicable in a mass w/drawl.

[Kirk Maldonado]

Effen:

While the trustees might have the authority to do that, isn't it highly unlikely that they would take such an approach?

It seems to me that there could be long-term negative political fallout from implementing such a drastic measure.

Have you seen or heard of other plans where the trustees have taken such action?

[Effen]

taken - no, contemplating - yes.

I agree it is drastic, but there are two sets of trustees (employer/union). The employer trustees need to determine if it is in the best interest of all the employers to terminate the plan in a mass w/drawal in order to capture more $ from those ER's who were going to w/draw anyway. If the plan is going down eventually, why let some of the employers get away with a smaller share of the liability?

I'll be honest, I don't really know how the machanics will work, but we have a few plans looking at the idea of a mass w/drawal if they can't qualify for relief under 412(e).

[JanetM]

That is rather scary. We contribute to a few of them and they are all in bad shape. Thinking about the cost if mass withdrawal occurs is hurting my brain.

[Kirk Maldonado]

Effen:

Thanks for your informative reply. It is very useful to learn what those plans are contemplating, even if nobody has actually implemented such an approach (yet).

[Guest VinSzel]

In the 1980's, the Fur Manufactures did a mass withdrawal and issues arising from that action were litigated in a MPPAA arbitration reported in the Emp. Bene. Cas. service published by BNA.

I agree about the termination rates versus the on-going rates. An ongoing rate might be 8% whereas a termination rate could be 4 -5% (or whatever it cost to buy an annuity from a commercial vendor).

Effen:

While the trustees might have the authority to do that, isn't it highly unlikely that they would take such an approach?

It seems to me that there could be long-term negative political fallout from implementing such a drastic measure.

Have you seen or heard of other plans where the trustees have taken such action?