Retroactive amendment to CBA

[Guest Salvador A Mander]

Participating employer ceased making contributions last month even though CBA providing for contributions does not expire until next year. Can employer and union jointly agree to amend the CBA so as to discontinue contributions effective last month? I am almost certain that's NOT possible (and disregard any withdrawal liability concerns), but any other thoughts would be welcome.

[Brian Haynes]

Here are a couple of thoughts. I don't think there is a problem with the union and employer retroactively ceasing the employer's obligation to contribute to the Pension Fund. However, the Pension Fund may have a problem with the retroactive application. The Pension Fund might sue the employer for delinquent employer contributions for the period of retroactivity since it was not put on notice of the cessation and/or relied on the employer's contributions for that period for funding purposes. Depending on the terms of the plan, the Fund might deny the employer's union employees with benefits for the retroactive period. If the Pension Fund had the employer sign a Participation Agreement which required contributions until the end of the collective bargaining agreement, the Fund could sue for delinquent employer contributions for that entire period since the Fund is just a third party beneficiary of that amended agreement. I know you stated not to be concerned with withdrawal liability, but, absent some sort of exception, the permanent cessation of the obligation to contribute (or the permanent cessation of covered operations) will trigger any withdrawal liability. Further, if it's to its advantage, the Fund might take the position that the retroactive date of cessation does not determine the date of withdrawal but rather the withdrawal date should be the date the collective bargaining agreement expires based on the evade or avoid rule under Section 4212(e) of ERISA. Hope this helps.

[Guest Salvador A Mander]

That's how I was thinking about it - thanks. Regarding the withdrawal liability, I just wanted to isolate the delinquent contributions issue to make sure that I wasn't overlooking any special rules that might provide for a good defense against a plan's collection action. I agree 100% that there is a withdrawal liability issue. Thanks again!