Withdrawal Liability

[Guest soccermom]

Employer is a non-profit ("NP") with several units under the non-profit umbrella. Two of the units (Unit A and Unit B) participate in a multiemployer pension plan. One of the units has to close down as the NP is no longer providing the service that Unit A provides. This is a partial withdrawal. NP is selling Unit A to a non-related party and wants to use 4204. However, since Unit A provides in-patient health care the buyer must apply to the state to get approval to continue to provide in-patient care. The approval process could take from 12 to 18 months. NP will shut down Unit A in November regardless. If the sale doesn't close for 12-18 months does NP have withdrawal liability until buyer takes over? Buyer won't take on the withdrawal liability until buyer knows that the sale will be approved by the state. Does anyone know if NP is liable for the withdrawal until the sale closes? Can 4204 still be used when there is this time delay between shutting down Unit A and the closing of the sale? Any authority that is on point or close to this fact pattern. Sorry this is so long.

[Jim Dexter]

From the facts you've presented, I don't see why the sale of Unit A will trigger a partial withdrawal (unless it's expected to trigger a 70% decline). Under which of the partial withdrawal rules do you expect a partial withdrawal to be triggered?

[Guest soccermom]

Jim -

I did not do the calc, the NP told me that it would trigger a partial withdrawal. I understand that if the calc was less than 70% then there would be no withdrawal liability. For arguments sake let's assume it is over 70% and there is a partial withdrawal for the sake of my questions above. Many thanks.

[Bill Ecklund]

This would only be a partial withdrawal if there is a 70% contribution base unit decline over a three year period of time, otherwise there is no withdrawal. Three years will pass before there would be an assessment from the plan, by that time your sale would be concluded. Obviously the employer would like to have the contribution history removed from its history for purposes of determining future withdrawals. I don’t have any specific authority on the time delay, but it appears to me that the sale should be structured as a 4204 sale conditioned upon the state’s approval of the sale. Make sure that the agreement defines the “year of sale” when the state approves it and title is transferred. When the buyer commences the new business, it will assume the last five years of contribution history from the seller and the sellers contribution history removed. Assuming the purchaser contributes for the same number of CBU’s that the seller contributed to prior to its shutdown of the operations, and fulfills the other requirements of 4202, the plan should readily accept this. Although I know of no specific authority on this, I would suggest checking with the plan to make sure that they would accept this

[Guest soccermom]

Bill - thanks so much - this was very helpful