Withdrawal liability - controlled group of general partner on the hook?

[SRNPEBT]

Employer is a general partnership. There are four unrelated general partners, each holding 25% interest in the employer, so none of the general partners are members of the same controlled group as the employer.

If employer withdraws from a multiemployer pension plan, I understand that each general partner can be held jointly/severally liable for the entire withdrawal liability (as applied under state law). But, is the controlled group of a general partner also on the hook if the general partner can't pay? For example, assume general partner is corporation x, which is wholly owned by corporation y. Can the plan or the PBGC go after corporation y?

My gut sense is no, since neither corporation y nor the general partner are in the same controlled group as the employer. But, I haven't found any cases on point. I would appreciate any thoughts. Thanks!

[jpod]

I don't have knowledge of all the case law, but your analysis makes perfect sense to me (i.e., the liability sits with the employer and members of ITS controlled group). However, if you reversed the facts and y was a subsidiary of x, then the plan could end up owning y! That, of course, flows from x's liability as a GP and not because of ERISA.

[Bill Ecklund]

There are basically two kinds of Controlled Groups: a Parent-subsidiary group or a Brother-Sister group:

In a Parent-Subsidiary group the parent owns ≥80% of stock of subsidiary

The regs define a Brother-Sister Group as two or more organizations conducting trades or businesses if (i) the same five or fewer persons who are individuals, estates, or trusts own (directly and with the application of §1.414©-4) a controlling interest in each organization, and (ii) taking into account the ownership of each such person only to the extent such ownership is identical with respect to each such organization, such persons are in effective control of each organization. The five or fewer persons whose ownership is considered for purposes of the controlling interest requirement for each organization must be the same persons whose ownership is considered for purposes of the effective control requirement.

The Brother-Sister group would be the one you would be looking at. If you look at the IRS regs. under section 414©, you will see a number of illustrations that will show that in your scenario there will no liability beyond the 25% General Partner