Withdrawal Liability And Retirement Plans Under ERISA
One of the promises an organization makes to its employees when it offers a retirement plan is that the funds needed to fund their post-work life will be there when they retire. To protect participating employees from experiencing an underfunded account, the Multiemployer Pension Plan Amendments Act was passed in 1980 as an amendment to the Employee Retirement Income Security Act (ERISA). It requires employers intending to withdraw from defined benefit plans sponsored by multiple employers to pay a share of the plan’s unfunded vested benefits.
Pitta LLP is a leader in labor law issues. Our attorneys have been representing unions and the trustees and fiduciary agents of retirement plans for more than four decades. We can guide your union through this complex area of the law.
What Is ERISA And How Is It Important?
The Employee Retirement Income Security Act (ERISA) was enacted in 1974. It put in place minimum standards for voluntary, private industry pension and health plans to ensure they are established and maintained fairly and in a financially sound manner. Over the years, ERISA has protected millions of Americans, ensuring that their rights to retirement, health and other benefits are secure.
Today, ERISA continues to provide critical oversight in an ever-changing economic landscape. Here are a few ways how:
- It demands transparency from plan administrators to its participants
- It establishes fiduciary responsibilities for those who manage and control plan assets
- It provides grievance and appeals processes for participants to get benefits from their plans
- It allows participants the right to sue for benefits and breaches of fiduciary duty
The enduring relevance of ERISA ensures that the retirement funds of employees are protected against mismanagement and abuse, securing financial futures for countless workers and their families.
How Withdrawal Liability Is Determined
Withdrawal liability occurs when an employer ceases to contribute to a multiemployer plan but has employees who have accrued benefits under the plan. This liability is the employer’s share of the plan’s unfunded vested benefits. Here is a step-by-step guide on how withdrawal liability is determined:
- Plan status evaluation: First, the current financial health and funding status of the pension plan are assessed.
- Employer’s contribution level: The employer’s history of contributions and the duration of their participation in the plan are examined.
- Allocation of unfunded vested benefits: The employer’s share of the plan’s unfunded vested benefits is calculated based on their contribution relative to other employers.
- Notice and collection: The plan sponsor then notifies the employer of their calculated withdrawal liability and sets a schedule for liability payments.
Understanding this process is crucial for unions to effectively protect the retirement benefits of their members. If an employer withdraws, knowing these steps helps ensure that obligations to employees are met.
With these insights into ERISA and withdrawal liability, leaders of labor unions are better equipped to uphold the rights and secure the futures of their members. If you have questions or need further assistance, Pitta LLP is here to help.
Why Your Organization Needs To Understand Withdrawal Liability
Retirement benefits are often the largest financial investment most employees will make. If your union has negotiated specific terms related to a defined benefit plan or another type of retirement account, an employer’s withdrawal from the plan may jeopardize both the future security of your members and your organization’s credibility.
Our firm can advise you on many factors related to this topic, including:
- Exemptions that the law provides for the construction, entertainment, trucking and retail food industries
- What actions by an employer do and do not constitute a withdrawal
- How withdrawal liability amounts are calculated and payment plans for employers enacted
- How arbitration is conducted between an employer and a multiemployer plan
Our firm will investigate the exact circumstances of the potential withdrawal and advise you on how best to proceed to protect employee benefits.
Bring Your Pension Funding Questions To Us
With three convenient New York locations, Pitta LLP serves clients in New York and New Jersey. Call us at 212-257-3973 or email our office to make an appointment with one of our lawyers.
