Employers who contribute to multiemployer pension funds are more and more concerned with unfunded liability and potential withdrawal liability. That exposure can be substantial and it is important to prepare to deal with it before taking any actions that trigger liability. But within the concept of withdrawal liability generally, there is a special consideration for employers in the building and construction industry generally that merits a closer. It provides an exception to withdrawal liability in certain circumstances involving the building and construction industry.
ERISA generally provides that an employer who ceases to have a contribution obligation to a plan has a withdrawal. Then it has a special section that provides that in the case of (1) an employer that has an obligation to contribute under a plan for work performed in the building and construction industry, a complete withdrawal occurs when (2) substantially all the employees with respect to whom the employer has an obligation to contribute under the plan perform work in the building and construction industry, UNLESS (3) the plan primarily covers employees in the building and construction industry, or is amended to provide that this subsection applies to employers described in this paragraph, and then ONLY IF (4) the employer continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.
Each step is important. (1) are you an employer in the building and construction industry? The term “building and construction industry” is not defined in MPPAA but it is under 8(f) of the Taft-Hartley Act, 29 U.S.C. Sec. 158(f), which contains the same term. Section 8(f) is applicable to employers “engaged primarily in the building and construction industry, defined as “subsuming the provision of labor whereby materials and constituent parts may be combined on the building site to form, make or build a structure.” It takes a case by case review of your business, but you don’t get the exception unless you are in the building and construction industry.
Step (2), substantially all of your employees have to perform work in the building and construction industry. Not all of them, but substantially all. So you have to determine how many using the same criteria to determine if the company itself is in the industry. Step (3) requires you to contribute to a plan that primarily covers employees in the industry, or has specifically been amended to state the exception applies. So you have to review the plan and know who it covers and what it says before knowing if you get the exception. Finally, step (4). If you don’t continue to perform covered work in the jurisdiction and don’t resume performing covered work for at least 5 years, then there is no withdrawal.
So why bring it up? Because this 4 step analysis is something that should be done BEFORE a withdrawal occurs. Don’t withdraw and assume you are exempt under this exception. Research each step carefully to make sure the exception really applies or the results could be disastrous. And of curse, make sure to consult with your attorney at Fox Rothschild for assistance.