Employers with a unionized workforce typically contribute to a multiemployer pension plan – most of which are seriously underfunded today. When the employer ceases operations, an underfunded pension plan will typically notify the employer that it is responsible for an assessment of its “withdrawal liability.” The assessment is designed to protect the financial solvency of the pension plans and to ensure that an employer who departs from the plan does not escape the plan’s future funding needs.
Assessments are based upon a statutory formula, and the pension plans and their actuaries are normally accurate in their calculations of withdrawal liability. However, sometimes the plans lack knowledge of facts which could serve as a partial or complete defense against the assessment. Those critical facts however, become absolutely useless if the employer ignores key deadlines. Under federal law, the pension plan’s assessment is considered correct and enforceable absent a timely challenge. And the time frames for challenge are short – ninety days to request review of the assessment and within 60 days of the lesser of the plan’s response to the request for revision or 120 days after the employer’s request for review, to initiate arbitration.
Employers seeking to bypass the review and arbitration requirements have sought assistance directly from the courts, but judicial opinions to date have only reinforced the unforgiving nature of these deadlines. And the opinions issued in 2016 unfortunately continue this trend. In March of this year, an employer who thought it initiated arbitration within the required time period was told it had not and had, in fact, waived the right to arbitration because it had only notified the pension plan of its intent to arbitrate and did not actually pay the requisite arbitration fee. In a similar case, the employer did not believe it was subject to any collective bargaining agreement which required pension plan contributions and so challenged the assessment in court, rather than by arbitration. The court determined the employer’s belief – whether in good faith or not – was irrelevant; the employer failed to pursue his defense in the appropriate arbitration forum and by the appropriate deadline – thereby losing those rights.
Employers ceasing operations frequently become engrossed in the myriad details associated with terminating employees or shutting down a business, so ignoring what can seem to be an inconsequential creditor’s notice is understandable. But where that notice comes from the pension plan, ignoring it can be fatal to an effective defense. Employers therefore must take quick action to avoid a default. As the courts in 2016 have emphasized, deadlines matter when opposing an assessment of withdrawal liability.