Pension Benefit Guaranty Corporation 

87-1 

January 23, 1987 

REFERENCE: 

 [*1] 4203(e) Date of Complete Withdrawal

4205(b)(1)Partial Withdrawals

70 Percent Decline

4205(b)(2)(A) Partial Withdrawals

Definition of Partial Cessation 

OPINION: 

This responds to your request for the opinion of the Pension Benefit Guaranty Corporation (PBGC) as to the

circumstances under which a bankruptcy proceeding may give rise to withdrawal liability under Sections 4203 and 4205

of the Employee Retirement Income Security Act, as amended (ERISA). 

Section 4203 of ERISA defines a complete withdrawal from a multiemployer plan as occurring when an employer

(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered

operations under the plan. Section 4205(b)(2) provides that a partial withdrawal occurs in certain circumstances where

the employer permanently ceases to have an obligation to contribute under one or more but fewer than all collective

bargaining agreements or permanently ceases to have an obligation to contribute with respect to work performed at one

or more but fewer than all of its facilities. Section 4205(b)(1) provides that a partial withdrawal also may occur as a

result of a sustained 70 percent decline in the employer's [*2] contribution base units. 

Filing a petition for reorganization under Chapter 11 of the Bankruptcy Code does not constitute a withdrawal. By

itself the filing of a reorganization petition does not affect the employer's obligation to contribute, covered operations,

or contribution base units. 

Section 1113 of the Bankruptcy Code does allow a debtor in possession to reject its collective bargaining agreement,

including its obligation to contribute to a multiemployer plan, if specified conditions are met. In specified circumstances,

Section 1113 also allows the bankruptcy court to authorize implementation of interim changes in the collective

bargaining agreement prior to court approval of rejection. However, this section does not permit unilateral changes in

a collective bargaining agreement until the requirements for rejection or for interim changes have been met. Until that

time, the obligation to contribute under a collective bargaining agreement continues. 

If an employer in a Chapter 11 reorganization stops contributing to a multiemployer plan after being authorized

under Section 1113 either to reject its collective bargaining agreement or to implement interim changes in the [*3]

collective bargaining agreement, then an inquiry into the facts and circumstances of the situation is needed to determine

whether a withdrawal has occurred, including whether the cessation of the obligation to contribute is permanent. If the

employer permanently ceases covered operations for any reason, including the conversion of a Chapter 11 reorganization

to a Chapter 7 liquidation or the entry of an order of relief in an involuntary Chapter 7 bankruptcy, a withdrawal will have

occurred. 

Assuming a withdrawal has occurred, the date of the withdrawal is determined under ERISA, not under the

Bankruptcy Code. Thus, if the withdrawal is based on a permanent cessation of covered operations, the date of

withdrawal is the date when operations ceased. See Section 4203(e) of ERISA. It does not relate back to the date of

filing of a Chapter 11 petition or an involuntary Chapter 7 petition if operations continued thereafter. Similarly, if the

withdrawal is based on a permanent cessation of the obligation to contribute, the date of withdrawal is the date when the

obligation to contribute ceased. See Section 4203(e) of ERISA. It does not relate back to the date of filing of a [*4]

Chapter 11 petition even if the obligation to contribute ultimately was rejected under Section 1113. See Trustees of

Amalgamated Insurance Fund v. McFarlin's Inc., 789 F.2d 98, 104 n.2 (2d Cir. 1986) (withdrawal liability "does not

derive from the collective bargaining agreement but from [ERISA]. . . ."). 

Of course, the initial responsibility for determining whether any particular action constitutes a withdrawal from a
multiemployer plan lies with the plan sponsor. ERISA further provides that a dispute between a plan sponsor and an

employer on this issue is to be resolved by arbitration, subject to review in courts. 

I hope this response has been of assistance. If you have further questions, please contact the attorney handling this

matter, John Foster of the Corporate Policy and Regulations Department. His telephone number is 202-778-8850. 

John H. Falsey 

Acting General Counsel