Source: https://www.executiveloyalty.org/m-a---retirement-plans.html
Timestamp: 2019-04-20 07:07:00+00:00

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​Code §410(b)(6)(C) re M&A transition rule for coverage testing. See Rev. Rul. 2004-11, as discusses in this article.
The 9th Circuit began its analysis in Heavenly Hana v. Hotel Union (filed 7/1/2018) by reciting the federal common law doctrine of successor liability. Under that well-established doctrine, a purchaser of assets will become subject to the seller’s federal employment, labor, and pension liabilities if the purchaser (1) substantially continues the seller's business, and (2) has notice of the seller's federal liability.
Amstar previously operated a hotel that participated in a multiemployer pension plan.
[I]n prior acquisitions involving multiemployer pension plans, Amstar had required ts agents to determine whether it could incur withdrawal liability from the transactions.
The [Asset Purchase Agreement] plainly informed Amstar that the employees at Ohana [as the seller] were unionized and that Ohana had contributed to a multiemployer pension plan.
Finally, the Plan’s annual funding notices, which indicated a state of underfunding, were publicly available on the internet.
Overall, potential asset purchasers should take precautions -- early in any possible transaction -- against the risk that substantial continuation of the seller's business and workforce may trigger successor liability for its pre-closing employment, pension, and ERISA obligations. Otherwise their lack of actual notice may not suffice to save them from successor liability.
2018.09.04 Successor Liability for Single Employer DB Plan - "Trade or Business" for Controlled Group. In PBGC v. Findlay Industries, the 6th Circuit held that a family trust which leased land to a commonly-controlled plan sponsor was a “trade or business,” and thereby became jointly and severally liable for the controlled group’s pension plan termination liability. Further, the buyer of the plan sponsor’s assets was held liable, as a successor employer, and therefore for the plan sponsor’s pension plan termination liability.
2018.03.12 Successor Liability -- "Big Buyer" Defense Fails for Asset Purchaser. For an asset purchaser to be held liable for withdrawal liability as a successor to a seller's multiemployer plan obligations, the purchaser must - (i) have had notice of the seller’s withdrawal liability, and (ii) “substantially continued” the seller’s operations. Under what some call the “big buyer” defense, purchasers have argued that they are not substantially continuing the seller’s business when those operations comprise only a small proportion of the purchaser’s post-acquistions operations. In Ind. Elec. Workers Pension Benefit Fund v. ManWeb Servs., the Seventh Circuit rejected that defense, and held that the proper inquiry focuses solely on the seller's operations, thereby hinging on the extent to which the purchaser continues the seller’s business after the asset purchase.
The facts here are comparable to those in Halliburton. Acme can make any changes to the ERISA plans, but Berkshire can "not cause the Company [Acme] to . . . (ii) reduce any benefit accruals . . . [or] (iii) reduce the employer contribution. . . ." . . . Additionally, the restrictive provisos here, like the provision in Halliburton, impose no time limit for how long Berkshire is prevented from causing Acme to reduce certain benefits.
Overall, the Hunter case provides a useful reminder that, in their acquisition agreements, buyers should consider including a Halliburton provision if they are making post-closing commitments to employees of the acquired company. This is the case (due to the Halliburton decision) even if the agreement provides that there are no third party beneficiaries.
Law360 reports that "[t]he Third Circuit held in a precedential decision Thursday that a federal common law standard applies for successor employer liability for alleged Fair Labor Standards Act violations in a case involving alleged overtime violations by a mortgage lender and its successor company." The case is Thompson v Real Estate Mortgage Network.
In an asset purchase under Bankruptcy Code §363, the "free and clear sale" did not result in the buyer's assumption of plans not listed in the purchase agreement, per the decision in International Union vs. Mahle Engine dismissing claims under ERISA and the Labor Management Relations Act (based on provisions in a collective bargaining agreement), because the sale order expressly provided for no successor liability except for plans being expressly assumed.
2013.Sept.16 Retirees Lose Challenge to Spin-off of Pension Plan .
A Texas district court has dismissed, claims by former Verizon employees that a spin-off of their pension plan violated ERISA because iplan fiduciaries breached their ERISA duties through . . . continued at M&A Benefits. “the involuntary transfer of retirees from Verizon’s allegedly more financially secure pension plans to Idearc’s allegedly less-secure plans.” See Murphy v. Verizon, ND Texas.
Although it is well established that the federal common law of successor liability has potential application to a seller’s multiemployer and nonqualified plan liabilities, there is no record of the PBGC acting to reverse its longstanding policy, expressed in a 1978 PBGC Opinion (78-10), to the effect that arms’ length asset sales for fair market value do not trigger successor liability for underfunded ERISA plans. Nevertheless, the PBGC has recently announced more aggressive enforcement activity (see "PBGC bares fangs"). For further information, see the Harvard Governance Blog titled "PBGC Initiates Pension Plan Termination in Leveraged Acquisition."

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