Opinion ID: 467556
Heading Depth: 1
Heading Rank: 1

Heading: historical background & statutory scheme

Text: 4 Under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001 et seq. (1976), amended by 29 U.S.C. Sec. 1301 et seq. (1982), employers contribute to a pension plan on behalf of each of their employees who is a member of a participating union. The amount of the payments is determined by a collective bargaining agreement between each employer and its employees. The plan is administered by trustees, half of whom are chosen by contributing employers and half by the union. 29 U.S.C. Sec. 186(c)(5)(B). The trustees set the level of benefits paid to participants and determine investment policy. ERISA also established the Pension Benefit Guaranty Corporation (PBGC), a government corporation, to insure employees' benefits against a plan's termination for insufficient funds. 5 Prior to MPPAA, 29 U.S.C. Sec. 1381 et seq. (1982), an employer who withdrew from a pension plan incurred a contingent liability: if a multiemployer plan terminated within five years following an employer's withdrawal, the employer was liable to the PBGC, but if the plan did not terminate within five years, the employer had no liability. The maximum of each employer's liability was 30% of its net worth. Because an employer who withdrew from a plan more than five years prior to its termination escaped with no liability, the remaining employers bore a greater share of liability. There was thus an incentive for employers to withdraw from plans in order to avoid future liability. Many withdrawals resulted, and the solvency of pension plans was threatened. 6 In 1980, Congress passed MPPAA, amending ERISA, to discourage withdrawals from multiemployer pension plans and to ensure the solvency of such plans. H.R.Rep. No. 869, 96th Cong.2d Sess. 67, reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2935. MPPAA, inter alia, imposed mandatory liability on withdrawing employers regardless of whether the plan terminated, and repealed the provision that set 30% of an employer's net worth as its maximum liability. Because MPPAA was signed into law on September 26, 1980, but imposed retroactive liability on employers who ceased contributing to a plan on or after April 29, 1980, in a worst case scenario an employer could be liable for all of its assets even if the plan remained solvent and even if the employer had left the pension plan prior to the enactment of MPPAA. 1 7 Title 29, Sec. 1381 provides that upon an employer's withdrawal from a pension plan, the plan's trustees determine the amount of liability. In determining the amount of liability, the trustees are required to use one of several actuarial methods set forth in Sec. 1391 or any alternative method approved of by the PBGC. 29 U.S.C. Sec. 1391(c)(1) (1982). Section 1394(a) prohibits the retroactive application of a method chosen after the date of the employer's withdrawal and Section 1394(b) requires that the selected method be applied uniformly to all employers who withdraw from the plan. 8 Once an employer's withdrawal liability is calculated, the plan is required to notify the employer and demand payment on an installment schedule. 29 U.S.C. Sec. 1399(b)(1). After the employer receives notice of the amount of his withdrawal liability, it may, within ninety days, ask for a review by the plan's trustees. 29 U.S.C. 1399(b)(2)(A). After a reasonable review, the trustees must notify the employer of their determination. 29 U.S.C. 1399(b)(2)(B). If a dispute persists, either party may initiate arbitration proceedings, in which the trustees' determination is presumed correct unless the party contesting it shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous. 29 U.S.C. Sec. 1401(a)(3)(A). Section 1401(c) provides that the arbitrator's decision is subject to review in a district court where there is also a presumption, rebuttable by a clear preponderance of the evidence, that the arbitrator's factual findings are correct. 9 Under Secs. 1399(c)(2) and 1401, the employer must commence payments within 60 days of being informed of its liability, regardless of whether a review has been requested or arbitration proceedings initiated. Under Sec. 1132(g), if the plan wins judgment for a delinquent payment, attorney's fees and other costs must be paid by the employer.