The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires certain civil penalties to be adjusted for inflation. PBGC released an interim final rule adjusting the maximum civil penalties provided for in Sections 4071 and 4302 of ERISA regarding failure to provide certain plan notices or other material information. The new maximum amounts are: $2,063 per day for Section 4071 penalties (up from $1,000 per day) and $275 per day for Section 4302 penalties (up from $100 per day). The adjusted amounts are effective August 1, 2016. The interim final rule is available here.
Seventh Circuit Denies Refund of Contributions to Multiemployer Plan for Mistakenly Covered Participant and Denies Arbitration Under the PBGC’s Default Rules for Withdrawal Liability
In Central States, Southeast and Southwest Areas Pension Fund v. Bulk Transport Corp., the U.S. Court of Appeals for the Seventh Circuit held that the employer could not seek a refund of contributions made to a multiemployer plan on behalf of an employee that the employer mistakenly believed was covered under the collective bargaining agreement because the employer had certified that the employee was eligible to participate in the plan and later explicitly covered the employee by name in subsequent collective bargaining agreements, and further, the pension fund had no duty to inquire as to the employee’s eligibility. The court also held that, in seeking arbitration for a dispute of withdrawal liability, the employer and the pension fund must use the American Arbitration Association’s (“AAA”) Multi-Employer Pension Plan Arbitration Rules that were approved by the PBGC instead of the PBGC’s default rules, notwithstanding the fact that the AAA had significantly… Continue Reading
IRS Issues Final Rules Regarding Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014
The Multiemployer Pension Reform Act of 2014 permits multiemployer defined benefit pension plans that are projected to have insufficient funds to pay full plan benefits (referred to as plans in “critical and declining status”) to reduce the pension benefits payable to plan participants and beneficiaries if certain conditions and limitations are satisfied. The final rules also set forth the notice requirements and the process for seeking approval from the Treasury, PBGC, and the DOL to suspend benefits. These rules affect active, retired, and deferred vested participants and beneficiaries of affected multiemployer plans, as well as employers contributing to, and sponsors and administrators of, those plans. The final rules are effective as of April 28, 2016. The final rules are available here.
Ninth Circuit Holds that Asset Sale Successor May be Liable for Predecessor Multiemployer Plan Withdrawal Liability without Assumption of Liability
The Ninth Circuit Federal Court of Appeals recently followed the Seventh Circuit’s rule that a successor employer can be liable for a predecessor business’s multiemployer pension plan withdrawal liability in an asset sale if the successor took over the business with notice of the liability. Generally, in an asset sale, a successor employer is liable for withdrawal liability if there is an express or implicit assumption of such liability in accordance with ERISA procedures. However, courts have imposed successor liability without an assumption where there is continuity of operations and notice of such liability. In Resilient Floor Covering Pension Trust Fund Board of Trustees v. Michael’s Flooring Covering, Inc., the Ninth Circuit expanded upon the meaning of “continuity of operations” and held that the most important factor in determining whether there is substantial continuity in the business operations is whether the successor has taken over the economically critical bulk of… Continue Reading
The Multiemployer Pension Reform Act of 2014 (the “Act”) was signed into law mid-December. The Act’s changes include permitting certain multiemployer plans to suspend benefits for participants, including participants already receiving benefits; doubling the amount of PBGC premiums; addressing contribution schedules once collective bargaining agreements expire; and increasing PBGC’s ability to partition plans and facilitate plan mergers. Generally, the Act’s provisions are effective for plan years beginning on or after January 1, 2015. The Consolidated and Further Continuing Appropriations Act, 2015, which contains the Act, can be found here.
A company that was managed by the owner’s son went out of business while it was behind on payments to a multiemployer pension plan. The son then launched two new businesses. The first entity bought some of the equipment from the company, while the second entity serviced the company’s former customers using the company’s former equipment that it leased from the first entity. The pension plan sought to collect the overdue payments from the two new entities under ERISA’s successor liability provisions. The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s application of ERISA’s two-pronged successor liability test, finding that successor liability attaches if (1) the successor had notice of the claim before the acquisition and (2) there is substantial continuity of operation of the business before and after the sale. Sullivan v. Running Waters Irrigation, Inc., No. 13-1308 (7th Cir. Jan. 9, 2014).