My Fault? Your Fault? Default! – Withdrawal Liability and the “Pay Now, Fight Later” Regime Under the MPPAA

Bloomberg BNA Pension & Benefits Daily

Mark M. Trapp, a Member of the Firm in the Labor and Employment and Litigation practices, in the firm’s Chicago office, authored an article in Bloomberg BNA’s Pension & Benefits Daily titled “My Fault? Your Fault? Default! – Withdrawal Liability and the ‘Pay Now, Fight Later’ Regime Under the MPPAA.”

Following is an excerpt:

In enacting the Multiemployer Pension Plan Amendments Act of 1980 (‘‘MPPAA’’), Congress intended to discourage employer withdrawals from multiemployer pension funds and to ensure employers do not leave a plan with only partially funded vested pension obligations. … The imposition of withdrawal liability is only the most obvious manifestation of this intent. The MPPAA also contains several procedural mechanisms designed to ensure that withdrawn employers meet their obligations to the fund, even while they are challenging an assessment of withdrawal liability.

For example, most practitioners are familiar with the ‘‘pay now, fight later’’ system established by the MPPAA, requiring a withdrawn employer to make interim payments according to the fund’s assessment schedule, even while going through the statutorily-mandated review process and arbitration. … If the employer fails to make such interim payments, it may be in default, generally known as a ‘‘missed payment’’ default. … In addition, the statute allows a fund to define other default events through its plan rules, the happening of which allows the fund to accelerate the outstanding amount due. … This second type of default is known as an ‘‘insecurity’’ default.