Withdrawal liability is a statutory obligation under the Employee Retirement Income Security Act (ERISA) that any unionized employer may have to confront. Exemptions from liability include one applicable to construction industry employers.
Under ERISA, the federal statute regulating employee benefit plans, an employer that has assumed an obligation to contribute to and subsequently withdraws from a multiemployer pension plan (MEPP) is liable for its allocable share of any underfunding. This “withdrawal liability” is triggered when a contributing employer withdraws from a MEPP. Withdrawal typically occurs when the employer’s contributory obligation permanently ceases.
Special rules (referred to as the “Building and Construction Industry Exception”) apply where (1) an employer contributes to a MEPP that primarily covers employees in the building and construction industry and (2) substantially all of the employees for whom such employer is obligated to contribute perform work in the building and construction industry.
Under the Building and Construction Industry Exception, an employer will not withdraw unless its contribution obligation permanently ceases and the employer (within five years) performs work of the type for which contributions were previously required on a non-contributory basis. In other words, withdrawal liability is imposed under the Building and Construction Industry Exception only when the employer’s...
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