Background
Consumers Concrete Corp. participated in a multiemployer defined-benefit pension plan administered by the Central States, Southeast and Southwest Areas Pension Fund. Consumers partially withdrew from the plan in 2017 and completely withdrew in 2019. The parties agreed that $23,272,103.41 in unfunded vested benefits was allocable to Consumers and that its annual payment for the complete withdrawal was $607,344.90.
The dispute concerned when to apply the credit associated with Consumers’s 2017 partial-withdrawal liability. The Fund applied the credit at step two of the four-step calculation prescribed by the Multiemployer Pension Plan Amendments Act, before the statute’s 20-year payment limitation. Consumers argued that the credit should be applied only after all four steps, including that limitation. An arbitrator agreed with the Fund, but the district court vacated the award and accepted Consumers’s interpretation. The Fund appealed.
The Court’s Holding
The Seventh Circuit affirmed. It held that the credit under 29 U.S.C. § 1386(b)(1) for liability arising from a prior partial withdrawal must be applied after the employer’s withdrawal liability has been calculated through the four-step process in 29 U.S.C. § 1381(b). Section 1381(b) distinguishes the allocable amount of unfunded vested benefits from the final “withdrawal liability,” and § 1386(b)(1) directs that the credit reduce the latter.
The court also concluded that step two—applicable “in the case of a partial withdrawal”—does not require applying the prior partial-withdrawal credit during the calculation of a later complete withdrawal. It read § 1386(b) as forward-looking: when partial-withdrawal liability is incurred, that amount is recorded as a credit against withdrawal liability in a subsequent year. The Pension Benefit Guaranty Corporation’s longstanding interpretation supported the court’s independent reading. The court expressly disagreed with the Ninth and Eleventh Circuits’ treatment of the issue.
Key Takeaways
- A prior partial-withdrawal liability credit reduces the fully calculated withdrawal liability, not an intermediate unfunded-benefits figure.
- For a later complete withdrawal, the credit is applied after the four-step process in § 1381(b), including the 20-year payment limitation.
- The Seventh Circuit affirmed the district court’s decision vacating the arbitration award that had adopted the Fund’s calculation.
Why It Matters
The sequencing can materially change what a withdrawing employer owes. Here, applying the credit after the 20-year limitation could reduce Consumers’s complete-withdrawal obligation to zero, depending on the ultimate amount of the credit, while the Fund’s method would require payments with a present value of $9,306,831.24.
The decision establishes the governing calculation method in the Seventh Circuit and creates a direct disagreement with decisions from the Ninth and Eleventh Circuits.