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 the complete withdrawal produced $23,272,103.41 in allocable unfunded vested benefits and an annual payment of $607,344.90.
The dispute concerned when to apply the credit that 29 U.S.C. § 1386(b)(1) provides for Consumers’s earlier partial-withdrawal liability. The Fund applied the credit during step two of the four-step calculation under 29 U.S.C. § 1381(b), before the statutory 20-year payment limitation. Consumers argued that the credit applied only after all four steps were completed. An arbitrator accepted the Fund’s method, but the district court vacated the award and denied the Fund’s request to enforce it.
The Court’s Holding
The Seventh Circuit affirmed. It held that a credit based on prior partial-withdrawal liability must be applied after the employer’s withdrawal liability has been calculated through the four-step process in § 1381(b). Section 1386(b)(1) directs that the credit reduce “withdrawal liability,” which § 1381(b) defines as the allocable amount of unfunded vested benefits after the statutory adjustments—not an intermediate figure produced during the calculation.
The court also concluded that step two applies when the withdrawal being calculated is a partial withdrawal. It read § 1386(b) as forward-looking: when partial-withdrawal liability is determined, that amount is recorded as a credit against withdrawal liability arising in a later plan year. The Pension Benefit Guaranty Corporation’s longstanding interpretation supported the court’s independent reading. Acknowledging contrary decisions from the Ninth and Eleventh Circuits, the Seventh Circuit nevertheless concluded that the statute’s text, context, and structure favored Consumers’s interpretation.
Key Takeaways
- A credit for prior partial-withdrawal liability under § 1386(b)(1) applies after the four-step withdrawal-liability calculation in § 1381(b).
- The phrase “in the case of a partial withdrawal” limits step two to calculating a current partial withdrawal; it does not require applying a prior partial-withdrawal credit midway through a later complete-withdrawal calculation.
- The decision creates a circuit disagreement with the Ninth and Eleventh Circuits over the sequencing of the statutory credit.
Why It Matters
The sequencing of the credit can materially change an employer’s obligation when the MPPAA’s 20-year payment cap applies. Here, applying the credit after the complete-withdrawal calculation could reduce Consumers’s obligation to zero, while the Fund’s method would require payments with a present value of $9,306,831.24.
For employers and multiemployer plans within the Seventh Circuit, the decision establishes that prior partial-withdrawal liability reduces the fully adjusted withdrawal-liability amount rather than an intermediate calculation. The resulting circuit disagreement may also affect litigation strategy in withdrawal-liability disputes involving earlier partial withdrawals.