A company currently contributes to a multiemployer plan. All employees will cease work for about two years. During such time, a new warehouse will be built. When the warehouse is built, all interested employees will be brought back. The current CBA extends beyond the time of the re-opening, so there will always be an obligation to contribute. However, there will be no actual contributions during the 2 year period.

Would this meet the second prong of the complete withdrawal test:

"permanently ceases all covered operations under the plan."


The cessation will not be permanent. The company fully intends to re-open the new and improved facility and start making contributions to the plan. It would obviously like to avoid making withdrawal liability payments during the temporary shut-down.

We have spent hours searching the case law, regulations, ... Any comments or suggested direction?

I think you should also look at partial withdrawal rules. Seems that there will be decline in contribution base units. ERISA 4205 explains how to figure. Are you lucky enough to be in food service or construction trades and can claim exemption from the rules?

The whole thing will depend on Union and Plan funding. Have you approached them on the issue?

Under the first method of determining a partial withdrawal, a 70% contribution decline, I think we will be back in business before the plan has enough data to calculate a decline. However, by the third year out, which is the first year we are back in business, we may be faced with some partial withdrawal liability.
With respect to the partial cessation of contribution obligation, that will not happen, because there will be no cessation of the obligation, just of the actual contributions.

So, it appears that we do not have to think about a partial withdrawal. However, we are faced with the possibility of a complete withdrawal.

Here are my thoughts for what they are worth.

My recommendation is to contact the plan trustees and discuss this with them.

My experience has been that they are much more receptive if you are proactive than if you are mounting defenses after they have already come after you. I think you have very little downside and a lot of upside if you take that approach. You will strike the plan trustees as a straight-shooter who isn't trying to get away with anything; you are just caught in a bad situation. My sense is that they have to deal with so many bad characters that you will get a decent reception if you come in as say "Look, I've got a problem. Is there something that we can work out that we can both live with?"

Emphasize that you understand their concerns and explain yours to them. Try to see if you can't come up with a compromise that works for both sides. Don't take absolute positions and they won't either.

Remember that they are in big enough trouble with their funding problems that they don't want to unnecessarily antagonize contributing employers by taking hard line positions in borderline situations.

Let us know how it works out.

Seasonal lay-offs, or plant relocations might be temporary, but a two year break seems to border on a permanent cessation. I'd view this as a complete withdrawal followed by an abatement. If the Fund takes it time in making the assessment, the abatement provision and regs Section 4207 might be worth considering. The interim payments owed until abatement is approved should be approximately the same as the regular contributions.

Is this employer in the Building and Construction Industry, contributing to a building and construction industry plan?

Thanks all for replying!!

As Kirk suggested, we were going to approach the fund before any action was taken.

We also thought about abatement, but that would probably not save much, if any, for the client.

And no, unfortunately, the employer is not in the building and construction industry.

However, the client was purchased, and our involvement in the matter is on hold at the moment.