Is it common for a multiemployer pension fund to have a written procedure for determining a discounted single sum payment an employer can make to fully pay its withdrawal liability? Would it involve discounting quarterly payments at a higher interest rate? Are you familiar with multiemployer funds that negotiate discounted lump sum payments on an ad hoc basis?

The initial assessment notice contains the amount of the withdrawal liability. That is the lump sum that the employer can pay to pay off its withdrawal liability. The periodic payment schedule is the lump sum with interest added.

Understood. My question is: is it common for a fund to discount the assessed lump sum withdrawal liability to encourage an employer to pay immediately rather than over a period of up to 20 years?

If there were no consideration beyond time value of money, the trustees of a multiemployer pension plan should not “discount” the amount of a correctly determined single-sum withdrawal liability merely because the employer would pay the single sum rather than payments over time. It’s the periodic-payments schedule that’s adjusted for time value of money; the single-sum amount is, at least ostensibly, the “now” value.

But in the real world, a skillful negotiator sometimes can negotiate a withdrawal liability. Even if the plan’s true motivation is getting ready money now, the trustees need different reasoning to support a compromise as one that a prudent-expert fiduciary should make in the plan’s best interests and following all of the fiduciary’s many duties. For example, the trustees might consider the risks and expenses of arbitration and litigation, and thus may consider the value of certainty. To provide enough “cover” to allow the trustees to pretend that what’s really a prompt-payment discount is, at least to defensible appearances, a proper compromise of what would be a disputed withdrawal liability, an employer might begin with a credible showing of an ERISA/MPPAA lawyer’s work, and the employer’s readiness to arbitrate and litigate. The stronger the “documentation” of a credible and expensive challenge, the more room the trustees have to compromise. The employer’s lawyer would seek the broadest satisfaction and releases, and would draft the settlement agreement to reduce the risk that a release is a prohibited transaction.

In my experience, different plans’ needs and tastes vary considerably, and there is often a difference in outlooks among a plan’s staff, counsel, and trustees.

To follow up on the original question, is anyone aware of any cases that have discussed a challenge of the enforceability of such settlement for a discounted withdrawal liability?

Has anyone seen any cases challenging the enforceability of a settlement for a discounted withdrawal liability?