Multiemployer Plans and Withdrawal Liability
The Multiemployer Structure
Multiemployer plans are collectively bargained plans to which two or more unrelated employers contribute. They are governed by a board of trustees, typically with equal employer and union representation. ERISA section 4201 imposes withdrawal liability when an employer withdraws from an underfunded plan.
Withdrawal Liability Mechanics
Liability is calculated as the employer's allocable share of the plan's unfunded vested benefits. There are two types: complete withdrawal (ceasing to have an obligation to contribute) and partial withdrawal (a significant reduction). The plan calculates liability, and the employer may request review and arbitration.
Traps to Watch
- Assuming withdrawal liability applies only to complete withdrawals; partial withdrawals also trigger liability.
- Forgetting that the plan, not the employer, calculates the initial liability.
- Missing the arbitration deadline, generally 60 days after the plan's response to a review request.
- Confusing the mass withdrawal rules with ordinary withdrawal.
Worked Example
An employer stops contributing to a multiemployer plan after its collective bargaining agreement expires. This is a complete withdrawal. The plan calculates the employer's allocable share of unfunded vested benefits, and the employer may request review within 90 days and arbitrate within 60 days of the plan's response.
Rule of Thumb
Identify the withdrawal type, then the calculation method, then the dispute timeline. Each step has its own deadline.