Summary
The United States Court of Appeals for the Second Circuit interprets 29 U.S.C. § 1415(c), which governs reductions to withdrawal liability under ERISA when employees change collective bargaining representatives and move from one multiemployer pension plan to another. The court holds that the phrase “unfunded vested benefits” is ambiguous but concludes that the district court correctly required Local 854 Pension Fund to reduce Mar-Can Transportation Company’s withdrawal liability by approximately $1.8 million. The judgment is affirmed, and Mar-Can’s cross-appeal concerning an evidentiary ruling is dismissed as moot.
Topics
Practice areas
Questions Presented
- Whether the phrase "unfunded vested benefits allocable to the employer" in 29 U.S.C. § 1415(c) is ambiguous.
- If ambiguous, whether Section 1415(c) requires the Old Plan to calculate the withdrawal-liability reduction as the value of the liabilities transferred minus the value of the assets transferred, rather than subtracting the transferred assets twice.
- Whether Mar-Can's cross-appeal concerning the exclusion of its expert report remained justiciable after affirmance of the judgment in Mar-Can's favor.
Holdings
- The phrase is ambiguous as used in Section 1415(c); the definition of "unfunded vested benefits" in Part 1 of ERISA Subtitle E does not control its meaning in Part 2.
- Under Section 1415(c), "unfunded vested benefits allocable to the employer" refers to the entire amount of liabilities transferred to the new plan. The withdrawal-liability reduction is therefore the value of the transferred liabilities minus the value of the transferred assets; the transferred assets are not subtracted twice.
- Mar-Can's cross-appeal challenging exclusion of its expert report is dismissed as moot because the court affirmed the judgment in Mar-Can's favor.
Key quotations
“The term “unfunded vested benefits allocable to the employer” as used in Section 1415(c) refers to the entire amount of liabilities transferred to an employer withdrawing from a multiemployer ERISA plan pursuant to Sections 1415(a) and (c).” (at 40)
“The judgment of the District Court requiring the Old Plan to transfer pension assets and liabilities and reducing Mar-Can’s withdrawal liability by $1.8 million, is therefore AFFIRMED. Mar-Can’s cross-appeal is DISMISSED as moot.” (at 40-41)
Factual background
Mar-Can operates a school-bus company and had contributed to the Teamsters-affiliated Local 854 Pension Fund since 1979. In March 2020, its employees voted to leave the Teamsters and join an Amalgamated Transit Workers local, which triggered Mar-Can's withdrawal from the Old Plan and contributions to a New Plan. The Old Plan assessed approximately $1.8 million in withdrawal liability and ultimately transferred approximately $5.5 million in liabilities and $3.7 million in assets associated with 144 active Mar-Can employees to the New Plan. The parties disputed whether Section 1415(c) required the Old Plan to reduce Mar-Can's withdrawal liability by the $1.8 million difference.
Procedural history
After Mar-Can's employees changed union representation, the Old Plan assessed approximately $1.8 million in ERISA withdrawal liability and initially refused to make the required transfer or reduce the assessment. Mar-Can sued in the Southern District of New York. The district court ordered the transfer of assets and liabilities and granted partial summary judgment to Mar-Can, ruling that Section 1415(c) required reduction of the withdrawal liability to zero. The Second Circuit affirmed and dismissed Mar-Can's evidentiary cross-appeal as moot.