Employers who contribute to multi-employer pension plans are occasionally surprised to learn of the existence of withdrawal liability. Even those familiar with the possibility of withdrawal liability are often unaware of the substantial amount the withdrawal liability could be. Below is a discussion of what withdrawal liability is, business activity that can trigger it and actions that can make a business owner personally liable for the liability. Also provided are steps employers can take to avoid being surprised by a withdrawal liability assessment or the amount of that assessment.
What is withdrawal liability?
Who is responsible to pay the withdrawal liability assessment?
For purposes of withdrawal liability, all trades or businesses “under common control” are treated as a single employer. This standard is applicable when determining whether a withdrawal has been triggered and also applies to determining what entity or person is required to pay the liability. Controlled group members are jointly and severally liable for withdrawal liability. Partners and parties to joint ventures can also be jointly and severally liable for the withdrawal liability. Under certain circumstances, parent-subsidiary and brother-sister groups can also be jointly and severally liable for the withdrawal liability. Significantly, the discharge of a controlled group member’s withdrawal liability in bankruptcy does not discharge the other controlled group members’ withdrawal liability obligations.