Since withdrawal liability represents the excess of the plan’s liabilities over its assets, some employers may expect that this massive influx of cash would reduce or eliminate their withdrawal liability. As of this date, however, the impact of EPPRA on an employer’s ultimate liability is unclear. The law as originally passed by the House of Representatives expressly excluded any financial assistance from the withdrawal liability calculus for a period of 15 years. However, this fund-friendly provision was struck from the bill during the Senate approval process and was not in the bill signed by President Joe Biden. In other words, under current law (e.g., EPPRA) and in the absence of anticipated regulations, an employer’s withdrawal liability could potentially be reduced or eliminated in its entirety. Unfortunately for employers, however, there is a catch.
Under EPPRA, PBGC is authorized to “impose, by regulation or other guidance, reasonable conditions on an eligible multiemployer plan that receives special assistance relating” to both “reductions in employer contribution rates” and “withdrawal liability.” The 15-year provision and the broad and express regulatory authority granted to PBGC by the statute has many practitioners (including the authors) expecting that PBGC will issue guidance similar to the excised provision. The most likely scenario is that an employer’s withdrawal liability will be calculated without regard to any EPPRA “special financial assistance” for a period of 15 years (consistent with the excised provision) or 10 years (the period for which MPRA benefit suspensions are disregarded for withdrawal liability purposes under ERISA Section 305(g)). Until PBGC issues this much-needed guidance, the exact impact of EPPRA on employers will be unknown.
Author(s): Paul Friedman, Robert Perry, David Pixley
Publication Date: 16 March 2021
Publication Site: JD Supra