Pension & Benefits News Multiemployer fund may pursue ERISA claim for unpaid “exit contribution”
Tuesday, September 10, 2019

Multiemployer fund may pursue ERISA claim for unpaid “exit contribution”

By Pension and Benefits Editorial Staff

A multiemployer plan may pursue a claim under ERISA Sec. 515 to enforce a requirement in the plan’s trust documents that smaller companies not otherwise required to pay withdrawal liability must still pay the fund an “exit contribution,” the U.S. Court of Appeals in Richmond (CA-4) has ruled. Reversing the district court, the Fourth Circuit determined that even though the relevant CBA had expired, the trust documents stipulated that the fee obligation would survive the CBA’s expiration.

Exit contribution. The employer, which employed members of a sheet metal workers’ union, signed on to an already existing collective bargaining agreement. The CBA incorporated other documents, including another CBA that was to remain in effect until April 30, 2016. The CBA required the employer to contribute to a multiemployer pension fund and incorporated by reference the fund’s trust documents.

The trust document required smaller employers that under the de minimis rules in ERISA Secs. 4201(b)(1)(A) and 4209 might not be required to pay withdrawal liability to nevertheless pay an “exit contribution” based on a formula set forth in the plan. The trust documents clarified that an employer’s obligation to pay an exit contribution existed independent of the CBA and remained in force after the CBA’s termination.

The employer’s obligation to contribute to the fund ceased in April 2016 when the CBA expired. In August, the pension fund notified the company that it had experienced “an event of withdrawal under Title IV of ERISA” upon the CBA’s expiration. The pension fund demanded an exit contribution of nearly $100,000, which it maintained was the amount the trust documents required based on the employer’s contribution history. The company refused to pay the exit contribution.

Delinquent contribution. The pension fund sued, alleging that the employer owed an exit contribution as a delinquent contribution under ERISA Sec. 515. The district court granted the employer’s motion to dismiss. The district court found that the employer’s obligation to pay an exit contribution ceased when the CBA expired because the CBA did not stipulate that the obligation would continue. Consequently, the employer was not bound by the trust documents’ requirements once the CBA expired.

Trust document obligations survive CBA expiration.  The district court erred in finding the employer’s obligations under the trust documents did not survive the CBA’s expiration, the Fourth Circuit determined. As the pension fund’s complaint alleged, the employer agreed to be bound both by the CBA and the trust documents, and so the district court needed to evaluate the trust documents’ terms to determine whether any specific obligations survived the CBA’s expiration. However, the district court failed to do so, instead incorrectly focusing only on the CBA’s incorporation provision.

ERISA Sec. 515 explicitly provides that a plan may sue any employer “obligated to make contributions to a multiemployer plan under the terms of the plan” or under the terms of a CBA. By signing the CBA, the employer agreed to be bound by the trust documents, which stipulated that the employer would be required to pay an exit contribution under certain circumstances. The trust document further provided that this obligation would survive the CBA’s expiration.

SOURCE: Board of Trustees, Sheet Metal Workers’ National Pension Fund v. Four-C-Aire, Inc. (CA-4).

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More