§1388 Reduction of partial withdrawal liability

Summary

An employer who partly leaves a multiemployer pension plan can stop making further partial-withdrawal payments if, for any two plan years in a row after the year it partially left, the number of contribution base units it has to pay for each of those years is at least 90 percent of the number it had in its “high base year.” If that 90 percent test is met for two straight years, the employer has no obligation to make further partial-withdrawal payments for plan years that start after that second year (except for any late payments already due). If in a plan year the employer’s contribution units equal or exceed the highest year’s units (without using the 90 percent rule), the employer may instead give the plan a bond worth up to 50 percent of the annual payment the plan would otherwise require. If the plan sponsor later decides the employer has no more liability, the bond is cancelled. If the plan sponsor finds the employer still owes money, the bond goes to the plan, the employer must pay the rest right away, and must keep making scheduled payments. The law also describes other special tests (one involving a 30 percent threshold and plan-wide 90 percent, and another saying a year with 110 percent—or another allowed percentage—of units can trigger a pro rata reduction) and has special rules for the building/construction and entertainment industries. The federal agency that enforces the law can make rules to reduce or cancel withdrawal liability, but such reductions generally apply only to changes in contributions for the same work or same collective bargaining agreement; plans can adopt other rules with agency approval.