§1388 Reduction of Partial Withdrawal Liability

Summary

An employer can stop owing partial withdrawal payments if, for two straight plan years after the year it partially withdrew, the employer’s contribution base units in each year are at least 90% of the number from the plan’s high base year. For a year when an employer’s units are as high as the plan’s top year, the employer can give a bond instead of paying up to 50% of that year’s required payment. If the plan later finds the employer has no more liability, the bond is cancelled. If the plan finds the employer still owes money, the bond goes to the plan and the employer must pay the rest and keep making required payments. If an employer’s units in a later year reach 110% (or another approved percent) of the partial withdrawal year, that year’s payment is cut down pro rata under federal rules. The law also sets a separate two-year test involving a 30% employer threshold and a 90% test for all employers. It limits liability for certain building and construction employers to cases where continued contributions cover no more than an insubstantial part of their work in that trade and area. Entertainment employers have no liability except as the federal agency allows by rule. The federal agency may write rules to reduce or cancel partial withdrawal liability, but reductions count only changes for the same operations or the same agreement that caused the withdrawal. Definitions: partial withdrawal year = the year the employer partially left the plan; high base year = the year used to measure the employer’s highest contribution level; contribution base units = the units used to count required contributions.