ERISA governs employer and individual retirement plans which many employees in the private sector rely on for a secure financial future. Retirement plans are usually an employee’s main investment strategy, therefore, withdrawals from these plans can severely impact employees’ retirement goals.
There are two types of withdrawals: Complete and Partial.
This occurs when an employer completely pauses contributions to a plan. There are unique withdrawal liability rules that apply to specific industries.
If all or the vast majority of employers completely leave a plan, this is known as a mass withdrawal. ERISA has created rules to prevent employers who gradually reduce contributions over time in an effort to escape withdrawal penalties. These are known as partial withdrawals which could potentially trigger liabilities.
A partial withdrawal scenario involves either:
CBUs measure an employer’s contribution using quantitative methods and a formula in ERISA that measures an employer’s CBUs over a period of time.
The other portion of a partial withdrawal is the “partial cessation,” which involves circumstances where employers may have expired agreements or stop contributions in facilities where employees continue to work.
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It’s also important to be aware of the Multiemployer Pension Plan Amendments Act (MPPAA) which was passed in 1980. This important act was created as an amendment to the Employee Retirement and Income Security Act, (ERISA) to protect employees who contribute to retirement plans.
This forces employers who want to pull out of defined benefit plans, like pensions, to pay a percentage of the plan’s unfunded vested benefits. This issue has become worse since 2008 due to the financial crisis, along with extremely low-interest rates, declining plan participation and a large number of retirees living longer.
Besides consulting legal counsel, it could be wise to work with an actuary to ensure how pulling out of a pension would impact your company’s bottom line. An actuary and a competent attorney could work together to determine the best course of action.
Important Relevant Withdrawal Liability Laws
Besides learning about various calculations, withdrawal types and the MPPAA, it’s also wise to learn more about relevant withdrawal liability laws.
Sale of Assets Exception
While certain sales of assets, like mergers and stock sales won’t trigger a withdrawal, there are more related rules which might be met.
Contact an ERISA Law Firm
ERISA withdrawals occur for an array of reasons, but the significance of these events differ depending on the circumstance. It is crucial to understand withdrawal liabilities and penalties and speak with an experienced employee benefits attorney who is knowledgeable with ERISA laws. Pension Lawyers in Los Angeles can help you or your business navigate the complexities of employee plan withdrawals.