RE: ERISA Union Pension Withdrawal Liability and the Building and Construction Industry Exclusion
February 15, 2018 • Darby N. DuComb
To Our Building and Construction Industry Clients:
We frequently hear concerns from some of you about your union pension withdrawal liability as you start to plan your retirement, wind down, or sell your businesses. So recently we dug into this issue with a couple clients who encouraged us to share with you some of your rights and responsibilities under the Employment Retirement Income Security Program (ERISA). ERISA was created in 1974 to protect and reform private pension and benefit trusts in the United States. ERISA applies to companies that contribute to a multi-employer plan, such as a union trust pension plan. When a company partially or completely withdraws from a multi-employer plan, that company may have withdrawal liability and have to pay unfunded vested benefits attributable to the withdrawing employers’ participation.
Withdrawal liability can be quite significant, but there is a “building and construction” industry exclusion. This exclusion applies to construction or building industry firms where substantially all of the employees perform work in the building and construction industry. These terms are not defined in ERISA, but over the years courts have defined a building and construction firm as one that provides “labor whereby materials and constituent parts may be combined on the building site to form, build, or make a structure. Additionally, “substantially all” employees is often understood as an average of 85% of employees working in the building and construction industry over the last eight years.
To take advantage of the “building and construction industry” exclusion, we recommend that you keep thorough records of company employment for a period of at least eight years, including accurate numbers of total employees and employees involved in a building or construction trade union. These rules are not necessarily black and white and every situation should be examined on a case-by-case basis, so please consult a lawyer before contacting a trust administrator or other regulatory agency.
Should you have any other questions or concerns, please feel free to contact Garth Schlemlein or Darby DuComb.
Mrs. DuComb's practice focuses on real property, land use, mediation, and general counsel services. Darby is a hardworking analytical lawyer that finds solutions to complex problems. She is an accomplished litigator, mediator, and transactional lawyer, with over 17 years of experience at the City of Seattle, including 13 years in the Seattle City Attorney's Office and Department of Construction and Inspections. Best known for her high ach...