A federal appeals court ruled Perfection Bakeries must apply a $2 million credit early when exiting a pension plan, limiting its chance to lower liability.
On August 1, the US Court of Appeals for the Eleventh Circuit affirmed a lower court ruling in favor of the Retail, Wholesale and Department Store International Union and Industry Pension Fund. At issue was how to apply a “partial withdrawal credit” when calculating total withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980.
Perfection had contributed to the pension plan for workers at facilities in Michigan and Indiana. In 2016, it partially withdrew after ending contributions in Michigan. This triggered a partial withdrawal liability of $2.23 million, which was amortized to $1.96 million based on federal regulations.
Then, in 2018, the company stopped contributions in Indiana – completing its full withdrawal from the plan. The pension fund calculated that Perfection’s allocable share of unfunded vested benefits was $17.3 million. At that point, the fund applied the earlier $1.96 million credit before applying the statutory 20-year cap on installment payments. The cap reduced the final liability to $6.32 million.
Perfection agreed with the raw figures but argued that the $1.96 million credit should have been applied after the cap, which would have brought its final liability down to $4.36 million.
The court rejected that approach. In a unanimous opinion authored by Judge Kevin Newsom, the panel held that the credit had to be applied during step two of the statutory four-step formula – not after all other adjustments had been made. The court said this was consistent with the text and structure of 29 U.S.C. § 1381 and with how the law incorporates Section 1386, which governs partial withdrawal credits.
The ruling follows the Ninth Circuit’s 2018 decision in GCIU-Employer Retirement Fund v. Quad/Graphics, Inc., the only other circuit-level decision on this issue to date.
Judge Andrew Brasher dissented, arguing the majority’s reading weakens the purpose of the credit by allowing it to be “gobbled up” by the 20-year cap. He said the law intended the credit to reduce final withdrawal liability – not to be offset by earlier limits.
For retirement plan sponsors, fiduciaries, and financial advisors, the decision reinforces that courts will adhere to the step-by-step process in the MPPAA – even if it results in employers paying more than they would under a different order of operations. Where multiple withdrawal events occur over time, sequencing matters.
The upshot: employers considering phased withdrawals or negotiating pension obligations in transactions need to model the timing of each step carefully. Once the cap applies, there may be no opportunity to use earlier credits to reduce final payments.
Meanwhile, Raymond James and Tritonpoint Partners separately welcomed father-son teams, including a breakaway from UBS in Missouri.
Paul Atkins has asked staff to solicit public comment on novel ETFs, pausing the clock on as many as 24 filings linked to the booming event contracts market.
From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.
Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.
Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions
Wellington explores how multi strategy hedge funds may enhance diversification
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
