“Exit Contribution” an End-Run Around de minimis Withdrawal Liability -

A recent ruling from the U.S. Court of Appeals for the Fourth Circuit, Sheet Metal Workers’ National Pension Fund v. Four-C-Aire, Inc. (4th Cir. July 3, 2019), provides that an “exit contribution” was owed by a participating employer in a multiemployer pension plan upon withdrawal from such a plan. This case is of note because there was no dispute by the plan that the participating employer did not owe a withdrawal liability. However, the court ruled that the collective bargaining agreement (CBA) and the trust agreement for the pension fund obligated the participating employer to pay an exit contribution before withdrawing from the plan.

Background

The participating employer, Four-C-Aire, Inc. (Four-C-Aire), employs members of a sheet metal workers union and signed onto an existing CBA. The CBA required that Four-C-Aire contribute to a multiemployer pension plan and incorporated the fund’s trust document into the CBA. The trust documents included a provision requiring Four-C-Aire to pay an exit contribution to the pension fund when (1) it ceased to have an obligation to contribute to the fund, and (2) as a result of the cessation of its obligation to contribute, it had an event of withdrawal under ERISA, but (3) it did not have to pay a statutorily-mandated withdrawal liability. The trust documents were unilaterally amended by the pension fund to provide that the exit contribution was independent of the CBA and continued to apply after the termination of the CBA.