Author: Gregory Ossi

Gregory Ossi resolves labor law issues and ERISA-related litigation matters for clients in the energy production, mining, government contracting, hospitality, manufacturing and construction industries. Greg counsels employers on a broad range of labor and employee benefits matters, such as collective bargaining, mergers and acquisitions, union organizing and retiree health care with an emphasis on multiemployer pension withdrawal liability. He also has extensive experience negotiating retirement and health care plans pursuant to collective bargaining agreements.

Strict Construction: Seventh Circuit Affirms Written Pension Obligations

On March 22, 2024, the United States Court of Appeals for the Seventh Circuit issued a ruling in Bulk Transp. Corp. v. Teamsters Union No. 142 Pension Fund, ordering the Teamsters Union No. 142 Pension Fund (the “Fund”) to repay Bulk Transp. Corp. (“Bulk Transport”) $2.3 million in withdrawal liability it had erroneously assessed upon Bulk Transport.

Bulk Transport and the Fund had a collective bargaining agreement (“CBA”) from 2003 to 2006. The CBA included a Construction Agreement and a Steel Mill Addendum. In 2004, Bulk Transport signed a contract for LISCO work – a term used by the parties to describe work hauling commodities. The LISCO work was not explicitly covered by the CBA, but Bulk Transport made contributions for the work using the wage rated and pension terms of the Addendum because the Union threatened to strike otherwise. In 2005, Bulk Transport stopped performing the LISCO work and subsequently stopped making contributions to the Fund for the employees who were performing that type of work. The Fund assessed withdrawal liability on Bulk Transport. Bulk Transport paid the withdrawal liability but requested arbitration.

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You Can’t Have Your Cake and Eat it, Too

On July 7, 2023, the U.S. District Court for the Northern District of Alabama issued a ruling in Perfection Bakeries Inc. v. Retail Wholesale & Dep’t Store Int’l Union & Indus. Pension Fund, ordering Perfection Bakery, Inc. (Perfection Bakery) to pay the Retail Wholesale and Department Store International Union and Industry Pension Fund (the Fund) withdrawal liability in the amount of $15.6 million.

The court affirmed the previously issued arbitrator’s decision regarding the amount of withdrawal liability Perfection Bakery owed the Fund for its 2018 complete withdrawal. Perfection Bakery argued that the partial withdrawal liability it had paid as a result of its 2016 partial withdrawal should count towards the 2018 total withdrawal liability to reduce the total liability overhead cost. Perfection Bakery argued that the Fund, by not doing so, had misinterpreted the applicable law governing withdrawal liability.

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NLRB: Severance Pay Cannot Include Condition to Waive Rights Under NLRA

The decision of the National Labor Relations Board (the Board) in McLaren Macomb, 372 NLRB No. 58 ( Feb. 21, 2023), reinstates a limit on the confidentiality, non-disclosure, and non-disparagement clauses that employers may include in severance agreements with most of their lower-level employees. While the Board bills its decision as a return to the standard applied in earlier cases, this decision suggests that the Board will take a broader view of how such agreements infringe on employees’ rights under Section 7 of the National Labor Relations Act.

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Multiemployer Pension Plan Alert: Evergreen Clauses May Trump the Bargaining Parties’ Subsequent Agreement

The U.S. Court of Appeals for the Seventh Circuit recently ruled that Central States, Southeast and Southwest Areas Pension Fund may continue its lawsuit against Transervice Logistics, Inc. and Zenith Logistics, Inc. seeking allegedly outstanding pension fund contributions. The case examined two consolidated appeals, each involving a nearly identical collective bargaining agreement (CBA) between each employer and a union, and trust agreements between each employer and the plaintiff fund. The court was asked to determine whether the employers were required to maintain contributions to a multiemployer pension plan pursuant to so-called “evergreen clauses” that renewed the CBAs each year unless timely terminated.

Factual Background

The CBAs obligated the employers to make pension fund contributions to plaintiff, making the fund a third-party beneficiary of the agreements. The trust agreements obligated the employers to contribute to the fund for the “entire term of any collective bargaining agreement… (including any extension of a collective bargaining agreement through an evergreen clause…).” The CBAs were set to expire on January 31, 2019 but contained evergreen clauses that renewed the CBAs each year unless terminated with 60 days’ notice.

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PBGC Announces Proposed Rule on Interest Rate Assumptions for Multiemployer Plan Withdrawal Liability

On October 14, 2022, the Pension Benefit Guaranty Corporation (PBGC) proposed a new regulation under ERISA Section 4213(a)(2) setting forth actuarial assumptions that a multiemployer pension plan may use in calculating an employer’s withdrawal liability. A PDF of the proposed rule can be found here.

Background on Withdrawal Liability

Under ERISA § 4213(c), an employer withdrawing from a multiemployer pension plan must pay the plan its proportional share of the plan’s unfunded vested benefits, which is the difference between the present value of the plan’s nonforfeitable vested benefits and the value of the plan’s assets. The plan’s actuary must employ a variety of assumptions to calculate the withdrawing employer’s liability, such as how long employees will work and how long retirees will live (both of which affect the value of the benefits the plan must pay in the future).

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ERISA Litigation Roundup: Damned if You Do, Damned if You Don’t

A string of ERISA lawsuits has emerged in recent weeks against companies who offer BlackRock Target-Date Funds (“TDFs”) as 401k investment options to their employees. The lawsuits allege the companies, in their capacities as plan sponsors, breached their fiduciary duty by choosing the low fee investment options offered by BlackRock Inc., despite their funds’ underperformance. This new litigation sparks concern amongst 401k plan sponsors who may now have to worry about lawsuits involving investment fees from all sides-for choosing the high fee options and for choosing the low fee options.

The lawsuits focus on the LifePath Index Funds of BlackRock, a suite of 10 target-date funds. TDFs have increased in popularity over the past couple of years because they offer participants a lower fee but managed investment option based on target retirement years. Although BlackRock isn’t a party to the litigation, these lawsuits shine a spotlight on the performance of these funds.

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Stay Tuned – the DOL Regulatory Agenda

The Department of Labor (“DOL”) recently published its Spring 2022 Regulatory Agenda, and here is a summary of several big ticket items:

ESG & ERISA: Plan sponsors and investment professionals have been waiting for final rules on the permissible use of environmental, social, and governance (“ESG”) considerations under ERISA when selecting plan investments and exercising shareholder rights with respect to plan assets. Based on the updated regulatory agenda, the DOL is planning to issue final ESG rules in December 2022.

Fiduciary Rule: Plan advisors and investment professionals have also been awaiting guidance on the DOL’s fiduciary rule re-write. The Trump era “fiduciary rule” is currently in effect and is a combination of a new and expansive definition of fiduciary advice and an exemption – PTE 2020-02 – from the prohibitions of ERISA and the Internal Revenue Code for certain conflicts of interest arising from nondiscretionary fiduciary recommendations. However, last year, the Biden administration announced that it is revisiting the definition of fiduciary investment advice and the requirements of various prohibited transaction exemptions. Based on the Agenda, we can expect a new proposed fiduciary rule in December 2022.

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ERISA Litigation Roundup: Mortality Table Pension Plan Litigation – Reasonableness Not Required

When determining alternative pension benefits (such as joint and survivor annuities and early retirement benefits), a recent court decision held that underlying actuarial assumptions selected decades ago do not violate federal law simply because they are outdated and may result in a pension benefit that is less than using more current actuarial assumption.

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PBGC Issues Interim Regulations on Special Financial Assistance for Multiemployer Pension Plans

Multiemployer pension plans are collectively bargained defined-benefit employee benefit plans that are funded by several unrelated employers for the benefit of unionized employees. In recent years, the crisis of significantly underfunded multiemployer plans has continued to grow. In response, Congress enacted the American Rescue Plan Act of 2021 (ARPA), which was signed into law on March 11, 2021. ARPA amended ERISA to establish a new program within the Pension Benefit Guarantee Corporation (PBGC) to offer “special financial assistance” (SFA) to multiemployer plans in danger of becoming insolvent; in contrast to other assistance offered by the PBGC, plans are not required to repay the SFA.

ARPA directed the PBGC to issue regulations or other guidance to prescribe the application requirements for SFA payments and for how funds are to be invested and to impose conditions on plans that receive SFA payments. On July 9, 2021, the PBGC issued this guidance in the form of interim regulations.

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$1.9 Trillion American Rescue Package Includes Major Relief for Single and Multiemployer Pension Plans

The $1.9 trillion COVID stimulus package recently signed into law by President Biden includes significant assistance for pension plans. The financial assistance provisions will have a large bearing on shoring up the ongoing multiemployer pension crisis. The pension assistance has not received as much press as have other provisions of the American Rescue Plan Act of 2021 (ARPA) but it is no less impactful. The stimulus package provides direct financial support for certain underfunded multiemployer pension plans and relief from several minimum funding rules for both multiemployer and single-employer plans.

The pension provisions of ARPA are a modified version of the Butch Lewis Act, a pension rescue bill that has passed in the House but never in the Senate in years past. ARPA should allow over 100 severely underfunded multiemployer pension plans to return to relative financial health; however, ARPA does not provide for any long-term funding reform that would prevent another pension crisis. It also will have little or no effect for contributing employers.
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