The credit arrived at the right step - and wiped out $9.3 million
A concrete company that left a multiemployer pension plan may owe nothing for leaving.
The US Court of Appeals for the Seventh Circuit on September 17 sided with Consumers Concrete Corp. in a dispute that could slash millions from the company's pension exit bill - and created a circuit split that employers across unionized industries will want to watch.
The backstory is straightforward. Consumers partially withdrew from a defined benefit plan run by Central States, Southeast and Southwest Areas Pension Fund in 2017. Two years later, it walked away entirely. The parties agreed the full exit triggered $23,272,103.41 in unfunded vested benefits, with annual payments of $607,344.90.
The fight was about a credit. Federal law gives employers a credit for liability already paid through an earlier partial withdrawal - a safeguard against paying twice for the same shortfall. The question was where in the calculation that credit lands.
Consumers said: apply it at the end, after the statute's four-step liability formula and its 20-year payment cap. That way, the credit could swallow the entire capped amount - roughly $9.3 million - leaving the company owing nothing. The Fund said: apply it earlier, at step two, before the cap kicks in. That left the full $9.3 million on the table.
An arbitrator picked the Fund's math. The district court flipped the result, and the Seventh Circuit agreed.
The reasoning came down to statutory language. "Withdrawal liability," the court held, means the figure that emerges after all four steps - not a number produced midway through. Slotting the credit in earlier would blur two concepts the statute treats as distinct. The credit provision itself is designed to look forward: when an employer partially withdraws, the plan records the credit for use the next time that employer heads for the door.
The Pension Benefit Guaranty Corporation weighed in with an amicus brief supporting the employer's reading, pointing to its own 1985 opinion letter reaching the same conclusion.
The decision puts the Seventh Circuit on the opposite side of the Ninth and Eleventh Circuits, both of which placed the credit at step two. The opinion did not shy away from the tension, noting all three judges on the Eleventh Circuit's panel in Perfection Bakeries acknowledged the question was difficult.
For HR and benefits professionals at companies in multiemployer plans, this is worth flagging: the order in which a single credit is applied can swing an employer's exit liability from millions to zero - and the right answer now depends on geography.
