As we’ve consistently said, the American Rescue Plan Act (ARP) is wonderful for the plan participants, but it does little to address some longer-term issues in multiemployer pension plans that could secure them further into the future. One such issue is withdrawal liability. The House bill specifically stated that employer withdrawal liability would not take into account any special financial assistance for 15-years after a plan received assistance, but this provision was removed from the Senate’s bill. As a result, there is uncertainty how withdrawal liability will be calculated once significant sums of money are received by these struggling plans.

The securing of pension benefits for the next 30-years (for current and future retirees) through the Act’s grant program may, in fact, reduce Withdrawal Liability for current employers given the dramatic improvement in funding. What I fear is that these employers will take advantage of the improved funding, should the PBGC not maintain the current rules, to exit these important pension systems rendering them fragile once again and likely forcing current and future workers into alternative pension structures.

We certainly don’t want this significant victory for union participants to be overshadowed by a potential unintended consequence as a result of changes to the calculation of withdrawal liability. We know that the PBGC has broad authority to impose restrictions on plans receiving financial assistance, including the authority to impose special rules pertaining to withdrawal liability. Let’s hope that any reduction in withdrawal liability penalties is scaled in over a long period of time (at least the 15-years originally considered in the House bill) and that the PBGC understands that DB pension plans must be protected and preserved for the masses.