Typically, partial withdrawal liability occurs when the employer’s contribution base units decline by at least 70% and remain at or below that level over a three year testing period. This is referred to as the 70% Decline Rule. However, under ERISA Section 4205(c), a multiemployer pension plan that covers mostly employees in the retail food industry may lower the partial withdrawal liability threshold to require only a 35% decline in contribution base units instead of a 70% decline. Although this provision of ERISA is seldom used, the United Food and Commercial Workers (UFCW) National Pension Fund has implemented a 35% decline rule. This has resulted in some unanticipated partial withdrawal liability for unsuspecting employers.
Employers who contribute to pension plans that cover mostly employees in the retail food industry should check the plans’ thresholds for partial withdrawal liability.