Association Modified Rules for Multiemployer Plan Withdrawal Liability Arbitration

Withdrawal liabilities are a contentious issue for multiemployer plans and have led to many lawsuits.

And, the liability for withdrawing employers can be extremely burdensome considering they are likely withdrawing from the plan due to financial constraints they already have. The fees to arbitrate multiemployer plan withdrawal liability have added to the problem.

But, attorneys with Drinker Biddle & Reath LLP have revealed that the American Arbitration Association (AAA) significantly altered its rules for multiemployer pension plan arbitrations, and the Pension Benefit Guaranty Corporation (PBGC) has approved the changes.

For one thing, the AAA lowered the fees required to initiate arbitration by tens of thousands of dollars. The attorneys explain that in 2013, the AAA implemented a new fee structure for withdrawal liability arbitrations that set fees based on the amount in dispute. Fees ranged from a minimum of $1,550 to $11,200 for cases with less than $1 million in dispute to a maximum $77,500 for disputes above $5 million. In contrast, the previous filing fee was $650 for most arbitrations. Now, the AAA has responded to a PBGC request for more reasonable fees with initiation fees that range from $2,500 to $5,000, depending on the amount in dispute. Additional fees may apply as well, such as fees for matters that are held in abeyance over one year ($300) and if hearings are rescheduled ($150).

Also, under the old rules, the initiating party had to bear the full cost of initiating the arbitration and associated fees imposed by the AAA without the opportunity for reimbursement. Under the new rules, the employer must pay the fees to initiate arbitration, but arbitrators are directed to apportion fees evenly in awards (unless the arbitrator determines otherwise). “This not only follows the ‘pay first, dispute later’ scheme set forth for withdrawal liability in [the Employee Retirement Income Security Act] but also reflects the requirement that arbitration costs be borne equally,” the attorneys say.

Finally, the PBGC raised concerns with the old rule that the AAA would unilaterally select an arbitrator if the parties could not agree on one. The PBGC believed this compromises the mutual selection required by its regulations. In response, the AAA amended the rules to allow either party to challenge the selection of an arbitrator within 10 days of his or her appointment.