Taft-Hartley Plan Wants Back $220M Partial Pension Withdrawal

The Boilermaker-Blacksmith Pension Trust is appealing arbitrator Richard C. McNeill Jr.’s January 10 arbitration ruling in favor of General Electric Co. The multiemployer plan is requesting the U.S. District Court for the Western District of Missouri address a question of federal law under the Employee Retirement Income Security Act, as amended by the Multiemployer Pension Plan Amendments Act of 1980.  

The complaint from the Taft-Hartley pension fund—for workers in the fields of construction, comprising $7.48 billion in retirement assets for 84,209 participants—asks a Missouri federal court order to overturn an arbitration award involving two separate partial withdrawal liability assessments from the pension trust that totaled $227.5 million.

“The issue for this Court to review on appeal is whether GE satisfies the criteria of the BCI [building and construction industry] Exemption and thus should be absolved from having to pay partial withdrawal liability to the Fund,” the complaint states. “In the Award, the Arbitrator incorrectly resolved this purely legal issue by holding that GE qualifies for the BCI Exemption.”

Under the test used by GE for determining its eligibility for the partial withdrawal, GE looked back at the aggregate number of construction employees over an eight-year period and divided by the sum of the construction and non-construction employees during the same period to assess whether the quotient was at least 85%, according to the complaint.

The pension requests that the Missouri federal court void the aggregate eight-year employee headcount test to determine eligibility that GE used and the arbitrator accepted. The initial outcome allowed GE to make partial withdrawals without requiring the withdrawing employer to pay a share of the plan’s funding deficit.

The arbitrator determined that GE demonstrated it satisfied the 85% threshold to meet the building and construction industry exemption, which courts have used to establish pension funds’ eligibility for the exemption. Congress created the BCI exemption carve-out when it passed the MPPAA, allowing building and construction industry companies to stay exempt under certain circumstance, says Richard Naegele, an attorney at law firm Wickens Herzer Panza, which is not involved in the litigation.

“[Plaintiffs] think that the arbitrator is kind of reading stuff into the statute,” says Naegele, the assistant chairperson of the Sandusky, Ohio, law firm’s business organizations and tax department. “If, in fact, the arbitrator did say that the statute plainly and unambiguously requires this test, OK, well, it [in fact] doesn’t,” says Naegele. “It doesn’t require any specific test, [and] it’s silent on what tests you use to determine [the meaning of] substantially all.”

The pension trust argues that the statutory provision is ambiguous and that the BCI Exemption does not specify the appropriate overall time period that should apply to the analysis (i.e. a single day, the year before the withdrawal, a multi-year period before the withdrawal, etc.).

“Despite seemingly acknowledging that the statute is ambiguous for this reason, … the Arbitrator ultimately held, paradoxically, that the statute plainly and unambiguously requires only one of the various potential headcount methods that he identified: an aggregate headcount test over an eight-year period,” the complaint states. “The test that the Arbitrator found to be plainly required by the BCI Exemption is nowhere to be found in the statutory text. He thus erred in construing the statute as prohibiting the Fund’s proposed monthly test and requiring an aggregate test.”

Naegele says the complaint is based on the arbitrator’s decision to accept GE’s method for satisfying the requirements for the exemption.

“The statute doesn’t provide for this eight-year aggregate test, [but McNeill Jr.] says it plainly and unambiguously requires this test,” Naegele says. “That’s the [pensions’] argument: that he just was focused on just one test, rather than considering some of the other tests.”

Allowing the GE awards to stand would render the statute meaningless, the pension fund argued in its complaint.

“If the Award is allowed to stand, the underlying statutory purpose will be defeated,” the complaint states. “Not only will the Fund’s remaining contributing employers be burdened with having to pay GE’s fair share of its employees’ underfunded vested pension liabilities, but also the Fund’s other manufacturing employers will have a blueprint of how to manipulate their practices to insulate themselves from ever having to pay withdrawal liability. All they would have to do is simply hire a large number of construction employees for just a few months at any time during an eight-year window, and they can forever be assured of satisfying the extra-textual aggregate test adopted by the Arbitrator.”

It is unlikely the court in this case would rule in favor of a single test above all others, says Naegele.

“I don’t think the result of this is going to be [the court is] going to impose one standard across everybody for determining this,” he says. “However this comes out, whatever the U.S. federal court for the Western District of Missouri decides, it’s going to get appealed to the [U.S.] 8th Circuit [Court of Appeals]. Hell, we’re talking [about] $220 million. You’re clearly going to appeal it.”

Representatives for neither General Electric nor the pension responded to requests for comment on the litigation.