Seventh Circuit Places Limits on Employers’ Withdrawal Liability from Certain Multiemployer Plans

On April 24, 2025, the Seventh Circuit upheld a Northern District of Illinois decision requiring a multiemployer pension plan to exclude the employers’ post-2014 rehabilitation plan contribution rate increases from the employers’ withdrawal liability calculation. 

Withdrawal Liability and Funding Reforms for Multiemployer Plans 

The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), sets standards including minimum funding for multiemployer defined benefit pension plans. Under ERISA and MPPAA, an employer that exits a multiemployer plan must pay “withdrawal liability” to the fund to cover the employer’s “share” of the fund’s unfunded vested liabilities. One datapoint used in calculating an employer’s “share” of the fund’s unfunded vested liabilities is the employer’s highest rate of contributions in the 10 years before withdrawal.

The 2006 Pension Protection Act (PPA) requires that some underfunded multiemployer pension plans take added remedial measures. Under the PPA, pension plans in “endangered status” must adopt “funding improvement plan[s],” and pension plans in “critical status” or “critical and declining status” must adopt “rehabilitation plan[s].” 29 U.S.C. § 1085(a). Both measures require the pension plan to propose changes—reduce future benefit accruals, increase contributions, or both—that would enable the plan to recover from its underfunded status. 29 U.S.C. § 1085(c)(1)(B)(i) & (e)(1)(B). 

Because of the PPA, an employer’s withdrawal liability can actually increase as its share of unfunded vested benefits decreases. This results when the funding improvement or rehabilitation plan requires employers to increase their contribution rates, thereby increasing the withdrawal liability based upon the resulting higher annual withdrawal liability payment amount. Withdrawal liability is paid in annual installments based on the employer’s highest contribution rate during the preceding 10 years, so an increased contribution rate inflates the annual payment amount. As a result, even if the overall unfunded vested benefits of the plan shrink, the employer’s ultimate withdrawal liability can still increase. 

To address this issue, Congress passed the Multiemployer Pension Reform Act of 2014 (MPRA). This law excludes post-2014 contribution rate increases from the calculation of annual withdrawal liability payments except for (1) increases in contribution requirements due to increased levels of work, employment, or compensation; or (2) additional contributions used to provide an increase in benefits permitted by subsection (d)(1)(B) or (f)(1)(B). 29 U.S.C. § 1085(g)(3)(A) & (g)(3)(B). Section 1085(f)(1)(B) permits amendments to a pension plan that increase benefits with plan actuary certification. 

Decision Highlights Employer Protection in Underfunded Multiemployer Pension Plans 

Event Media Inc. and Pack Expo Services, LLC, were contributing employers to the Central States, Southeast and Southwest Areas Pension Fund. See Cent. States, Se. & Sw. Areas Pension Fund v. Event Media, Inc., 2025 WL 1185368 (7th Cir. Apr. 24, 2025). In 2008, the actuary certified that the Fund was in critical status, which required it to adopt a rehabilitation plan. When the actuary projected that the Fund would become insolvent by 2025, the employers withdrew from the Fund, thereby incurring withdrawal liability. To calculate the employers’ withdrawal liability, including its annual payment, the Fund used the 2019 contribution rate because it was the “highest contribution rate” in the last 10 years. The employers objected that the Fund should have used the lower 2014 rate because the MPRA excluded post-2014 contribution rate increases required by a rehabilitation plan. The employers argued that rate increases between 2014 and 2019 were all required by the Fund’s rehabilitation plan and therefore should have been excluded from the calculation.

The Seventh Circuit, applying the plain language of the statute, agreed with the employers. The Fund argued that because subsection (f)(1)(B) dealt only with amendments to a pension plan made after the adoption of a rehabilitation plan, increases in the contribution rate that were agreed to before 2014 but not yet implemented (like the ones here) do not require a plan amendment and are thus not excluded by Section (f)(1)(B). The Seventh Circuit rejected this position because it ignored the plain language of the statute, which said Section 1085(g)(3) excludes contribution rate increases “[i]n general,” unless some limited “[s]pecial” exception applies. Because the post-2014 contribution rate increases were not included as an amendment to the rehabilitation plan and were not accompanied by an actuarial certification, they were not “permitted by subsection . . . (f)(1)(B).” Therefore, the Fund should have used the 2014 rate when calculating the employers’ withdrawal liability payments. 

Impact of Event Media and Recommendations 

Event Media presents positive news for employers that may be subject to withdrawal liability. The decision follows two other Northern District of Illinois cases that rejected similar arguments from the Fund. An employer that has made contributions pursuant to a funding improvement or rehabilitation plan should pay special attention to the rate the Fund uses in any withdrawal liability estimate or assessment to make sure the Fund is complying with the limitations of the applicable law.