Responding to a pension fund’s dire financial condition, its board passed an amendment requiring employers withdrawing from the fund to pay a portion of the fund’s deficiency. One contributing employer, WestRock, then sought a declaratory judgment that the amendment violated ERISA, arguing on appeal that it had a claim under 29 U.S.C. §§ 1132(a)(10) or 1451(a). Whether these provisions granted a statutory cause of action was the issue of first impression in WestRock RKT Co., v. Pace Industry Union-Management Pension Fund, 2017 WL 2111114 (11th Cir. May 16, 2017).
Subsection B of § 1132(a)(10) provides that a civil action may be brought by an employer “if the plan sponsor . . . fails to update or comply with the terms of the funding improvement or rehabilitation plan in accordance with the requirements of [Section 1085].” WestRock argued that the phrase “in accordance” allowed it to challenge both the substance and procedure of the amendment; the board argued that an employer could only bring an action to challenge the procedural requirements. The court declined to decide which view was correct because it found that WestRock failed to properly allege that the amendment violated § 1085 substantively or procedurally. It noted that the statute has no explicit restriction on the board’s ability to charge withdrawing employers for their share of the funding deficiency. The amendment was adopted pursuant to the sponsor’s authority to adopt reasonable measures under § 1085(e)(3)(A)(ii), which did not require the agreement of the bargaining parties.Whether the amendment violated § 1082, as WestRock argued, was irrelevant, and besides, it did not. When employers face an automatic payment to compensate for a funding deficiency, § 1082 relieves them from that payment when a rehabilitation plan is adopted. But this did not prohibit a charge based on accumulated funding deficiencies in all scenarios.
Section 1451(a) authorizes an employer to bring an action when it “is adversely affected by the act or omission of any party under [Subtitle E],” which governs withdrawal liability. The court found that the text did not support WestRock’s reading that because Subtitle E governs “withdrawal liability,” it governs any and all liability that a plan may impose on a withdrawing employer. The enactment of the amendment fell under the board’s authority under Subtitle B. WestRock’s argument was one of implied preemption, that no other charges can be levied against a withdrawing employer because Congress specified how to divvy up a withdrawing employer’s share of the unfunded vested benefits. But the court found nothing in the text to indicate Congress intended for withdrawal liability to be the only payments a withdrawing employer would ever face, and read this absence as intentional.
Finding no cause of action under 29 U.S.C. § 1132(a)(10) or § 1451(a), the Eleventh Circuit affirmed the district court’s grant of the board’s motion to dismiss for failure to state a claim.
Posted by Keith Emanuel.