Assessment of Special Rules Exempting Employers Withdrawing From Multiemployer Pension Plans From Withdrawal Liability

In response to a requirement of the Multiemployer Pension Plan Amendments Act, GAO studied the effect of special rules which apply to employers withdrawing from multiemployer pension plans in the construction, trucking, and entertainment industries. GAO also assessed the criteria for granting or denying requests for special withdrawal liability exemptions to plans in other industries.

The act made a significant change in contributing employers' relationships to multiemployer pension plans which are established pursuant to collective bargaining agreements. The act requires withdrawn employers to pay for their allocated portion of the plan's unfunded vested benefits. However, special rules apply to employers contributing to construction and entertainment industry plans which exempt them from withdrawal liability. A limited exemption from liability is also available to qualified trucking industry plans. GAO found that the special withdrawal liability exemption had little effect on 45 of the 54 construction plans sampled, because the plans either were fully funded for vested benefits or had not identified any withdrawn employers. At the remaining plans, most of the withdrawn employers had no withdrawal liability. The exemption for the trucking industry had little effect at the plans GAO sampled. Only one of the nine plans qualified for exemption. The exemption had little effect at two of the three sampled entertainment plans because they were fully funded. The third plan had not identified any withdrawn employers. GAO found that the plans' generally adequate funding levels provided reasonable protection to the plans. Two out of eight requests for exemptions for plans in other industries have been approved and the remaining applications are being reviewed. The small number of applications and the plan-by-plan evaluation approach should allow careful evaluation of industry characteristics as well as the financial condition of the plans applying.