The Washington Star Company v. International Typographical Union Negotiated Pension Plan

729 F.2d 1502, 235 U.S. App. D.C. 1, 5 Employee Benefits Cas. (BNA) 1503, 1984 U.S. App. LEXIS 24166
CourtCourt of Appeals for the D.C. Circuit
DecidedMarch 27, 1984
Docket83-1313
StatusPublished
Cited by54 cases

This text of 729 F.2d 1502 (The Washington Star Company v. International Typographical Union Negotiated Pension Plan) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
The Washington Star Company v. International Typographical Union Negotiated Pension Plan, 729 F.2d 1502, 235 U.S. App. D.C. 1, 5 Employee Benefits Cas. (BNA) 1503, 1984 U.S. App. LEXIS 24166 (D.C. Cir. 1984).

Opinion

HARRY T. EDWARDS, Circuit Judge.

This case is an appeal from a decision of the District Court, 582 F.Supp. 301, upholding the constitutionality of the withdrawal liability provisions of the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), Pub.L. No. 96-364, 94 Stat. 1208 (codified in scattered sections of 5, 26 & 29 U.S.C.). 1 The Washington Star Company (the “Star”), against whom withdrawal liability has been assessed by the International Typographical Union Negotiated Pension Plan (the “Plan”), challenges the MPPAA provisions on the grounds that they violate substantive and procedural due process and the right to trial by jury. We conclude that these challenges are without merit. Accordingly, we affirm the judgment of the District Court.

I. Background

A. The MPPAA Withdrawal Liability Provisions

The Multiemployer Pension Plan Amendments Act of 1980 is the product of exten *1504 sive congressional study of and experimentation with the regulation of the nation’s private pension system. The Act’s withdrawal liability provisions were enacted because Congress determined that the existing regulatory framework created by the Employee Retirement Income Security Act of 1974 (“ERISA”) not only was inadequate to deal with the special problems of multiemployer pension plans, but actually contributed to the financial distress of such plans by creating incentives for employer withdrawals and eventual plan terminations.

ERISA, the first significant attempt at comprehensive federal regulation of private pension plans, was the product of almost a decade of study. One problem Congress identified during the course of that study was that terminations of pension plans had deprived employees of anticipated retirement benefits. To remedy this problem, Congress established a termination insurance program in title IV of ERI-SA. The program is administered by the Pension Benefit Guaranty Corporation (“PBGC”), an independent corporation established within the Department of Labor. In the event a covered plan terminates with insufficient assets to pay vested pension benefits, the PBGC guarantees those benefits up to specified levels. The PBGC receives no appropriations from general revenues, but finances the termination insurance program with premiums paid by covered plans.

Single employer plan benefits were insured unconditionally upon the enactment of ERISA. Multiemployer plan benefits, however, were guaranteed solely at the discretion of the PBGC until January 1, 1978, at which time the guarantees were to become mandatory. Multiemployer plans are plans maintained pursuant to one or more collective bargaining agreements that cover the employees of two or more employers. The employers normally agree to contribute at rates specified in the agreements. Contributions are made to a pooled fund administered by a board of trustees composed equally of employer-designated and union-designated trustees. The trustees normally have the authority to manage the assets of the plan and to set eligibility requirements and benefit levels. Under title IV as enacted in 1974, an employer who withdrew from a multiemployer plan had no further responsibility to the plan unless the plan terminated within five years. If the plan did terminate within that period and lacked sufficient funds to pay all vested benefits, and if the PBGC elected to pay the unfunded guaranteed benefits to the plan’s beneficiaries, then the employer became liable to the PBGC for the employer’s share of the guaranteed benefits, up to a maximum of 30% of the employer’s net worth.

Concerned about the potential cost of extending mandatory benefit insurance to multiemployer plans and recognizing the need for further study, Congress four times extended the commencement date of the mandatory guarantee program and ordered the PBGC to prepare a comprehensive report analyzing the multiemployer situation. The PBGC concluded that the cost of insuring all plan benefits would be unacceptably high. The PBGC also argued that mandatory termination insurance would create further incentives for plan termination. The House Education and Labor Committee agreed with this assessment:

Under the existing termination insurance rules, guarantees are provided by the PBGC to participants in a terminated plan. Guarantee levels are high enough to result in coverage of virtually 100 percent of the vested benefits of participants in certain multiemployer plans. Employers who withdraw from a multiemployer plan more than five years before termination have no further obligation to fund the liabilities of the plan, while employers who remain with a plan until it terminates, or withdraw within five years of termination, are liable to the PBGC for unfunded guaranteed benefits up to 30 percent of net worth.
In the case of a financially troubled plan, termination liability creates an additional incentive for employers to withdraw early. In such a plan, contribution *1505 increases may be escalating so sharply that termination liability may prove cheaper than continuing the plan. The remaining employers have an incentive to terminate the plan. Where active employees determine that benefits may be provided for them at considerably less cost than current contributions and are satisfied that vested benefits for retirees and others are virtually 100 percent covered by the guarantees, there is an incentive for the union to agree to terminate the plan. The result is to transfer the cost of providing benefits to the insurance system. The current termination insurance provisions of ERISA thus threaten the survival of multiemployer plans by exacerbating the problems of financially weak plans and encouraging employer withdrawals from and termination of plans in financial distress.

H.R. Rep.No. 869, Part I, 96th Cong., 2d Sess. 54-55 (1980). The House Ways and Means Committee expressed similar views. See H.R. Rep.No. 869, Part II, 96th Cong., 2d Sess. 15 (1980), U.S.Code Cong. & Admin.News, pp. 2918, 2922.

The withdrawal liability provisions of the MPPAA are a central part of the solution adopted by Congress to protect the benefit security of participants in multiemployer pension plans and encourage the maintenance and growth of such plans. Under the MPPAA, an employer who withdraws from an on-going multiemployer plan no longer incurs merely a limited contingent liability payable to the PBGC. Rather, the withdrawing employer incurs an immediate liability for a reasonable share of the plan’s unfunded vested benefits. See 29 U.S.C. § 1381 (Supp. V 1981). When such withdrawal occurs, it is the duty of the plan to determine the amount of the employer’s withdrawal liability, notify the employer of the amount, and collect it. Id. § 1382.

The MPPAA describes a variety of methods by which a plan may calculate the amount owed by a withdrawing employer. See 29 U.S.C. § 1391 (Supp. V 1981). See generally Cummings & Kershaw, Withdrawal Liability Under the Multiemployer Pension Plan Amendments Act of 1980,

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729 F.2d 1502, 235 U.S. App. D.C. 1, 5 Employee Benefits Cas. (BNA) 1503, 1984 U.S. App. LEXIS 24166, Counsel Stack Legal Research, https://law.counselstack.com/opinion/the-washington-star-company-v-international-typographical-union-negotiated-cadc-1984.