Practical Law Glossary Item 2-507-9172 (Approx. 3 pages)
Glossary
Withdrawal Liability
An employer's liability owed to a multiemployer plan if the employer totally or partially withdraws from the plan (29 U.S.C. § 1381). Since the plan remains liable to pay the future pensions of employees with vested benefits, withdrawal liability is intended as payment of the employer's share of the plan's funding shortfall. After the employer withdraws from the plan, the plan sponsor must:
Determine the amount of the employer's withdrawal liability.
Notify the employer of the withdrawal liability amount.
Collect the withdrawal liability amount from the employer.
The plan's board of trustees determines the extent to which unfunded vested benefits are attributable to the withdrawing employer and a schedule of payments for up to 20 years is established. There is a 20-year cap on withdrawal liability payments, generally.