Magazine article HRMagazine

ERISA Permits Union's Indemnification of Employer's Pension Liability

Magazine article HRMagazine

ERISA Permits Union's Indemnification of Employer's Pension Liability

Article excerpt

Shelter Distribution Inc. v. General Drivers, Warehousemen & Helpers Local Union No. 89, 6th Cir., No. 11-5450 (March 16, 2012).

A union agreement to indemnify an employer for any contingent liability that might be incurred as a result of the employer's participation in a multiemployer pension plan did not violate the Employee Retirement Income Security Act (ERISA), the 6th U.S. Circuit Court of Appeals decided.

During negotiations between Shelter Distribution Inc. and the General Drivers, Warehousemen and Helpers, Local Union No. 89, for a new contract, the union disclaimed its representation of Shelter's employees and terminated the collective bargaining process. When Shelter then withdrew from a multiemployer pension plan, the plan imposed "withdrawal liability" against Shelter in the amount of $57,291. Shelter demanded indemnification for this amount from the union pursuant to their collective bargaining agreement.

The union asserted that the Multiemployer Pension Plan Amendments Act (MPPAA) prohibited employers and unions from shifting withdrawal liability through a negotiated collective bargaining agreement, but the district court enforced the contract provision. The 6th Circuit concurred.

The MPPAA also amended ERISA by creating "withdrawal liability" that requires employers who withdraw from a multiemployer pension plan to contribute to the plan a proportionate share of the "unfunded vested benefits. …

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