When an employer withdraws from a multiemployer plan, the plan sponsor is required to notify the employer of the amount of any withdrawal liability and the schedule for liability payments, and it must demand payment in accordance with that schedule. An employer may seek review of its liability and the schedule of payments; however, payments must continue to be made according the payment schedule during the pendency of any review. If an employer defaults in its payments, the plan sponsor may accelerate the employer’s withdrawal liability. In the case of unpaid withdrawal liability, a multiemployer fund is entitled to recover, among other amounts, an amount equal to the greater of 1) interest on any unpaid contributions or 2) liquidated damages provided for under the plan, generally not in excess of 20 percent of the amount of unpaid contributions.
E & L Development, Inc. was a participating employer in the Central States, Southeast and Southwest Areas Pension Fund before it completely withdrew from the fund as of October 4, 2008. On August 12, 2010, the fund notified E & L that its withdrawal liability was $1,076,391.08 and that it could discharge its liability in a lump sum or monthly payments of $8,718.08, beginning September 2010 and ending May 2028. On September 17, 2010, the fund notified E & L that payment was past due. The notice provided that if payment was not received within 60 days, the fund would accelerate E & L’s withdrawal liability. E & L made no payments.
The fund brought suit for the $1,076,391.08 withdrawal liability and liquidated damages of $215,278.22 (i.e., 20 percent of $1,076,391.08), as well as other amounts. E & L did not contest the withdrawal liability amount or other amounts, but argued that liquidated damages should be limited to 20 percent of the unpaid installments payments, not the entire withdrawal liability amount. This argument would have the effect of reducing E & L’s liquidated damages to $33,273.60.
The court rejected E & L’s argument. It noted that the fund complied with all procedural requirements in accelerating the withdrawal liability. Once the withdrawal liability had been properly accelerated, the total withdrawal liability amount represented the unpaid contributions referred to under the statute, not simply the unpaid installments. Accordingly, the fund was entitled to liquidated damages equal to $212,278.22. (Cent. States, Southeast & Southwest Areas Pension Fund v. E & L Development, Inc., N.D. Ill. Aug. 15, 2012)