Equitable Exception To Excuse Interim Withdrawal Liability Payments Rejected

A federal district court in New Jersey recently declined to apply an equitable exception to excuse an employer’s failure to pay interim withdrawal liability payments while it challenged the demand for withdrawal liability. Nat’l Integrated Grp. Pension Plan v. Black Millwork Co., 2:11-cv-05072-KM-MAH (D.N.J. August 1, 2013). After making one withdrawal liability payment, the employer initiated arbitration to challenge the plan’s demand for withdrawal liability and made no further payments. Notwithstanding ERISA’s “pay now, dispute later” statutory withdrawal liability rules, the employer argued that the court should apply an equitable exception to this mandate. In particular, the employer argued that the court should invoke, like the Fifth and Seventh Circuits have done, equity to excuse an employer’s failure to pay interim withdrawal liability when an employer could show: (i) severe financial hardship, and (ii) the fund’s claim is frivolous and not colorable. The district court, observing that the Third Circuit had previously expressed skepticism regarding whether a court could apply such an equitable exception, concluded that even if the Third Circuit were to adopt such an equitable exception, the employer had not shown that the plan’s claim was frivolous.

Source: ERISA Practice Center