9th Circuit Ruling on Partial Withdrawal Liability Clarifies Law

In an important withdrawal liability decision, the Ninth Circuit Court of Appeals clarified application of the credit for partial withdrawals, holding that the credit for partial withdrawal is applied before the application of the 20-year limitation on withdrawal liability payments. The case is GCIU-Employer Retirement Fund v. Quad/Graphics, Inc.


Title IV of the Employee Retirement Income Security Act (ERISA), as amended, imposes liability on an employer if it withdraws or partially withdraws from a multiemployer plan. A partial withdrawal occurs upon the cessation of an employer's obligation to contribute to the plan under one but not all of the collective bargaining agreements that require such contributions. If the employer subsequently has another partial withdrawal or a complete withdrawal, the employer is given a credit for any prior partial withdrawal, which reduces the liability for the subsequent withdrawal. ERISA also provides that an employer's obligation shall not exceed 20-years of payments (referred to as the "20-year cap"). The order in which the credit for a partial withdrawal and the 20-year cap are applied can significantly affect the amount of liability.

Example: An employer completely withdraws from a plan with a withdrawal liability of $12 million before applying any adjustments. The employer's annual payment is $500,000. The employer has a credit for a prior partial withdrawal of $3 million.

If the 20-year cap is applied first, the $12 million liability is reduced to $10 million (20 years of $500,000) and then the credit for the prior partial withdrawal further reduces the $10 million to $7 million, which can be paid off over 14 years.1

However, if the credit for the partial withdrawal is applied first, the $12 million liability is reduced to $9 million and requires 18 years of payments by the employer.

Facts of the Case

Quad/Graphics acquired Quebecor World (USA), Inc. in 2010. Quebecor was obligated to contribute to the GCIU-Employer Retirement Fund (the Fund) by various collective bargaining agreements. Quebecor (and therefore Quad/Graphics) incurred a partial withdrawal in 2009 when contributions ceased at one of its facilities. In 2011, the employer completely withdrew. In determining the complete withdrawal liability, the plan applied the credit for the 2009 partial withdrawal prior to applying the 20-year cap. The employer sought arbitration arguing, among other issues, that the 20-year cap should have been applied before the credit which would decrease the liability by $14 million. The arbitrator ruled for the plan and the district court affirmed the arbitrator's ruling.

The 9th Circuit Decision

In its appeal, Quad/Graphics relied upon PBGC Opinion Letter 85-4, which states that the 20-year cap is to be applied before the credit for partial withdrawal. The 9th Circuit rejected this argument based on the text of section 4201(b) of ERISA, which lays out the order in which the various relief provisions are to be applied. In particular, the law provides that the amount of unfunded vested benefits allocated to an employer is adjusted: first, by the de minimis rule, next in accordance with ยง4206, and next to reflect the 20-year cap. Section 4206(b) provides for the credit for prior partial withdrawals. The 9th Circuit accorded no deference to PBGC Opinion Letter 85-4 stating that it misconstrued the plain language of the law. Accordingly, the 9th Circuit affirmed the district court, concluding that under the ordering rules in the statute the 20-year cap is applied after applying the credit for prior partial withdrawals.


Presently, many plans have to deal with both a prior partial withdrawal and the 20-year cap. Those plans should review their procedures for calculating the credit for previous partial withdrawals in cases where the 20-year cap comes into play. This includes situations where they have been following PBGC Opinion Letter 85-4.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.

1 For simplicity, this example ignores interest.