Controlled Group Liability and Successor Employer Rules After PBGC v. Findlay Industries Inc.

Description

Pension funding obligations may not be limited to the immediate employer and sponsor of a pension plan. Third parties may now have pension liability as members of a controlled group or as a successor in an asset sale. Employers, investors, shareholders, and lenders must carefully analyze the controlled group liability and successor employer rules under ERISA, the Internal Revenue Code (IRC), and recent court decisions, and effectively implement strategies to minimize the dangers of pension liability.

ERISA provides that employees of a "trade or business" under the common control with another entity are treated as a single employer and have joint and several liability when the single-employer pension plan is terminated or an entity withdraws from a multiemployer pension plan.

In addition to controlled group liability, courts have imposed successor liability on a buyer in an asset deal where the buyer had actual or constructive notice of the pension plan liabilities before the sale and continues the operations of the seller. The majority of those cases have involved actions by multiemployer pension plans to collect withdrawal liability from unrelated third parties. However, recent case law suggests that the theory of successor liability could also become more prevalent in the single-employer plan context.

Listen as our panel discusses the impact of the Sixth Circuit's decision in PBGC v. Findlay Industries Inc., et al. and other recent cases, essential rules under ERISA and the IRC for controlled group and successor liability, and methods to limit claims and reduce the risk of liability.