Under the Worker Retirement Earnings Security Act of 1974 (ERISA), when a building and construction company exits an underfunded multiemployer strategy, the company should pay “withdrawal liability.” The withdrawal liability is based upon the company’s share of the strategy’s underfunded liabilities, which can be computed in different methods. Still, typically, the more a business has contributed gradually, the more it will owe.
For mid-sized and little business, this looming liability can be huge, in some cases, higher than the worth of the business itself. This produces a considerable issue that should be resolved.
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There is an exemption that building and construction businesses can take benefit of under ERISA. Notably, companies in the “structure and building market” can leave withdrawal liability offered different needs are satisfied. I talked about those guidelines in more information here, but most notably: (1) the company needs to stop its responsibility to make contributions under the cumulative bargaining contract (CBA); and (2) the company should not carry out covered work under the CBA for a minimum of 5 years afterward.
For your construction crew they may also need a DOT exam.
Following are numerous choices for how a building and construction business can resolve its withdrawal liability, consisting of:
- Not do anything
- Pay it
- Use subcontractors
- A stock sale of the business
- A possession sale of the business
- Work out with the strategy
- Not do anything
It is possible the quantity of withdrawal liability your business deals with will go down over time, either as an outcome of your union work reducing or the strategy ending up being much better moneyed.