Multiemployer Pension Withdrawal Liability After City of Tacoma: Deadlines, the Interest Rate Fight, Business Sales, and Bankruptcy for California Employers

Few letters surprise a California business owner like a withdrawal liability demand. A concrete contractor in Riverside, a grocery distributor in San Bernardino, or a trucking company in Fontana decides to stop contributing to a union pension plan, whether by closing a yard, selling assets, or letting a contract lapse, and months later the plan’s actuary sends a bill for the company’s share of the plan’s unfunded vested benefits. The number is often seven figures. On August 10, 2026, the Ninth Circuit affirmed a ruling that cut one of those bills by roughly $30 million, and the case shows both how much the actuary’s assumptions matter and how unforgiving the statute’s deadlines are.

What did the Ninth Circuit decide in City of Tacoma?

The City of Tacoma withdrew from the Western Metal Industry Pension Fund, and in November 2021 the fund demanded $44,325,881. Its actuary had discounted the fund’s future benefit obligations using the Pension Benefit Guaranty Corporation’s annuity purchase rates of 2.84% and 2.53%, even though the same fund assumed a 7% return when setting contributions for employers who stayed. A lower discount rate makes the present value of future benefits larger, so the choice multiplied the city’s bill. An arbitrator found the PBGC rates improper and ordered a recalculation at 7%, and the district court affirmed, noting the rate choice had increased the assessment by about $30 million.

In an unpublished memorandum, City of Tacoma v. Western Metal Industry Pension Fund, No. 25-4055 (9th Cir. Aug. 10, 2026), the court agreed that the PBGC rates didn’t reflect the plan’s own assets or expected experience, as ERISA requires. It followed its published decision in GCIU-Employer Retirement Fund v. MNG Enterprises, Inc., 51 F.4th 1092 (9th Cir. 2022), which arose from the Central District of California. Rather than sending the question back to the actuary, the panel upheld the order to use the 7% funding rate, because the fund’s own actuary had described that rate as based on expected returns. It denied Tacoma’s request for attorney’s fees, citing the fund’s ability to pay and the effect on participants. The city won, but only after years of arbitration and federal court review.

Why is the interest rate the whole fight?

Because the unfunded vested benefits calculation is a present value, and small changes in the discount rate move it enormously. 29 U.S.C. § 1393(a) requires withdrawal liability assumptions that, taken together, offer the actuary’s best estimate of anticipated experience under the plan. The Sixth Circuit in Sofco Erectors, Inc. v. Trustees of the Ohio Operating Engineers Pension Fund, 15 F.4th 407 (6th Cir. 2021), and the D.C. Circuit in United Mine Workers of America 1974 Pension Plan v. Energy West Mining Co., 39 F.4th 730 (D.C. Cir. 2022), reached similar conclusions about rates untethered to the plan’s investments.

Two developments could shift the ground. In M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, decided May 21, 2026, the Supreme Court held that assumptions adopted after the measurement date can be used, while leaving other questions open. And the PBGC has a 2022 proposed rule that would let plans pick any rate from the PBGC’s own rates to the funding rate, including blends. The federal regulatory agenda targets a final rule for November 2026. If it’s adopted as proposed, arguments like Tacoma’s would get harder. Plans that received Special Financial Assistance under the American Rescue Plan are a separate category: 29 C.F.R. § 4262.16(g) requires them to use PBGC rates for years, so the Tacoma argument generally won’t help an employer leaving one of those plans.

What deadlines apply after a demand letter arrives?

This is where employers lose cases they could have won. Under § 1399(b)(2), the employer has 90 days after receiving the demand to ask the plan to review it. Payments still start within 60 days of the demand, regardless of any review request, under the “pay now, dispute later” rule in § 1399(c)(2). Arbitration must be initiated within 60 days after the earlier of the plan’s response to the review request or 120 days after the request, under § 1401(a)(1). Miss that window and the amount becomes due and owing, with no chance to challenge the actuary’s rate. Miss a payment and, 60 days after written notice, the plan can accelerate the entire balance and sue for interest, liquidated damages equal to the greater of interest or 20%, and attorney’s fees.

How much can the rate change a small employer’s bill?

Here’s a simplified illustration, not an actuarial calculation. Suppose a Riverside concrete contractor stops contributing but keeps doing nonunion work in the same area, which counts as a complete withdrawal under the construction industry rule in § 1383(b). Assume its allocable share of vested benefits is a stream of $500,000 a year for 25 years, and its share of plan assets is $5 million. Discounted at 7%, those benefits are worth about $5.83 million, leaving withdrawal liability of roughly $827,000. At 2.5%, they’re worth about $9.21 million, and the liability jumps to about $4.21 million, roughly five times as much.

The payment schedule changes the real cost again. The statute sets annual payments from the employer’s historical contributions, say 18,000 hours at a $10 contribution rate, or $180,000 a year, and amortizes the liability at the plan’s funding rate, capped at 20 years of payments under § 1399(c)(1)(B). The $827,000 liability is paid off in about six years, roughly $1.03 million in total. The $4.21 million liability generates more annual interest than the payment covers, so the employer pays the full 20 years, $3.6 million. The rate dispute is worth about $2.57 million in actual cash.

What happens when the business is sold, or files bankruptcy?

A stock sale usually isn’t a withdrawal, because the contributing employer doesn’t change. An asset sale is a withdrawal unless the parties follow § 1384 precisely: the buyer must take on substantially the same contribution obligation, post a bond or escrow for five plan years, and the seller stays secondarily liable if the buyer withdraws during that period. Buyers can inherit liability even outside that section. In Resilient Floor Covering Pension Trust Fund v. Michael’s Floor Covering, Inc., 801 F.3d 1079 (9th Cir. 2015), the court held that a buyer with notice of the liability that continues substantially the same business can be a successor. Any deal that looks designed to dodge the liability can be disregarded under § 1392(c). Our post on California assignments for the benefit of creditors covers related sale structures for distressed companies.

Owners also need to know about controlled group exposure. Under § 1301(b)(1), all trades or businesses under common control are treated as one employer. In Board of Trustees of the Western Conference of Teamsters Pension Trust Fund v. Lafrenz, 837 F.2d 892 (9th Cir. 1988), owners who leased trucks to their own company were running a trade or business and became personally liable. The modern version is the family trust or LLC that owns the yard and leases it to the union contractor. That entity may be swept into the controlled group, and if the leasing activity isn’t run through a separate corporation or LLC, the owners’ personal assets can be at risk. Estate plans and entity structures for these businesses should be reviewed with that rule in mind.

In bankruptcy, liability from a withdrawal before the filing is generally a nonpriority unsecured claim that can be discharged or paid a percentage under a plan, as in Trustees of the Amalgamated Insurance Fund v. McFarlin’s, Inc., 789 F.2d 98 (2d Cir. 1986). The Third Circuit has given administrative priority to the portion tied to work after the petition, and the Ninth Circuit hasn’t decided that question. Controlled group members that don’t file bankruptcy remain fully liable. On the tax side, 26 U.S.C. § 404(g) treats withdrawal liability payments as deductible plan contributions.

Frequently Asked Questions

What is multiemployer pension withdrawal liability?

It’s an employer’s share of a union pension plan’s unfunded vested benefits, assessed when the employer stops contributing in whole or in part. ERISA requires the employer to pay it in installments or a lump sum.

How long do I have to challenge a withdrawal liability assessment?

You have 90 days after receiving the demand to request review, and you must start arbitration within 60 days after the earlier of the plan’s response or 120 days after your request. Missing arbitration makes the amount final.

Do I have to pay while I dispute the assessment?

Yes. Installments begin within 60 days of the demand even if you’ve requested review or started arbitration. Refunds are available if you win.

Are PBGC annuity rates allowed for withdrawal liability in the Ninth Circuit?

Under the Ninth Circuit’s published GCIU decision, followed in the unpublished City of Tacoma memorandum, using PBGC annuity rates that don’t reflect the plan’s expected experience is improper. Plans receiving Special Financial Assistance are required to use PBGC rates for a period of years.

Does selling my company’s assets trigger withdrawal liability?

Generally yes, unless the sale meets § 1384, which requires the buyer to assume substantially the same contribution obligation and post a bond or escrow, with the seller remaining secondarily liable for five years.

Can owners be personally liable for withdrawal liability?

Not usually for a corporation’s liability, but owners can be liable through commonly controlled trades or businesses, such as a sole proprietorship or an unincorporated leasing activity serving the company.

How North Star Law Firm Can Help

North Star Law Firm helps California employers review withdrawal liability demands, meet review and arbitration deadlines, structure business sales around § 1384, and evaluate bankruptcy options when the liability threatens the company. Phillip Zagotti is a California attorney and a CPA, which lets the firm test the actuary’s assumptions and model payment scenarios alongside the legal defenses. Learn more about the firm’s work on buying and selling a business, business sale tax structuring, and Subchapter V reorganization.