Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—2d Cir.: Terminated union pension fund was eligible for PBGC Special Financial Assistance program, (Apr 30, 2025)

By Jason Albright, J.D.

In 2011, the fund’s largest employer, Hostess Brands, Inc., had stopped making contributions.

The PBGC was not entitled to summary judgment against a union benefit fund’s APA suit alleging that the fund was entitled to participate in the pandemic-related Special Financial Assistance program, even though the fund was terminated in 2016, the Second Circuit found. Under 29 U.S.C. § 1432(b)(1)(A), the PBGC must grant assistance to a multiemployer plan that “is in critical and declining status (within the meaning of section 1085(b)(6) of this title) in any plan year beginning in 2020 through 2022,” and the statute’s provisions do not, by their terms, exclude a plan that was terminated by mass withdrawal (Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund v. PBGC, No. 23-7868 (2d Cir. Apr. 29, 2025)).

The fund. The Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund was created in 1955 by an agreement between several large bakeries and Bakery Drivers Union Local 550. It is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and ERISA’s implementing regulations.

Hostess bankruptcy and insolvency. In 2011, the fund’s largest employer, Hostess Brands, Inc., stopped making contributions. Hostess declared bankruptcy in 2012, and its liability to the fund was eventually discharged in 2015.

Termination by mass withdrawal. In 2016, facing insolvency, the fund reached an agreement with its four remaining employers to transfer some of their members to a newly created pension plan. Those employers were then relieved of their obligations to continue contributing to the fund, triggering the fund’s termination by mass withdrawal under ERISA.

Not the “end.” “Despite its connotation,” in the words of the court, “a ‘termination’ of this kind does not mark the end of a plan’s operations.” In the succeeding years, the fund continued to perform audits, to conduct valuations, to file annual reports, and to make payments to more than 1,100 beneficiaries.

Resumed contributions and insolvency. And indeed, in September 2022, hoping to ensure the fund’s eligibility under the newly-enacted Special Financial Assistance (SFA) program, a former employer—Bimbo Bakeries USA—agreed to rejoin the fund and resume contributions on behalf of its then-current employees. The fund became insolvent about a year later.

SFA program. Congress established the SFA program—in the midst of the COVID-19 pandemic—in the American Rescue Plan Act of 2021. Under the SFA statute, the PBGC must grant assistance to all eligible multiemployer plans, including plans that were “in critical and declining status (within the meaning of section 1085(b)(6) of this title) in any plan year beginning in 2020 through 2022.” 29 U.S.C. § 1432(b)(1)(A). Of the three financial statuses defined in 29 U.S.C. § 1085, “critical and declining” is the direst.

Application and rejection. In September 2022, shortly after reenlisting Bimbo Bakeries, the fund applied for assistance under the SFA program, asserting that it was in critical and declining status and thus qualified for SFA under § 1432(b)(1)(A). The PBGC rejected the application, finding that the fund could not be “in critical and declining status” because it “has had no zone status since plan year 2016, when the Plan terminated by mass withdrawal.”

The reenlistment of Bimbo Bakeries made no difference, the agency found, because “ERISA contains no provision allowing a multiemployer plan that terminated by mass withdrawal under section 4041A to be restored.” The PBGC did not indicate that it had any other reason to reject the application.

Lawsuit and appeal. An APA action was brought by the fund in federal district court in New York, claiming, among other things, that the PBGC’s denial of its application was contrary to law. Both parties moved for summary judgment, raising two questions of statutory interpretation: (1) whether § 1432(b)(1)(A), the SFA eligibility provision at issue, per se excludes multiemployer plans that previously terminated by mass withdrawal; and (2) whether ERISA permits such plans to be restored.

The district court sided with the PBGC on both issues, concluding that a multiemployer plan that had been terminated by mass withdrawal could neither claim SFA funding under § 1432(b)(1)(A) nor restore itself. The district court thus denied the fund’s motion for summary judgment, granted summary judgment for the PBGC, and affirmed the PBGC’s denial of the fund’s SFA application. This appeal followed.

SFA statute. The Second Circuit initially observed that, under 29 U.S.C. § 1432(b)(1)(A), the PBGC must grant assistance to a multiemployer plan that “is in critical and declining status (within the meaning of section 1085(b)(6) of this title) in any plan year beginning in 2020 through 2022.”

Section 1085(b)(6), in turn, states that “a plan in critical status shall be treated as in critical and declining status if the plan is described in one or more of subparagraphs (A), (B), (C), and (D) of paragraph (2) and the plan is projected to become insolvent within the meaning of section 1426 of this title during the current plan year or any of the 14 succeeding plan years....” The subparagraphs referenced in § 1085(b)(6), in turn describe a plan’s financial condition in terms of the projected value of its assets compared to its projected liabilities.

Section 1085(b)(6) also references the definition of insolvency in 29 U.S.C. § 1426, which provides that “a multiemployer plan is insolvent if the plan’s available resources are not sufficient to pay benefits under the plan when due for the plan year.”

These provisions, the appeals court noted, “do not, by their terms, exclude a plan that was terminated by mass withdrawal (that is, a plan that had at one time stopped receiving employer contributions).” And the PBGC neither disputed that such a plan could meet these criteria, nor that the fund meets them here.

29 U.S.C. § 1081(c) and PBGC’s argument. The agency pointed to 29 U.S.C. § 1081(c), which provides that Part 3 of Subchapter I of ERISA—which includes § 1085 but not the SFA statute—“applies, with respect to a terminated multiemployer plan,” only “until the last day of the plan year in which the plan terminates.” The PBGC argued that § 1081(c) applies to the status definitions in § 1085 as well as its requirements. And because the fund terminated in 2016, the PBGC argued, the fund could not have a “status” under § 1085 in the 2020, 2021, or 2022 plan years, making it ineligible under § 1432(b)(1)(A).

Unpersuaded. The Second Circuit was unpersuaded. “Section 1081(c) does not apply to the SFA statute, which is located in a different part of a different subchapter,” the appeals court observed. “Nor does it apply by virtue of its application to § 1085.” By using the phrase “within the meaning of section 1085(b)(6),” reasoned the court, the SFA statute incorporates by reference only the definition contained in § 1085(b)(6). It did not incorporate external limitations on § 1085’s operation, such as the limitation contained in § 1081(c).

“Congress,” the appeals court added, “also knew how to exclude terminated plans expressly—which it did in one of the other SFA eligibility provisions. See 29 U.S.C. § 1432(b)(1)(D) (a plan is eligible for SFA if it ‘became insolvent... and has remained so insolvent and has not been terminated as of March 11, 2021’ (emphasis added)).” And the fact that Congress chose not to include a similar limitation in subparagraph (A), the provision at issue here, was telling. In short, according to the Second Circuit, “the words that Congress chose to codify eligibility for SFA do not support a per se exclusion of terminated plans under § 1432(b)(1)(A).”

The judgment of the district court was thus reversed and remanded with instruction to enter judgment for the fund, vacate the agency’s denial of the fund’s SFA application, and remand to the PBGC for reconsideration.

The case is No. 23-7868.

Judge: Pérez, M.

Attorneys: Jeremy Paul Blumenfeld (Morgan, Lewis & Bockius) for Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund. Erin Kim, Office of the General Counsel, for Pension Benefit Guaranty Corp.

Companies: Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund; Pension Benefit Guaranty Corp.

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