Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—7th Cir.: Partial withdrawal credit applied once entire amount of complete withdrawal liability calculated after applying all four steps of Sec. 1381(b)(1), (Sep 18, 2026)

By Ronald Miller, J.D.

The Seventh Circuit had to determine the proper application of an employer’s prior partial withdrawal liability credit when calculating the employer’s current withdrawal liability.

After examining the language, context, and structure of the relevant statutes, the Seventh Circuit concluded that the credit MPPAA Section 1386(b)(1) provides to an employer’s withdrawal liability based on a prior partial withdrawal should be applied after the employer’s withdrawal liability is calculated employing the four-step process in Section 1381(b). The employer and a union pension fund disputed how exactly that credit should be applied. An arbitrator adopted the fund’s calculation, applying the credit at step two of the process. On appeal, the district court vacated the arbitration award, accepting instead the employer’s contention that the credit should be applied at the completion of all four steps. The appeals court concluded that the more natural reading of the MPPAA favored the employer’s construction and affirmed the district court (Consumers Concrete Corp. v. Central States, Southeast and Southwest Areas Pension Fund, Nos. 25-1765 and 25-1766 (7th Cir. Sept. 17, 2026)).

Withdrawal from pension fund. In 2017, the employer, Consumers Concrete, undertook a partial withdrawal from the multiemployer pension fund. The annual payments the employer was obligated to pay as a result of the 2017 partial withdrawal are uncontested.

Then in January 2019, the employer effected a complete withdrawal when it bargained out of participating in the fund altogether. The parties agreed that this resulted in a total of $23,272,103.41 in unfunded vested benefits allocable to the employer and that the annual payment for its complete withdrawal is $607,344.90.

Multiemployer pension plans. Multiemployer pension plans are created through a collective bargaining agreement between multiple employers with a union. To prevent employers from withdrawing en masse and making a pension plan insolvent, Congress amended ERISA with the Multiemployer Pension Plan Amendments Act (MPPAA). The MPPAA lays out a four-step process for calculating the employer’s complete withdrawal liability and provided the employer with a credit for the liability it incurred for its partial withdrawal in 2017.

Employer credit. The dispute in this case centered on how the employer would be credited for the amount it paid (and continues to pay) for its 2017 partial withdrawal. In the employer’s view, the credit should be applied once the entire amount of its complete withdrawal liability is calculated after employing all four steps of Section 1381(b)(1), including Section 1399(c)(1)(B)’s 20-year limitation. On the other hand, the pension funds contended that the credit should be applied at step two, before Section 1399(c)(1)(B) kicks in.

Under the employer’s approach, the amount it would be obligated to pay for its complete withdrawal could be as low as zero because the credit based on its 2017 partial withdrawal liability could exceed the present value of the complete withdrawal payments it would have to make over the next 20 years, which (at a 3.00 percent discount rate) is $9,306,831.24. On the other hand, the fund’s preferred methodology would require the employer to pay $9,306,831.24 over the next 20 years.

The employer timely filed an arbitration request contesting the fund’s calculation of its 2019 complete withdrawal liability. The arbitrator ruled for the fund and both parties appealed to the district court. The employer sought to vacate or modify the arbitration award and the fund to enforce it. The district court accepted instead the employer’s contention that the credit should be applied at the completion of all four steps and granted the employer’s motion.

The Seventh Circuit had to determine the proper application of an employer’s prior partial withdrawal liability credit when calculating the employer’s current withdrawal liability. The appeals court had to keep in mind that “Congress in the MPPAA enacted an intricate statutory scheme with detailed calculations, all of which came about through the legislative process: a balance of competing interests, legislative compromise, and stakeholder input.”

The appeals court noted that there are reasonable arguments on both sides. However, it concluded that the statutory language and context better supported the employer’s construction of Sections 1381(b) and 1386. Accordingly, the Seventh Circuit diverged from the Eleventh and Ninth Circuits on this point.

“Withdrawal liability.” The partial withdrawal liability credit, Section 1386(b)(1), provides that an employer’s partial withdrawal liability shall “reduce[]” “any withdrawal liability … in a subsequent year.” To answer the question what does “withdrawal liability” mean, and how is it calculated, the appeals court looked to Section 1381(b), which provides that an employer’s “withdrawal liability” is “the amount determined under section 1391 of this title to be the allocable amount of unfunded vested benefits, adjusted” by the steps one through four. Thus, under Section 1386(b)(1)’s express terms, the appeals court must apply the partial withdrawal credit to that final figure.

However, the fund would apply the partial withdrawal liability credit at step two. This not only contradicts the plain reading of Section 1386(b)(1), but it confuses “withdrawal liability” with “the allocable amount of unfunded vested benefits,” which the parties agreed are two distinct concepts.

The appeals court observed that although the funds’ reasoning had some appeal, all the cross-referenced provisions in steps one, three, and four “reference ‘unfunded vested benefits,’ or section 1391’s calculation for that value, as the starting point for the adjustment.”

Further, the funds pointed to Section 1381(a)’s language that “the employer is liable to the plan in the amount determined under this part[.]” This theory presupposes, however, that the four steps constitute the entire universe of inputs needed to calculate an employer’s withdrawal liability, but this was not correct. In fact, there are other sections of the statute that reduce or modify a company’s withdrawal liability after the four steps set forth in Section 1381(b). “Because the statute expressly contemplates changes to ‘withdrawal liability’ after it is calculated, there is nothing odd about applying the partial withdrawal credit in subsection 1386(b) in the same way.”

Step Two. The next major disagreement between the parties was the meaning of step two—“next, in the case of a partial withdrawal, in accordance with section 1386 of this title.” The fund’s primary argument was that the employer’s prior partial withdrawal credit had to be applied at step two because, in its view, step two requires the application of the entirety of Section 1386, including Section 1386(b), which authorizes the credit. This argument, however, ran into several problems.

First, it ignores step two’s condition precedent—“in the case of a partial withdrawal.” Section 1381 provides the protocol for calculating the liability for an employer that “withdraws from a multiemployer plan in a complete withdrawal or a partial withdrawal.” The most natural way to read “in the case of a partial withdrawal” is that step two applies only when the employer is seeking to carry out a partial withdrawal. In that case, the employer’s liability for the pending partial withdrawal would be calculated under Section 1386(a), and the amount of that liability will be noted in the event that the employer undertakes a subsequent partial or complete withdrawal under Section 1386(b).

Section 1386(b)(1) focuses on the time that the partial withdrawal liability is first calculated, not when the subsequent liability (whether complete or partial) is determined—which could be any number of years later. Thus, when a company wishes to undertake a partial withdrawal, the sponsor applies both subsections (a) and (b) of Section 1386, as step two requires.

PBGC’s interpretation. Moreover, the PBGC’s interpretation of these provisions supported the appeals court’s independent conclusion. The MPPAA delegated regulatory authority to the PBGC to “provide for proper adjustments” in the prior partial withdrawal liability credit “so that the liability for any complete or partial withdrawal in any subsequent year … properly reflects the employer’s share of liability with respect to the plan.” Five years after the MPPAA’s enactment, stakeholders asked the PBGC to address the exact question currently before the appeals court. It answered that the credit “is an adjustment to withdrawal liability, i.e. a further adjustment to the [§ 1381] amount” and, therefore, “must be made after the employer’s subsequent withdrawal liability is calculated in accordance with [§ 1381].”

In an amicus brief in this case, the PBGC affirmed its longstanding position that “§ 1386(b)(1)’s directive that withdrawal liability ‘shall be reduced’ is best understood to operate on the fully-adjusted amount of withdrawal liability determined under § 1381(b)(1), rather than on intermediate figures in the calculation process.”

Thus, the Seventh Circuit concluded that the credit Section 1386(b)(1) provides to an employer’s withdrawal liability based on a prior partial withdrawal should be applied after the employer’s withdrawal liability is calculated employing the four-step process in Section 1381(b). Accordingly, the judgment of the district court was affirmed.

The cases are Nos. 25-1765 and 25-1766.

Judge: Lee, J.

Attorneys: Mark McKay Trapp (Conn Maciel Carey) for Consumers Concrete Corp. Daniel E. Sullivan for Central States Southeast and Southwest Areas Pension Fund.

Companies: Consumers Concrete Corp.; Central States, Southeast and Southwest Areas Pension Fund

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