Exclusion of Rehabilitation Plan‐Mandated Contribution Increases from Withdrawal Liability Calculations

Introduction

In Central States, Southeast and Southwest Areas Pension Fund v. Event Media Inc. (Nos. 24-1739, 24-1740, 24-1741 & 24-1742; decided April 24, 2025), the Seventh Circuit addressed a finely drawn dispute over how to calculate an employer’s withdrawal liability under ERISA’s multiemployer pension plan provisions. Event Media Inc. and Pack Expo Services, LLC (the “Employers”) withdrew from the Central States Pension Fund (the “Fund”) in 2019 and incurred statutory withdrawal liability. The parties disagreed on whether post-2014 increases in the employers’ contribution rates—required by the Fund’s rehabilitation plan—must be included in the calculation of periodic withdrawal liability installments under 29 U.S.C. § 1085(g)(3). The district court excluded those increases; the Fund appealed. The Seventh Circuit affirmed, holding that § 1085(g)(3) plainly requires disregard of all rehabilitation-plan-mandated, post-2014 contribution rate hikes unless they fall within two narrow exceptions, neither of which applies here.

Summary of the Judgment

The court framed the issue as one of statutory interpretation. ERISA, as amended by the Multiemployer Pension Reform Act of 2014, directs that any increase in an employer’s contribution rate required by a funding improvement or rehabilitation plan “shall be disregarded” in calculating the “highest contribution rate” for withdrawal liability purposes, unless the increase (1) is due to increased work levels or (2) “is used to provide an increase in benefits … permitted by subsection (f)(1)(B).” 29 U.S.C. § 1085(g)(3). The Employers argued that their contribution rate increases from $328 (2014) to $424 (2019) were required by the Fund’s 2019 rehabilitation plan and are not within either exception, so they must be excluded. The Fund contended that those increases were not “permitted by subsection (f)(1)(B)” and thus should be included in the calculation. The Seventh Circuit disagreed with the Fund, concluding that § 1085(f)(1)(B) only authorizes post-rehabilitation amendments increasing benefits upon actuarial certification. Because no such amendment or certification existed, the post-2014 increases were not “permitted,” and accordingly must be disregarded. The court affirmed the district court’s judgment for the Employers.

Analysis

1. Precedents Cited

Concrete Pipe & Products of California v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602 (1993): ERISA’s overarching purpose is to protect employees’ retirement benefits.
Milwaukee Brewery Workers’ Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414 (1995): ERISA withdrawal liability rules initially created an unintended “race to the exit” incentive.
Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp. of California, Inc., 522 U.S. 192 (1997): The 1980 amendments fixed that flaw by imposing a withdrawal liability tied to an employer’s proportionate share of unfunded vested benefits.
Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984): Withdrawal liability should track an employer’s share of the plan’s underfunding.

2. Legal Reasoning

The court’s analysis turned on the text and structure of 29 U.S.C. § 1085(g)(3). Subsection (A) establishes the general rule: any contribution increase required by a funding improvement or rehabilitation plan is excluded from the “highest contribution rate” calculation. Subsection (B) then creates two narrowly drawn exceptions. By its terms, subsection (B)(ii) excludes from the exception any rate increase “used to provide an increase in benefits … permitted by subsection … (f)(1)(B).” The Fund argued that “permitted by” should be read passively—to mean “not prohibited by”—and thus all pre-rehabilitation increases are automatically excluded from § 1085(g)(3)’s disregard rule. The court rejected that construction for three reasons:

Plain Language: “Permitted by” connotes affirmative authorization, not mere absence of prohibition. If Congress intended a passive sense, it could have said “not prohibited by” or used broader language.
Statutory Structure: Section 1085(f)(1)(B) speaks only to post-plan amendments that increase benefits and requires an actuary’s certification. Because no such amendment or certification occurred here, § 1085(f)(1)(B) does not apply.
Legislative History and Purpose: The 2014 amendments specifically aimed to prevent a situation where rehabilitation-plan-required rate hikes would paradoxically raise withdrawal liability. The text implements that goal by disregarding those required increases unless they fall within the two clear exceptions.

Accordingly, the court held that the Employers’ post-2014 rate increases must be disregarded, and the district court’s orders were affirmed.

3. Impact

This decision provides important guidance to multiemployer pension plans, contributing employers, and practitioners:

Certainty in Withdrawal Liability: Plans must exclude post-2014, rehabilitation-plan-mandated increases from liability calculations, reducing disputes over historic rate hikes.
Narrow Exceptions: The ruling underscores that only two narrow exceptions apply—rate increases tied strictly to work volume or expressly authorized benefit hikes with actuarial certification.
Administrative Practice: Pension funds must carefully track and document whether contribution rate changes were required by improvement or rehabilitation plans and ensure compliance with actuarial certification protocols if benefit increases are proposed.
Future Litigation: Employers facing withdrawal liability will invoke § 1085(g)(3) to exclude non-voluntary rate increases, and courts will rely on this decision’s plain-language approach.

Complex Concepts Simplified

Multiemployer Pension Plan: A retirement plan maintained jointly by multiple employers and one or more labor unions to pool resources and risks across an industry.
Unfunded Vested Benefits: The gap between the present value of promised benefits to participants and the assets held to pay those benefits.
Withdrawal Liability: A statutory charge imposed on an employer that leaves a multiemployer plan, intended to cover its share of the plan’s unfunded vested benefits.
Rehabilitation Plan: A set of measures (e.g., increasing contribution rates, reducing future accruals) required by statute when a plan is in “critical” or “critical and declining” status to restore the plan’s financial health.
Actuarial Certification: A formal opinion by a plan actuary confirming that a proposed benefit increase is fully funded by contributions not contemplated in the rehabilitation plan.

Conclusion

Central States v. Event Media clarifies a narrow but consequential corner of ERISA’s withdrawal liability regime. By adhering to the plain language of 29 U.S.C. § 1085(g)(3), the Seventh Circuit held that contribution rate increases required by a rehabilitation plan after 2014 are to be disregarded in calculating an employer’s highest contribution rate—unless those increases fall within two very limited exemptions. This decision reinforces textual fidelity in statutory interpretation, offers certainty to plan sponsors and withdrawing employers, and upholds the balance Congress struck in protecting multiemployer pension plans without subjecting employers to unduly punitive withdrawal charges.