Partial-Withdrawal Credits Must Be Applied at “Step Two” of the MPPAA Formula
(Perfection Bakeries Inc. v. Retail, Wholesale & Department Store International Union Pension Fund, 11th Cir., 2025)

1. Introduction

Perfection Bakeries produces éclairs, breads, and – now famously – a new appellate precedent on pension law. After first curtailing its Michigan obligations and later withdrawing entirely from a multi-employer pension plan, the company disputed how a partial-withdrawal credit should be applied in the statutory four-step formula that converts “allocable unfunded vested benefits” into “withdrawal liability” under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). The pension fund applied the credit during Step Two; Perfection insisted the credit must be applied after the entire four-step sequence, thereby allowing the credit to reduce the already-capped figure yielded in Step Three (the 20-year cap). The Eleventh Circuit, joining the Ninth, sided with the fund and adopted a bright-line rule: all subsection 1386 adjustments – including the credit for a prior partial withdrawal – belong at Step Two.

2. Summary of the Judgment

• The court affirmed summary judgment for the Pension Fund and the arbitration award below.
• Applying ordinary-meaning canons and contextual cross-references, the panel held that § 1381(b)(1)(B) incorporates the entirety of § 1386 (“first”, “next”, “then”, “finally” sequence), therefore the partial-withdrawal credit in § 1386(b) must be taken at Step Two.
• The court rejected Perfection’s contentions that (a) the credit can only reduce “withdrawal liability” – a term that supposedly exists only after all four steps – and (b) the statutory purpose of the credit is frustrated if it is “swallowed” by the 20-year cap.
• The court afforded Skidmore, not Chevron, weight to a contrary 1985 PBGC opinion letter and found its reasoning unpersuasive in light of the statutory text.
• Judge Jordan concurred; Judge Brasher dissented, favouring Perfection’s reading and the PBGC’s historic position.

3. Detailed Analysis

3.1 Precedents and Authorities Cited

• Milwaukee Brewery Workers Pension Plan v. Schlitz, 513 U.S. 414 (1995) – Supreme Court exposition of MPPAA’s purpose; quoted for background on withdrawal liability and the 20-year cap.
• GCIU-Employer Retirement Fund v. Quad/Graphics, Inc., 909 F.3d 1214 (9th Cir 2018) – The only prior circuit decision directly on point; Ninth Circuit held credit applies at Step Two. Eleventh Circuit expressly “joins” GCIU, creating emerging unanimity.
• Canons: ordinary-meaning (Levin v. United States, Tanzin v. Tanvir), whole-text approach, and avoidance of policy-based rewriting (Mansell v. Mansell).
• Agency Material: PBGC Opinion 85-4 (1985) – treated respectfully under Skidmore, ultimately rejected.

3.2 Court’s Legal Reasoning

1. Sequential Syntax. § 1381(b)(1) uses “first… next… then… finally,” signalling compulsory sequence. Step Two’s instruction refers to “section 1386” in toto, unlike Step Three which singles out § 1399(c)(1)(B). This textual contrast suggests Congress purposely folded all of § 1386 – including sub-§ (b) credit – into Step Two.
2. Cross-Reference Harmony. § 1399(c)(1)(A) (installment payment rules) and § 1405(a) (sale of assets rules) each require the application of “section 1386” prior to their own operations. These backward glances only make sense if § 1386 is executed at Step Two.
3. “Withdrawal Liability” vs “Unfunded Vested Benefits.” Although “withdrawal liability” is a defined term produced by the four steps, the court reasoned that interim figures can still carry that label in common parlance and within the statute itself (see § 1386(a), § 1399(c)(1)(B)). Therefore, the credit’s command to reduce “withdrawal liability” does not force it outside Step Two.
4. Purposive Concerns. The court acknowledged that a Step Two credit can be overtaken by the 20-year cap but found no statutory absurdity: (i) many cases will fall below the cap; (ii) Congress may deliberately allow the cap to subsume earlier reductions; and (iii) mass-withdrawal situations escape the cap altogether.
5. Agency Deference. Post-Loper Bright, PBGC’s 1985 interpretation enjoys only persuasive weight. Because the letter simply echoed Perfection’s defeated arguments and lacked textual engagement, it did not overcome the court’s own reading.

3.3 Likely Impact

• National Uniformity Trend. With the Eleventh Circuit concurring in GCIU, there is now alignment in two major circuits. Funds and employers in the South-East, West, and Ninth Circuit states must apply the credit at Step Two unless and until another circuit diverges.
• Strategic Litigation Posture. Employers contemplating staged withdrawals must recognise that early partial-withdrawal credits may evaporate if their later complete withdrawal faces a large 20-year cap figure.
• PBGC Regulatory Re-assessment. The decision undermines the PBGC’s long-standing 85-4 guidance; expect either updated rulemaking or agency acquiescence. Until then, plan sponsors may favour the Eleventh/Ninth methodology to pre-empt litigation.
• Arbitration and District Court Reviews. The opinion underscores that legal interpretations by MPPAA arbitrators receive de novo judicial review. Funds should document textual analysis at the plan-level to withstand challenge.

4. Complex Concepts Simplified

Unfunded Vested Benefits (UVBs)

The dollar amount by which promised benefits exceed a plan’s assets, allocable among employers under complex actuarial rules (§ 1391).

Withdrawal Liability

The employer’s share of UVBs after four statutory adjustments (de minimis reduction, § 1386 adjustments, 20-year cap, sale-of-assets rules).

Partial vs. Complete Withdrawal

• Complete: Employer stops all covered operations or all obligations to contribute (§ 1383).
• Partial: Reduction in contributions (≥ 70 %) or cessation at one facility while others continue (§ 1385).

Four-Step Formula (§ 1381(b)(1))

1. De minimis rule (§ 1389).
2. Partial-withdrawal adjustments (§ 1386 – proration & credit).
3. 20-year cap on annual instalments (§ 1399(c)(1)(B)).
4. Special reduction for asset sales/liquidation (§ 1405).

20-Year Cap

Even if the computed liability indicates 40 annual payments, the employer owes only 20. This protects ongoing employers from huge assessed liabilities and ensures predictability.

Partial-Withdrawal Credit (§ 1386(b))

A dollar-for-dollar credit against future withdrawal liability equal to the present value of prior partial-withdrawal payments (after amortisation rules in PBGC regs).

5. Conclusion

Perfection Bakeries pressed the Eleventh Circuit to maximise its statutory credit by postponing it until after the 20-year cap. The court, however, prioritised statutory sequencing, holistic cross-references, and emerging inter-circuit consistency. Going forward, employers in Eleventh Circuit states must recognize that a prior partial-withdrawal credit may offer little practical relief if their subsequent withdrawal liability already exceeds the 20-year cap. Conversely, pension plans gain a clearer blueprint that resists PBGC’s now-outdated opinion letter. In the broader context of MPPAA jurisprudence, the case cements the principle that textual sequencing outranks perceived policy preferences, signalling that courts will not re-order Congress’s statutory steps even when the economic consequences appear harsh.