Termination by Mass Withdrawal Does Not Preclude SFA Eligibility Under 29 U.S.C. § 1432(b)(1)(A)

Introduction

This commentary examines the United States Court of Appeals for the Second Circuit’s decision in Bd. of Trs. of the Bakery Drivers Loc. 550 et al. v. Pension Benefit Guaranty Corp., No. 23-7868 (2d Cir. Apr. 29, 2025). The appeal arose after the Pension Benefit Guaranty Corporation (“PBGC”) denied special financial assistance (“SFA”) to a multiemployer pension plan (the “Fund”) that had terminated by mass withdrawal in 2016. The district court granted summary judgment to the PBGC, holding that a prior termination disqualified the Fund from SFA under 29 U.S.C. § 1432(b)(1)(A). On appeal, a unanimous three-judge panel reversed, holding that the SFA statute’s reference to “critical and declining status” in 29 U.S.C. § 1085(b)(6) does not import ERISA’s separate termination‐related sunset provision, 29 U.S.C. § 1081(c). This newly articulated principle clarifies the scope of “incorporation by reference” in federal statutes and affirms that previously terminated plans, so long as they meet the “critical and declining” criteria, are eligible for relief under the American Rescue Plan Act of 2021.

Summary of the Judgment

The Second Circuit held that:

• 29 U.S.C. § 1432(b)(1)(A) requires that a plan be “in critical and declining status (within the meaning of section 1085(b)(6))” in a 2020–2022 plan year, but does not incorporate ERISA’s separate limitation in 29 U.S.C. § 1081(c) that sunsets “status” after termination.
• The phrase “within the meaning of section 1085(b)(6)” is a “cut-and-paste” incorporation of text only, not of external limitations or sunset provisions.
• Because the Fund clearly met § 1085(b)(6)’s “critical and declining” criteria in 2022—especially after Bimbo Bakeries USA rejoined—the PBGC erred in concluding that its 2016 termination rendered it ineligible.
• The district court’s grant of summary judgment to the PBGC was reversed, and the case was remanded with instructions to enter judgment for the Fund, vacate the PBGC’s denial, and reconsider the application under the correct legal standard.

Analysis

Precedents Cited

• Jam v. International Finance Corp., 586 U.S. 199 (2019) – Adopted the “cut-and-paste” rule: a statute referring to another statute “cuts and pastes” only the text referenced, not its entire context or associated provisions.
• Interstate Consolidated Street Railway Co. v. Massachusetts, 207 U.S. 79 (1907) – Early articulation that incorporated statutes create “clones” of the referenced material, whose force derives entirely from the adopting law.
• Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024) – Reiterated that in interpreting statutes administered by agencies, courts must “exercise independent judgment,” rather than defer to the agency where the text is clear.
• Pfizer, Inc. v. U.S. Department of Health & Human Services, 42 F.4th 67 (2d Cir. 2022) – Affirmed that APA challenges to summary-judgment grants of agency action are reviewed de novo against the administrative record.
• Lackey v. Stinnie, 145 S. Ct. 659 (2025) – Confirmed that policy considerations, no matter how persuasive, cannot override unambiguous statutory text.

Legal Reasoning

The court’s reasoning can be broken down into three core points:

1. Textual Incorporation: The SFA statute’s critical‐status provision states that plans must be “in critical and declining status (within the meaning of section 1085(b)(6)).” Following Jam and Interstate, the panel held that this language incorporates only the text of § 1085(b)(6), not independent ERISA limitations such as § 1081(c). Thus, any “status” requirements beyond § 1085(b)(6)’s four subparagraphs do not carry over.
2. Congressional Drafting Choices: The court observed that Congress knew how to incorporate statutory definitions with broader limitations—using phrases like “for purposes of” or “to which . . . applies”—but chose “within the meaning of” only for § 1085(b)(6). In other SFA provisions (e.g., § 1432(b)(1)(D)), Congress expressly excluded plans “terminated as of” a certain date. The absence of similar language in § 1432(b)(1)(A) confirmed that terminated plans are not per se excluded.
3. Role of the APA: Because the PBGC’s interpretation conflicted with the statute’s text, it was “arbitrary, capricious, [and] contrary to law” under 5 U.S.C. § 706(2)(A). The panel exercised independent judicial review rather than deferring to the agency’s policy concerns about administrative burdens.

Impact

This decision has significant implications for:

• Multiemployer Pension Plans: Plans previously terminated by mass withdrawal—but later re-sponsored or otherwise meeting the “critical and declining” metrics—now have a clear path to secure SFA under the American Rescue Plan Act.
• PBGC Administration: The PBGC must revisit any SFA applications it denied solely on the basis of prior termination and reconsider them under the correct statutory standard.
• Statutory Interpretation: Reinforces the principle that references to another statute incorporate only the text specified, not ancillary provisions, which will guide future statutory drafting and litigation over incorporation by reference.
• ERISA Jurisprudence: Clarifies the interplay between general ERISA termination rules and targeted relief programs, potentially influencing rehabilitation and termination protocols in other contexts.

Complex Concepts Simplified

• Termination by Mass Withdrawal: Under 29 U.S.C. § 1341a(a)(2), when every employer stops contributing or withdraws, a multiemployer plan “terminates.” However, that plan must continue paying benefits and filing reports under ERISA’s post-termination rules.
• Critical and Declining Status: Defined in 29 U.S.C. § 1085(b)(6), this is the worst of ERISA’s three “zone” statuses. A plan must (a) meet one of four subparagraphs comparing assets plus projected contributions to projected liabilities, and (b) be projected to become insolvent within 15 years.
• Incorporation by Reference: A statutory technique where one law “cuts and pastes” language from another. Only the text quoted is imported, not the entire section or related limitations—an approach the court calls creating a “clone” of the referenced material.
• Zone Status Sunset (29 U.S.C. § 1081(c)): Establishes that ERISA’s “Part 3” rules, including status definitions, apply only until the end of the plan year in which a plan terminates. The Second Circuit held that this sunset does not attach to the standalone SFA statute because Congress did not expressly incorporate § 1081(c).

Conclusion

The Second Circuit’s decision in Bakery Drivers Local 550 v. PBGC establishes a critical precedent: when Congress refers to a section “within the meaning of” another provision, courts must import only the text of that provision—not unrelated limitations or sunset clauses. This textualist interpretation ensures that multiemployer pension plans previously terminated by mass withdrawal remain eligible for special financial assistance if they satisfy the “critical and declining” criteria laid out in 29 U.S.C. § 1085(b)(6). The ruling not only vindicates the Fund but also provides clarity to the PBGC’s administration of the American Rescue Plan Act and guides future statutory drafting on incorporation by reference.