Seventh Circuit Holds Asset Sale Does Not Require Exclusion of Contributions From Withdrawal Liability Calculation

Why It Matters

The ruling prevents employers from reducing withdrawal payments by omitting sold‑asset contributions, reshaping how multi‑employer pension exits are financially modeled.

Key Takeaways

• Asset‑sale exemption does not waive contribution inclusion for payment caps
• Withdrawal liability may double when sold‑asset contributions count
• Courts separate liability calculation from buyer’s contribution obligations
• Employers must reassess divestiture economics under ERISA §4204
• Seventh Circuit ruling sets precedent for future withdrawals

Pulse Analysis

The interplay between ERISA’s withdrawal liability rules and the asset‑sale exemption has long been a gray area for employers exiting multi‑employer pension plans. Section 4204 allows a seller to transfer assets without triggering a partial withdrawal, provided the buyer assumes the seller’s recent contribution history. However, the statute governing the calculation of the maximum annual payment – the three‑year average of contributions over the prior decade – makes no reference to excluding those transferred contributions. This distinction became pivotal in the SuperValu case, where the plan’s inclusion of sold‑store contributions more than doubled the company’s payment ceiling.

The Seventh Circuit’s analysis hinged on statutory language, emphasizing that the provision dictating liability calculation expressly calls for exclusions, while the provision setting the payment cap does not. By treating the two calculations independently, the court rejected SuperValu’s argument that counting the contributions would amount to double‑counting, since the buyer’s obligation to succeed to the seller’s contributions applies only to the buyer’s own withdrawal liability. The decision underscores that sellers cannot rely on the exemption to lower their eventual payment schedule, even if they have already divested assets.

For practitioners, the ruling mandates a reassessment of divestiture strategies. Companies must model withdrawal liabilities using the full contribution record, including assets slated for sale, to avoid unexpected payment spikes. Transaction advisors should factor in the potential for higher annual caps when negotiating asset sales, possibly renegotiating purchase agreements or seeking alternative structuring mechanisms. As more courts confront similar ERISA nuances, the SuperValu precedent will likely shape future litigation and influence how employers approach pension plan exits.