AMERICAN ARBITRATION ASSOCIATION

Multiemployer Pension Plan Withdrawal Liability Arbitration Tribunal

In the Matter of the Arbitration between AAA No. 54-621-0005-87

LUDINGTON NEWS COMPANY, INC.

and

MICHIGAN UNITED FOOD AND

COMMERCIAL WORKERS UNIONS
AND DRUG AND MERCANTILE
EMPLOYERS JOINT PENSION FUND.
____________________________________/

OPINION OF THE ARBITRATOR

April 1, 1988

Upon a Stipulated Record

For the Fund: For the Company:

Theodore Sachs Anthony J. Heckmeyer
I. Mark Steckloff Andrea L. Bowman
Sachs, Nunn, et al., PC. Keller, Thoma, et al., PC.
100 Farmer Street 440 E. Congress, Fifth Floor
Detroit, Michigan 48226 Detroit, Michigan 48226
 STIPULATED RECORD

Stipulated Issue

Whether the statute of limitations contained in 29 USC Sec 1451(f), or

alternatively MCLA Sec 600.5813, operates to bar the Pension Fund's
assessment and collection of withdrawal liability against the Ludington News
Company?

Stipulation of Facts

1. The Michigan United Food and Commercial Workers Unions and Drug
and Mercantile Employers Joint Pension Fund (the "Pension Fund") is a
multiemployer pension plan within the meaning of Section 3(2) and (37)
and 4001(a)(3) of ERISA, 29 USC Sec 1002(2) and (37) and Sec
1301(a)(3).

2. The Pension Fund was formerly named the Retail Store Employees
Unions AFL-CIO and Drug and Mercantile Employers Joint Pension
Fund.

3. The Pension Fund is administered by a joint board of trustees (the

"Trustees"), which is the "plan sponsor" within the meaning of ERISA
Sec 3(16)(B), 29 USC Sec 1002(16)(B). The Board of Trustees is
composed of twelve trustees, half of which are appointed by participating
employers and half by participating unions.

4. Ludington News Company, Inc. ("Ludington") is a Michigan corporation

engaged primarily in wholesale distribution of magazines and paperback
books.

5. Until September 30, 1980, Ludington operated a Metropolitan Airport

Newsstand division, some of whose employees were represented for
purposes of collective bargaining by United Food and Commercial
Workers Union, Local No. 876 ("Local 876").

6. Ludington and Local 876 were parties to a series of collective bargaining

agreements under which Ludington was required to participate in and
contribute to the Pension Fund.

2
7. Ludington became a participating employer in the Pension Fund on July
1, 1971, and continued to participate in the Pension Fund until September
30, 1980.

8. On September 30, 1980, Ludington withdrew from the Pension Fund.

Ludington's withdrawal was caused by its closing its Metropolitan
Airport Newsstand division.

9. On November 7, 1986, Pension Fund Manager Jacqueline Russow, on

behalf of the Trustees, sent Joint Exhibit 1 to Ludington, which notified
Ludington of the amount of its alleged withdrawal liability ($24,169) and
payment schedule, and demanded payment.

10. On December 1, 1986, Ludington, through its counsel, requested review

of the Trustees' determination with respect to its withdrawal liability. (Jt
Ex 2).

11. The Trustees considered Ludington's request for review at their

December 10, 1986 meeting.

12. On December 18, 1986, the Trustees reaffirmed their determination of

Ludington's alleged withdrawal liability and payment schedule. (Jt Ex 3).
Ludington received the decision of the Trustees on December 22, 1986.
February 16, 1987 was a national holiday, the day George Washington's
birthday was observed.

13. On February 17, 1987, Ludington filed a Demand for Arbitration with the
American Arbitration Association. (Jt Ex 4). Notice of said Demand was
received by the Fund on February 18, 1987.

14. Ludington asserts that the Trustees' assessment and collection of

withdrawal liability is barred by the six-year statute of limitations found
in 29 USC Sec 1451(f), ERISA Sec 4301(f), or alternatively by the six-
year statute of limitations found in MCLA Sec 600.5813. The Trustees
assert that these limitation periods do not apply to its November 7, 1986
notice and demand for payment of Ludington's alleged withdrawal
liability.

15. As of December 1, 1987, Ludington has made the following payments on

account to the Pension Fund:

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 $3,626.00 received January 5, 1987;
$3,626.00 (plus $7.45 interest) received April 16, 1987;
$3,626.00 received July 6, 1987;
$3,626.00 received September 30, 1987.

16. If the Trustees' claim is not barred by the statute of limitations found in
either ERISA Sec 4301(f) or MCLA Sec 600.5813, then the amount of
withdrawal liability determined by the Trustees ($24,169) is due and
owing by Ludington according to the schedule set forth by the Trustees,
less interim payments.

17. All Joint Exhibits (attached hereto) are authentic and are admitted.

18. To the extent permitted by law, this arbitration is governed by the

Multiemployer Pension Plan Arbitration Rules of the American
Arbitration Association.

Joint Exhibits

1. November 7, 1986 letter from Fund Manager Jacqueline Russow to Ivan

Ludington, Jr., demanding payment of withdrawal liability, with
withdrawal liability calculation and schedule.

2. December 1, 1986 letter from Ludington counsel Anthony J.

Heckemeyer to Russow requesting review.

3. December 18, 1986 Decision of Pension Fund Trustees in answer to

Ludington's request for review.

4. February 10, 1987 Demand for Arbitration of Ludington News (without

enclosures), filed February 17, 1987.

5. Excerpts of September 9, 1981 minutes of a meeting of the Trustees,

adopting the rules of the American Arbitration Association for
withdrawal liability arbitrations.

6. September 27, 1985 Notice of Third Amendment to Restated Trust

Agreement.

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7. June 19, 1987 Resolution of Pension Fund Trustees, amending the
Pension Fund Trust Agreement to adopt rules of the American
Arbitration Association as to withdrawal liability arbitrations.

ANSWER TO STIPULATED ISSUE

ERISA Sec 4301(f), 29 USC Sec 1451(f) preempts MCLA Sec 600.5813

and does not bar the Pension Fund's assessment and collection of withdrawal

liability against the Ludington News Company.

DISCUSSION

Federal Preemption

ERISA Sec 514(a), 29 USC Sec 1144(a) provides in pertinent part:

[T]he provisions of this title and title IV shall supersede any and all State
laws insofar as they may now or hereafter relate to any employee benefit
plan . . . .

This express preemption provision has been construed expansively. Firestone

Tire & Rubber Co v Neusser, 810 F2d 550, 552-553 (CA 6, 1987). There can be

no doubt that ERISA Sec 4301, 29 USC Sec 1451 applies to the collection of

withdrawal liability:

(a)(1) A plan fiduciary, employer, . . . who is adversely affected by the

act or omission of any party under this subtitle with respect to a
multiemployer plan, … may bring an action for appropriate legal or
equitable relief, or both.

(b) In any action under this section to compel an employer to pay

withdrawal liability, any failure of the employer to make any withdrawal
liability payment within the time prescribed shall be treated in the same
manner as a delinquent contribution . . . .

5
 (c) The district courts of the United States shall have exclusive
jurisdiction of an action under this section without regard to the amount
in controversy, except that State courts of competent jurisdiction shall
have concurrent jurisdiction over an action brought by a plan fiduciary to
collect withdrawal liability.

(f) An action under this section may not be brought after . . . 6 years after
the date on which the cause of action arose . . . .

(Emphasis supplied).

See Combs v Western Coal Corp, 611 F Supp 917, 920 (D DC, 1985); Robbins

v Pepsi-Cola Metropolitan Bottling Co, 636 F Supp 641, 681 n 6 (ND Ill, 1986).

Because Congress has legislated a statute of limitations for withdrawal liability

actions, all otherwise applicable state statutes of limitations are preempted.1

Thus, MCLA Sec 600.5813 has no application.

Application of the Federal Statute

The issue presented is reduced, therefore, to how the federal statute

applies. To decide this, we must determine "the date on which the cause of

action arose." Under the ERISA scheme for withdrawal liability, it is incumbent

upon the plan sponsor to make a demand for payment of withdrawal liability.

ERISA Secs 4202 & 4219(b)(1), 29 USC Secs 1382 & Sec 1399(b)(1). In the

usual case, payment is to be made according to an amortization schedule with a

20-year cap ERISA Sec 4219(c)(1), 29 USC Sec 1399(c)(1). It is the plan

sponsor's demand which (directly or indirectly) begins the limitation period for

the initiation of arbitration. ERISA Secs 4221(a)(1) & 4219(b)(2), 29 USC Secs

6
1401(a)(1) & 1399(b)(2); 29 CFR Sec 2641.2(a). However, no withdrawal

liability payment actually is due until sixty (60) days after the demand. ERISA

Secs 4219(c)(1)(A)(i) & (2), 29 USC Secs 1399(c)(1)(A)(i) & (2).2 Thus, the

plan sponsor has no cause of action to collect withdrawal liability until sixty

days after the sponsor's own demand for payment and even then, of course, only

if the withdrawing employer does not make timely payments in accordance with

the amortization schedule. See also ERISA Sec 4221(b)(1), 29 USC Sec

1401(b)(1).3

For the foregoing reasons, the Pension Fund's cause of action did not

arise before January 6, 1987, sixty days after the Fund's demand of November 7,

1986 (Jt Ex 1), because nothing was due before that date. The statute of

limitations with respect to the first installment would not run until six years

later, or January 6, 1993. Because a withdrawing employer has a statutory right

to make withdrawal liability payments in installments which may be spread over

a period of years (usually not to exceed 20), the statute does not begin to run

with respect to a particular installment until that installment falls due.4

Ludington quite understandably argues that ERISA Sec 4301(f), 29 USC

Sec 1451(f) ought to apply like a "normal" statute of limitations. A well-defined,

isolated event transpires, namely, withdrawal from a multiemployer pension

plan occurs. Six years elapse, and the plan sponsor does nothing. Under almost

7
any other circumstances, the statute of limitations would have run. ERISA,

however, is not normal; indeed, its scheme for withdrawal liability is unique.5

Although the Pension Fund is not precluded from assessing and

collecting withdrawal liability at this late date, correct application of the

statutory provisions6 significantly penalizes the Pension Fund for delay, because

the Fund is not entitled to any additional interest for the period between

withdrawal and demand. Casablanca Ind's and UFCW Local 23 - Giant Eagle

Pension Fund, 7 EBC 2705, 2726-2727 (Arb, 1986), motion to reopen den 9

EBC 1537 (1987); Loomis Armored, Inc and Central States Pension Fund, 8

EBC 1899, 1918-1922 (Arb, 1987).7 Thus, Ludington, even at this late date, is

being asked to pay no more than it would have had to pay with a more timely

demand.8 In the interim, Ludington has had the use of its money, free of

additional charge.

For its part, the Fund points out that the plain language of ERISA Sec

4301, 29 USC Sec 1451 shows that the section is applicable exclusively to court

action and not to a plan sponsor's demand. The only limitation on the demand is

that it be made "[a]s soon as practicable after an employer's complete or partial

withdrawal." ERISA Sec 4219(b)(1), 29 USC Sec 1399(b)(1). Although the

quoted language might suggest the availability of a laches-type defense,

Ludington has chosen to defend instead under ERISA Sec 4301(f), 29 USC Sec

8
1451(f).9 Even if Ludington should attempt to avail itself of such a defense,

there are no facts in the record which demonstrate the requisite detrimental

reliance. Indeed, Ludington has suffered no damage because delay has not been

accompanied by any kind of interest penalty.

I am satisfied that Ludington has raised the timeliness question in such a

way as not to preclude all consideration of the plan sponsor's conduct under

ERISA Sec 4219(b)(1), 29 USC Sec 1399(b)(1). Although ERISA's 6-year

limitation may have no direct bearing on the timeliness of a plan sponsor's

demand, in a proper case, it might serve as a guideline. Here, however, although

more than 6 years elapsed between withdrawal and demand, the record is

devoid of facts to support a finding of detrimental reliance, an element essential

to any laches-type defense. Western Coal, 611 F Supp 919; Pepsi-Cola, 636 F

Supp 681 n 6.

Burden of Proof

The burden of proof in a withdrawal liability arbitration remains a subject

of serious debate. Carnation Co and Central States Pension Fund, 9 EBC 1409,

1417-1419 (Arb, 1988). The principal difficulty is that Congress intermixed the

usual civil standard of proof ("shows by a preponderance of the evidence") with

the appellate standard of review under F R Civ P . 52(a) ["clearly erroneous"]

and threw in "unreasonable" for good measure:10

9
 For purposes of any proceeding under this section, any determination
made by a plan sponsor under sections 4201 though 4219 and section
4225 is presumed correct unless the party contesting the determination
shows by a preponderance of the evidence that the determination was
unreasonable or clearly erroneous. ERISA Sec 4221(a)(3)(A), 29 USC
Sec 1401(a)(3)(A).

In Fraser Shipyards, Inc and IAM National Pension Fund, 7 EBC 2562,

2568-2573 (Arb, 1986), the arbitrator grappled with the meaning of this

virtually nonsensical provision.11 In an effort to give meaning to all of the

operative phrases, "unreasonable" was related to conclusions of law and "clearly

erroneous" to findings of fact. The phrase, "shows by a preponderance of the

evidence" was given an expansive interpretation a la Wigmore so as to place the

burden of persuasion as to law and fact on the party contesting the plan

sponsor's determination.12 Finally, the various interpretations were combined

into a functional formulation of the burden of proof in a withdrawal liability

arbitration:

In order to prevail in a withdrawal liability arbitration, the party

contesting the plan sponsor's determination must (1) prove to the
arbitrator, definitely and firmly, on the basis of the entire evidence, that a
mistake has been committed, or (2) convince the arbitrator that the
determination is against controlling law or is unsupported by a coherent
legal argument. 7 EBC 2572.

See also Oolite Industries, Inc and Central States Pension Fund, 8 EBC 2009,

2018-2019 (Arb, 1987); Commercial Carriers, Inc and IAM National Pension

Fund, 9 EBC 1101, 1112 (Arb, 1987).

10
 In the instant matter, the parties have presented for decision a pure

question of law, without regard to the arbitral presumption in favor of the plan

sponsor's determination. There are several possible explanations for this

procedural posture. First, absent agreement by the parties, a dispute arising

under ERISA Sec 4301(f), 29 USC Sec 1451(f) may not be within the

arbitrator's jurisdiction. See ERISA Secs 4221(a)(1) & (3)(A), 29 USC Secs

1401(a)(1) & (3)(A).13 Thus, the arbitral presumption may not, by its terms,

apply. Second, there is authority that no deference is due the plan sponsor's legal

conclusions. Oolite Industries, 8 EBC 2019 n 7. Finally, parties consensually

may submit to arbitration virtually any dispute they please, on their own terms.

Shearson/American Express, Inc v McMahon, 107 S Ct 2332 (1987); United

Paperworkers Int'l Union v Misco, Inc, 108 S Ct 364 (1987); Armoudlian v

Zadeh, 116 Mich App 659, 668-669 (1982). Inasmuch as the instant matter was

submitted jointly by stipulation, the issue of the applicability of the statute of

limitations is properly before me, as presented.

Costs

As indicated, this arbitration may not be within the purview of ERISA

Sec 4221, 29 USC Sec 1401. Nevertheless, because the parties have stipulated

that the AAA Rules apply (supra paragraph 18), the arbitrator has authority to

award costs, including attorney's fees [AAA Rules, Secs 38 & 47(c)], just as he

11
would have under ERISA Sec 4221(a)(2), 29 USC Sec 1401(a)(2). Although

decision is for the Pension Fund, the matter is one of first impression and, as

noted, a normal statute of limitations would bar the Fund's claim. Thus, costs

should be divided equally.

Dated: April 1, 1988 _____________________

E. Frank Cornelius

NOTES

1. State limitations may apply, of course, where Congress has not legislated.
Central States Pension Fund v Kraftco, Inc, 799 F2d 1098, 1104-1105 (CA 6,
1986); Miles v NY State Teamsters Employee Benefit Plan, 698 F2d 593, 598
(CA 2, 1983), cert den 464 US 829; "Pension Issues in Collective Bargaining",
10 MI Tax L J 13, 20-21 (Oct.-Dec. 1984). See also infra n 4.

2. The ambiguous language of ERISA Sec 4219(c)(2), 29 USC Sec

1399(c)(2) presents a technical problem regarding the "due date" of the first
installment. It states:

Withdrawal liability shall be payable in accordance with the schedule set

forth by the plan sponsor under subsection (b)(1) beginning no later than
60 days after the date of the demand notwithstanding any request for
review or appeal of determinations of the amount of such liability or of
the schedule.

If the due date is set in the sponsor's schedule, then the phrase, "beginning no
later than 60 days after the date of the demand," would seem superfluous. It
does not seem particularly reasonable to interpret it merely as a limitation on the
extension of time which a sponsor may grant for payment; it seems more
reasonable to interpret it as allowing the withdrawing employer 60 days after
demand within which to begin payment. See Carnation Co and Central States
Pension Fund, 9 EBC 1409, 1448 (Arb, 1988). Indeed, absent some such
interpretation, there is nothing in ERISA Sec 4219(c)(1), 29 USC Sec
1399(c)(1) to preclude the sponsor from demanding payment according to a

12
schedule beginning on the first day of the plan year following withdrawal, so
that back payments might be due. Perhaps a happy medium is to interpret the
statutory provision as meaning that the due date of the first installment must fall
between the date of the demand and the sixty-first day thereafter. Obviously, a
resolution of this technical problem is unnecessary to the disposition of the
instant matter; in fact, the Pension Fund nicely avoided it by making the first
payment due 60 days after the demand (Jt Ex 1).

3. This particular provision has caused a number of courts needless (in the
arbitrator's opinion) concern. See, for example, United Retail & Wholesale
Employees Pension Plan v Yahn & McDonnell, Inc, 787 F2d 128, 132-134 & n
7 (CA 3, 1986); aff'd by equally divided court 107 S Ct 2171 (1987). Read in
context, the provision means only that the schedule of payments, as determined
by the plan sponsor, becomes final if not timely challenged in arbitration. See
Fraser Shipyards, Inc and IAM National Pension Fund, 7 EBC 2562, 2566 n 10
(Arb, 1986).

4. Cf. Jackson v American Can Co, 485 F Supp 370 (WD Mich, 1980), in
which the court concluded that a pension annuity is an installment contract
within the meaning of Michigan's statute of limitations, and so suit for a
monthly pension payment need not be brought until 6 years after that payment
falls due.

5. Note, "Trading Fairness for Efficiency: Constitutionality of the Dispute

Resolution Procedures of the Multiemployer Pension Plan Amendments Act of
1980," 71 Geo L J 161, 171, 180 (1982).

6. Correct application of statutory provisions must be presumed because

Ludington makes no complaint in that regard; see supra paragraph 16.

7. In Carnation Co and Central States Pension Fund, 9 EBC 1409, 1448-

1451 (Arb, 1988), Arbitrator Nagle takes issue with Arbitrator Tilove's
explication of ERISA's amortization provisions in Loomis, with respect to first
year interest. ERISA Sec 4219(c), 29 USC Sec 1399(c); 8 EBC 1918-1922.
Nagle chooses to follow Arbitrator Jaffe in Casablanca, 7 EBC 2727 -2729, and
not include such interest. Although (like most questions under ERISA) the
matter is not free from doubt, to see that Tilove reaches the more reasonable
result when he concludes that interest is to be included for the first year of
amortization, let us review the steps in calculating a standard withdrawal
liability payment schedule:

13
(a) Determine the date of withdrawal. For a complete withdrawal, it is
the date the employer ceased to have an obligation to contribute to the
plan or permanently ceased all covered operations under the plan. See
ERISA Sec 4203(a), 29 USC Sec 1383(a). For a partial withdrawal, it is
the last day of the plan year in which the precipitating event occurred.
See ERISA Sec 4205(a), 29 USC Sec 1385(a).

(b) Determine the withdrawing employer's share of the plan's unfunded

vested benefits under ERISA Sec 4211, 29 USC Sec 1391. See ERISA
Sec 4219(c)(1)(A)(i), 29 USC Sec 1399(c)(1)(A)(i). Except in the case of
a partial withdrawal pursuant to ERISA Sec 4205(a)(1), 29 USC Sec
1385(a)(1) [70-percent contribution decline], the amount determined
under ERISA Sec 4211, 29 USC Sec 1391 is to be based upon the plan's
unfunded vested benefits as of the end of the plan year preceding
withdrawal. See ERISA Secs 4211(b), (c) & 4206(a)(1), 29 USC Secs
1391(b), (c) & 1386(a)(1). In the exceptional case, the amount is based
upon unfunded vested benefits one plan year earlier still. See ERISA
Secs 4206(a)(1)(B) & 4205(b)(1)(B)(i), 29 USC Secs 1386(a)(1)(B) &
1385(b)(1)(b)(i).

(c) Adjust (b) for the de minimis amount determined under ERISA Sec
4209, 29 USC Sec 1389 and for a partial withdrawal under ERISA Sec
4206, 29 USC Sec 1386, if appropriate. See ERISA Sec 4219(c)(1)(A)(i),
29 USC Sec 1399(c)(1)(A)(i). Note that an adjustment cannot be made
for a partial withdrawal until the end of the plan year following the
withdrawal, because the employer's contribution base units for that plan
year are required in the computation. See ERISA Sec 4206(a)(2)(A), 29
USC Sec 1386(a)(2)(A). Thus, if interest is not included for the first year
of amortization, each and every employer partially withdrawing from a
multiemployer plan gets an interest free year, at the very least.

(d) Compute the equal annual payments based upon the withdrawing
employer's contribution history. See ERISA Sec 4219(c)(1)(C)(i), 29
USC Sec 1399(c)(1)(C)(i). Adjust if necessary for a partial withdrawal.
See ERISA Sec 4219(c)(1)(E), 29 USC Sec 1399(c)(1)(E). Again, no
adjustment for a partial withdrawal can be made until the end of the plan
year following withdrawal. See ERISA Sec 4206(a)(2)(A) 29 USC Sec
1386(a)(2)(A). The fact that the annual payments are fixed independently
of the interest rate and amortization period, may be the source of much of

14
the current confusion, because this is contrary to customary practice
under which rate and period are used to determine payment. Indeed, the
inclusion or exclusion of first year interest seems masked, because the
amount of the payments never changes; only the period changes.
Suggestions, such as those in Casablanca, 7 EBC 2728, that the effects of
including or excluding first year interest are concentrated in the first year
are misleading, because the payments are the same either way. The
effects in fact are spread over the entire period of amortization.

(e) Using the interest rate assumed in the most recent actuarial valuation
for the plan, calculate the number of years required to amortize the net
amount left after (c) in equal annual payments found in (d). The number
of years is to be calculated as if the first payment were made on the first
day of the plan year following the plan year in which the withdrawal
occurred and as if each subsequent payment were made on the first day
of each subsequent plan year. Typically, the result will call for a partial
payment in the final year. See ERISA Secs 4219(c)(1)(A)(i) & (ii), 29
USC Secs 1399(c)(1)(A)(i) & (ii).

(f) Cap the number of annual payments determined under (e) at 20. See
ERISA Sec 4219(c)(1)(B), 29 USC Sec 1399(c)(1)(B).

(g) Convert the capped annual payment schedule to a schedule of

quarterly payments (or other periodic payments, if plan rules so provide).
There is to be no interest adjustment for the conversion to quarterly
payments (but there may be an adjustment from quarterly payments if
plan rules call for a different frequency). See ERISA Sec 4219(c)(3), 29
USC Sec 1399(c)(3); Loomis, 8 EBC 1918-1919, 1922. The effect of the
conversion to quarterly payments is to increase the effective interest rate.
For purposes of illustration, consider a calendar year plan in which the
first annual payment otherwise would fall due January 1, 1990. Then the
quarterly payments derived from this particular annual payment would be
due April 1, July 1 and October 1, 1989, and January 1, 1990.

(h) Translate the schedule for quarterly payments, in time, so that the
timing of the first payment coincides with the date which is 60 days after
the date of the plan sponsor's demand ("due date"). See ERISA Secs
4219(c)(1)(A)(i) & (2), 29 USC Secs 1399(c)(1)(A)(i) & (2); but see
supra n 2. If the time between withdrawal and due date exceeds one
quarter, the effective interest rate will be decreased; if less, the effective

15
rate will be increased. The combined effects of the conversion to
quarterly payments under (g) and the translation in time, on the effective
interest rate, will depend upon the facts of each case. The effect of failing
to include first year interest in the calculation (e) now can be seen clearly.
In Casablanca, the complete withdrawal took place April 6, 1982, but the
demand was not issued until November 28, 1984. 7 EBC 2705-2706,
2726. By not including first year interest, the withdrawing employer was
given an extended grace period of well over 3 years in which no interest
was charged. Similarly, in Carnation, the partial withdrawal took place
December 31, 1981, yet the demand was not made until October 26,
1983. 9 EBC 1409, 1448. Again, the withdrawing employer incorrectly
was given an extra interest free year. The omission of first year interest
also, of course, generally shortens the amortization period.

(i) If the withdrawing employer wishes to prepay its indebtedness in a

lump sum without penalty pursuant to ERISA Sec 4219(c)(4), 29 USC
Sec 1399(c)(4), then yet another problem of statutory interpretation
arises, because Congress seems to distinguish between "the outstanding
amount of an employer's withdrawal liability" and "the outstanding
amount of the unpaid annual withdrawal liability payments". Compare
ERISA Sec 4219(c)(5), 29 USC Sec 1399(c)(5) with ERISA Sec
4219(c)(4), 29 USC Sec 1399(c)(4). It is the latter which the withdrawing
employer is entitled to prepay "without penalty". Assuming a distinction
between the two, then "the outstanding amount of the unpaid annual
withdrawal liability payments" must be brought to present value. ERISA
Sec 4219(c)(6), 29 USC Sec 1399(c)(6) states:

Except as provided in paragraph (1)(A)(ii), interest under this

subsection shall be charged at rates based on prevailing market
rates for comparable obligations, in accordance with regulations
prescribed by the corporation.

Because the only purpose of the valuation interest rate in ERISA Sec
4219(c)(1)(A)(ii), 29 USC Sec 1399(c)(1)(A)(ii) is to determine the
number of years in the uncapped amortization schedule, ERISA Sec
4219(c)(6), 29 USC Sec 1399(c)(6) seems to imply that the payment
schedule should be brought to present value at prevailing market rates.
Note that 29 CFR Secs 2644.1-.4 do not address the issue.

16
 (j) The issues raised in paragraph (i) can be illustrated using the much
belabored and beleaguered example that seemed to trouble Arbitrators
Nagle and Jaffe, which is set forth conveniently in 4 Pension Plan Guide
(CCH) Par 15,686.10 and also at Carnation, 9 EBC 1449-1450 n 37
($1,000,000 withdrawal liability to be paid in annual installments of
$63,750 at 6% interest). Although Nagle suggests that it would take "146
separate manual calculations" to understand that the uncapped payoff
period is 49 years and that interest is included for the first year, 9 EBC
1450, a glance at any decent book of interest tables would reveal these
facts. E.g., Thorndike, Compound Interest and Annuity Tables, p 4-18
(Warren, Gorham & Lamont, 1982). If the withdrawing employer in the
example wanted to pay off the maximum of 20 annual installments of
$63,750 in a lump sum without penalty, the payment schedule would
have to be brought to present value at prevailing market rates. Assuming
a market rate of 10%, the present value would be $542.740. Thorndike,
Tables, p 5-6. Typically, the prevailing market rate will exceed the plan's
valuation rate, so that there would tend to be little incentive for
prepayment.

The worst case scenario is one in which an employer fully withdraws and is
served that day with a demand for withdrawal liability in an amount covered by
the first payment. In theory, under the procedure set forth above, the
withdrawing employer could be charged a full year's interest for only 60 days'
use of money, but the chance of that happening (as the instant matter vividly
illustrates) is about equal to the chance of a coin coming to rest on its edge. Cf.
Carnation, 9 EBC 1451 n 41; citing Casablanca, 7 EBC 2728. In real life cases,
the inclusion of first year interest will yield a sensible result. The issue can be
discussed in the terminology of payment "in advance" versus "in arrears,"
Thorndike, Tables, p 33, or in that of "deferred annuity" versus "immediate
annuity," Casablanca, 7 EBC 2728. Payment in arrears is the customary way of
doing business and virtually all mathematical tables are set up that way. The
conversion to in advance is straightforward. Thorndike, Tables, pp 33-34.
Implicit in PBGC Opinion Letter 85-1 is the assumption that annual payment
under (e) is in arrears, because the letter asserts that monthly payoff is more
rapid than quarterly; just the opposite would be true if payment under (e) were
calculated in advance. But see Casablanca, 7 EBC 2728, which appears to read
the letter differently. In conclusion, payment in arrears is so much the norm that
any deviation from it should be the result of express congressional intent rather
than strained statutory interpretation.

17
On an unrelated point, Arbitrator Nagle quotes Fraser Shipyards, Inc and IAM
National Pension Fund, 7 EBC 2562, 2580 (Arb, 1986) in a manner which may
prove confusing if left uncorrected. Carnation, 9 EBC 1421 n 11. When
determining whether the employer had permanently ceased to have an
obligation to contribute on behalf of a group of plan participants within the
meaning of ERISA Sec 4205(a)(2)(A), 29 USC Sec 1385(a)(2)(A), the
arbitrator in Fraser Shipyards was loathe to overlook the fact that, by the date of
the arbitration hearing, no contributions had been made to the pension plan for
over 48 straight months. The arbitrator wrote:

I conclude that an arbitrator's decision as to whether a plan sponsor's

determination of withdrawal liability is unreasonable or clearly erroneous
is to be based on all of the evidence available at the time of arbitration. 7
EBC 2580 (footnote omitted).

Under similar circumstances, Arbitrator Gordon reasoned and wrote in a like

vein:

I see nothing in MPPAA that compels ignoring evidence after a plan

sponsor's initial determination of a complete withdrawal for purposes of
determining the reasonableness of its ultimate determination. A contrary
conclusion would work an enormous hardship on employers since it
would mean that evidence of a post-demand resumption of operations
which a plan sponsor disregarded on post-demand review, could not be
used to assess the reasonableness of the plan sponsor's determination of a
permanent cessation. Such a result is hardly consistent with the purposes
of the ERISA Sec 4219(b) procedures . . . . Western Dominion Coal Co
and UMW 1950 and 1974 Pension Plans, 6 EBC 2353, 2368 (Arb,
1985).

In Carnation, the issue was the time as of which the reasonableness of actuarial
assumptions is to be assessed. 9 EBC 1421. In truth, there is no real
disagreement between Carnation and Fraser Shipyards, because the correct time
is the date of the plan sponsor's determination. The point being made in Fraser
Shipyards was that reasonableness should be judged in light of all evidence
available at arbitration, including evidence of subsequent events. 7 EBC 2580 &
n 32. Indeed, accuracy is the principal measure of the reasonableness of
actuarial assumptions, since their very purpose is to predict plan behavior.
Arbitrator Nagle really is not in disagreement, as he concludes, ". . . I would not
rule out all consideration of subsequent experience." 9 EBC 1421.

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8. Surely "the most recent actuarial valuation for the plan" in ERISA Sec
4219(c)(1)(A)(ii), 29 USC Sec 1399(c)(1)(A)(ii) refers to the one immediately
prior to withdrawal, else the withdrawing employer would be subject to interest
rate changes occurring during the determination process.

9. Interestingly, laches would not be a defense to a plan sponsor's suit to

collect withdrawal liability. Western Coal, 611 F Supp 919; Pepsi-Cola, 636 F
Supp 681 n 6. Note that any issue of timeliness under ERISA Sec 4219(b)(1),
USC Sec 1399(b)(1) expressly is arbitrable and hence may be waived if not
raised in arbitration. See ERISA Sec 4221(a)(1), 29 USC Sec 1401(a)(1).

10. Although the distinction between a burden of proof and a standard of

review is well known, Woodby v INS, 385 US 276, 282 & n 8 (1966), how to
interpret and apply them when they are hopelessly entangled is the subject of the
current debate. See infra n 11.

11. The burden of proof will be examined in minute detail in an upcoming

article entitled, "MPPAA's Arbitral Presumptions Are Constitutional."

12. See 9 Wigmore, Evidence Sec 2485, pp 286-287 (Chadbourn rev, 1981).
Under this view, the arbitrator is seen as trier of law and of fact. See also supra
n 11.

13. Ordinarily, the statute of limitations would be interposed as an

affirmative defense to a collection action brought under ERISA Sec 4301, 29
USC Sec 1451. See F R Civ P 8(c). In the first part of its brief, Ludington seeks
to draw upon the distinction between a statute of limitations and a statute of
creation, citing numerous cases, such as Martin v US, 436 F Supp 535, 537 (SD
Cal, 1977); First S & L Assoc v First Fed S & L Assoc of Ha, 547 F Supp 988,
995-996 (D Ha, 1982); Ames v Texaco, Inc, 568 F Supp 1317, 1322 (WD Mich,
1983). A statute of limitations is procedural and its expiration must be pleaded
and proved by defendant, whereas a statute of creation is jurisdictional and
compliance with its terms must be pleaded and proved by plaintiff. If passage of
a 6-year time limit had the sweeping effect of extinguishing all of the Pension
Fund's rights and remedies against Ludington and divesting courts of all subject
matter jurisdiction over suits by the Fund, Ludington might find itself without a
forum in which to press its own claim for a refund, because application of the
statute likely would be symmetrical.

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