Defunct trucking company Yellow Corp. is liable for $6.5 billion in withdrawal liability to be paid to the 11 multiemployer pension plans it exited after shuttering in 2023, a bankruptcy judge has ruled.
In his Sept. 13 ruling in U.S. Bankruptcy Court in Wilmington, Del., Judge Craig Goldblatt said the company, which ceased operations in July 2023, is liable for its share of unfunded vested benefits as a result of withdrawing from the 11 multiemployer pension plans despite those plans receiving a total of $40 billion in special financial assistance from the Pension Benefit Guaranty Corp.
Yellow Corp. had argued that federal funds awarded under the American Rescue Plan Act of 2021 should count as “plan assets” in calculating the plans’ unfunded vested benefits, which would either reduce or eliminate their withdrawal liability. However, the 11 multiemployer plans did not take into account the influx of government cash when calculating Yellow’s withdrawal liability.
By far the largest of the 11 multiemployer plans and thus with the largest proof of claim is Teamsters Central States, Southeast & Southwest Areas Pension Fund, Chicago, which received $36 billion in special financial assistance. The pension fund calculated Yellow’s withdrawal liability “as of the end of the plan year preceding the plan year in which the employer withdraws,” or as of Dec. 31, 2022.
Central States’ application for special financial assistance had been approved by the PBGC on Dec. 5, 2022, and the pension fund received the $36 billion in assistance as a lump sum on Jan. 12, 2023, according to the court filing.
Despite Yellow’s argument that the federal funds received by the pension funds should count as plan assets, Judge Goldblatt in his ruling pointed to two regulations issued by the PBGC: The “No-Receivables” Regulation, that ARPA funds that have been awarded but not paid yet should not be counted as plan assets, and the “Phase-In” Regulation, which states that for the purpose of calculating plan assets, the funds received through special financial assistance should be treated as if received over time, even if received as a lump sum.
Yellow argued that the regulations exceeded the PBGC’s authority, but in his ruling Judge Goldblatt said the PBGC had such authority granted by the American Rescue Plan Act, as well as the Employee Retirement Security Act of 1974, that gave the PBGC the authority to adopt “regulations as may be necessary to carry out the purposes” of Title IV of ERISA, which includes employer withdrawal liability provisions.
