Milwaukee Brewery Workers' v. Jos. Schlitz Brewing

Citation115 S.Ct. 981,513 U.S. 414,130 L.Ed.2d 932
Decision Date21 February 1995
Docket Number93768
PartiesMILWAUKEE BREWERY WORKERS' PENSION PLAN, Petitioner v. JOS. SCHLITZ BREWING COMPANY and Stroh Brewery Company et al
CourtUnited States Supreme Court
Syllabus *

The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. §§ 1381-1461, permits an employer withdrawing from an underfunded multiemployer pension plan to "amortize" the charge it is required to pay to cover its fair share of the plan's unfunded liabilities by making installment payments to the plan. Following the August 14, 1981, withdrawal of respondent Schlitz from petitioner multiemployer pension plan (the Plan), a dispute arose as to when, for purposes of calculating Schlitz's amortization schedule, interest began to accrue on the company's withdrawal charge. The Plan claimed that accrual began on the last day of the plan year preceding withdrawal, December 31, 1980, the "valuation date" as of which the withdrawal charge was determined. Schlitz, however, argued for January 1, 1982, the first day of the plan year following withdrawal. Under the Plan's reading, Schlitz's last annual installment would be substantially greater than it would under Schlitz's own reading. The District Court disagreed with Schlitz, but the Court of Appeals reversed.

Held: MPPAA calculates its installment schedule on the assumption that interest begins accruing on the first day of the plan year following withdrawal. Pp. 7-17.

(a) For computation purposes, § 1399(c)(1)(A)(i)—which (the parties agree) governs this case and which authorizes an employer "to amortize the [withdrawal] amount in . . . annual payments . . ., calculated as if the first payment were made on the first day of the plan year following the plan year in which the withdrawal occurs and as if each subsequent payment were made on the first day of each subsequent plan year"—causes interest to accrue over subsequent plan years, but not during the withdrawal year itself. Although the statute does not mention interest directly, the word "amortize" assumes interest charges. However, the word does not indicate that interest accrues during the withdrawal year. One generally does not pay interest on a debt of the kind here at issue until that debt arises—i.e., until its principal is outstanding. Under the statute, the withdrawing employer's debt does not arise at the end of the year preceding the year of withdrawal. Rather, § 1399(c)(1)(A)(i)'s instruction to calculate payments as if the "first payment" were made on the "first day" of the year following withdrawal demonstrates that the debt must be treated as if it arose at that time. The Plan's contrary reading of the statute cannot be easily reconciled with statutory provisions permitting an employer to pay the amount owed in a lump sum and thereby avoid paying amortization interest, § 1399(c)(4), and defining a withdrawing employer's basic liability without reference to interest during the withdrawal year, §§ 1381(b)(1), 1391. Pp. 8-11.

(b) The several arguments of the Plan and its amici(1) that allowing a withdrawing employer to avoid interest during the withdrawal year works against the statute's basic objective of requiring the employer to pay a fair share of the plan's underfunding; (2) that the statute's language actually favors calculating interest from the last day of the plan year before withdrawal; and (3) that the legislative history demonstrates that Congress expressly rejected the idea of a "funding gap" between the valuation date at the end of the plan year before withdrawal and the beginning of the year following withdrawal—are not persuasive. Pp. 11-17.

3 F.3d 994 (CA 7 1993), affirmed.

BREYER, J., delivered the opinion for a unanimous Court.

Michael G. Bruton, Chicago, IL, for petitioner.

Richard K. Willard, Washington, DC, for respondents.

Justice BREYER delivered the opinion of the Court.

The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 94 Stat. 1208, 29 U.S.C. §§ 1381-1461, provides that an employer who withdraws from an underfunded multiemployer pension plan must pay a charge sufficient to cover that employer's fair share of the plan's unfunded liabilities. The statute permits the employer to pay that charge in lump sum or to "amortize" it, making payments over time. This case focuses upon a withdrawing employer who amortizes the charge, and it asks when, for purposes of calculating the amortization schedule, interest begins to accrue on the amortized charge. The Court of Appeals for the Seventh Circuit held that, for purposes of computation, interest begins to accrue on the first day of the year after withdrawal. We agree and affirm its judgment.

I

We shall briefly describe the general purpose of MPPAA, the basic way MPPAA works, and the relevant interest-related facts of the case before us.

A. MPPAA's General Purpose

MPPAA helps solve a problem that became apparent after Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, 29 U.S.C. § 1001 et seq. ERISA helped assure private-sector workers that they would receive the pensions that their employers had promised them. See, e.g., Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for So. Cal., 508 U.S. ----, ---- - ----, 113 S.Ct. 2264, 2271, 124 L.Ed.2d 539 (1993). To do so, among other things, ERISA required employers to make contributions that would produce pension-plan assets sufficient to meet future vested pension liabilities; it mandated termination insurance to protect workers against a plan's bankruptcy; and, if a plan became insolvent, it held any employer who had withdrawn from the plan during the previous five years liable for a fair share of the plan's underfunding. See 26 U.S.C. § 412 (minimum funding standards); 29 U.S.C. § 1082 (same); 29 U.S.C. § 1301 et seq. (termination insurance); 29 U.S.C. § 1364 (withdrawal liability).

Unfortunately, this scheme encouraged an employer to withdraw from a financially shaky plan and risk paying its share if the plan later became insolvent, rather than to remain and (if others withdrew) risk having to bear alone the entire cost of keeping the shaky plan afloat. Consequently, a plan's financial troubles could trigger a stampede for the exit-doors, thereby ensuring the plan's demise. See Connolly v. Pension Benefit Guaranty Corporation, 475 U.S. 211, 216, 106 S.Ct. 1018, 1021-1022, 89 L.Ed.2d 166 (1986); Pension Benefit Guaranty Corporation v. R.A. Gray & Co., 467 U.S. 717, 722-723, n. 2, 104 S.Ct. 2709, 2714, n. 2, 81 L.Ed.2d 601 (1984); see also 29 U.S.C. § 1001a(a)(4); H.R.Rep. No. 96-869, pt. 1, pp. 54-55 (1980); D. McGill & D. Grubbs, Fundamentals of Private Pensions 618-619 (6th ed. 1989). MPPAA helped eliminate this problem by changing the strategic considerations. It transformed what was only a risk (that a withdrawing employer would have to pay a fair share of underfunding) into a certainty. That is to say, it imposed a withdrawal charge on all employers withdrawing from an underfunded plan (whether or not the plan later became insolvent). And, it set forth a detailed set of rules for determining, and collecting, that charge.

B MPPAA's Basic Approach

The way in which MPPAA calculates interest is related to the way in which that statute answers three more general, and more important, questions: First, how much is the withdrawal charge? MPPAA's lengthy charge-determination section, § 1391, sets forth rules for calculating a withdrawing employer's fair share of a plan's underfunding. See 29 U.S.C. § 1391. It explains (a) how to determine a plan's total underfunding; and (b) how to determine an employer's fair share (based primarily upon the comparative number of that employer's covered workers in each earlier year and the related level of that employer's contributions).

One might expect § 1391 to calculate a withdrawal charge that equals the withdrawing employer's fair share of a plan's underfunding as of the day the employer withdraws. But, instead, § 1391 instructs a plan to make the withdrawal charge calculation, not as of the day of withdrawal, but as of the last day of the plan year preceding the year during which the employer withdrew—a day that could be up to a year earlier. See 29 U.S.C. §§ 1391(b)(2)(A)(ii), (b)(2)(E)(i), (c)(2)(C)(i), (c)(3)(A), and (c)(4)(A). Thus (assuming for illustrative purposes that a plan's bookkeeping year and the calendar year coincide), the withdrawal charge for an employer withdrawing from an underfunded plan in 1981 equals that employer's fair share of the underfunding as calculated on December 31, 1980, whether the employer withdrew the next day (January 1, 1981) or a year later (December 31, 1981). The reason for this calculation date seems one of administrative convenience. Its use permits a plan to base the highly complex calculations upon figures that it must prepare in any event for a report required under ERISA, see 29 U.S.C. § 1082(c)(9), thereby avoiding the need to generate new figures tied to the date of actual withdrawal.

Second, how may the employer pay the withdrawal charge? The statute sets forth two methods: (a) payment in a lump sum; and (b) payment in installments. The statute's lump-sum method is relatively simple. A withdrawing employer may pay the entire liability when the first payment falls due; pay installments for a while and then discharge its remaining liability; or make a partial balloon payment and afterwards pay installments. See 29 U.S.C. § 1399(c)(4). The statute's installment method is more complex. The statutory method is unusual in that the statute does not ask the question that a mortgage borrower would normally ask, namely, what is the amount of each of my monthly payments? What size monthly payment will amortize, say, a 7% 30-year loan of $100,000? Rather, the statute fixes the amount of each payment and asks how many such payments there will have...

To continue reading

Request your trial
109 cases
  • Fund v. Quad/Graphics, Inc.
    • United States
    • U.S. District Court — Central District of California
    • 19 Abril 2017
    ...This ensures that employer withdrawals do not bankrupt the plan. See generally Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co. , 513 U.S. 414, 416, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995).A withdrawal is either partial or complete. 29 U.S.C. § 1381(a). A withdrawal is pa......
  • Bd of Trustees, Trucking Employees v. Kero
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 12 Julio 2004
    ...to a separate holding not relevant here, by the Supreme Court's decision in Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 421, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995). 18. The Fund urges that Huber' s analysis on this point has been undermined by interveni......
  • Roofers Local No. 30 Combined Pension Fund v. D.A. Nolt Inc.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • 25 Agosto 2010
    ...in the context of the mandated delay in assessment during a labor dispute. Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414 [115 S.Ct. 981, 130 L.Ed.2d 932] (1995), otherwise overruled the direct holding in Huber and emphasized the amortization commands of E......
  • Brown v. Astro Holdings, Inc
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • 29 Agosto 2005
    ...the previous five years liable for a fair share of the plan's underfunding." Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 416, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995) (citations Under ERISA as originally enacted, therefore, an employer could withdraw from......
  • Request a trial to view additional results
2 firm's commentaries
  • This Week At The Ninth: Money, Money, Money, Money
    • United States
    • Mondaq United States
    • 7 Febrero 2022
    ...The Fund's analysis relied on the Supreme Court's decision in Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414 (1995), which, in interpreting the effect of the 1980 amendments to ERISA, stated that the amendment "fixes the amount of each annual payment at ......
  • This Week At The Ninth: Money, Money, Money, Money
    • United States
    • Mondaq United States
    • 7 Febrero 2022
    ...The Fund's analysis relied on the Supreme Court's decision in Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414 (1995), which, in interpreting the effect of the 1980 amendments to ERISA, stated that the amendment "fixes the amount of each annual payment at ......
1 books & journal articles
  • Table of Cases
    • United States
    • The Path of Constitutional Law Suplemmentary Materials
    • 1 Enero 2007
    ...Mills v. Duryee, 11 U.S. (7 Cranch) 481, 3 L.Ed. 411, 484 (1813), 997 Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995), Minneapolis Star and Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575, 103 S.Ct. 1365......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT