By: Mark A. Rysberg
There has been no shortage of discussion regarding the possible repeal of Michigan’s prevailing wage act. However, one topic that has not been part of the conversation is the possible interplay between repealing prevailing wage and complete or partial withdrawal liability that may result for employers participating in underfunded multi-employer defined benefit pension plans. In general, decreasing or discontinuing contributions to such plans can trigger employer withdrawal liability as set out in ERISA (the Employee Retirement Income Security Act).
Both sides of the prevailing wage debate appear to agree that if the act is repealed the benefits and rates of labor on public construction projects will decrease. Presumably, that would impact the contributions to union based multi-employer defined benefit pension plans, which would make it more difficult, if not impossible, for currently underfunded plans to improve their present financial situation. In turn, employers whom participate in currently underfunded plans could be responsible for large withdrawal liability that they did not anticipate or prepare for.
Managers of construction companies that participate in these plans should be discussing the extent and possibility of withdrawal liability in the ordinary course of management operations. However, the possibility that Michigan’s prevailing wage act will be repealed adds another layer of complexity which requires strategic planning. Proactive management directed at avoiding and monitoring such exposure is important. Employing professionals knowledgeable in how to navigate those management issues can be a significant resource for successfully avoiding and mitigating potential liability.