Recent cases demonstrate the broad reach of pension plan withdrawal liability. Under the Multiemployer Pension Plan Amendments Act, 29 U.S.C. 1381 et seq, an employer that ceases to participate in a multiemployer pension plan may be responsible for withdrawal liability. Such liability, however, also can be imposed on other trades and businesses under common control with the contributing employer. For example, in McDougall v. Pioneer Ranch Limited Partnership, 494 F. 3d 571 (7th Cir. 2007), the court held a family limited partnership responsible for nearly $4 million in pension plan withdrawal liability that arose when a commonly owned trucking company could not pay. McDougall and other recent decisions illustrate how withdrawal liability can reach entities created for purposes of estate planning and real estate investment.

In McDougall v. Pioneer Ranch Limited Partnership, 494 F. 3d 571 (7th Cir. 2007), Elaine and Robert Whiting owned a trucking company that withdrew from a multiemployer pension plan. Once the plan learned that the trucking company could not pay the withdrawal liability, the plan sued the Pioneer Ranch Limited Partnership, which the Whitings had created along with their children for purposes of estate planning. The plan argued that the partnership should pay the withdrawal liability because the partnership was a trade or business under common control with the trucking company. In general, entities are under common control if they share at least 80 percent common ownership, which was undisputed in this case. Consequently, the dispute focused on the partnership's status as a trade or business.

To determine if an activity amounts to a trade or business, a court considers whether the person engaged in the activity (1) for the primary purpose of income or profit, and (2) with continuity and regularity. In McDougall, the court determined that the partnership satisfied this test. Despite testimony that the Whitings used the ranch as a vacation home and never made a profit selling cattle, the court focused instead on facts showing that (1) the partnership agreement stated, among other things, that its purpose was to "engage in the business of farming, ranching, and any agricultural pursuit," (2) the Whitings' tax returns claimed business exemptions and deductions for farming expenses, and showed that the farming activity generated annual income of $20,000 per year, and (3) the partnership employed one full-time employee and two part-time employees. On these facts, the court concluded that the Whitings "engaged in the activities on Pioneer Ranch for the primary purpose of income or profit and simply derived incidental personal benefit from Pioneer Ranch." 494 F. 3d at 578.

Real estate investment activities can lead to a similar result. For example, numerous courts have ruled that individuals or entities leasing real estate to a commonly owned business that contributes to a multiemployer pension plan are jointly and severally responsible for the contributing employer's withdrawal liability. See National Pension Plan of The Unite Here Workers Pension Fund v. Swan Finishing Company, Inc., 2006 WL 1292780 (S. D. N. Y. 2006) (limited partnership that leased real estate to a commonly owned contributing employer was responsible for withdrawal liability); International Painters and Allied Trades Industry Pension Fund v. KKB, LLC, 421 F. Supp. 2d 71 (D. D. C. 2006) (limited liability company that leased real estate to a commonly owned contributing employer was responsible for withdrawal liability); PBGC v. Don's Trucking Company, Inc., 309 F. Supp. 2d 827 (E. D. Va. 2004) (a husband and wife who jointly owned real estate they leased to commonly owned contributing employer were personally responsible for withdrawal liability)

Accordingly, individuals who own entities that contribute to a multiemployer pension plan should engage in estate planning and investment activities bearing in mind the need to consider the potential withdrawal liability ramifications of those activities.