Employees can switch unions without triggering withdrawal liability

On February 18, 2026, in the case Mar-Can Transportation Co. v. Local 854 Pension Fund the influential Second Circuit Court of Appeals ruled that when unionized employees vote to change unions, the mandatory transfer of pension liabilities to the new union’s plan can substantially reduce or eliminate an employer’s withdrawal liability. 

Under the Employment Retirement Income Security Act (“ERISA”), employers who withdraw from multiemployer pension plans must pay their share of the plan’s unfunded liabilities. This obligation exists even when the withdrawal is involuntary—for example, when employees vote to leave one union and join another, forcing their employer to switch pension plans.

However, when employees switch unions, ERISA requires their old pension plan to transfer assets and liabilities to the new plan to cover the departing employees and reduce the employer’s withdrawal liability to account for these transfers. How this reduction is to be calculated has been the subject of dispute.

In 2020, Mar-Can Transportation’s bus drivers voted to leave the Teamsters and join the Amalgamated Transit Workers. The old pension plan transferred $5.5 million in pension liabilities and $3.7 million in assets to the new plan and assessed Mar-Can $1.8 million in withdrawal liability to account for the difference.

Mar-Can disputed the old plan’s assessment, arguing that it should receive a $1.8 million credit against its withdrawal liability because the old plan had offloaded $1.8 million more in liabilities than assets, effectively collecting what Mar-Can would have owed because the old plan was no longer responsible for the employees’ pension benefits. Under this approach, the reduction formula is simple – and employer’s withdrawal liability is reduced by the difference between the liabilities transferred minus assets transferred. The pension fund disagreed and claimed that Mar-Can owed the full $1.8 million despite the transfers. 

The Southern District of New York federal court sided with Mar-Can, granted summary judgment and ordering the $1.8 million reduction in Mar-Can’s withdrawal liability. 

The old plan appealed and lost – the Second Circuit Court of Appeals found no reason Congress would penalize employers whose workers exercised their right to choose new representation and affirmed Mar-Can’s win.

In the states covered by the Second Circuit – Connecticut, New York, and Vermont -Employers facing union transitions now have clearer ground rules. When employees change unions and the old plan transfers more liabilities than assets, that excess directly reduces the employer’s withdrawal liability. This reduction can be substantial and can eliminate withdrawal liability entirely in some cases. The other Courts of Appeal covering the rest of the country appear to have not addressed this issue.

© 2026 by Andrew J. Martone and Martone Legal, L.L.C.