How Far Does Withdrawal Liability Extend? Local 705 International Brotherhood of Teamsters Pension Fund v. Pitello

Employers often ask how far withdrawal liability extends? Does it include other business entities owned by the same company? What about property those other entities own? On July 7, 2021, the Seventh Circuit decided in Local 705 International Brotherhood of Teamsters Pension Fund v. Pitello that withdrawal liability can reach affiliated trades or businesses that are under “common control” with the withdrawing employer, including any real estate owned by an such entity.


How is this possible? Well, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) began imposing charges on employers that stop participating in multiemployer defined benefit plans. The charge is deemed an assessment of the withdrawing employer’s share of the plan’s total unfunded vested benefits owed to the participants. This prevents an employer from withdrawing from a multiemployer plan and sticking the remaining employers with the total unfunded liability.

In Pitello, the defendants owned a building out of which they operated two other businesses that they also owned. Neither business paid rent nor had a rental agreement to operate out of the property. One of these businesses, Gradei’s Express Co., had an obligation to contribute to the Local 705 Teamsters defined benefit plan. However, the Pitellos closed Gradei’s Express, ceased engaging in covered employments, and withdrew from the fund.

The Plan sent Gradei’s, the Pitellos, and the other company they owned (called “GX Warehousing”) a notice and demand for payment of assessed withdrawal liability in the amount of $221,932.55. The Pitellos ignored this demand and did not request arbitration. Therefore, the Plan filed suit against all defendants in federal court requesting the assessed withdrawal liability.

In reviewing the case, the Pitello Court noted a distinction between a trade or business and a passive investment. An activity is considered a trade or business if (1) it is primarily for income or profit and (2) the activity is undertaken with continuity and regularity. Here, the court noted that leasing property to a withdrawing employer, or allowing such an employer to use the property, constitutes a “trade or business.” That means the lessor could be jointly and severally liable for the withdrawal liability. On the other hand, passive investments are more personal and detached and therefore not subject to withdrawal liability.

In this case, the Pitellos other company owned a building that was used by the withdrawing employer to run operations. The Pitellos tried to argue that the property was not a “trade or business” because they had purchased the land over 15 years before ceasing covered operations, received no tax benefits, exemptions, or deductions, and did not collect rent. However, the court disagreed and noted that a landowner’s use of its own property to run another business was a form of equity that should be treated as part of the underlying business entity.

From the Court:

“Absent persuasive evidence that does not appear in this record, ‘the inescapable conclusion is that the [defendants]’s leasing activity was simply an extension of the business operations of…the withdrawing employer, and was a means to fractionalize [the withdrawing employer]’s assets.”


In withdrawal liability cases, plan trustees should evaluate all potential assets of a withdrawing employer, including those owned by other related entities. This would include an analysis as to whether the related entities are under “common control” and whether any assets owned by these entities constitute a trade or business or passive investment. As we saw in Pitello, depending on the circumstances these assets could be used to satisfy an employer’s withdrawal liability and preserve the overall funding status of the plan.