The U.S. Supreme Court has agreed to hear a case that could significantly reshape how pension plans calculate an employer’s financial responsibility when withdrawing from a multiemployer pension fund. In M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, the justices will determine whether it is lawful for pension plans to revise actuarial assumptions after the measurement date—the official end of the plan year used to calculate withdrawal liability—so long as those revisions are based on data from that date.
Background: What Is Withdrawal Liability?
Under the Multiemployer Pension Plan Amendments Act (MPPAA) of 1980, an employer that exits a multiemployer pension plan must pay its share of the plan’s unfunded vested benefits. This obligation, known as withdrawal liability, is calculated using actuarial assumptions and financial data as of the measurement date—typically the last day of the plan year before withdrawal.
These assumptions are crucial, as they define the estimated value of future benefits and plan assets. Small changes in assumptions—such as the interest rate used to discount future liabilities—can dramatically impact the withdrawal bill.
Key Terms
- Measurement Date: The date as of which the plan calculates liabilities (usually plan year-end).
- Actuarial Assumptions: Estimates used to calculate pension plan obligations (e.g., life expectancy, discount rates).
- Unfunded Vested Benefits: The shortfall between what a plan owes to participants and what it has in assets.
The Legal Conflict and Why This Matters
In this case, the IAM National Pension Fund revised its actuarial assumptions after the plan year had closed but still based those assumptions on data from the proper measurement date. The D.C. Circuit upheld this approach, ruling it permissible under ERISA so long as the data corresponds to the measurement date—even if the assumptions are adopted afterward.
However, the employer group led by M & K Employee Solutions challenged that logic. They argue that ERISA requires assumptions to be set as of the measurement date, meaning any changes after that point are inherently retroactive and unlawful. They claim this allows pension funds to manipulate liability amounts and creates financial unpredictability for employers.
This position is supported by a 2021 Second Circuit ruling in Metz Culinary Management, which held that only the assumptions already in place on the measurement date can be used to calculate withdrawal liability. That decision directly conflicts with the D.C. Circuit’s, creating a circuit split that prompted the Supreme Court to step in.
This case has far-reaching implications for employers, pension funds, and actuaries:
- For employers: A ruling against retroactive assumption changes would help ensure predictability in liability calculations, giving companies firmer ground when planning for or exiting multiemployer plans.
- For pension plans: Allowing post–year-end assumption updates provides flexibility to incorporate late-arriving data or economic changes and helps ensure liabilities reflect actual financial conditions.
- For actuaries: The Court’s decision may determine whether actuaries must finalize assumptions by the end of the plan year or retain discretion to revise them after year-end.
In financial terms, a single assumption change—such as using a lower interest rate—can increase withdrawal liability by millions. The issue is particularly relevant today as more employers exit union-affiliated pension plans due to cost, volatility, or restructuring.
Government Position & Broader Legal Context
Both the U.S. Department of Justice and the Pension Benefit Guaranty Corporation (PBGC) have backed the D.C. Circuit’s interpretation. They argue that actuaries should have leeway to use new assumptions so long as they reflect year-end data, noting that ERISA doesn’t prohibit such updates and that timely, accurate liability calculations benefit overall plan integrity.
The dispute also touches on broader ERISA principles, such as:
- “As soon as practicable” timing rules: Withdrawal liability must be assessed promptly but not immediately, which may support the D.C. Circuit’s flexibility.
- Equitable defenses: Even if post–year-end adjustments are allowed, employers may still challenge excessive delays in issuing liability demands under the legal doctrine of laches.
For further details, please contact the lawyers at Tobia & Lovelace Esq., LLC at 201-638-0990.