In a recent decision, the Sixth Circuit ruled that a pension fund’s actuary must re-evaluate a Michigan paving firm’s withdrawal liability, rejecting the use of artificially low interest assumptions tied to policy goals rather than actuarial reality.
Case Overview & Ruling
The case centered on Ace-Saginaw Paving Co.’s partial exit from the Operating Engineers Local 324 multiemployer pension fund. The actuary used a PBGC-based 2.27% interest rate—far lower than the fund’s 7.75% funding rate—to calculate withdrawal liability, inflating the company’s owed amount from about $6.3 million to $16.4 million.
Critically, internal emails revealed that the actuary intentionally chose the lower rate to discourage employers from leaving the fund—a policy-based motivation rather than an unbiased actuarial estimate. The Sixth Circuit held this violated ERISA’s requirement that actuarial assumptions be reasonable and reflect the “best estimate” of expected outcomes—not fund stability strategies.
While the court affirmed the ERISA violation, it did not require use of the 7.75% rate specifically—only that a compliant recalculation be conducted.
Ramifications & Future Developments
This decision deepens scrutiny over how withdrawal liability is computed and signals heightened judicial oversight of actuarial discretion.
- It reinforces that actuaries must act with neutrality—not as policy advocates.
- Employers facing high liability bills may now more confidently challenge calculations grounded in strategic risk-avoidance.
- A related legal wrinkle remains unresolved: whether later-adopted assumptions may apply retroactively to prior-year calculations. The Supreme Court has agreed to resolve a split between circuits on this issue, likely by mid-2026.
For further details, please contact the lawyers at Tobia & Lovelace Esq., LLC at 201-638-0990.