On June 30, the Supreme Court granted certiorari in a withdrawal liability case, M&K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, that could affect most of the nation’s 1,400 multiemployer plan. Like most multiemployer plans, the IAM Fund sets its interest and mortality assumptions for withdrawal liability “as of” the last day of a plan year, based on an actuary’s report. But the assumptions are usually not set until weeks or months after that date. For instance, liability for withdrawals in 2025 is based on the plan’s unfunded vested benefits (UVB) as of December 31, 2024, but the UVB may not be set until March 2025 or later. Changes in the interest rate assumption can have a large effect, swinging liabilities between five and fifteen percent per 100 basis points (e.g., from 7.5 to 6.5 percent).
In M&K, withdrawn employers complained that setting assumptions after the valuation date allowed the trustees to “retroactively” increase their withdrawal liability. The arbitrators agreed with the employers, but the district court reversed, and the employers appealed to the D.C. Circuit. The D.C. Circuit affirmed, noting that performance of a valuation “as of” — but after – the valuation date allows the actuary to take plan experience into account as ERISA requires.
The Second Circuit had reached a contrary conclusion, in National Retirement Fund v. Metz Culinary Management, treating the valuation as a plan rule that ERISA says cannot be implemented retroactively. The Second Circuit suggested that a different ruling would open the door to “manipulation and bias.” Under the Second Circuit’s view, actuarial assumptions would roll over from one year to the next unless they are changed on or before the end of the year.
With only two circuits weighing in, the issue might not have seemed ripe for Supreme Court review. But the Court asked the Solicitor General for his views. With the PBGC’s support, the SG advised that that case warranted immediate review because even relatively small changes in assumptions can affect withdrawal liability bills by millions of dollars and “the dueling rules” can “open any determination of withdrawal liability to challenge.”
The case will be on the calendar for the Court’s October Term, with briefs due over the summer. Given its importance to the multiemployer community, the case will probably attract “friend of court” briefs on both sides of the issue. We have written about this and related issues, and our lawyers have significant experience with actuarial issues under ERISA. If you want to know more, please contact Israel Goldowitz or the Wagner lawyer you usually work with.
