By Israel Goldowitz
Withdrawn employers have always sought to minimize withdrawal liability, while multiemployer plans have sought to maximize it. The Pension Benefit Guaranty Corporation (PBGC) has sought to protect plan participants and the multiemployer insurance fund while balancing the interests of continuing employers and withdrawn employers. The recent Supreme Court decision in M&K Employee Solutions v. Trustees of the IAM National Pension Fund (May 21, 2026) https://www.supremecourt.gov/opinions/25pdf/23-1209_i3kn.pdf reflects these tensions.
In M&K, the Court considered what ERISA means when it requires a withdrawal liability valuation “as of” the valuation date. Agreeing with the PBGC and with standard actuarial practice, the Court held that the valuation may be done after the valuation date as long as the actuary considers only facts in existence on that date.
For multiemployer plans, minimum funding is based on assumptions (including interest and mortality) that are “reasonable” and represent the actuary’s “best estimate” of anticipated plan experience. That is also true for withdrawal liability purposes.
In January 2018, the IAM Fund’s actuary changed the prior year’s interest assumption as of December 31, 2017, for withdrawals during 2018, from 7.5 percent to 6.5 percent. A lower interest rate yields a higher present value of vested benefits.
The 100-basis point reduction increased M&K’s liability more than threefold, from $1.8 million to $6.2 million. The increase was so large because the interest rate affects the value of the plan’s vested benefits but not the value of plan assets.
M&K asserted that the Fund must use the 7.5 percent assumption, as it did not change the assumption by December 31, 2017. An arbitrator agreed, but the district court reversed, and the U.S. Court of Appeals for the D.C. Circuit upheld the district court. The appellate court reasoned that the “best estimate” standard permits the actuary to set assumptions after the valuation date as long as they are “based on the body of knowledge available up to the valuation date.”
The Supreme Court unanimously affirmed, holding that, in context, “as of” is “understood to ‘assign an event to one time and the recognition of it to another.’” Thus, the facts must exist on the valuation date, but the valuation may be performed after that date. And an assumption is not a fact but a valuation tool, adopted when the need for a valuation arises.
ERISA itself has no deadline for setting assumptions, the Court continued, and ERISA’s “best estimate” standard supports the conclusion that assumptions may be set after the valuation date. Data may not be available until after the valuation date. Forcing an actuary to set assumptions by that date could result in assumptions that do not reflect her best estimate. And the mismatch between recent data and older assumptions would make for an “incoherent statutory scheme.”
The M&K decision does not affect plans that receive Special Financial Assistance (SFA). Those plans must use PBGC “closeout” assumptions, which are meant to reflect market prices for insurance company annuities and are usually more conservative than funding assumptions. PBGC requires that by regulation as a condition of the plan’s receipt of SFA.
The M&K decision does not directly affect plans’ use of a “blended” interest rate, which averages closeout and funding interest rates. Employers have successfully challenged such rates as not representing the actuary’s “best estimate,” as there cannot be one best estimate for funding purposes and another for withdrawal liability purposes.
Nor does the decision address PBGC’s authority to prescribe withdrawal liability valuation assumptions by regulation, as the Court stated. PBGC issued a proposed regulation in October 2022 that would allow a plan to use closeout rates, its funding rate, or any rate in between, without regard to the “best estimate” standard.
The proposed regulation is designed to reduce risk shifting by withdrawn employers to continuing employers, plan participants, and the insurance fund. The current Administration has not said whether it will issue the rule as proposed, modify it, or take other action.
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The Wagner Law Group was on the brief for an amicus in M&K in support of the Fund. We are experts in ERISA litigation, advice, and legal policy, including PBGC and multiemployer plan issues. We would be happy to discuss your needs in those areas.
