On June 30, 2025, the Supreme Court granted certiorari in M&K Employee Solutions, LLC et al. v. Trustees of the IAM Nat’l Pension Fund to address whether the requirement under ERISA section 4211 that multiemployer pension plans compute withdrawal liability based on the plan’s unfunded vested benefits “as of the end” of the plan year requires the plan to use actuarial assumptions that the actuary adopted at the end of the year, or allows the plan to use actuarial assumptions that the actuary adopted after the end of the year.  

The Supreme Court’s decision in this case will resolve a split between the D.C. and Second Circuits as to whether a plan actuary can calculate an employer’s withdrawal liability using different assumptions than were in place as of the end of the prior plan year.  The Second Circuit held in Nat’l Ret. Fund v. Metz Culinary Mgmt., Inc. that the plan must calculate withdrawal liability using assumptions in effect on the last day of the plan year prior to the year of the employer’s withdrawal (known as the “Measurement Date”).  Later, the D.C. Circuit in M&K Employee Solutions held that plans can calculate withdrawal liability using assumptions adopted after the Measurement Date (that is, after the fact that the employer has withdrawn is known) as long as the assumptions are based on information known as of the Measurement Date.

The petitioners argued that the disagreement between the circuits defeats the ability of ERISA to provide a uniform body of law governing employee benefit plans, and prevents contributing employers from being able to adequately plan for potential withdrawal liability.  The petition was supported by both the U.S. Chamber of Commerce and the Pension Benefit Guaranty Corporation (“PBGC”).  Opponents of the petition argued that the circuit split is narrow, and that the issue rarely arises and is not consequential for employers.  Ultimately, the Supreme Court decided the case is worth its time, and will put to rest this narrow, yet meaningful, question.

Background

When a contributing employer in a multiemployer pension plan ceases to have an obligation to contribute to the plan (e.g. in the case of a cessation of union operations or bargaining out of the obligation to contribute to the plan), the employer “withdraws” from the plan.  At a high level, as a result of the withdrawal, the withdrawing employer is obligated to pay its share of the plan’s underfunding (if any); this obligation is called “withdrawal liability”.  Under ERISA section 4211, withdrawal liability generally is the withdrawing employer’s allocable share of any “unfunded vested benefits” (i.e., the value of the plan’s nonforfeitable benefits less the value of the plan’s assets) as of the end of the plan year preceding the plan year in which the employer withdraws. 

The calculation of a plan’s unfunded vested benefits requires the plan actuary to select certain assumptions – most significantly, an interest rate assumption.  Even a small change to the interest rate assumption can have a significant impact on the plan’s unfunded vested benefits and, by extension, an employer’s withdrawal liability.  The lower the assumed interest rate, the higher the liability. 

When an employer withdraws and the plan assesses withdrawal liability, contributing employers can challenge the assessment through a statutory request for review and arbitration process.

It is worth noting that contributing employers have the right under ERISA to request annually an estimate of the employer’s withdrawal liability and it is a good practice to do so.  Employers may use those estimates in corporate planning, mergers and acquisitions, and union negotiations.

M&K Employee Solutions

In M&K Employee Solutions, the employer (M&K) –  and other employers, but for simplicity we refer only to M&K here – withdrew from the IAM National Pension Fund in 2018.  Therefore, the Measurement Date for determining the M&K’s withdrawal liability was December 31, 2017.  The discount rate used to value the plan’s unfunded vested benefits that was in effect on the Measurement Date was 7.5%.  However, after the Measurement Date, the plan’s actuary adopted a 6.5% discount rate and used that rate to value the plan’s unfunded vested benefits.  This full percentage-point discount rate reduction increased the plan’s unfunded vested benefits by over 600% dramatically increasing the employer’s withdrawal liability. 

M&K challenged the plan’s calculation using assumptions adopted after the Measurement Date through the statutorily-required review and arbitration process.  The arbitrator concluded that the plan must use assumptions in effect on the Measurement Date.  The plan appealed to the U.S. District Court for the District of Columbia, which held that the plan actuary can use assumptions adopted after the Measurement Date as long as those assumptions are based on information as of the Measurement Date.  The D.C. Circuit Court affirmed. The circuit court reasoned that permitting an actuary to adopt assumptions after the Measurement Date serves ERISA’s purpose of protecting plans and plan participants and beneficiaries.

Supreme Court Cert Petition

On May 9, 2024, M&K filed a petition for writ of certiorari with the Supreme Court.  The petition was opposed by the pension fund.

On October 7, 2024, the Court “invited” the U.S. Solicitor General to file a brief “expressing the views of the United States.”  On May 27, 2025, the Solicitor General, along with PBGC, filed an amicus brief in support of the Court granting certiorari. On May 30, 2025, the Supreme Court granted the petition, formulating the question presented in the way suggested by the Solicitor General and PBGC. That question is “[w]hether 29 U. S. C. §1391’s instruction to compute withdrawal liability ‘as of the end of the plan year’ requires the plan to base the computation on the actuarial assumptions to which its actuary subscribed at the end of the year, or allows the plan to use different actuarial assumptions that were adopted after the end of the year.”

Thompson Hine Takeaways

Employers have long been frustrated by changes in multiemployer pension fund’s discount rate assumptions that dramatically increase the withdrawing employer’s liability.  The Supreme Court will now settle the issue of whether plans can retroactively change their assumptions for calculating withdrawal liability.

If the Supreme Court sides with the Second Circuit, actuaries and trustees will not be able to make changes to assumptions after the Measurement Date, and arguably withdrawal liability estimates requested by and provided to employers prior to their withdrawal will be more reliable estimates of the actual withdrawal liability.  This could provide employers greater clarity when making business decisions, such as the decision to withdraw.  And, assumptions will not be able to be manipulated with knowledge that a particular employer has withdrawn.  Preventing that type of moral hazard also serves ERISA’s purpose of protecting plans and plan participants and beneficiaries by helping to ensure the integrity of the multiemployer plan system.

If, however, the Court sides with the D.C. Circuit and holds that actuaries and trustees can make changes to assumptions retroactive to the Measurement Date of withdrawal liability for a particular employer, arguably withdrawal liability estimates will be unreliable for purposes of estimating the actual withdrawal liability, making it more difficult to plan for withdrawal liability as an employer does any other corporate liability.  In union negotiations, uncertainty regarding withdrawal liability could cause employers whose union employees wish to move away from a multiemployer pension plan to offer lower levels of wages or other benefits, not knowing what a withdrawal from the plan will cost the employer. 

Until the Supreme Court issues a decision in this case, employers should continue to challenge unfavorable changes to a plan’s assumptions after the Measurement Date.