Supreme Court Allows Actuary to Set Withdrawal Liability Assumptions After Measurement Date
On May 21, 2026, the Supreme Court issued an opinion in I.A.M. National Pension Fund v. M&K Employee Solutions (M&K), that allows the actuary for multiemployer pension plan to set actuarial assumptions for withdrawal liability calculations after the measurement date. The Supreme Court’s opinion resolves a difference in rulings in the circuit courts of appeal. This alert describes the difference between the circuit courts and the holding of the Supreme Court.
Background
Under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, an employer that withdraws from a multiemployer plan is assessed withdrawal liability based upon the employer’s allocated share of unfunded vested benefits. Withdrawal liability was added to ERISA in 1980 by the Multiemployer Pension Plan Amendments Act (MPPAA).
An employer’s withdrawal liability is determined as of the end of the plan year prior to the plan year of the withdrawal, which is called the “measurement date.” The amount of withdrawal liability is generally calculated by the plan’s actuary based upon the unfunded vested benefits as of the measurement date. The unfunded vested benefits are determined using actuarial assumptions chosen by the plan’s actuary.
To the extent a withdrawing employer disputes the amount or calculation methods, the employer must go through arbitration procedures before filing a lawsuit. After arbitration, either the withdrawing employer or the plan can request the district court to review the decision.
For decades after the passage of MPPAA, actuaries set the assumptions for withdrawal liability without serious challenge in the courts. However, in recent years there have been challenges as to the interest rate used to compute the value of the unfunded vested benefits and the time when the assumptions could be selected.
The Metz Case
In National Retirement Fund v. Metz Culinary Management (Metz), 946 F. 3d 146 (2nd Cir. 2020), the Court of Appeals for the Second Circuit (2nd Circuit) addressed the question of whether a multiemployer pension plan actuary can change the actuarial assumptions used to determine withdrawal liability after the measurement date. In Metz, the plan changed actuaries during 2014 and an employer withdrew in the same year. The new actuary adopted a lower interest rate for withdrawal liability purposes after the December 31, 2013, measurement date, which applied to withdrawals during 2014. The 2nd Circuit opined that “the assumptions and methods used to calculate the interest rate assumption for purposes of withdrawal liability must be those in effect as of the Measurement Date.” Thus, “[a]bsent a change by a Fund’s actuary before the Measurement Date, the existing assumptions and methods remain in effect.”
M&K and Ohio Magnetics Cases
In M&K, the Trustees of the I.A.M. Pension Fund assessed withdrawal liability against three employers for the 2018 withdrawal from the plan. For withdrawals during 2017, which had a measurement date of December 31, 2016, the plan actuary was using an interest rate for withdrawal liability purposes of 7.5%. In late January of 2018, the plan actuary selected a new interest rate for withdrawal liability purposes of 6.5%, to be applied to all employer withdrawals during the 2018 plan year. The employers challenged the withdrawal liability assessment.
Similarly, in Ohio Magnetics, the employer withdrew from the plan in 2018. The employer challenged the application of the 6.5% interest rate as an impermissible change to the interest rate after the measurement date. In both cases, the arbitrator found for the employers based upon the Metz decision and the district court reversed the arbitration decision and said that the assumptions could be changed based upon information known or knowable as of the measurement date. The employers in both cases appealed to the United States Court of Appeals for the District of Columbia (the D.C. Circuit).
D.C. Circuit Decision
The D.C. Circuit consolidated the two pending appeals (M&K and Ohio Magnetics) into one. On February 9, 2024, the D.C. Circuit issued a decision in the consolidated appeal.
The D.C. Circuit concluded that an actuary may select their assumptions after the measurement date “so long as those assumptions are ‘as of’ the measurement date, that is, the assumptions must be based on the body of knowledge available up to the measurement date.” The D.C. Circuit decision in M&K created a split between the D.C. Circuit and the 2nd Circuit. The employers in M&K appealed to the Supreme Court, which agreed to hear the case to resolve the difference between the circuits.
Supreme Court Decision
The Supreme Court agreed with the D.C. Circuit and held that actuaries may select their withdrawal liability assumptions after the measurement date. In doing so, the Supreme Court disagreed with the reasoning and holding of the 2nd Circuit in the Metz case. The Court interpreted the words “as of” to mean that the hard data that is the basis for the unfunded vested benefit calculations must be fixed on the measurement date, and (as agreed by the parties) the actual calculation can be made later. In the view of the Court, actuarial assumptions and methods are “tools used to make actuarial valuations,” and did not have to be selected by the measurement date.
The Supreme Court opinion recognized that the plan and the employers also disputed whether the actuarial assumptions had to be based upon information that was known or knowable at the measurement date. As stated in footnote 2 of the opinion, that issue was not before the Court and was left for another day.
Cheiron Observations: The Supreme Court decision in M&K appears to be somewhat narrow in scope. Under the decision, actuaries for multiemployer pension plans are clearly able to set or change the withdrawal liability assumptions after the end of a plan year. The issue as to whether, as the D.C. Circuit held, the assumptions had to be based (or were based) on information available as of the end of the plan year will likely be the subject of future arbitrations and future cases.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.