ERISA Withdrawal Liability: SCOTUS Decision on Narrow Issue Upholds Retroactive Assumption Changes

Takeaways

• Resolving a circuit split, the U.S. Supreme Court in M & K Employee Solutions held that actuarial assumptions used to calculate withdrawal liability may be selected after the measurement date.
• The Court reasoned that actuarial assumptions are forward-looking “predictive judgments,” and ERISA does not impose a deadline requiring them to be set before the measurement date.
• The decision’s practical effect is narrow, and employers still retain the ability to challenge assumptions.

Related link

• M & K Employee Solutions, LLC

Article

The U.S. Supreme Court has ruled multiemployer pension plan actuaries can retroactively change assumptions underlying their withdrawal liability calculations. M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, No. 23-1209 (May 21, 2026).

M & K Employee Solutions resolved a circuit court split on a narrow issue: Whether the actuarial assumptions (including the critical interest rate assumption) underlying the calculation of withdrawal liability must be selected prior to the date as of which the withdrawal liability is determined under the Employee Retirement Income Security Act (ERISA).

Background

Withdrawal liability is a statutory exit tax that is triggered when an employer’s obligation to contribute to a multiemployer pension plan (MEPP) completely or partially ceases. Once triggered, the liability represents a withdrawn employer’s allocable share of the MEPP’s unfunded vested benefits (UVBs).

UVBs are calculated as of the last day of the plan year preceding the year of the withdrawal, referred to as the “Measurement Date.” Since UVBs represent the excess of liabilities over assets and liabilities represent the present value of the MEPP’s future benefit payment obligations, the interest rate used to calculate withdrawal liability bears an inverse relationship to the amount of UVBs. In other words, a lower withdrawal liability interest rate will generate higher UVBs and therefore higher withdrawal liability.

The petitioners in M & K Employee Solutions were four employers who had each withdrawn from the IAM National Pension Fund during the 2018 plan year. Under ERISA, their withdrawal liability would be determined “as of” the last day of the 2017 plan year: Dec. 31, 2017. Finalizing the Fund’s 2016 actuarial valuation in November 2017, the Fund actuary determined that a 7.5% withdrawal liability interest rate represented his “best estimate of anticipated experience under the plan” as required by the statute. Two months later (in January 2018), the actuary published its 2017 valuation and lowered the Fund’s withdrawal liability interest rate to 6.5%. This change had the effect of increasing the Fund’s UVBs from $500 million (as of the Dec. 31, 2016, Measurement Date) to $3 billion (as of the Dec. 31, 2017, Measurement Date.) Each employer’s withdrawal liability similarly ballooned (for example, from $1.8 million to $6.2 million for one employer) as a result.

Consequently, each employer challenged the Fund’s calculations under the mandatory arbitration regime applicable to withdrawal liability. Based primarily on the U.S. Court of Appeals for the Second Circuit’s decision in National Retirement Fund v. Metz, 946 F.2d 146 (2d Cir. 2020), each arbitrator held that a MEPP actuary must select actuarial assumptions for withdrawal liability purposes prior to the applicable Measurement Date.

Two consolidated district court actions subsequently vacated the arbitral awards, holding that actuaries could lawfully use assumptions selected after the Measurement Date to calculate withdrawal liability. In a consolidated appeal, the D.C. Circuit in 2024 affirmed (92 F. 4th 316) the lower court decisions.

The Supreme Court granted review to resolve the split between the D.C. and Second Circuits.

M & K Employee Solutions

The Supreme Court held that withdrawal liability can be calculated based on actuarial assumptions selected after the Measurement Date. Its decision was based primarily on two provisions of ERISA.

The first, ERISA Section 4211 (29 U.S.C. §1391), specifies the various methods that a MEPP can use to calculate withdrawal liability. Although this section does not refer to actuarial assumptions (let alone specify when they must be adopted), the employers relied on the statutory directive that “withdrawal liability be calculated based on the MEPP’s UVBs ‘as of’ the measurement date.” The Supreme Court distinguished actuarial assumptions from “hard data” (such as the number of plan participants) and explained that actuarial assumptions are “predictive judgments” about “future performance—tools actuaries use to calculate the plan’s UVBs.” The Court thus found that actuarial assumptions cannot be “in effect” as of the Measurement Date as the employers had urged.

The Court moved on to the second provision, ERISA Section 4213 (29 U.S.C. § 1393), the section that governs use of actuarial assumptions for calculating withdrawal liability. Not only does Section 4213 not require that assumptions be selected prior to the Measurement Date, it “provides no deadline at all.” The Court found this omission significant in light of the inclusion of a deadline in a different section of the statute (ERISA Section 4219, 29 U.S.C. § 1399) requiring that the amortization period for withdrawal liability payments be determined based on the interest rate assumption used in the most recent actuarial valuation. The Court presumed that Congress’ omission of a similar limit for the assumptions used to calculate withdrawal liability was intentional. The Court also found that ERISA Section 4213’s requirement that the assumptions represent the actuaries’ “best estimate of anticipated experience” further supported the conclusion that assumptions do not have to be selected prior to the Measurement Date. The Court determined that requiring actuaries to use assumptions selected before the Measurement Date (and potentially based on “stale data”) would conflict with this statutory “best estimate” requirement.

The employers advanced two other arguments. First, they argued that the statute prohibits retroactivity, citing ERISA Section 4214 (29 U.S.C. § 1394). This section prohibits the use of any “plan rule or amendment” adopted after an employer withdraws. Actuarial assumptions are not plan rules or amendments, however; accordingly, the Court found the Congressional choice not to enact a similar retroactivity rule in ERISA Section 4213 “strongly suggests that actuarial assumptions are not subject to any such limitation.” Lastly, the employers advanced a policy argument, asserting that allowing MEPPs to retroactively choose assumptions “will open the door to manipulation.” The Court quickly disposed of this, finding that policy concerns cannot trump the best interpretation of a statute.

Implications

Although the Supreme Court’s ruling in M & K Employee Solutions significantly impacts the employers in this case financially, future application is expected to be limited. The Court decided a narrow issue: Whether ERISA requires pension plans to assess withdrawal liability based on actuarial assumptions adopted before the Measurement Date. Even if the Court had found in favor of the employers, MEPP actuaries could still lawfully change assumptions on or one day prior to the Measurement Date.

Significantly, the Court expressly noted that employers can challenge any assumption in arbitration, including the critical interest rate assumption. The Supreme Court’s holding does not change best practices for employers with potentially significant MEPP exposure — to minimize such exposure by closely monitoring contribution amounts and obligations and regularly obtaining withdrawal liability estimates.

Please contact the authors with any questions about M & K Employee Solutions or any other withdrawal liability matters.