What Do Employers Owe When Withdrawing From Pension Plans? SCOTUS to Weigh In

Quick Hits

• The Supreme Court of the United States will decide how pension plans must set the interest rate assumptions used to calculate how much an employer owes if it withdraws from a multiemployer pension plan.
• The outcome will likely affect employers’ timing considerations regarding withdrawal from their multiemployer pension plans, as the differences could amount to millions of dollars, depending on the Court’s decision.

Background on Case

In 2018, M&K Employee Solutions, LLC withdrew from its multiemployer pension plan with IAM National Pension Fund. To calculate the plan’s underfunding, the pension fund’s actuary applied a 6.5 percent interest rate, adopted in January 2018, resulting in an amount exceeding $3 billion for the 2017 plan year. This figure is six times higher than it would have been had the actuary used the 7.5 percent interest rate that was in effect at the end of 2017. Consequently, M&K incurred an additional charge of $4,360,701 due to the lower interest rate.

When interest rates fall, the expected future value of pension plan assets declines. As a result, more money must be contributed now to ensure that promised benefits can be paid out in the future. This situation increases both the risk and extent of underfunding within the pension plan. Consequently, an employer’s potential withdrawal liability, the amount owed if they exit the plan, also rises. Employers that remain in the plan may face higher required contributions to keep the plan adequately funded.

In the United States Court of Appeals for the D.C. Circuit, M&K argued that the plan should have used the figures effective at the end of the 2017 plan year, not new ones set in 2018 after the beginning of the new year, when M&K withdrew from the plan. Ruling in favor of the pension fund, the D.C. Circuit allowed adoption of new assumptions after the end of the prior plan year so long as they were based on information “as of” the measurement date (the last day of the prior plan year).

The D.C. Circuit’s decision directly contradicted the U.S. Court of Appeals for the Second Circuit’s ruling in National Retirement Fund v. Metz Culinary Management, Inc., where the court held that plans must use the assumptions “in effect” on the measurement date. The Second Circuit found that retroactively applying assumptions was inconsistent with the U.S. Congress’s legislative intent and undermined specific provisions of the Employee Retirement Income Security Act (ERISA), such as section 101, which allows employers to request and receive notice of their estimated withdrawal liability. This split among the circuit courts has paved the way for the Supreme Court of the United States to review ERISA’s timing provisions for withdrawal liability.On May 9, 2024, M&K filed its petition for a writ of certiorari. It argued that ERISA requires withdrawal liability to be calculated “‘as of the end of the plan year preceding the plan year in which the employer withdraws.’” It contended that this language mandates the use of actuarial assumptions in effect on the measurement date, not those adopted retroactively after that date. Furthermore, allowing post-measurement date changes undermines the predictability of determining withdrawal liabilities. This unpredictability, the plaintiffs argue, disrupts collective bargaining by making it difficult for employers and unions to make informed decisions on fundamental questions like whether to move from one multiemployer pension plan to an alternative retirement benefit.

The Trustees of the IAM National Pension Fund counter that ERISA imposes only two requirements for actuarial assumptions: they must be “‘reasonable,’” and they must represent the “‘actuary’s best estimate of anticipated experience under the plan.’” The trustees argue that the statute does not impose any explicit timing requirement for when assumptions must be selected. In their view, actuaries should be permitted to use the most current and complete information available, even if that means selecting assumptions after the measurement date, to ensure that withdrawal liability calculations have time to incorporate the information of the plan through the end of the plan year and estimate its true financial condition.

On June 30, 2025, the Supreme Court of the United States granted M&K’s petition and will address “whether 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.”

Amicus Brief Arguments

The U.S. Chamber of Commerce recently filed an amicus brief in support of M&K that centers on the broader policy implications for the business community and the stability of multiemployer pension plans. The organization emphasized that Congress, by passing the Multiemployer Pension Plan Amendments Act (MPPAA) in 1980, intentionally set a measurement date preceding withdrawal to provide certainty and predictability for employers considering whether to remain in or exit a plan. Their brief warns that the D.C. Circuit’s approach undermines collective bargaining, prevents employers from making critical business decisions, and deters employer participation in multiemployer plans, ultimately threatening plan solvency. Further, the organization argues that such retroactive changes open the door to potential bias and manipulation by plan trustees, contrary to the statutory objectives of the MPPAA.

Meanwhile, James P. Naughton, an actuarial expert who has testified before Congress on issues related to multiemployer pension plans, also filed an amicus brief supporting M&K by providing a detailed actuarial and economic rationale for a “bright-line requirement” in which actuarial assumptions must be fixed as of the statutory measurement date, not set or changed retroactively after that date. He warned that letting pension plans change these assumptions after the measurement date creates uncertainty, invites manipulation, and is inconsistent with how actuaries are supposed to work. Finally, Naughton emphasized that, in actuarial practice, the goal is to provide reliable estimates that people can plan around, not to chase “perfect” accuracy with hindsight.

Next Steps

• If the Supreme Court rules that plans can change their calculations after the year ends, withdrawing employers could experience a more significant increase in withdrawal liability than expected, sometimes millions of dollars more.
• If the Court finds that plans must use assumptions from the measurement date, employers will have a better understanding of their withdrawal liability fees, but plans might have a harder time making sure they can fund pension liability.

• Until the Court ultimately rules on the circuit split, both employers and pension plans may want to consider how a change in the rules could affect their budgets.
• Employers that are considering leaving a multiemployer pension plan may wish to ask for estimates of what they might owe under different scenarios pending the Court’s decision and be ready for ERISA’s requirements to change.

Ogletree Deakins’ ERISA Litigation and Employee Benefits and Executive Compensation practice groups will continue to monitor developments in this case and will provide updates on the Employee Benefits and Executive Compensation blog as additional information becomes available.

Russell S. Buhite is a shareholder in Ogletree Deakins’ Seattle and Tampa offices.

Stephen M. Park is an associate in Ogletree Deakins’ New York office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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