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Who Sets the Rules for Exiting Pension Plans?

Who Sets the Rules for Exiting Pension Plans?

Supreme Court to decide whether pension funds can change actuarial assumptions after employers leave

Overview

When employers exit multiemployer pension plans, they owe a share of unfunded benefits—a calculation that hinges on assumptions about future investment returns. The IAM National Pension Fund changed its interest rate assumption from 7.5% to 6.5% in January 2018, weeks after the measurement date, and applied it retroactively to employers who had already withdrawn. The result: withdrawal liabilities tripled from $935 million to over $3 billion.

The Supreme Court heard oral arguments today in a case that will determine whether pension plans can adjust actuarial assumptions after employers have already left. The ruling will affect roughly 1,400 multiemployer plans covering 11 million workers. A decision for employers would lock in assumptions at year-end, giving businesses predictable exit costs. A decision for pension funds would let actuaries update assumptions using the latest available data, potentially strengthening fund solvency but creating uncertainty for withdrawing employers.

Key Indicators

1,400
Multiemployer plans affected
Number of pension plans nationwide that will be bound by the ruling
11M
Covered workers
Participants in multiemployer pension plans impacted by the decision
600%
Liability increase
How much M&K's withdrawal liability grew after the retroactive rate change
1%
Interest rate change
The drop from 7.5% to 6.5% that triggered the dispute

People Involved

MK
Michael E. Kenneally
Lead Counsel for Petitioners (Argued before Supreme Court on January 20, 2026)
John G. Roberts Jr.
John G. Roberts Jr.
Lead Counsel for Respondent (Representing IAM National Pension Fund trustees)

Organizations Involved

IA
IAM National Pension Fund
Multiemployer Pension Plan
Status: Respondent in Supreme Court case

Multiemployer pension plan covering employees represented by the International Association of Machinists and Aerospace Workers union.

M&
M&K Employee Solutions, LLC
Private Employer
Status: Lead petitioner in Supreme Court case

Former contributing employer to the IAM National Pension Fund that withdrew in 2018.

U.S. Chamber of Commerce
U.S. Chamber of Commerce
Business Advocacy Organization
Status: Filed amicus brief supporting employers

Largest business lobbying organization in the United States, representing more than 3 million businesses.

Pension Benefit Guaranty Corporation
Pension Benefit Guaranty Corporation
Federal Agency
Status: Supported certiorari; filed brief through Solicitor General

Federal agency that insures private-sector pension benefits and oversees multiemployer plan solvency.

NA
National Coordinating Committee for Multiemployer Plans
Industry Advocacy Organization
Status: Filed amicus brief supporting pension fund

Coalition of employer associations, labor unions, and professionals advocating for multiemployer pension plan interests.

Timeline

  1. Supreme Court Hears Oral Arguments

    Legal

    Justices hear arguments on whether pension plans can retroactively apply actuarial assumptions when calculating withdrawal liability.

  2. Supreme Court Grants Certiorari

    Legal

    The Court agrees to hear M&K Employee Solutions v. Trustees of the IAM National Pension Fund.

  3. Solicitor General Supports Certiorari

    Legal

    The Solicitor General, with PBGC support, files a brief urging the Court to resolve the 'clear conflict' affecting 1,400 multiemployer plans.

  4. Court Invites Solicitor General's Views

    Legal

    The Supreme Court requests the U.S. government's position on whether to hear the case.

  5. M&K Petitions Supreme Court

    Legal

    M&K Employee Solutions files a petition for certiorari, asking the Supreme Court to resolve the circuit split.

  6. D.C. Circuit Rules for Pension Fund

    Legal

    The D.C. Circuit holds that actuaries may adopt assumptions after the measurement date if based on information available 'as of' that date, creating a circuit split.

  7. Second Circuit Rules for Employers in Metz

    Legal

    In National Retirement Fund v. Metz Culinary Management, the Second Circuit holds actuarial assumptions must be locked in as of the measurement date.

  8. Fund Adopts 6.5% Rate Retroactively

    Administrative

    After a board meeting, the IAM fund's actuary adopts a 6.5% interest rate and applies it to calculate withdrawal liability for employers who left in 2018.

  9. M&K and Ohio Magnetics Withdraw from Fund

    Event

    Multiple employers including M&K Employee Solutions and Ohio Magnetics withdraw from the IAM National Pension Fund during 2018.

  10. Measurement Date for 2018 Withdrawals

    Administrative

    The statutory date 'as of' which withdrawal liability must be calculated for employers leaving the IAM fund in 2018.

  11. IAM Fund Uses 7.5% Interest Rate

    Administrative

    The IAM National Pension Fund's actuary sets the interest rate assumption at 7.5% for funding valuations.

  12. Supreme Court Upholds MPPAA in Concrete Pipe

    Legal

    In Concrete Pipe v. Construction Laborers Pension Trust, the Court rules withdrawal liability is constitutional, establishing that it creates a 'fixed and certain debt.'

  13. MPPAA Establishes Withdrawal Liability Framework

    Legislation

    President Carter signs the Multiemployer Pension Plan Amendments Act, requiring employers leaving underfunded pension plans to pay their share of unfunded benefits.

Scenarios

1

Employers Win: Assumptions Locked at Year-End

Discussed by: U.S. Chamber of Commerce, employer-side ERISA practitioners, business publications

The Court rules that withdrawal liability must be calculated using actuarial assumptions in effect at the measurement date. This would give employers predictable exit costs, potentially encouraging more businesses to join multiemployer plans. However, pension funds would lose flexibility to use the most current data, which actuaries argue produces more accurate liability assessments. The IAM fund and similar plans would need to recalculate billions in withdrawal liability for employers who withdrew after rate changes.

2

Pension Fund Wins: 'As Of' Interpretation Prevails

Discussed by: NCCMP, PBGC, labor-side attorneys, pension fund administrators

The Court affirms the D.C. Circuit, holding that actuaries may adopt assumptions after the measurement date as long as they reflect conditions 'as of' that date. This preserves fund flexibility to incorporate the latest available information, which proponents argue better protects plan solvency and participant benefits. Employers would face less certainty about withdrawal costs, but the Solicitor General argued this interpretation aligns with ERISA's purpose of protecting participants.

3

Narrow Ruling on Timing, Broader Questions Deferred

Discussed by: ERISA scholars, Supreme Court analysts

The Court issues a narrow ruling focused on statutory interpretation of 'as of the end of the plan year' without establishing bright-line rules for all actuarial assumption changes. This would resolve the immediate circuit split but leave questions about the scope of permissible assumption changes for future litigation. Pension plans and employers would continue operating under some uncertainty pending further regulatory or legislative clarification.

4

Congress Intervenes with Statutory Fix

Discussed by: Legislative observers, NCCMP policy advocates

Regardless of the Court's ruling, Congress acts to clarify ERISA's withdrawal liability provisions. This could occur if the decision creates significant disruption for either employers or pension funds. The Multiemployer Pension Reform Act of 2014 and American Rescue Plan of 2021 showed Congress's willingness to intervene in multiemployer pension issues when systemic stability is at stake.

Historical Context

Concrete Pipe & Products v. Construction Laborers Pension Trust (1993)

June 1993

What Happened

An employer challenged the constitutionality of MPPAA withdrawal liability after being assessed a share of unfunded benefits upon leaving a multiemployer pension plan. The employer argued the assessment violated due process and constituted an unconstitutional taking of property.

Outcome

Short Term

The Supreme Court upheld MPPAA, ruling that withdrawal liability was constitutional and describing it as a 'fixed and certain debt' that employers assumed by participating in the plan.

Long Term

The decision established the legal foundation for withdrawal liability, confirming Congress's authority to impose financial obligations on departing employers. It remains the leading precedent in ERISA multiemployer cases.

Why It's Relevant Today

The current case tests what 'fixed and certain' means in practice. If assumptions can change after the measurement date, employers argue the debt is neither fixed nor certain when they make withdrawal decisions.

Central States Teamsters Pension Fund Bailout (2022)

December 2022

What Happened

The Central States, Southeast & Southwest Areas Pension Fund received $35.8 billion from the PBGC's Special Financial Assistance program—the largest single pension bailout in U.S. history. The fund, which covered 357,000 Teamsters, had been projected to run out of money by 2025 due to decades of underfunding and employer withdrawals.

Outcome

Short Term

The bailout restored the fund's ability to pay full benefits through 2051, avoiding cuts of up to 40% for retirees.

Long Term

The program demonstrated federal willingness to backstop troubled multiemployer plans but raised questions about moral hazard and whether remaining employers should bear exit costs when federal assistance is available.

Why It's Relevant Today

The Central States crisis shows what happens when employer withdrawals accelerate: remaining employers face growing liability, more exit, and the fund spirals toward insolvency. Today's case affects incentives for employers considering withdrawal.

MPPAA Passage (1980)

September 1980

What Happened

Congress passed the Multiemployer Pension Plan Amendments Act to address a wave of employer withdrawals that were destabilizing pension plans. Before MPPAA, employers could exit plans without paying their share of unfunded benefits, leaving remaining employers and the PBGC holding the bag.

Outcome

Short Term

MPPAA imposed withdrawal liability on departing employers, requiring them to pay their allocable share of unfunded vested benefits.

Long Term

The law stabilized the multiemployer system for decades but created an exit barrier that some argue traps employers in troubled plans. Courts have since grappled with how to calculate liability fairly.

Why It's Relevant Today

The current dispute centers on MPPAA's requirement to calculate liability 'as of the end of the plan year.' Congress's 1980 intent—balancing employer predictability against plan solvency—is at the heart of the interpretive question before the Court.

13 Sources:
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SCOTUSblog Legal Information Institute U.S. Chamber of Commerce ERISA Litigation & Compliance Wagner Law Group Winston & Strawn International Foundation of Employee Benefit Plans Justia Justia U.S. Supreme Court Center Pension Benefit Guaranty Corporation Littler Mendelson P.C. PLANSPONSOR Justia