Supreme Court Gives Pension Actuaries Exit Bill Flexibility (1)

Pension funds have flexibility to calculate the liability of withdrawing employers using methods adopted after the date set by law, the US Supreme Court held Thursday, ruling against companies that raised concerns about unpredictable and inflated bills.

The federal law governing withdrawal liability calculations “contains no requirement that actuaries use assumptions adopted prior to the measurement date,” the court said in a unanimous opinion by Justice Ketanji Brown Jackson. The Employee Retirement Income Security Act “imposes few substantive requirements” on how pension actuaries select the assumptions underlying these calculations, she said.

The case asked the justices to resolve a circuit split over the interest rate assumptions used to calculate the money owed by companies pulling out of multiemployer pension funds. Small changes in these assumptions can cause big swings in an employer’s financial liability, and federal circuit courts disagreed about when they must be in place before they can be used to tally a bill.

Circuit Split

The US Court of Appeals for the D.C. Circuit in 2024 allowed the actuary for a machinists’ union pension fund to calculate an employer’s liability using assumptions adopted after the end of the plan year preceding the employer’s withdrawal—a move that increased M&K Employee Solutions LLC’s bill from about $1.8 million to more than $6 million.

But those assumptions must be “based on the body of knowledge available up to the measurement date,” the appeals court said, creating a split with the Second Circuit, which ruled in 2020 that liability must be calculated using the assumptions that are actually in effect on the measurement date.

M&K asked the Supreme Court to step in, arguing that limits on pension actuary discretion are baked into the relevant statutory text and necessary to avoid massive uncertainty and wild swings in liability. The US Solicitor General advised the court to take the case, backing a rule that would give actuaries flexibility to use later-adopted assumptions that reflect the state of the world on the relevant measurement date.

Tools, Not Inputs

The Supreme Court sided with the pension fund, saying that the actuarial assumptions underlying these calculations are “tools” aimed at making “predictive judgments about a plan’s anticipated future performance,” rather than “factual inputs” that are frozen in time.

These assumptions should “reflect the actuary’s knowledge as of the measurement date,” the court said. “But the relevant information about the plan’s performance or macroeconomic conditions, as it stood on the measurement date, may not become available until after the measurement date.”

Setting a hard deadline for these assumptions would create an “incoherent statutory scheme” in which actuaries must value plan’s unfunded vested benefits “based on hard data as it stood on the measurement date while at the same time applying assumptions selected based on an older set of facts,” the court said.

M&K argued that giving actuaries this flexibility would open the door to manipulation and inflated bills, but the company’s preferred approach “does nothing to address these concerns,” the court said.

“Plans and actuaries could still select assumptions with an eye towards inflating withdrawal liability before the measurement date given the significant discretion they enjoy in selecting assumptions,” Jackson wrote for the court.

The justices also found it significant that Congress included a deadline for setting assumptions in other parts of federal pension law, but not the rules governing withdrawal liability calculations.

“We presume this omission is intentional,” Jackson said in the opinion.

Morgan, Lewis & Bockius LLP represented M&K. Proskauer Rose LLP represented the trustees of the IAM National Pension Fund.

The case is M&K Emp. Sols., LLC v. Trs. of IAM Nat’l Pension Fund, U.S., No. 23-1209, 5/21/26.