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On September 14, 2026, the US Federal District Court for the Southern District of New York, in IAC Dayton, LLC, and International Automotive Components Group North America, Inc. v. National Retirement Fund, sided with IAC Dayton, the withdrawing employer, holding that the actuary for the National Retirement Fund (NRF) “violated ERISA by using an interest rate that [he] acknowledged was not entirely based on the [Fund’s] expected return on assets.”
The court ordered that the arbitrator recalculate IAC Dayton’s withdrawal liability and that, instead of the much lower 2.53% discount rate the actuary had originally used, “[i]n the absence of additional evidence sufficient to support a different discount rate, the Court presumes withdrawal liability should be calculated using the 7.3% rate which the Actuary put forth as his best estimate of the plan’s anticipated experience.”
The case is interesting as the first lower court decision since M&K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, in which the Supreme Court sided with the fund in a withdrawal liability/discount rate dispute. In this article, we provide a very brief note on the case and discuss how the Dayton court distinguished the Supreme Court’s decision in M&K Employee Solutions.
This case is one of a series of cases involving disputes over how much withdrawal liability a withdrawing employer must pay an underfunded multiemployer plan. These cases always turn on the discount rate used to value the plan’s liabilities. In these cases, the value of plan assets is simply a fair market value number over which there is no dispute, but the (present) value of plan liabilities must be determined by discounting future obligations to a present “lump sum” number using a valuation interest rate (AKA discount rate).
In these circumstances, the relationship between the discount rate that is used and how much the withdrawing employer owes is highly leveraged/non-linear. For instance, in IAC Dayton, with respect to a withdrawal that took place in 2020, the amount IAC Dayton owed as determined by the plan’s actuary using the (above noted) 2.53% rate was $3,565,687. Based on the rate proposed by IAC Dayton and adopted by the court, 7.3%, IAC only owed $226,731. (We discuss the math in these cases, with examples, in our article PBGC regulatory agenda includes finalizing multiemployer plan withdrawal liability interest rate regulation.)
Procedurally, this case came before the district court after an arbitrator adopted the plan actuary’s valuation of liabilities.
During the arbitration, the plan’s actuary explained his adoption of a lower (and, in effect, “risk-free”) discount rate “based on the Fund’s intolerance of risk”:
(1) [T]he Fund was in critical status, (2) the Fund was negatively leveraged in that there were substantially more inactive and vested participants than there were participants who were still active, (3) the Fund’s benefits were frozen, (4) no new contributing employer had joined the Fund since 2015, (5) the Fund did not receive enough employer contributions to pay benefits and Fund expenses, (6) employer contributions would be insufficient to offset a significant investment shortfall, and (7) the Fund was unable to invest whatever withdrawal liability payments it received because those monies were being used to cover operating costs.
In addition, the arbitrator adopted the fund’s argument that use of a (very low) “risk free rate” was justified because “when an employer withdraws it no longer bears the risk that the Fund’s investments might yield a lower return than expected, so the Fund is justified in charging the withdrawing employer as if the Fund were going to invest in risk-free assets.” (As the court noted, however, after an employer withdraws, it gives up any potential for future investment returns in excess of the actuary’s best estimate; and in fact, the actuary for the Fund testified at arbitration that “although he did not recall exactly the chances that the assets of the Fund would exceed the PBGC rate, he believed it was in the range of 90 to 95%.”
The court rejected these arguments, finding that ERISA withdrawal liability rules provide that:
[W]hen determining an employer's withdrawal liability, “actuarial assumptions and methods” must, “in the aggregate, [be] reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan.” … This requires a consideration of the plan’s actual assets.
Based on that standard, the court found that the plan’s actuary had in 2020 used a 7.3% discount rate to determine the plan’s minimum funding requirement, and that therefore the actuary had (“in other words”) “estimated that the Fund’s assets would grow at a compounding rate of 7.3% per year.” Hence the statement in the court’s order that “the Court presumes withdrawal liability should be calculated using the 7.3% rate which the Actuary put forth as his best estimate of the plan’s anticipated experience.”
We discuss the Supreme Court’s decision in M&K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund in our article Supreme Court allows multiemployer plan withdrawal liability to be determined based on interest rate assumption adopted after valuation measurement date. In that (May 21, 2026) decision, the Supreme Court unanimously held that a multiemployer plan could calculate withdrawal liability based on a valuation interest rate adopted after the statutory measurement date for those liabilities.
Very briefly, the IAC Dayton court distinguished the Supreme Court decision as dealing with the narrow question of whether a valuation interest rate adopted post-measurement date could be used for withdrawal liability valuations, something on which ERISA is silent. In contrast, the governing provision of ERISA explicitly requires that the discount rate used “must reflect the actual assets and anticipated returns of the plan.”
We will continue to follow this issue.
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