Supreme Court allows multiemployer plan withdrawal liability to be determined based on interest rate assumption adopted after valuation measurement date

On May 21, 2026, a unanimous Supreme Court, in M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, held that a multiemployer plan could calculate withdrawal liability based on a valuation interest rate adopted after the statutory measurement date for those liabilities.

In this article we provide a note on the Court’s decision, beginning with some background. We conclude with a discussion of its significance for employers contributing to multiemployer plans.

Background – Why calculation of withdrawal liability matters

Some employers provide retirement benefits for many of their employees through one or more multiemployer (“Taft-Hartley”) plans, and that benefit format represents, in effect, a strategic “fact of life” for them. But there are also employers that maintain their own (“single employer”) retirement plan for the vast majority of their employees but who nevertheless make contributions to one or more multiemployer plans for certain discrete groups of unionized employees (e.g., their loading dock workers).

When, as in M & K v. IAM National Pension Fund, an employer withdraws from one of these plans, it will generally trigger “withdrawal liability” – essentially, the withdrawing employer’s allocable share of the plan’s underfunding – if the plan's actuary determines that there are not enough assets in the plan to pay for all of the plan’s unfunded vested benefit liabilities (UVBs).

The amount of UVBs, and the withdrawing employer’s withdrawal liability, can be large and is very interest rate sensitive and therefore very highly leveraged. For the plan in this litigation, plan UVBs using the withdrawing employer’s preferred assumption (7.5%) were $500 million; using the plan’s preferred assumption, they were over $3 billion.

This level of sensitivity to changes in interest rates selected by actuaries for the plans is not unusual. While the details of the math behind that calculation are beyond the scope of our analysis here, readers might think of it this way. UVB is the excess of a plan’s vested benefit liability over plan assets. For example, if vested benefit liability = 100 and plan assets = 95, the UVB = 5. However, if we increase vested benefit liability by 20%, the UVB increases to 120 – 95 =25, a five-fold increase in UVB and therefore withdrawal liability.

The legal question …

Under the applicable provisions of ERISA, generally, the withdrawing employer’s withdrawal liability is determined based on plan UVBs determined on the last day of the preceding plan year (the “measurement date”). Lower courts are divided on whether that rule means that all factors that affect the valuation – including both plan data (e.g., the number of participants and plan assets and plan obligations) and actuarial assumptions and methods (e.g., the interest rate used to value plan obligations) – must be fixed as of the measurement date. Or whether the measurement date rule only applies to plan data, and a plan may, as in this case, use different actuarial assumptions/methods (critically, a different interest rate assumption) to value withdrawal liability than it used to value plan liabilities had that calculation been performed on the measurement date.

As noted, resolution of this issue has (in many cases) a dramatic effect on the withdrawing employer’s liability. Based on the measurement date interest rate (7.5%), in this case the employer’s withdrawal liability would have been $1.8 million. Based on the interest rate used by the plan (adopted after the measurement date) the withdrawal liability was $6.2 million.

Thus, the issue before the Supreme Court was:

Whether [ERISA’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 most recently adopted before the end of the year, or allows the plan to use different actuarial assumptions that were adopted after, but based on information available as of, the end of the year.

The Court’s decision

In its decision in favor of the plan, the Court held that ERISA does not require that “actuarial assumptions be selected on or before the measurement date.” It held that the only things that must be fixed as of the measurement date are the “facts” about the plan (“hard data such as the number of plan beneficiaries”). Actuarial assumptions (e.g., the interest rate assumption) are not those sorts of facts, rather they are simply “tools” actuaries use – and the statute sets no deadline for the adoption of these assumptions. ERISA only requires that these assumptions 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.”

With respect to the employer’s objection that this approach might “open the door to manipulation,” and that “[p]lans and their actuaries … will retroactively select assumptions in order to increase withdrawing employers’ liability,” the Court simply stated that such “policy concerns cannot trump the best interpretation of the statutory text.”

Significance of the Court’s decision for contributing employers

As we noted earlier, contributing to multiemployer pension plans is simply a part of doing business for many employers in unionized businesses. Unlike for their non-union workforce, where they might simply decide they no longer want to offer a defined benefit plan for those employees, doing so in a collectively bargained environment can bring with it significant financial consequences for the employers.

Not all withdrawals are planned. Sometimes they occur because an employer loses a business contract and simply no longer has work on which to deploy that union workforce. This means that there are situations where an employer will withdraw from a multiemployer plan not because it was their goal, but simply because “business happened.” ERISA allows contributing employers to annually request from a multiemployer plan estimates of withdrawal liability. They are just that. Estimates. In the situation in this case, had M&K requested an estimate during the plan year in which it withdrew, that estimate would have used the old 7.5% interest rate, arouind $1.8 million. Yet their actual withdrawal liability was $6.2 million.

Next steps for contributing employers

We think it is good practice for employers that contribute to multiemployer pension plans to annually request withdrawal liability estimates if that amount could possibly be material to their business.

We’re aware, however, that a large number of such employers do not like to request estimates because they fear the union will assume they plan to withdraw.

The alternative is to seek the assistance of actuaries that work on multiemployer plans in support of contributing (and withdrawing) employers rather than on behalf of the plan trustees.

In order to make these estimates from employer-side actuaries meaningful, employers will want to discuss with the actuary their views of their business and industry, so that forecasts will be appropriate for financial modeling. And employers. will want to hold on to as much relevant data as possible. That means at least:

The amount of contributions made to each plan for each plan year (or as many years as possible).

The number of contribution base units (almost always hours worked) for which they have made contributions to the plans for those plan years.

The rate at which they’ve been required to contribute to the plan for each plan year, e.g., $5.00 for each covered hour worked.

What about transactions (M&A) involving contributing employers?

Corporate transactions (mergers and acquisitions) with multiemployer plan participation in them can be particularly complex to understand and do financial diligence. For buy side transactions, companies will be either strategic (they see a business synergy and plan to retain their acquisition for an extended period of time) or financial (often involving private equity funds that will seek to exit the deal after around five to seven years).

In either case, it’s important to understand the financial risks a buyer of an employer that is contributing to a multiemployer plan is taking on. Those risks may turn out to be more significant than anticipated.

Don’t be fooled by “zone status.” We’ve seen a number of “Green Zone” (healthy) plans that have presented acquiring companies with the largest potential withdrawal liability exposures. And in light of this Supreme Court decision, last year’s zone status might not be at all representative of this year’s zone status.

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Obviously, this decision presents challenges for employers considering withdrawing (or facing a risk of “inadvertently” withdrawing) from as multiemployer plan. These employers will want to consult with their employer-side actuary with multiemployer plan experience as well as somewhat specialized ERISA counsel.

There are some issues the decision leaves open that are likely to generate further litigation, critically when and how may plan “manipulation” of the interest rate be challenged?

We will continue to follow this issue.