Vorys Benefits Brief: Recent Court Decisions Affecting Withdrawal Liability

Employers who participate in underfunded multiemployer pension plans should be aware of two recent court cases that could affect their withdrawal liability. On May 21, 2026, the United States Supreme Court (SCOTUS) issued its unanimous decision in M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund.  608 U.S. 264 (2026), affirming the lower court decision (see 92 F.4th 316 (D.C. Cir. 2024)).  SCOTUS held that the Employee Retirement income Security Act of 1974, as amended (ERISA), does not require multiemployer pension plans to select the actuarial assumptions underlying a withdrawal liability calculation on or before the measurement date. 

On August 1, 2025, the Eleventh Circuit court issued a decision in Perfection Bakeries Inc. v. Retail Wholesale & Dept. Store International Union, 147 F.4th 1314.  SCOTUS denied cert on April 20, 2026, allowing the appellate court decision to stand.  The Eleventh Circuit held that the credit for a partial withdrawal should be applied against the total withdrawal liability before applying the 20-year payment cap.  This ordering rule meant that the employer effectively did not get any credit for the partial withdrawal liability payments that they had made for several years and that the employer was required to pay the full withdrawal liability payments for 20 years.

These decisions could have a significant impact on an employers’ withdrawal liability.

Background

Under ERISA, an employer that ceases its obligation to contribute to an underfunded multiemployer pension plan must pay withdrawal liability equal to its allocable share of the plan’s unfunded vested benefits (UVBs).  UVBs represent the difference between the present value of all vested plan obligations and the current value of plan assets.  Withdrawal liability is calculated as of the last day of the plan year preceding the employer’s withdrawal, or the “measurement date.”

When calculating withdrawal liability, actuaries consider certain actuarial assumptions to convert future benefit obligations into their present value.  The discount rate is an assumption that uses interest rates to calculate the present value of future benefits.  There is an inverse relationship between the discount rate and the present value of liabilities, so even a modest reduction in the discount rate can substantially increase an employer’s withdrawal liability based on an increased present value of the withdrawing employer’s pension liabilities.

If an employer drops their contributions by more than 70%, they may have a partial withdrawal.  The plan calculates the withdrawal liability and then prorates it based on the percentage of reduction.  So, an employer that is contributing at 20% of their historical rate would pay 80% of the withdrawal liability.  ERISA provides a credit for against the full withdrawal liability for any withdrawal liability payments that had been paid.

ERISA caps the amount that can be collected by the multiemployer plan to payments based on the withdrawing employer’s highest contribution rate and an average of their highest contribution basis.  Under this methodology, the withdrawal liability payments are typically higher than the contributions that the employer had been making to the plan before the withdrawal.  These payments continue until the earlier of (a) 20 years or (b) the withdrawal liability has been paid in full. 

SCOTUS’s Holding in M&K

The decision in M&K concerned withdrawal liability under the IAM National Pension Fund.  The Fund’s actuary determined withdrawal liability “as of” December 31, 2017 (i.e., the applicable measurement date).  Through November 2017, the actuary had used a 7.5% discount rate.  Nevertheless, in January 2018 (i.e., after the measurement date), the actuary formally adopted a reduced 6.5% discount rate for withdrawal liability.  In general, the lower the discount rate assumption, the higher the liability.  The change to the assumed discount rate increased the withdrawal liability for the employer from $1.8 million to $6.2 million.

The employer appealed the assessed withdrawal liability.  The arbitrator agreed with the employer, but the district court, DC Circuit Court of Appeals and SCOTUS disagreed.  The Courts ruled that ERISA does not require the actuarial assumptions behind a withdrawal liability calculation to be selected on or before the measurement date, so long as those assumptions are reasonable and reflect the actuary’s best estimate.  The measurement date fixes the facts, not the assumptions.

The Eleventh Circuit’s Decision in Perfection Bakeries

The decision in Perfection Bakeries concerned withdrawal liability under the Retail, Wholesale and Department Store International Union and Industry Pension Fund.  In 2016, an employer stopped contributing for its Michigan employees (i.e., a partial withdrawal) and incurred partial withdrawal liability of $2,228,268.  Two years later, the same employer stopped contributing for its Indiana employees (i.e., a complete withdrawal).  For the complete withdrawal, the plan’s actuary calculated the employer’s allocable share of UVBs at $17,331,978 and applied a partial withdrawal credit of $1,962,408, reducing the assessed amount to $15,369,570.  The credit was smaller than the earlier withdrawal liability relating to the employer’s contributions for its Michigan employees because the applicable Pension Benefit Guaranty Corporation (PBGC) regulations require multiemployer plan sponsors to amortize previously assessed amounts for a partial withdrawal when converting them to a credit against a subsequent withdrawal.  The 20-year cap then reduced the liability to $6,318,741.  Had the credit been applied after the cap rather than before it, the final liability would have been $4,356,333.

The employer appealed the assessed withdrawal liability.  The arbitrator, the district court, and the Eleventh Circuit all agreed with the plan.  The Courts ruled that ERISA requires credits for partial withdrawals to be applied before the 20-year cap.  In so ruling, the Eleventh Circuit declined to follow a prior 1985 PBGC opinion letter reading the statute the opposite way, joining the Ninth Circuit (the only other circuit to have reached the question).  SCOTUS denied certiorari on April 20, 2026, leaving the Eleventh Circuit’s decision in effect.  

Key Takeaways

1. Timing of Actuarial Assumptions. SCOTUS concluded that ERISA’s instruction to calculate withdrawal liability “as of” the measurement date applies to the plan information used in the calculation, such as participant counts and asset values, and does not require actuarial assumptions to have been in place on that date.  The Court further concluded that ERISA does not set a separate deadline for choosing those assumptions.
   
   
2. The “Best Estimate” Standard. SCOTUS emphasized that actuarial assumptions must reflect the actuary’s “best estimate of anticipated experience under the plan.”  It explained that some economic and plan-related information may not be available until after the measurement date, and that a rule requiring earlier assumptions could lead to less accurate calculations.  The Court did not decide whether assumptions must be based only on information available as of the measurement date, leaving previous circuit court decisions limiting withdrawal liability calculations to the body of knowledge available on the measurement date intact but unresolved.
3. Challenges to Assumptions. The decision does not change employers’ ability to contest actuarial assumptions in arbitration.  An employer may still argue that an assumption is unreasonable or that it does not reflect the actuary’s actual best estimate of anticipated plan experience under ERISA.
4. Weighing a Full or Partial Withdrawal. Employers whose withdrawal liability would be limited by the 20-year cap have a strong incentive to avoid a partial withdrawal.

Recommendations for Employers

Evaluate Fund Estimates with Caution.  A fund-provided estimate of withdrawal liability should be treated as a preliminary input in assessing potential exposure.  The estimate reflects the assumptions in use when it is prepared, and those assumptions may change, including after the relevant measurement date.  A later change in actuarial assumptions may produce a materially different assessment.  Independent actuarial modeling may assist in evaluating the range of possible liability assessments and the sensitivity of that liability to changes in assumptions.  

Model Impact of Reductions in Contributions.  Employers should consult legal counsel when considering collective bargaining or a corporate transaction that could trigger a complete or partial withdrawal under ERISA. 

Prepare Any Challenge with Close Attention to the Fund’s Assumptions and Methods.  When contesting a withdrawal liability assessment, an employer should investigate the fund’s method of calculation.  A material disparity between the rate used for the assessment and the rate used for funding may support an argument that the assumption is unreasonable or does not reflect the actuary’s best estimate.  Employers should consult legal counsel before challenging a fund’s withdrawal liability assessment.