Pension Exit Costs Are a Moving Target After Supreme Court Ruling

Employers with multiemployer pension exposure should retire the comfortable assumption that the number they receive before withdrawal is the number that controls after withdrawal. In M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, the US Supreme Court unanimously held that ERISA does not require actuarial assumptions for withdrawal liability to be selected on or before the statutory measurement date. A pension plan may therefore apply assumptions, including a lower discount rate, after that date provided those assumptions satisfy ERISA’s reasonableness and “best estimate” requirements. 608 U.S. ___ (2026), No. 23-1209.

The holding is narrow in scope but broad in consequence because it removes a clean timing-based objection that withdrawing employers had long used to challenge assessments and makes withdrawal exposure materially harder to price in transactions, restructurings, and labor-strategy decisions. ERISA fixes the date as of which a plan’s unfunded vested benefits are measured, but does not, the court held, freeze the actuarial tools used to value those benefits. See 29 U.S.C. §1381, §1391, §1393; M & K Employee Solutions, LLC, 608 U.S. ___ (2026).

Why the Case Matters

Withdrawal liability is the exit charge imposed when an employer completely or partially withdraws from an underfunded multiemployer pension plan. The liability generally represents the employer’s allocable share of the plan’s unfunded vested benefits, measured as of the last day of the plan year preceding the withdrawal. 29 U.S.C. §1381, §1391; 29 C.F.R. Chapter XL, Subchapter I (withdrawal liability for multiemployer plans); Pension Benefit Guaranty Corporation Technical Update 10-3 (discussing ERISA § 4201, §4211, and §4213 and withdrawal-liability assumptions).

That calculation depends heavily on actuarial assumptions, and the discount rate is especially important. A lower discount rate increases the present value of future benefit obligations and can sharply increase the amount assessed to the withdrawing employer. M & K Employee Solutions, LLC, 608 U.S. ___ (2026), slip op. at 2, 4-5 (describing the shift from a 7.50% to a 6.50% discount rate and the resulting increase in assessed liability).

In M & K, the employers withdrew from the IAM National Pension Fund during 2018, so the relevant measurement date was Dec. 31, 2017. The fund applied a 6.50% discount rate adopted after Dec. 31, 2017, rather than the 7.50% rate previously used. The change increased the fund’s unfunded vested benefits from roughly $500 million to just over $3 billion; for one employer, the assessment increased from about $1.8 million to about $6.2 million.

The employers argued that ERISA required the plan to use assumptions already in effect on the measurement date, and the arbitrators agreed. The district courts and DC Circuit Court of Appeals did not. The Supreme Court affirmed the DC Circuit and resolved the split with the Second Circuit. See National Retirement Fund v. Metz Culinary Mgmt., Inc., 946 F. 3d 146, 152 (2d. Cir. 2020), cert. denied (2020).

The Court’s Holding

The Court’s reasoning began with discussing ERISA §4211, 29 U.S.C. §1391, which requires plans to calculate withdrawal liability based on unfunded vested benefits “as of” the measurement date. The Court read that phrase to fix the date for hard data about the plan, such as assets and participant information, not to impose a deadline for selecting actuarial assumptions.

The Court then turned to ERISA §4213, 29 U.S.C. §1393, which governs actuarial assumptions and methods for withdrawal liability. The provision requires reasonableness and the actuary’s best estimate, but it does not contain a timing deadline, and the Court declined to add one by implication. M & K Employee Solutions, LLC, 608 U.S. ___ (2026), slip op. at 11-12; Jackson Lewis P.C., “ERISA Withdrawal Liability: SCOTUS Decision on Narrow Issue Upholds Retroactive Assumption Changes” (May 26, 2026).

The Court also emphasized the professional nature of actuarial judgment. Assumptions are not static facts. They are predictive judgments used for a particular valuation purpose. In the Court’s view, freezing them on the measurement date could undermine, rather than advance, ERISA’s best-estimate requirement.

The Practical Effect

M & K delivers an unwelcome result for withdrawing employers: less certainty. An employer can no longer assume that the assumptions in place at year-end will govern the final assessment. A plan may use assumptions selected after the measurement date, so long as the assumptions measure the plan as of that date and meet ERISA’s substantive standards. M & K Employee Solutions, LLC, 608 U.S. ___ (2026), slip op. at 11-12; Jackson Lewis P.C., “ERISA Withdrawal Liability: SCOTUS Decision on Narrow Issue Upholds Retroactive Assumption Changes” (May 26, 2026).

This matters most when the discount rate changes because a modest reduction in the rate can produce a large increase in unfunded vested benefits. Employers considering a sale, shutdown, asset transfer, bargaining-unit restructuring, or negotiated exit from a plan should treat withdrawal liability as a range of possible outcomes rather than a fixed number.

Transaction diligence should change accordingly. Buyers and lenders should not stop at the latest withdrawal-liability estimate. They must ask what assumptions were used, whether the plan uses different assumptions for funding and withdrawal-liability purposes, whether those assumptions have changed historically, and whether the actuary has reserved the right to revise assumptions after year-end. See Faegre Drinker Biddle & Reath LLP, “Supreme Court Decides M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund” (May 21, 2026); Jackson Lewis P.C., “ERISA Withdrawal Liability: SCOTUS Decision on Narrow Issue Upholds Retroactive Assumption Changes” (May 26, 2026).

Challenges Remain Available

M & K does not give plans unlimited discretion because employers still may challenge withdrawal-liability determinations in arbitration. But after M & K, the central fight is less likely to be whether an assumption was selected too late and more likely to be whether the assumption was unreasonable, unsupported by plan experience, or inconsistent with the actuary’s best estimate. See 29 U.S.C. §1401(a)(3)(B); 29 U.S.C. §1393(a)(1); Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602 (1993).

That is a harder case to prove. Under ERISA, the actuary’s determination of unfunded vested benefits is presumed to be correct unless the contesting party proves, by a preponderance of the evidence, that the assumptions and methods were unreasonable in the aggregate or that the actuary made a significant error. See 29 U.S.C. §1401(a)(3)(B); 29 U.S.C. §1393(a)(1); Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal., 508 U.S. 602 (1993).

Plans should not read the decision as a license for casual post-year-end changes. A later-selected assumption should be supported by a contemporaneous record showing why the change was made, what information was considered, and how the assumption relates to expected plan experience.

The Unanswered Question

The court expressly left one important issue open: whether assumptions selected after the measurement date must be based only on information available as of that date. That question may become the next front in withdrawal-liability disputes. M & K Employee Solutions, LLC, 608 U.S. ___ (2026), slip op. at 6 n.2.

The distinction matters because some information becomes available after year-end but describes conditions that existed at year-end, such as final asset reconciliations, census updates, or completed plan-experience data. Later market developments or employer-specific events raise different questions. Future arbitrations may turn on where courts draw that line.

Bottom Line

M & K is a technical ERISA decision with immediate balance-sheet consequences. For employers, the lesson is practical: Ask for the estimate, but do not stop there. Ask what assumptions support it, how those assumptions could change, and what the liability would look like under a different discount rate.

Withdrawal liability should now be treated less like a number and more like a risk model.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Samuel W. Krause is a partner at Hall Benefits Law.

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