M & K Employee Solutions, Inc. v. Trustees of IAM Nat. Pension, Docket No. 23-1209

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When four companies tried to leave a pension plan in 2018, they thought they knew what they owed. Then the bill nearly tripled. A single change in how the pension fund's accountants calculated the debt that was made months after the official measurement date pushed the companies' combined bill from roughly three million dollars to roughly ten million dollars. Now the Supreme Court has ruled that such changes are legal, a decision that could reshape how companies budget for leaving pension plans nationwide.

What Happened

The four employers were withdrawing from the IAM National Pension Fund. Under federal pension law, companies that leave a plan must pay their share of any shortfall. The pension fund's actuary, a specialized accountant who calculates pension obligations, needed to determine how much money the companies owed.

The actuary used a key number called the discount rate to do this calculation. Think of it as a tool that translates future pension payments into today's dollars. On December 31, 2017, the official measurement date, the rate was set at 7.5 percent. But months later, the actuary lowered it to 6.5 percent. That small change had a massive impact: it nearly tripled what the companies owed.

The employers argued this was unfair. They said the law required all the numbers to be locked in by December 31, 2017. The pension fund disagreed, saying the measurement date was just a reference point, not a deadline for finishing the math. Two federal appeals courts split on the question, so the Supreme Court stepped in to settle it.

The Court's Decision

In a unanimous decision, the Supreme Court sided with the pension fund. Justice Ketanji Brown Jackson wrote that nothing in the law prevents actuaries from changing their assumptions after the measurement date.

The Court drew a distinction between hard facts and educated guesses. Facts like how much money is in the plan or how many people are owed benefits must be frozen as of December 31. But assumptions like the discount rate are predictive tools, not facts. They can be refined later as the actuary gathers more information and makes better judgments.

The Court also noted that Congress knows how to write timing rules when it wants them. In other parts of the pension law, Congress explicitly tied assumptions to specific dates. The fact that Congress did not do so for withdrawal liability calculations suggested it did not intend to. The employers' concern about unfair manipulation, the Court said, is already addressed by a separate legal process called arbitration, which allows companies to challenge assumptions they believe are unreasonable.

What Remains Unclear

The ruling answers one question but leaves another wide open. The Court said actuaries do not have to finalize assumptions by the measurement date. But it did not say whether actuaries can use information that did not exist on the measurement date when making those choices.

Here is why this matters: Imagine an actuary selecting a discount rate in January for a December 31 measurement date. A major market downturn happens in early January. Can the actuary use that new information? The Supreme Court did not say. This ambiguity could significantly affect what companies actually owe, since using newer market data could push bills higher or lower depending on what happens.

The Court did reassure employers that arbitration provides a check against unreasonable assumptions. But how seriously arbitrators will scrutinize these decisions remains to be seen in future cases.

Pension Calculations Can Change

If you work for a company considering leaving a pension plan, this decision makes budgeting harder. You cannot simply lock in what you owe on the official measurement date. The final bill may change based on calculations made months later. Companies should now budget for uncertainty and be prepared to challenge any assumptions they believe are unfair through the arbitration process. For pension funds, the ruling gives them more flexibility to ensure their calculations reflect the most current financial information available.