During Tuesday’s proceedings in the case of M&K Employee Solutions v Trustees of the IAM National Pension Fund, the U.S. Supreme Court justices exhibited skepticism about mandating actuaries to adhere to outdated assumptions for assessing liabilities in multiemployer pension plans. This case involves multiemployer pension plans, which contrast significantly with the more common defined-contribution plans due to the level of risk borne by the employer.
The complexity arises when an employer withdraws from such a defined-benefit plan, requiring the departing employer to pay their share of any financial shortfall based on calculations as of a set date preceding their exit. The dispute in this instance stems from a disagreement over whether the actuaries should use prior assumptions or revised ones that more accurately reflect current and anticipated economic conditions as of the plan’s valuation date.
Justice Brett Kavanaugh questioned the practicality of ignoring significant economic changes when evaluating liability, emphasizing the importance of using “reasonable” assumptions and providing the “best estimate” as mandated by the statute. Justice Ketanji Brown Jackson echoed these concerns, highlighting how major events like the COVID-19 pandemic could dramatically alter asset returns and should not be ignored in actuarial assessments. Chief Justice John Roberts further illustrated this point by considering the implications of historical events, such as World War II.
Advocates for the trustees of the pension fund, including John E. Roberts and Kevin Barber, faced minimal challenges from the bench, suggesting a judicial inclination towards allowing actuaries the discretion to adjust assumptions based on current insights. This inclination is aligned with the view that actuaries should be permitted to apply their professional judgment without constraints from outdated assumptions.
In summary, while the justices will finalize their decision post-hearing, the argument suggests they may lean towards granting actuaries the autonomy to employ up-to-date information in their calculations. This approach could have significant financial implications for the involved parties, emphasizing the technical nature and high stakes of this ERISA case.
For more information, refer to the full article on SCOTUSblog.