In a significant ruling, the United States Supreme Court has addressed how actuaries should handle calculations for employers withdrawing from multi-employer pension plans. The case, M&K Employee Solutions v. Trustees of the IAM National Pension Fund, hinged on whether the Employee Retirement Income Security Act of 1974 (ERISA) necessitates using outdated economic assumptions when determining liabilities for departing employers.
The opinion, delivered by Justice Ketanji Brown Jackson, clarified this issue, aligning with the perspective that actuaries are not required to rely on old data. Instead, they can use up-to-date economic assumptions to accurately assess the costs at the time of calculation. This decision is grounded in the statute’s language, which separates the “measurement date” for hard plan data from the time at which actuaries may choose the appropriate “tools” for their calculations, like interest rate assumptions.
Justice Jackson asserted that actuarial assumptions are not static data but rather predictive judgments necessary for precise financial assessments of future obligations. These assumptions, she noted, do not need to be “frozen” at any past date, thus allowing actuaries the latitude to use current, more accurate economic figures in their evaluations.
The ruling follows from distinct statutory requirements. ERISA demands actuaries’ assumptions to be “reasonable,” reflecting the plan’s history and projecting future expectations, yet it does not stipulate these assumptions must be based on any fixed date. The decision takes account of similar language used elsewhere in ERISA, affirming that Congress’s choice not to constrain the assumption date was intentional.
This ruling resolves conflicting practices, particularly in New York courts, which held a differing interpretation. While its impact might be circumscribed within the broader ERISA litigation landscape, it provides clarity for actuaries and ensures more accurate financial assessments for multi-employer pension plans.
To read more about the decision and its implications, visit the full article on SCOTUSblog.