THE NATIONAL RETIREMENT FUND, EACH ON BEHALF OF THE LEGACY PLAN OF THE NATIONAL RETIREMENT FUND, BOARD OF TRUSTEES OF THE NATIONAL RETIREMENT FUND, EACH ON BEHALF OF THE LEGACY PLAN OF THE NATIONAL RETIREMENT FUND, Plaintiffs - Counter - Defendants - Appellees,
METZ CULINARY MANAGEMENT, INC., Defendant - Counter - Claimant - Appellant.
ARGUED: February 8, 2018
from a judgment of the United States District Court for the
Southern District of New York (Valerie Caproni,
Judge), vacating an arbitration award. The award
held that interest rate assumptions for purposes of
withdrawal from a multiemployer pension plan liability are
those in effect on the last day of the year preceding the
employer's withdrawal. The district court held that
interest rate assumptions may be determined after withdrawal
and retroactively imposed. We disagree and vacate.
LITVIN (Paisner Litvin LLP, on the brief), Bala Cynwyd, PA,
for Defendant - Counter - Claimant - Appellant.
E. RICHMAN (Schulte Roth & Zabel LLP, on the brief), New
York, New York, for Plaintiffs - Counter - Defendants -
R. Perry, Todd H. Girshon (Jackson Lewis P.C.), New York, New
York, for Amicus Curiae Joseph Abboud Manufacturing Corp. and
Waterford Hotel Group, Inc.
Before: WINTER, LIVINGSTON, and CHIN, Circuit Judges.
WINTER, CIRCUIT JUDGE.
Culinary Management, Inc., a contributing employer to the
National Retirement Fund, appeals from Judge Caproni's
decision vacating Arbitrator Ira F. Jaffe's award. His
award held that appellees improperly calculated
appellant's withdrawal liability based on interest rate
assumptions adopted in 2014 after appellant withdrew from the
Plan. The district court held that Section 4213 of the
Employee Retirement Income Security Act ("ERISA"),
29 U.S.C. § 1393, does not require actuaries to
calculate withdrawal liability based on interest rate
assumptions used prior to an employer's withdrawal from a
plan. The district court further held that interest rate
assumptions must be affirmatively reached and may not roll
over automatically from the preceding plan year. For reasons
stated below, we vacate the district court's judgment.
are a trust fund, established and maintained pursuant to
Section 302(c)(5) of the Labor Management Relations Act
("LMRA"), 29 U.S.C. § 186(c)(5), and its Board
of Trustees ("Trustees"). The Fund -- through its
Trustees --sponsors and administers the Legacy Plan of the
National Retirement Fund (the "Plan"), a
multiemployer plan within the meaning of Section 3(37) of
ERISA, 29 U.S.C. § 1002(37).
multiemployer pension plans, several "employers pool
contributions into a single fund that pays benefits to
covered retirees who spent a certain amount of time working
for one or more of the contributing employers." Trs.
of The Local 138 Pension Tr. Fund v. F.W. Honerkamp Co.,
692 F.3d 127, 129 (2d Cir. 2012). Appellant was an employer
contributing to the Plan until May 16, 2014 when it
effectuated a complete withdrawal from the Plan. See
Section 4203(a) of ERISA, 29 U.S.C. § 1383(a).
plan is underfunded, an employer seeking to withdraw must pay
its share of unfunded vested benefits ("UVBs").
See 29 U.S.C. § 1381(b)(1). UVBs are
"calculated as the difference between the present value
of vested benefits and the current value of the plan's
assets." Pension Benefit Guar. Corp. V. R.A. Gray
& Co., 467 U.S. 717, 725 (1984) (citing 29 U.S.C.
§§ 1381, 1391). The Multiemployer Pension Plan
Amendments Act of 1980 (the "MPPAA") sets forth
rules for calculating a withdrawing employer's share of a
plan's underfunding. Pursuant to the MPPAA, "[i]f an
employer withdraws from a multiemployer plan . . . the
employer is liable to the plan in the amount determined under
this part to be the withdrawal liability." 29 U.S.C.
§ 1381(a). "Withdrawal liability is the withdrawing
employer's proportionate share of the pension plan's
unfunded vested benefits." Honerkamp, 692 F.3d
to Section 4211 of ERISA, a plan may select one of four
identified allocation methods or develop its own method for
calculating UVBs, subject to approval by the Pension Benefit
Guaranty Corporation ("PBGC"). 29 U.S.C. §
1391. Critical to the present dispute, Section 1391 of the
MPPAA directs plans to calculate the withdrawal charge, not
as of the date of withdrawal or sometime later, but as of the
last day of the plan year preceding the year during which the
employer withdrew. This date could be up to a year earlier.
Milwaukee Brewery Workers' Pension Plan v. Joseph
Schlitz Brewing Co., 513 U.S. 414, 417-18 (1995) (citing
§§ 1391(b)(2)(A)(ii), (b)(2)(E)(i), (c)(2)(C)(i),
(c)(3)(A), and (c)(4)(A)). The last day of the plan year
preceding the year during which the employer withdraws is
referred to as the "Measurement Date." Because
appellant withdrew from the Plan on May 16, 2014, the
applicable Measurement Date is December 31, 2013.
many actuary assumptions necessary to calculate withdrawal
liability, only the interest rate assumption is at issue in
this matter. To determine an employer's withdrawal
liability, a plan's actuary must estimate the present
value of the plan's vested benefits and the interest rate
necessary to discount the liability for future benefit
payments. See Combs v. Classic Coal Corp., 931 F.2d
96, 98 (D.C. Cir. 1991). Because the interest rate assumption
governs the estimate of a plan's growth from investments
apart from employers' future contributions, increasing
the interest rate assumption decreases an employer's
withdrawal liability, and vice versa. See id. ERISA
Section 4213(a) requires withdrawal liability to be based on
"reasonable" actuarial assumptions and methods,
"taking into account the experience of the plan and
reasonable expectations," and to be "the
actuary's best estimate of anticipated experience under
the plan." 29 U.S.C. § 1393(a)(1).
Consultants ("Buck") served as appellees'
actuary for many years. In October 2013, appellees replaced
Buck with Horizon Actuarial Services, LLC beginning in 2014.
For several years before its termination as the Plan's
actuary, Buck utilized a 7.25% interest rate assumption to
determine the Fund's UVBs. The Plan's 2013 Form 5500
Schedule MB,  states that a 7.25% interest rate
assumption remained in place in 2013 for ...