June 26, 2019

June 25, 2019

Subscribe to Latest Legal News and Analysis

June 24, 2019

Subscribe to Latest Legal News and Analysis

Piling On: Corporations Support the New York Times in Multiemployer Pension Calculation Dispute

Several large employers are disputing how much money the New York Times owes a union multiemployer pension fund. Recently, six companies—including US Foods Inc. and United Natural Foods Inc.—filed an amicus brief supporting the New York Times in its case before the US Court of Appeals for the Second Circuit. Ruprecht Co., an Illinois meat processor, also filed its own brief in support of the New York Times.

Under the Employer Retirement Income Security Act of 1974 (ERISA), when determining an employer’s withdrawal liability, the actuarial assumptions and methods must “offer the actuary’s best estimate of the anticipated experience under the plan.” The underlying issue, in this case, involves an actuarial method called the “Segal Blend,” which often is used to value unfunded vested benefits and calculate withdrawal liability (an exit fee) from a union multiemployer pension plan. Under the Segal Blend, the actuary blends the multiemployer plan’s assumed interest rate on investments with a lower interest rate used by the Pension Benefit Guaranty Corporation for terminating plans. Many multiemployer pension plans commonly use the Segal Blend to calculate an employer’s unfunded liability and payment upon exiting the multiemployer plan (known as “withdrawal liability”). These large employers claim that using the Segal Blend results in an artificially lower interest rate, which in turn results in larger employer withdrawal liability and larger amounts an employer must pay to exit the multiemployer pension plan.

The suit claims that using the Segal Blend does not reflect the actuary’s best estimate of the anticipated experience under the multiemployer plan and violates ERISA. The listed companies object to the use of the Segal Blend, arguing that the calculation fundamentally undermines ERISA and allows multiemployer pension funds to impose disproportionately large liability on employers leaving the fund (while avoiding strict judicial review). The legal briefs note that multiemployer plans have an incentive to inflate the amounts owed by withdrawing employers and that this is easy to do by altering the calculation method with the Segal Blend. In this case, the employers allege that the artificially deflated interest rate under the Segal Blend does not reflect the multiemployer fund’s anticipated experience. Rather, the companies claim that the interest rate for the withdrawal liability calculation should be the same interest rate used by the actuaries to determine the multiemployer plan’s required minimum funding.

On the other side of the case, several groups have filed briefs supporting the multiemployer fund’s calculation, including the Segal Group, Inc. (creator of the Segal Blend), the federal pension insurance agency, and an interest group representing multiemployer pension and welfare plans. Given both the large liabilities at issue in this case and the general funding crisis for many multiemployer pension plans, the Second Circuit’s decision could have a wide-reaching impact on the financial health of all multiemployer plans.

© 2019 McDermott Will & Emery

TRENDING LEGAL ANALYSIS


About this Author

Diane M. Morgenthaler, Corporate Tax Planning Attorney, Retirement Plans for Companies, McDermott Will Emery, Chicago Law Firm
Partner

Diane M. Morgenthaler focuses her practice on employee benefits and executive compensation. She represents clients in matters before the US Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation.

Diane serves as employee benefit counsel to Fortune 500 corporations and other global corporations, and represents both public and private clients. She regularly designs and implements a variety of employee benefit plans and programs. Diane has extensive experience in employee benefit issues involved in...

312-984-7676
Maureen O'Brien, McDermott Will Emery, qualified plan design Attorney, welfare Administration lawyer
Counsel

Maureen O'Brien is counsel in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on advising clients on a broad range of employee benefits matters, including qualified plan design, welfare plan design, employee benefit plan compliance issues, fiduciary matters, multiemployer pension plan issues and nonqualified deferred compensation plans.

312-984-3242
Partner

Rick Pearl focuses his practice on litigation involving the Employee Retirement Income Security Act of 1974 (ERISA). He represents companies, their benefits committees, plan administrators, fiduciaries, and service providers in complex, class-action litigation and Department of Labor lawsuits, audits, and investigations.  His particular expertise is with actions for breach of fiduciary duty and prohibited transactions.

His litigation experience includes high-profile 401(k)/403(b) lawsuits alleging excessive fees and imprudent investment options...

312 984 5390
Associate

Erin Steele focuses her practice on employee benefits and executive compensation. She has experience working on matters related to employee stock ownership plans (ESOPs), code section 401(k) plans, health and welfare arrangements, and Employee Retirement Income Security Act of 1974 (ERISA) litigation. She has also assisted in employee benefits matters as part of corporate transactional due diligence work.

During law school, Erin served as an ERISA litigation intern at the US Department of Labor Office of the Solicitor, Division of Plan Benefits Security, and as a...

202 756 8436