May 16, 2021

Volume XI, Number 136

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Second Circuit Prohibits Retroactive Changes to Withdrawal Liability Interest Rate Assumptions

The Second Circuit Court of Appeals recently issued a withdrawal liability decision of which both multiemployer pension plans and their contributing employers should be aware.  Specifically, in National Retirement Fund v. Metz Culinary Management, Inc., No. 17-1211, 2020 WL 20524 (Jan. 2, 2020), the Second Circuit held that the interest rate used to calculate an employer’s withdrawal liability is the rate that was in effect on the last day of the fund’s plan year preceding the year of the employer’s withdrawal, i.e., the “measurement date.”  In so holding, the Court rejected the plan actuary’s decision to use a lower discount rate adopted after the measurement date that had the effect of substantially increasing the amount of the employer’s liability.  The Court reasoned that retroactive changes to the actuarial methods and assumptions used to calculate withdrawal liability are inconsistent with the legislative history of ERISA § 4214, which requires the fund to provide advance notice to employers of any “plan rules and amendments” that affect withdrawal liability.  The Court also observed that withdrawal liability estimates provided under ERISA § 101(l) would be of “no value” if such retroactive changes were permitted.  Going forward, multiemployer plans may need to coordinate with their actuaries to ensure that decisions regarding the methods and assumptions used to calculate withdrawal liability are made and communicated in a timely manner consistent with this decision.

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© 2021 Proskauer Rose LLP. National Law Review, Volume X, Number 8
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About this Author

Anthony S Cacace, Labor and Employment attorney, Proskauer Rose law firm
Associate

Anthony S. Cacace is an Associate in the Labor and Employment Department and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center. Anthony focuses on ERISA litigation and counsels plans and plan sponsors on a full spectrum of employee benefit issues.

Anthony represents employers, plan sponsors, plan trustees and other plan fiduciaries in lawsuits brought pursuant to ERISA, alleging claims for breaches of fiduciary duty, benefit claim denials, plan investment losses and improper plan amendments. He also represents plan clients during...

212-969-3307
Justin Alex, Employment Attorney, Proskauer Rose Law Firm
Associate

Justin Alex is an Associate in the Washington, DC office and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center.

202.416.6816
Neil Shah, Proskauer Rose, Labor Rights Lawyer, ERISA Litigation Attorney,
Associate

Neil Shah is an associate in the Labor & Employment Law Department and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center.

Rutgers University School of Law, Newark, J.D., 2009

 

cum laude

Order of the Coif

Managing Editor, Rutgers Law Review

Dean's Merit Scholarship

 

New York University, College of Arts & Science, B.A., 2006...

973-274-3205
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