Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, September 24, 2019

In with a Bang and Out with a Whimper: Second Circuit Challenge to Popular Withdrawal Liability Calculation Method Settles

PensionA case that was watched by many employers and pension plan members alike went out with little drama, as the Second Circuit docket sheet of New York Times Company v. Newspaper and Mail Deliverers' Publishers' Pension Fund pinged to life with a stipulation withdrawing the case with prejudice on last Monday.

The issue that was the great importance to its many followers was that of the challenge to the Segal Blend discount rate assumption, used by many multiemployer pension plans to calculate employer withdrawal liability. Any variation to this discount rate assumption can have a massive effect on the liability. ERISA requires actuaries to select a discount rate for withdrawal liability and an interest rate for minimum funding purposes that reflect the actuary's "best estimate of anticipated plan experience."

The New York Times argued that the Fund's 7.5% interest rate reflected the actuary's best estimate, the 6.5% Segal Blend rate did not, and the Fund must employ a higher rate, thus decreasing the withdrawal liability of the employer. The arbitrator upheld the use of the Segal Blend rate and the case went to trial, where the Southern District of New York reversed the arbitrator, finding that the Segal Blend runs afoul of the statutory requirement to use a discount rate that reflects the actuary's best estimate of anticipated plan experience. The Fund appealed, but the case was dismissed with prejudice due to an obvious settlement.

The dismissal of the case means that the Southern District of New York's opinion still stands, but the opinion will not be binding authority for many employer withdrawals. The opinion can be useful for employers to challenge the use of the Segal Blend, while the District of New Jersey’s decision upholding the use of the Segal Blend in Manhattan Ford Lincoln, Inc. v. UAW Local 259 Pension Fund will assist funds defending their use of the Segal Blend. That case was also settled before it made it to the next level of appellate court.

See Gregory J. Ossi & Christopher R. Williams, In with a Bang and Out with a Whimper: Second Circuit Challenge to Popular Withdrawal Liability Calculation Method Settles, National Law Review, September 18, 2019.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink


Post a comment