M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund

Mr. Kineely? Thank you, Mr. Chief Justice, and may it please the court. Section 1391 creates a clear timing rule. With draw liability is based on the plan's unfunded vestative benefits as of the end of the prior year. The statute then defines unfunded vestative benefits,

as the value of the plan's non-forvitable benefits minus the value of the plan's assets.

That first number is the present value of decades of future pension payments.

“So the assumptions that the plan actually where he makes about the future are a crucial part of what determines that number.”

Changing the assumptions changes the present value and thus changes the amount of unfunded vestative benefits. But under the statute's timing rule, that amount is frozen on the valuation date. Later changes in that amount cannot factor into the employer's liability. That's just as true for changes caused by new assumptions as it is for changes from any other component of the computation.

Respondents argue that until recently, actually worries have often selected with draw liability assumptions after the valuation date.

It's not clear that that's true, but even if it is, it doesn't alter the meaning of the statutory text.

“And respondents themselves can see that plans and actuaries can readily comply with our reading of the statute and in recent years have started to do so.”

That makes sense our reading promotes predictability and consistency through a clear and simple rule. Respondents reading does the opposite. For them, actuarial assumptions can be changed anytime, including after the employer withdraws, even if the change triples or quadruples, what the employer believed it would owe.

There's no reason to read the statute as creating so much uncertainty.

I welcome the courts' questions. More petitioners are surprised by the valuation that they know about it before they withdrew. The records not clear for all of the petitioners, several of the petitioners did receive estimates in 2018 that used the new assumptions, but they were surprised when they received those estimates to see that the discount rate used was not the one that they understood the plan to have had in the prior year. So as the discount rate, the major factor in the cost of the financial.

Yes, it is your honor and that's because of the compounding of interest over time and has an exponential effect on the amount. What is the exact language that you're relying on that pegs us as the date, the valuation of the valuation? It's the language in 1391 unfunded vested benefits as of the end of the, as of the end of the plan year preceding the plan year in which the employer withdraws. So additional language setting the same date in different parts of the statute, but it's that as of the end of the plan year that is the cut off date under the statute.

What if, I'm not even sure this applies to this thing, but let's say on January 31, you know, the companies have given in all their information. And I mean December 31st and on January 1st, one of the companies males in and saying, you know, we forgot to count all of our accountants, you know, because they're based somewhere else.

“There's there's 55 of them, you should add them to the numbers we sent you.”

Can the pension fund do that? Yes, you're on the key, the key point in our view of the statutory language is that all of the inputs that go into the computation of unfunded vested benefits have to be frozen or fixed on the December 31st date. And so there are objective facts out in the world like the amount of plan assets or the number of retirees, those are all just facts out in the world that can't be changed because of what someone thinks about them. But actually our assumptions are fundamentally unlike that. They are judgments not only about 10 to 40 years of future experiences of the plan, but they can often embody normative judgments as well, such as how withdrawing employers should.

Should bear the cost of the plans under funding relative to the employers who continue to contribute to the plan. So numbers that should have been counted but weren't as of December 31st, you can't go back and put those in, but assumption about how you should calculate. For example, numbers of employees when you can't just go by and count them, that you can't change that. So I don't think there's an assumption about the number of employees, but the line I would draw is between the facts that are immutable, that are out in the world, they're objective facts and the things that are actually the product of the mental judgment of a particular person, the actuary that's hired by the plan to play this role.

Why would that be because you acknowledge the chief justice that the facts can come in later, so long as there has of December 31st?

And actually trying to figure out what the unfunded vested benefit is, you know, and has to calculate out in the future given that set of information, you can't use different information. So what's impermissible about that? I mean, he's trying to figure out what the appropriate discount rate is given the information on December 31st.

“I think the difficulty with that your honor is that it defines actual assumptions to narrow away. They don't only predict an objective way what the plans experience over decades will be.”

When, as here, the assumptions we're dealing with are specific to withdrawal liability, they also reflect the actuary in the plan's preferences for policy decisions such as the relative burden borne by withdrawing employers versus contributing employers.

And so it's not simply an objective assessment of what's true out in the world, it's actually changing what the plan's approach normatively will be.

Does that help you or hurt you? I mean, is it your argument that the actuary who is making these kinds of judgments that are themselves not really engaged?

“Because they're not just the hard data. I see that and I think the other side would agree, but why then can't the actuary be making those judgments later?”

Isn't the as of only with respect to the hard data and the things that the actuary then needs to look at in order to be making his judgment?

No, you're on our under the text, unfunded vests of benefits are the thing that's as of the measurement date. And unfunded vests of benefits are defined by section 1393C as the present value of non-fourth literal benefits minus the value of plan assets. No one thinks that changes in the value of plan assets after the measurement date could factor into an employer's withdrawal.

“I understand, but the question here is whether the assumptions that the actuary is making in order to assess the value of the unfunded vested benefits have to be selected.”

These assumptions have to be made during the plan year or whether those assumptions can come later. And what is confusing me about your argument is that I understood from the statute that the statute at times requires annual reporting of this information. I'm sure these are doing this on an ongoing basis, not just with withdrawal. And the statute gives like seven months after the end of the plan for this information about unfunded benefits to come in with respect to these annual reports, suggesting that even Congress understood that it was going to take a while.

So there are things that are assessed retrospectively in that seven month period. So why isn't that just what's happening here and the fact that that is the way the statute works undermines your view that those calculations have to be and assumptions have to be made in the actual plan year. In the reporting requirements in a risk of your honor, there is no specific valuation date that plans are required to use when preparing their form they're doing annual reports, right? So it's not the previous year.

They get to choose a valuation date within the previous year in the month before. So it's up to them. It's not specified in the statute. 1391 is very clear that there is a specific valuation date that has to govern the calculation of withdrawal liability. And our view is that to apply that rule that as of language consistently, all of the inputs that go into the computation, including the assumptions which really are an input. But they're part of what to actually plug into the model. But you said that you already said that the assumptions are something else that they are the actuaries best judgment based on of what the future performance of this plan was going to be.

I was with you on that. And so as a result, it seems to me that this is something different than the inputs. Well, I think it isn't input. It's kind of like the curve that a teacher might use in grading exams. It determines what the ultimate value will be. And in that respect, if you change that factor in the calculation, you'll end up with a different number. But it is an input. It does predict 20 to 40 years of future experience. It also embodies, as in this case, the PowerPoint presentation that actually presented to the trustees says that on jay 176 that there's a tradeoff between providing more protection to contributing employers versus being

In Judge Moss' opinion, which picked up on Judge Lamber's opinion, Judge Moss said that if a major economic shock altered the return profile of the plan's assets before the measurement date, but after the plan had issued its annual valuation for the prior plan near the companies, all would prohibit the plans actually from considering those events when calculating withdrawal liability and heat points out that that's intention with the word reasonable intention with the statutory word best to estimate.

And he says under your view, the actuary would be reduced to admitting that its assumptions were wrong.

You want to respond to that? Sure, you're on our. I think that that's an unrealistic view of how interest rate assumptions in this context work, because we're talking about retirement payments for two to four decades into the future, even a shock such as the 2008 financial crisis here, which you think if any market event would change actual aerial assumptions that would. That the plan has had the same 7.5% funding rate, and this is a point that the Chamber of Commerce makes in Samicus brief, before and after that stock market event, that's still not the kind of event that's going to change investment returns for three to four decades into the future, because over, you know, as we saw five years to ten years, the markets rebounded.

“I think it's unrealistic to think that there will be a market event in the final days of the year that the actuary can't take into account if it really is this sort of world changing of the point about the statutory terms.”

I think the terms reasonable and best estimate are, you know, hurdles for your position, because they don't imply something as specific as what your articulating. So how you deal with those two specific statutory provisions. So we read the statute as having two different requirements. The first requirement is a timing requirement that all of the inputs that go into calculating unfunded best benefits must be as of the measurement date. And then there's an additional requirement that the assumptions employed by the actuary have to be reasonable in the best estimate.

And if an actuary doesn't comply with both of those things, assessing withdraw liability, it hasn't fully comply with the statute. But there's a reason why you don't have any retroactivity language in 1393. That's the provision that specifically deals with the actuary all assumptions, but our timing rule applies not only to the actuary all assumptions, but to all of the inputs that go into the calculation. And more, which is the, before the second circuit decision, I understand it and you mentioned this and you're opening the other sides proposed methodology was the was commonplace and was the in place for several decades and you want to respond to that.

“I think that's true year-honor. All of the arbitrators, the US arbitrators that have dealt with this issue that we're aware of, and this goes back to 2008, have said that changing assumptions after the valuation date is inappropriate.”

We have the embassy industries decision in the joint appendix in this case.

They're relying a lot on a 2020 issue brief from the American Academy of Actuaries that seems to have been a direct response to the second circuit's decision.

And they're also relying on the actual standards of practice, which the relevant number 27 was first released in 1996. So there's absolutely no evidence at all before the court that before 1996 it's the very earliest actually where he's were doing this. And as I said, all of the arbitrations where this has come out, have come out our way. Before it is your understanding of input scope, 1393 talks not only about assumptions, but also about methods and deeds use that as one phrase assumptions and methods.

“So does your argument mean that an actuary also can't update the methods that they use?”

Well, they can always update them, of course. It's just a question of whether they can apply them in the initial year or more.

I think that methods would be part of the way that the computation is performed. There are additional requirements if the actually is changing allocation methods, 1394 deals with that specific issue. That doesn't govern the amount of the unfunded vestative benefits, however, that governs the proportion of those unfunded vestative benefits that are allocated to a particular employer. But I think our general position and I think we're consistent about this across all the inputs is that any decision that an actuary or plan makes that will change the amount of unfunded vestative benefits has to be made before December 31.

And that really doesn't pose much of a practical problem for plans. If you have a clear deadline, you know how to comply with it. And plans are the ones, of course, who hire actuaries and who can monitor whether or not they're sufficiently updating their assumptions. In this case, there was an ad hoc meeting in January of 2018 where they had a back and forth about what the assumption should be.

It's a very workable rule that we have, which is, if it happens before the end of the year, 1391 is complied with and we can move on. The DC circuit adopted this information available test, which I think is really going to create a lot of litigation and arbitration going forward whenever you have a change in assumptions. Because now the actuary will have to be deposed to figure out what exactly they were thinking about whether what they were thinking about was available in the relevant sense on December 31, whether they had their blinders on and didn't think about anything that happened after December 31.

“And we know that the MPPA was not designed to give rise to this sort of fact bound expensive to litigate controversy in withdrawal liability cases. I think the bright line rule we're suggesting is the best for accomplishing that.”

I guess the thing that concerns me a little bit about the rule that you're suggesting is that it seems to focus on or suggest that a change is being made. And you've said that many times you've said, you know, any decision that will change the amount of the UVB as though that amount was something that was longstanding, pre-existing, established by some other source or whatnot. I guess I don't know why that's the case. I thought as you said originally what is happening here is that when called upon the actuary is looking at a certain set of facts, hard beta about this plan and making a judgment about how it's going to perform in the future and for the purpose of the withdrawal liability, it's to tell people how much they need to pay.

Why then is that a change if it's being done after the plan year? I appreciate that they may have done it the previous year as a part of the annual report or whatnot, but it seems like each time they're doing it, they're making this kind of assessment on the basis of the state of the world at that point. So why the thrust of your rule or the suggestion that you're making seems to be driven by this notion that what's happening is any change that the -- are actually wants to make has to be done within the plan year.

“But he's not really changing. He's just looking at what happened in the previous year and making this kind of best judgment, right?”

Well, respectively, you're on our -- I disagree with that characterization. I think the idea of a change in actualary assumptions is well-rooted in Arissa in the minimum funding provision, which is 29 USC-1084. One of the things the actually where he is supposed to take into account when figuring out the life of the plan finances over the course of a year is the change in actualary assumptions that either causes a loss or gives rise to a credit to the plan.

That's just the same concept applied in a different -- for a different substance or something.

But you're saying he has to do it within the year. The data is still coming in. I mean, isn't he making a judgment about how this plan is going to do? How could he possibly do it reliably and consistently and reasonably if we don't know what has happened for that entire year?

In practice, it's because the types of data that change at the end of the year don't have a 10 to 40 year effect on the plan's future experience.

Whether they have X number of retirees doesn't change how much the plan's investments are going to return. If there were a major change in the plan's investment portfolio, as happens, if a plan is about to go and solve it and they need to move everything into cash so they can continue to play benefits as long as possible, that's the kind of major change that a plan trustee would know about and would be able to tell the actuary in December. January, whenever it happens, look, we're about to make this change and you need to account for that.

In terms of this plan's performance, I think under your rule, they would have to ignore that, right, because it didn't happen during the plan year, and I guess how is that consistent with Congress's statement that the actuary is supposed to be making their best judgment?

“Well, I think even under the DC circuits rule, if it happens in January, they can't take into account that for the December 31 assumption and that's how I read the DC circuits as of information available as of test.”

I think that if the actuary ever thinks that something significant has happened enough that I need to revise my actuarial assumptions, they can always do that.

It doesn't take a end of your process, it can happen at any point in time, it doesn't have to happen through particular formalities, and they will do that if there's something major. The great example, the data is still unclear whether COVID has had any long-term effect on life expectancy and experts go both ways on that, and we're years out from the original event.

We have to do it as soon as practical, but sometimes in practice, that's years down the road, and under their view, even years down the road, the actuary could be revising the actuarial assumptions.

Even if some employers were charged with their all liability under those assumptions for withdrawal during the same year, there's no limiting principle to that argument. If in Congress is demonstrated concern about retroactive changes in such things as the de minimus reduction or switching between allocation methods, and the de minimus reduction section 1389 is a question of about $100,000 to a given employer. The idea that they would have been completely unconcerned about millions of dollars of a delta by changing the actual assumptions is really hard to swallow.

Does that your answer apply? I mean, as I understand that anyway, we're talking about companies leaving, and you're trying to calculate their liability.

And let's say the calculation was done under a particular assumption. They found whatever it is they have to do.

And then you find out in January that the numbers were way off, excuse me, because a particular assumption was used when a different assumption should have been used, or because the accounting board, you know, you should a new report in January saying, this is how you're supposed to calculate it to get the most accurate determination, not the way you did it. And you still stick with the numbers in January?

“I think it makes sense. I think you have to your honor. Otherwise, there would be no limits to what information could be factored in retroactively.”

Even years down the road for an employer who thought they had withdrawn and thought that their liability would be acts, it's actually four or five X, depending on the change in assumptions it's made.

And I don't think Congress designed the statute to work that way.

Well, what if the assumptions that, whether the numbers that were used, it turned out to be, you know, grossly unfair, given the more accurate means of determining what those numbers should be that comes in in January? But I think that the numbers we're talking about again are like what will the investment portfolio of the plan return over the next 20 to 40 years? Those numbers aren't necessarily fair or unfair. They're supposed to just be neutrally predicting the future. And actually, where he's due that year to year for all sorts of reasons under Arissa, so they will be aware of what the assumptions should be adjusted to do if there are any assumptions changes that need to be made.

But usually assumptions and our friends on the other side admit this remained stable from year to year. These aren't things we're fine tuning a little bit here and there all the time. Well, and maybe I'm just repeating the question my colleague just asked that there must be situations where it is a more dramatic change. Whether it's COVID or, you know, I don't know, the start of World War II, Pearl Harbor. It seems to me that there ought to be some bases where there are assumptions that were made are fairly, are dramatically different.

“And the liability is placed on the company as of the time they depart, right?”

You know, as of the end of the prior year, December 31st. Right, Congress chose not to make it the date of the withdrawal. And I think they did that. So every withdrawing employer who draws in the same year will be charged the same amount of withdrawal liability. But under respondents reading the statute, there's no reason that has to be so. And actually where he can always say, I actually thought about it further and I think that assumptions should be changed. So even though we've already assessed these employers, we're going to assess this new employer, this other employer, a higher amount, that would be perfectly permissible under their rule.

And the plan could even hire a new actuary because they don't like the assumptions that have been sent out in that prior bills for a given year. Nothing in their reading of the statute would prohibit any of those things.

“But you could also challenge those things in arbitration, correct?”

So there's a mechanism, there's a remedy for the problem that you just addressed. Well, no, I was imagining a scenario where the new actuary sincerely believes that the other assumptions are the right ones. You have the ability in the statute for any assessment of actual assumptions to be raised in arbitration. So you have the argument that this is unfair. Other people were charged to different rate. This is a new actuary who doesn't know what he's doing. You can raise all of those things in arbitration, right?

Yes, and our point is just that we also think that the requirements in 1391 have to be raised, something you can raise in arbitration as well. Thank you council, Justice Thomas, this is Alito. There was no withdrawal liability here that was calculated based on post withdrawal changes to assumptions, correct?

Yes, in this case.

So that's, and two of the four employers you represent got the correct calculation, correct, under the new assumption.

“Yes, one didn't even ask, and only one who asked a year before got the use of the old assumption, correct?”

That's correct, you're on it. All right, you're asking for a rule that they have to use a calculation or an assumption that has been previously arrived at before December 30, correct? Correct. But the calculation required is as of December 31st. So there will have been and can be changes that occur between that old assumption calculation and even under your best theory, December 31st.

So if the old assumption was done the prior summer, the prior January as of December 31st, some things will have changed. Under your calculation, under your theory, they can't look at that, correct? No, you're on it. Our theory is that things won't have changed enough to warrant a revision in terms of assumptions on your part. But if the reality could be mortality table.

If that does happen, they can make the change throughout the end of the year. There's no reason they have to wait until January. Why does this sound like 1399, C1, a Roman rule number two? There it requires a determination of the amortization period for paying withdrawal liability to be called based on the assumptions used for the most recent, actually aerial valuation of the plan.

Congress knew how to fix the use of assumptions to a particular date. It didn't do it here. Why shouldn't I assume it didn't mean to do that here?

“Well, I don't think in our view you have to use the last valuation assumptions when assessing our calculating unfundive estimates.”

You could change them in December, and if you're the actually wary, that would be fine. And why should we do it? Well, I think that is what Congress did. And they can't do that in 1399 C as you're on it was quoting. They have to use something that was previously reported to the government regulators.

Thank you. Okay. Just as far as it's. Just as camera.

In the second circle of opinion, Judge Winter explaining that the other side's position presents opportunity for manipulation.

Is succinctly elaborate on what your concern is on that because there's a lot of debate in the amicus briefs on that point. Yes, Your Honor. So under the statute, the assumptions are really supposed to be the actually where he's own assumptions. And they're not supposed to be the trustees assumptions.

“But in practice, and I think a J.A. 175 is illustrative of this.”

Actually, where he's know their clients have preferences about such things. They're supposed to be able to sit input from their client the trustees on what assumptions would be appropriate for withdrawal liability purposes. In addition to that, which I think is one of the concerns. Trustees can also hire a new actuary as happened in Metz. They had one actuary who had been in place using one set of assumptions for many years.

And then after the date of withdrawal, a newly hired actuary came and cut down the discount rate assumption by almost half. And that quadruple be amount that the employer owed. That could happen under respondents rule any time. How to, I think Justice Jackson lived this. An employer could still challenge, for example, the switch from 7.5 to 6.5 as being unreasonable or not the best estimate correct.

They could, but it would be difficult. In many cases, because there's a range of acceptable assumptions that actually where he's can use. And they're like, I just want to make sure they can't. They could procedurally can't do regularly. It's not that regular actually.

Not regularly, I shouldn't have added that, but they can't do that. In theory, they can do that. And then how much money is involved in this case for the foreign employers?

Just the total amount that they were assessed is about $10 million.

And under the correct assumptions, interview, the amount would have been something more like a third of that. Okay. Justice spirit. Justice Jackson. Thank you, Council.

Mr. Roberts. No relation. Not at all. Thank you, Mr. Chief Justice, and may it please the court. I think the issue where the court is getting caught up on is as a textual matter of what the phrase as of means.

Because that's the key phrase in this case.

So the phrase creates a reference point for performing work at a later date, not a deadline by which the work must be completed.

It would be highly unusual for Congress to use a phrase like as of that contemplates work being done in the future to require actuaries to do work like select assumptions before the measurement date. That's just not what as of means.

“And that's how actuaries have interpreted the phrase for 40 years or so.”

We have our amicus brief in which the actuaries talk about this. This is well established practice, selecting assumptions after the measurement date. There are a couple of cases where this comes up. The cones case that we cite. There's a UMW case that's cited in the HR policy brief.

So there's examples where actuaries have selected in the past assumptions after the measurement date. The other thing I'll point out our reading of as of that it requires work to be done in the future, not before the reference date, is consistent with how that phrase is used throughout the law. So for instance, an eminent domain case is a calculation of the property value is done as of the date of the taking. Well, all of the work is done after that date, including making value judgments and selecting assumptions, including, by the way, selecting a discount rate.

“Because in eminent domain cases, you need to account for the time value of money.”

So everything that happened in this case in which the actuaries selected the assumptions. A mere three weeks after the measurement date is consistent with the concept of the phrase as of its consistent with longstanding actual practice. And it's consistent with other areas of the law that use the phrase as of. By us grounding their assumptions on the plans anticipated experience as of the measurement date, the actually did what the statute requires, which is calculate UVBs as of the measurement date.

Any limit to that temporarily or just volume wise quantitatively? Limit in terms of when the assumptions can be selected. Yes, so the statutory scheme accounts for that. My brother here is talking about things happening years and years in the future. That's not how it would work under the statute.

So first under 13, section 13, 99, the employer has to assess withdrawal liability within a practicable amount of time.

From the time of the withdrawal. That is a limit. And so in order to assess liability, the actually has to calculate the UVBs, which means the actually has to select the assumptions. So within a basically reasonable time of withdrawal, the actually has to select the assumptions. There's another built-in limitation in the statute, which the court talked about in the Bay Area laundry case, which is that plans have a strong incentive to assess liability as soon as possible, so they can get paid as soon as possible.

The statute has set up so that even if an employer wants to dispute the calculation, they still have to pay first. This is all about maintaining the solvency of plans and ensuring their survival.

And so plans have an incentive to do these calculations quickly, and so that's a second limitation of the statute.

The other thing that I'll say is that there are these annual valuations that came up, which the actuary has to select assumptions before it can do these annual valuations. So this idea that it's going to be 10 years in the future that these assumptions are being -- that's not how the statute works. The statute has built-in limiting principles to ensure that there is a reasonable time between the measurement date and the date of selection of the assumptions. Mr. Canily argued that the DC circuit's rule leads to administrative ability problems.

Is he correct on that? I don't think so, Your Honor. So the issue with the DC circuit rule that's being referred to is addressing the secondary question in this case. So the primary question is can an actuary is it permitted to select assumptions after the measurement date? That's the primary question, and our position is yes. The question that follows from that, which you're alluding to Justice Alito, is what information can the actuary use when making those selections after the measurement date?

Is it allowed -- does it have to sort of stop its body of knowledge on the measurement date or can it consider subsequent events?

“And what the DC circuit said was, you have to stop on the measurement date.”

Anything that happens after that, the actuary should not consider, even though it's allowed to select the assumptions after the measurement date.

They have a given set of data, and they exercise their professional judgment and make projections based on a given set of data.

“All the DC circuit rule is saying is to stop the data set at the measurement date.”

This is the type of thing that we ask parties to do in the law all the time. So for instance, if there's an issue of whether someone acted reasonably, right, a jury has to consider the facts and circumstances at the time of the action. And it has to put out of its mind the subsequent, you know, potentially years worth of things that happened in order to decide if the action was reasonable at the time.

Even under this statute, the arbitrator who is can decide whether the assumptions selected were reasonable has to think about where the reasonable at the time they were selected.

So the arbitrator has to put out of its mind, you know, subsequent events. So I don't think there's anything unworkable about asking an actuary who's trained in exactly this type of, you know, profession to just consider events up through the measurement date.

“In any event, what you're calling the primary question is the only question before us, isn't that correct?”

That's our, that's our position, Justice Jackson, absolutely.

The question presented is purely about whether it is permissible to select assumptions after the measurement date.

The question, the secondary question on what information can be used, you know, the parties talk about a little bit in the briefs. Our position is, I think the United States is positioned as well, is that that question is not presented in this case. There's no circuit split on that issue, and it's not an actually an issue that would matter at all to the outcome of this case. Because, you know, it's a very limited factual record here, but what we do know is that the assumptions here were selected a mere three weeks after the measurement date.

And there is no record on this, but it will show, eventually, if the other side brings a challenge in arbitration following this case, it will show that nothing happened during that three week period. It actually doesn't matter for this case, whether the actually wearing based the assumptions on what it knew on January 1st or if it considered, because it didn't consider subsequent events. Another argument that Mr. Canily made that concerns me is that your rule will lead to disparate treatment of different employers depending upon the time when they withdraw.

So I don't think that's a concern, your honor. The way that the statute works is these incredibly complicated calculations are done once per year. And so this is the annual valuation and the UVBs are calculated as part of the annual valuation. And so what happens is when it's time to do the calculations, the actual way selects the assumptions, does the calculations, and then those calculations are used for withdraw liability for the rest of the year. That's -- that's -- we're not aware of any case in which someone has then gone back and redone all of those calculations. That's not really the way the statute's supposed to work.

We're not aware of any case of that ever happening. You know, could it happen? I'd have to think about that, but it's certainly not the way the statute is.

“That's what I wanted them. Meaning your rule, or the one you want us to announce, is they can change it. There's nothing in that rule that would stop them from changing it. Post withdraw.”

That's correct, you know. All right, so tell me what protects against that game'smanship. Well, I think the statute already has protections built into it. So any employer who wants to challenge its withdrawal liability assessment can in arbitration argue that the assumptions that were used in the calculation were either unreasonable, or they don't represent the actuaries best estimate of the plans anticipated experience. Now, that second prong there, that's a subjective test. The point of that test is if for some reason the actuary was pressured, or it made a decision that wasn't based purely on the actuary's professional judgment, well, then there is an avenue for challenging that.

So this concern about gamesmanship, the statute already accounts for concerns with gamesmanship. There's already a mechanism in place. But if the general rule is that the actuary can change assumptions, I don't know how we and it then becomes the fact based fight in every situation. It is a fact that would be a fact question for the arbitrator. That would be the employer would need to show that there was some sort of improper, you know, impropriety in the selection process. That's how that's how Congress set this up. Congress, and I should point out, by the way, that the fact that Congress chose actuaries to make these decisions also addresses some of this concern about gamesmanship.

So the mere fact that we have actuaries is a built-in protection in the statute in and of itself.

“And then you have these additional provisions, which Congress put in, just in case something goes wrong in the selection process of something unfair happens.”

There is the ability for the employer to challenge the assumption.

Mr. Kenyale was suggesting that those challenges aren't often made, that it's a very high bar, and that it's nice that people have that, but it's never going to be used in a lot of manipulation.

Can exist before you get to that point. I don't agree with that, Your Honor. There are cases, the Sofco case, the energy, West case, in which courts have struck down or asked actuaries to recalculate withdraw liability because they found that the assumptions were either unreasonable or didn't satisfy the best estimate requirements. So this is not a toothless standard by any means. You said at the beginning your position represented the well-established practice. There was some pushback on that, you know, so I can just elaborate on how we should think about that.

Yeah, so the, what we have, in terms of evidence to support that is we have the brief, the Amicus brief from the four largest actual firms who work in this space.

And, and they say that this is a longstanding practice. We cite in our brief to a an issue brief by the academy of actuaries in which they say this is how this is how we've always done it.

The other side hasn't put any evidence to contradict any of that. I also point out just the two cases. The reason there's, there's not a lot of case law in this timing issue, because everyone knew this wasn't an issue. And until Metz came up, all the actuaries selected the assumptions after the measurement data nobody thought twice about it. It's only been since Metz that this has become something that people talk about. So there's not a lot of case law that talks about that timing. What we've been able to find are a couple of cases where just in the background section, it tells you when the assumptions were selected.

And the cones case, if you look at the district workers and we cite the cones case in our brief, you got to go to the district court decision. That shows that the actuaries selected the assumptions after the measurement data. Nobody complained, because that was standard practice. And that, by the way, was back in, I believe 1981 or 1982, just a couple of years after the statute was passed. There's another case that we found recently, it's cited in HR policy, Amicus brief, it's the UMW case. And if you have to dig through the record a little bit, but it shows that in September of 2014, the actuaries selected assumptions for a June of 2014 measurement data.

So three months after the measurement data. Again, nobody complained about the timing, because everyone understood this is what it means to calculate something as of a measurement data. And you're casting mats as essentially creating the problem, understand your position on that judge winner who wrote that opinion. Very wise judge, very knowledgeable about these kinds of topics. So how did that get off track in your view?

“I mean, I think what mats should have done, right? The facts and mats on their face looked bad, right? The plan replaced its actuary and then the new actuary came in and the new interest rate used by the new actuary was dramatically different, right?”

And all of that happened after the employers had withdrawn, right? All the facts were looked really bad in that case. We don't have any of those facts in our case. I think so. And I think the right approach, I mean, the reason I went off the rails was because the arbitrator is the one who came up with the timing rule.

And then it went up on appeal so that that was the question in front of the second circuit is whether there was this timing rule.

I think the proper approach would have been to send it back to the arbitrator and tell the parties to use the mechanisms that Congress gave them. Congress would allow the employer to argue that something improper happened in the selection process. The plan had some, you know, had its hands all over this, you know, firing the actuary. When I bring that kind of a challenge, which they're allowed to do in arbitration, argue that the new rate is unreasonable. You're allowed to do that in arbitration.

“That's which should have happened in mats. I think, you know, that's just my view on that. Instead it came up with this rule that's completely a text rule.”

I think it's very interesting that if you read the Metz opinion, Metz doesn't rely on the as of language. It's not. There's really no textual holding at all in mats. It's all about this idea that the legislative history of section 1394, which doesn't even deal with assumptions. You know, shows some general congressional interest and anti retroactivity. It's exactly the opposite assumption that you would make normally when doing statutory construction. So there are there are lots of problems with the Metz decision.

Thank you, Council. Thank you. Mr. Marma. Mr. Chief Justice and made please the court. For decades, pension plan actuaries have selected their assumptions for withdraw liability after the measurement date.

Until the second circuit in mats became the first court to prohibit that practice.

That decision is wrong as various provisions of a resume clear. Section 1391's as of language plainly contemplates a retrospective determination of withdraw liability. And nothing in that section suggests a different rule for the underlying actuaries assumptions. Section 1393 explicitly governs the actuaries assumptions for withdraw liability without saying anything about timing. We're as section 1394 explicitly addresses retroactivity without saying anything about the assumptions.

Patricia's policy concerns lack merit as well, particularly in light of the longstanding contrary practice, and could not justify their timing rule anyway.

This court should navigate mats and affirm the judgment below. I welcome the court's questions.

“Do you agree with the respondent that there wasn't a problem until mats came along?”

I do agree and I would say to the point that was just being discussed about the extent to which this was common practice. We have all the evidence that my friend Mr. Roberts mentioned, but we also have evidence from other fields. All the various standards that we cite from the accounting field, a prezyl field at page 17 of our brief, talk about how it's appropriate in some circumstances to rely on events post-dating the evaluation date or the date of the relevant assessment. Informulating the kind of estimates and indeterminate inquiries that go into any kind of financial model or any kind of assessment.

So that's consistent with the general practice that Mr. Roberts was describing. You say that things were working well before mats have very serious practical problems emerged since mats. Or is it simply a matter of the fact that actuaries were used to doing things in a particular way and they don't want to change the way they've been doing it?

“I think it may be too early to tell Justice Leeto. These cases do tend to move rather slowly through arbitration.”

So it's hard to say how disruptive the mats rule has been. But mats as rule does necessarily deprive actuaries of the ability to account for a certain year-end information that becomes available only after the measurement date. So it's clearly disruptive in that sense. It's also disruptive potentially in the sense that it requires actuaries to use necessarily stale assumptions. So here, Petitioner's position is that the actuary was obliged to rely on actuary assumptions that had been employed in November of 2017.

Although November of 2017 is only a little bit before the measurement date here, those assumptions were keyed to the measurement date from the previous plan year to the end of 2016. So one of the upshots and one of the anomalies in Petitioner's position is that it would require the use of stale assumptions, which as we discussed in our brief is inconsistent with section 1393's best estimate requirement. You can understand can you how an employer though might not appreciate it. The discount rates changed after the withdrawal and jams them with many millions more dollars in withdrawal, I believe.

I certainly appreciate that just this cabinet, a couple of things on that. The decision withdrawal might be based in part on how much that liability is.

Yes, so first of all, one thing to note is that Petitioner's position is limited.

They're proposed timing rule is limited to the actuary assumptions. So they accept the fact that all the other inputs into the withdrawal ability to trigger. Got that, but the discount rate change itself could have many millions of dollars in impact for the withdrawing employer, correct? That's certainly true.

“I think another important provision here is section 1021L.”

That's the provision that entitles each participating employer in the plan to an estimate of the withdrawal liability that would be assessed. But I think it's quite important that that provision posits that the relevant employer with the drew in the previous year. So it's two years. Correct. And years before. The reason why I just discovered I think it's important is that it suggests that Congress intentionally chose not to force plans and their acturies to prematurely select their assumptions to early in the year simply because an estimate request has been made.

PBGC, what's going on with the proposed rule. So as far as I know it remains pending, it does not go to any site likelihood of an end to that.

Well, whenever you have like a presidential transition that affects the timeline for these things and rules do often just date for quite a while.

For present purposes, at least as it was proposed, would have no impact on the issues in this case because it wouldn't affect the timing. It would affect the substantive range of permissible discount rates to use and that would be promulgated under a different provision of section 393 than the one that we're dealing with here. I just wanted to add one quick point.

“I think I can offer the court a pretty basic hypothetical to show why a petitioner's position can't be correct.”

If I were determining my life expectancy as of 2025, that's one of the most basic actual assumptions you can make.

I would have my choice of which mortality table to use, mortality tables can vary in all kinds of ways. Demographically, they can be limited to men versus women, blue collar versus white collar workers. The mere fact that I made my choice of table in 2026 does not mean that I was failing to comply with the as of requirement of the inquiry. And as long as you accept that petitioner's position simply cannot be correct, it all turns on the meaning of as of.

And as Mr. Roberts was explaining, that's not what as of means.

Thank you council. Thank you. Roboto Mr. Canadian. Thank you, Mr. Chief Justice. I want to start with Mr. Roberts's point about they're actually being a timing guardrail under their reading of the statute. That as soon as practicable language from 1399C is not much of a guardrail at all, there are cases including the Heuber case as this court described in Milwaukee. We're two and a half years past between the withdrawal and the assessment.

And that two and a half years a lot can happen. A new actuary can come in and think very sincerely that their own best view about what the plans anticipated experience will be requires a much lower discount rate.

“And under their reading of the statute, that new actuary's views would have to control because that's what that actuary's best estimate would be.”

I think that the administrative ability of our rule in comparison to theirs is evident just from looking at the facts of this case. I think that Mr. Roberts said that the actuary's assumptions have to solely be that actuary's own judgment about the plans anticipated experience. The actuary's own presentation to the trustees reflected that the actuary wanted the trustees input on how to calculate withdrawal liability. If we lose here on remand, we will have to litigate, we will have to depose the actuary and figure out what exactly happened in that meeting and what whether that actuary's views were affected at all by that meeting.

The actuary actually went into the meeting proposing either a 7.5% or 7% rate. The fact that he came out of the meeting with a 6.5% rate, which had not been modeled in the presentation at all, will give rise to problems. That's just one example of the fact based litigation that will be necessary under my friend on the other side's view of the statute. And that won't be in just in this case, it'll be in all the cases going forward where there's a change.

“I think it's not a surprise that the four largest actuarial firms are in this court advocating for plan flexibility.”

The plans are the ones who hire the actuarial firms and obviously would prefer to have that flexibility as well. The actuary doesn't require any of these actuarial firms, but they're not immune to a client pressure as Professor Nott and describes in his Amicus brief, and indeed, the trustees are as concrete pipe describes, individuals with a statutory role in fiduciary obligation to look after the benefits of the plan, and that can readily, and in good faith, lead them to choosing actuaries that will increase withdrawal liability.

The other reasons why there haven't been many cases and one of the reasons why I disagree with Mr. Roberts' characterization that withdrawal liability assumptions have often been changed after the measurement date is because actuarial assumptions tend not to change at all. And I think that if we had seen anything to the contrary, the brief and opposition and the search stage brief by the government wouldn't have admitted that actuarial assumptions hardly ever change. The acts of meds did look bad, but there's nothing in the DC circuits will let alone the broader rule that my friends on the other side since really, really prefer that would prevent the facts from in-mets from reoccurring any time an actuar plan decided that it wanted to come down hard on withdrawing employers in the future.

There haven't been any problems since-mets. I think that the best evidence of that claim is the brief and opposition pages 16 through 17, and then the supplemental brief filed by respondents at 2 and 4.

The scenarios where actuarial assumptions change and require need to be changed in order to deal with changes in mortality are very rare, and there aren't any concrete examples of that in front of the court.

“To answer your question, Justice Cavanagh, about the PBGC rule, I think it's important to recognize what that rule is proposing.”

That rule is proposing to give a range of assumptions that can be selected in any circumstances, so that the safeguards that my friends identified, reasonableness, best estimate of anticipated experience.

Those wouldn't be implicated any longer if the PBGC rule is enacted, that rule would abrogate the soft co-case that Mr. Robert cited as his example for how those standards have teeth.

The PBGC rule would replace that part of the statutory inquiry, and the only thing that could protect a employer from getting a surprise bill, months or even years after the withdrawal, would be the timing rule that we argue is already inherent in the as of language in section 1391. Thank you.

Thank you, Council. The case is submitted.