Trs. of IAM Nat'l Pension Fund v. M & K Emp. Sols.

Decision Date28 September 2022
Docket Number1:21-cv-02152-RCL
CourtU.S. District Court — District of Columbia



No. 1:21-cv-02152-RCL

United States District Court, District of Columbia

September 28, 2022


Royce C. Lamberth, United States District Judge.

This case requires the resolution of several classic legal issues: the propriety of judicial review, appropriate timing of a counterclaim, and several difficult issues of statutory interpretation. The cause for these questions is the Employee Retirement Income Security Act (“ERISA”) and its many provisions aimed at maintaining the stability of multiemployer pension plans (“MPPs”). Nationally, MPPs manage many billions of dollars in assets and serve millions of current and former employees. IAM National Pension Fund (“IAM”) is one such plan. Through its trustees, it seeks confirmation in part and vacatur in part of an arbitration award resolving two discrete issues governing the calculation of liability to be assessed a former employer-participant in the plan. That former employer, M&K Employee Solutions, LLC (“M&K”), is the defendant in this action and seeks to keep IAM's lawsuit out of the courts, or alternatively, to vacate in part and confirm in part the award. After a deep dive into ERISA's labyrinthian statutory scheme, the Court concludes that it may review the award in full and holds that the arbitrator erred as a matter of law on the issues submitted to him by the parties. Accordingly, the Court will VACATE the award and REMAND to the arbitrator for further proceedings consistent with the Court's memorandum opinion.



This Court has previously explained much of the background on the relationship between M&K and IAM as well as the circumstances underlying M&K's withdrawal across three separate opinions in a related case.[1] Therefore, a truncated review of the framework surrounding MPPs, followed by the background of the case at hand and its procedural history, is sufficient for present purposes.


In 1974, Congress passed ERISA “[t]o ensure that employees who were promised a pension would actually receive it.” United Mine Workers of Am. 1974 Pension Plan v. Energy W. Mining Co., 39 F.4th 730, 734 (D.C. Cir. 2022). One type of pension plan is an MPP, which is “maintained pursuant to a collective bargaining agreement between multiple employers and a union.” Id.; 29 U.S.C. § 1002(37)(A) (defining MPPs). Unlike single employer pension plans, operated for the benefit of a single employer, MPPs are designed to serve many different employers “mostly in industries where there are hundreds or thousands of small employers going in and out of business and where the nexus of the employment relationship is the union that represents employees who typically work for many of those employers over the course of their career.” United Mine Workers, 39 F.4th at 734 n.1.

In the late 1970s, legislative attention turned to ERISA's inadequate protection of MPPs “from the adverse consequences that resulted when individual employers terminate their participation in, or withdraw from, multiemployer plans.”


Pension Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 722 (1984). Specifically, in ERISA's original formulation, employers in MPPs were generally free to withdraw from MPPs without an ongoing obligation to support the plan-even as workers retained earned benefits. See United Mine Workers, 39 F.4th at 734 & n.2. That put MPPs under significant financial stress. Id. at 734-35.

So, in 1980, Congress added new obligations for employers withdrawing from MPPs with the passage of the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), codified at 29 U.S.C. §§ 1381-1461. The MPPAA was designed “to ‘protect the financial solvency of multiemployer pension plans'” by implementing “withdrawal liability.” IAM PI III, 2022 WL 594539 at *1 (quoting Bay Area Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal., 522 U.S. 192, 196 (1997)). Withdrawal liability “requires that an employer withdrawing from a multiemployer pension plan pay a fixed and certain debt to the pension plan.... [Comprising] the employer's proportionate share of the plan's ‘unfunded vested benefits,' calculated as the difference between the present value of vested benefits and the current value of the plan's assets.” R.A. Gray, 467 U.S. at 725 (citing 29 U.S.C. §§ 1381, 1391). That liability is determined “as of” the last day of the “Plan Year” prior to the “Plan Year” during which the employer withdrew. 29 U.S.C. § 1391; Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 417-18 (1995). Thus, a withdrawal during the 2018 Plan Year would generate liability based on the unfunded vested benefits as of the last day of the 2017 Plan Year. That last day of the Plan Year is referred to as the “measurement date.”

Upon an employer's withdrawal from an underfunded MPP, “[t]he MPPAA calls upon a plan's trustees, not the employer, to propose the amount of withdrawal liability and orders the trustees to set a payment schedule.” IAM PI III, 2022 WL 594539 at *1; 29 U.S.C. § 1382. When calculating that liability, a plan actuary “must make numerous assumptions,” such as “how long


employees will work and how long retirees will live,” as well as the “discount rate, i.e., the rate at which the plan's assets will earn interest.” United Mine Workers, 39 F.4th at 735. If there are no specific regulations on the issue, plan actuaries are required to use “actuarial assumptions and methods which” (1) “in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations)” and (2) “in combination, offer the actuary's best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393(a).

If an employer wishes to dispute the liability calculation generated by the trustees, the employer “may timely initiate a dispute-resolution procedure, first by requesting review from the trustees and later by pursuing arbitration.” IAM PI III, 2022 WL 594539 at *1 (citing 29 U.S.C. §§ 1399(b)(2), 1401(a)(1)). “[A] plan's determination of unfunded vested benefits ‘is presumed correct unless a party contesting the determination shows by a preponderance of the evidence that' either ‘(i) the actuarial assumptions and methods used in the determination were, in the aggregate, unreasonable (taking into account the experience of the plan and reasonable expectations), or (ii) the plan's actuary made a significant error in applying the actuarial assumptions or methods.'” United Mine Workers, 39 F.4th at 735-36 (quoting 29 U.S.C. § 1401(a)(3)(B)). Furthermore, “[t]he court must apply a ‘presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct.'” Id. at 736 (quoting 29 U.S.C. § 1401(c)).

“Upon completion of the arbitration proceedings in favor of one of the parties, any party thereto may bring an action . . . to enforce, vacate, or modify the arbitrator's award.” 29 U.S.C. § 1401(b)(2).

B. IAM's Operations and Actuarial Valuations

IAM is a qualifying MPP within the requirements of ERISA. Arbitration Stipulation Undisputed Facts ¶ 1, ECF No. 1-2 at 2-9. IAM “provides retirement benefits to employees who


performed covered work for employers that remitted contributions to the Fund in accordance with collective bargaining agreements with the International Association of Machinists and Aerospace Workers, AFL-CIO (or with affiliated local or district lodges).” Id. ¶ 2.

IAM's actuary prepares actuarial valuations and calculates withdrawal liability for employers withdrawing from IAM. Id. ¶¶ 9-10. In that role, the actuary must prepare actuarial valuations for a Plan Year which runs from January 1 to December 31. Id. ¶ 11. These valuations are made after the Plan Year concludes. Id. For example, the actuarial valuation for the 2016 Plan Year was produced on November 2, 2017. Id. ¶ 12. When computing the actuarial valuations, IAM's actuary must use a discount rate, along with other methods and assumptions, to determine the required calculation of unfunded vested benefits. Id. ¶¶ 12-15. The 2016 Plan Year actuarial valuation concluded that, as of the end of the 2016 Plan Year, IAM had unfunded vested benefits of $448,099,164. Id. ¶ 13. That calculation was based on a 7.5% discount rate and investment return assumption. Id. ¶ 14.

On January 24, 2018, IAM's actuary met with the Board of Trustees of IAM to review assumptions and methods used in making actuarial valuation calculations. Id. ¶ 15. After that meeting, “[IAM's actuary] changed various methods and assumptions used to calculate withdrawal liability for employers that effected a withdrawal from the Fund during the 2018 Plan Year, including reducing the discount rate from 7.50% to 6.50%.” Id. ¶ 17. When IAM's actuary subsequently calculated the actuarial valuation for the 2017 Plan Year, it used the 6.5% discount rate and 7.5% investment return assumption-a discount rate only adopted following the meeting in January 2018. Id. ¶¶ 17, 21. The actuarial valuation for the 2017 Plan Year then showed unfunded vested benefits of $3,043,369,928. Id. ¶ 20.


C. M&K's Relationship with IAM and M&K's Withdrawal

M&K Employee Solutions, LLC-Alsip (“M&K Alsip”), M&K Employee Solutions, LLC-Joliet (“M&K Joliet”), and M&K Employee Solutions, LLC-Summit (“M&K Summit”), along with the defendant, M&K, were a single employer for purposes of ERISA from October 1, 2012 through December 31, 2018. Id. ¶¶ 22-23. M&K Alsip, M&K Joliet, and M&K Summit were all parties to separate bargaining agreements that required them “to remit contributions to [IAM] on behalf of their respective employees who performed covered work.” Id. ¶ 24. Those obligations began in October of 2012 and “were renegotiated and extended on several occasions.” Id. ¶¶ 2526. Each permanently...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT