Trs. of the IAM Nat'l Pension Fund v. Ohio Magnetics, Inc.

Decision Date06 February 2023
Docket NumberCivil Action 21-928 (RDM),21-00931 (RDM),21-02132 (RDM)
CourtU.S. District Court — District of Columbia

OHIO MAGNETICS, INC., et al., Defendants.

Civil Action Nos. 21-928 (RDM), 21-00931 (RDM), 21-02132 (RDM)

United States District Court, District of Columbia

February 6, 2023


Randolph D. Moss United States District Judge

These consolidated cases require the Court to interpret various provisions of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., a prospect that can send chills down the judicial spine. But Judge Richard Posner, invoking a quote from Oliver Wendell Holmes, offers words of comfort to judges required to give meani0ng to ERISA's arcane terms. See Chicago Truck Drivers Union v. CPC Logistics, Inc., 698 F.3d 346, 353 (7th Cir. 2012). As Justice Holmes wrote to the English jurist Sir Frederick Pollock in a very different time and context but in words that, as Judge Posner notes, are apt to judicial efforts to interpret ERISA: “I am frightened weekly [by seemingly hard cases,] but . . . when you walk up to the lion and lay hold[,] the hide comes off and the same old donkey of a question of law is underneath.” Id. (quoting 1 Holmes-Pollock Letters: The Correspondence of Mr. Justice Holmes and Sir Frederick Pollock, 1874-1932, at 156 (Mark De Wolfe Howe ed. 1941)). This is such a case. The complexity of the statutory regime and the intricate calculations required to implement it are, at first, daunting. But once that “hide comes off,” both the question presented and the answer to it are readily discernible. Id.


The present dispute began in 2018, when three companies-Ohio Magnetics, Inc., Toyota Logistics Services, Inc., and Phillips Liquidating Trust (successor in interest to the Phillips Corporation) (collectively the “Defendants” or “Companies”)-withdrew from the IAM National Pension Fund (the “Fund”). Dkt. 34-2 at 5 (Pl.'s SUMF ¶ 20); see 29 U.S.C. § 1383(a).[1] The Companies' withdrawal entitled the Fund to assess withdrawal liability against each of them. 29 U.S.C. § 1381. Simplifying somewhat, withdrawal liability is a charge equal to each company's proportionate share of the unfunded pension benefits to which workers participating in the pension plan associated with the Fund have a vested interest. Id. § 1381(b)(1). Pension funds retain actuaries to calculate withdrawal liability, and the Fund's actuary did so here, basing its calculations on certain actuarial assumptions that it adopted on January 24, 2018. Dkt. 34-2 at 6 (Pl.'s SUMF ¶ 22).

The question presented here is whether the Fund's actuary was permitted to use the assumptions that it did in calculating the Companies' withdrawal liability. The Companies say that the actuary was not permitted to do so. They contend that because they withdrew in 2018, the actuary was required to use the assumptions that were “in effect” on December 31, 2017 to calculate their liability. Dkt. 37 at 5. For support, they point to provisions of ERISA that require liability for a withdrawing employer to be assessed based on a fund's unfunded vested benefits “as of” the end of the year prior to that in which the employer withdraws. Plaintiffs, the Fund's trustees, disagree. They maintain that, under the very same statutory provisions, the Fund's actuary was free to set its assumptions at any time and, in so doing, to consider any and all


events occurring up to the time it made its withdrawal liability calculation, including events occurring after December 31, 2017. Dkt. 34-1 at 7.

The Court disagrees with both positions. It concludes that ERISA provides actuaries more flexibility than the Companies posit but less than they would have under the Trustees' theory. Because the Court's reading of the statute is at odds with those of the arbitrators whose awards are under review-all of whom sided with the Companies-the Court will GRANT Plaintiffs' motion for summary judgment, Dkt. 34, DENY Defendants' cross-motion for summary judgment, Dkt. 38, VACATE the arbitration awards, and REMAND the cases to their respective arbitrators for further proceedings consistent with this opinion and to resolve any further challenges to the withdrawal liability assessments.



In a multiemployer pension plan, multiple employers make financial contributions to the same general trust fund, and the money in that fund is used to provide for the pensions of the various employers' employees. 29 U.S.C. § 1002(37); see Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 605-06 (1993). These plans are maintained in accordance with collective bargaining agreements between the employers and a union and are governed by the provisions of ERISA. United Mine Workers of Am. 1974 Pension Plan v. Energy West Mining Co., 39 F.4th 730, 734 (D.C. Cir. 2022). Among other things, ERISA requires employers participating in multiemployer plans to “contribute annually to the plan whatever is needed to ensure it has enough assets to pay for the employees' vested pension benefits when they retire.” Id.


An employer who participates in a multiemployer plan is free to withdraw from the plan and to terminate its obligation to make annual contributions. 29 U.S.C. § 1383. But an employer's withdrawal does not divest any worker enrolled in the plan of the pension benefits he or she has earned; the fund and its remaining contributors must still provide for the vested pension benefits of all its participants. See Energy West, 39 F.4th at 734-35 & n.2. This structure can create perverse incentives: if a plan's funding begins to lag-say, because a market downturn decreases the value of its assets-participating employers will be required to make larger annual contributions in order to comply with ERISA. Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 416-17 (1995). And as required annual contributions grow, so too does the incentive for participating employers to withdraw. Id. Withdrawals further exacerbate funding shortfalls, and a shortfall-withdrawal-shortfall cascade can send a plan into a “death spiral.” Energy West, 39 F.4th at 734. ERISA created a federally chartered insurance corporation, the Pension Benefit Guaranty Corporation (“PBGC”), to backstop troubled pension plans and to head off death spirals. 29 U.S.C. § 1302. But, in practice, the existence of this safety net only further encouraged withdrawals and threatened to stretch the PBGC's obligations beyond its means. See Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 214-15 (1986).

Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 (the “MPPAA”), Pub. L. 96-364, 94 Stat. 1208, to address this problem. To ensure that employers pay their fair share (and to discourage strategic withdrawals) the MPPAA requires withdrawing employers to pay for the privilege. 29 U.S.C. § 1381. Under the MPPAA, an employer that withdraws from a multiemployer plan must pay “its pro rata share of the pension plan's funding shortfall,” also known as its withdrawal liability. CPC Logistics, 698 F.3d at 347; 29 U.S.C. § 1381(a), (b).


More specifically, withdrawal liability is imposed based on “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.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 725 (1984) (quoting 29 U.S.C. §§ 1381, 1391); see 29 U.S.C. § 1393(c).

Withdrawal liability is a function of both known variables and indeterminate assumptions. For instance, when calculating withdrawal liability, a plan's actuary knows how many employees are enrolled in the plan and what benefits their pensions provide. But the actuary must estimate, among other things, how long these employees will work and how long they will live. Energy West, 39 F.4th at 735. The assumption with the greatest effect on the withdrawal liability bottom line is the rate at which the plan's assets will grow “by the miracle of compound interest”-that is, the discount rate. CPC Logistics, 698 F.3d at 348. The higher the discount rate, the faster the fund's assets are projected to grow on their own, and thus the smaller the present value of the plan's liabilities, the lower the funding shortfall, and the less a withdrawing employer's withdrawal liability. See Id. And, conversely, the lower the discount rate, the slower the assets are assumed to grow, and thus the greater the present value of the plan's liabilities, and the more a withdrawing employer must pony up. See Id. The MPPAA requires plans calculating withdrawal liability to use “actuarial assumptions and methods which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393(a)(1).

Of particular importance here, the statute also requires that withdrawal liability be calculated “not as of the day of withdrawal, but as of the last day of the plan year preceding the


year during which the employer withdrew,” also known as the “measurement date.” Jos. Schlitz Brewing Co., 513 U.S. at 418 (citing 29 U.S.C. §§ 1391(b)(2)(A)(ii), (b)(2)(E)(i), (c)(2)(C)(i), (c)(3)(A), and (c)(4)(A)). So, for a plan operating on a calendar year, withdrawal liability is based on the plan's unfunded vested benefits “as of” December 31 of the year before the year in which the employer withdraws. Id. This is true regardless of when in the year the withdrawal takes place. Employers who withdrew from a calendar year plan on January 1, 2022, June 30, 2022, and December 31, 2022, would all be liable for their share of the plan's unfunded vested benefits “as of” December 31, 2021. 29 U.S.C. § 1391(b)(2)(E)(i).

Congress apparently adopted “this calculation date” to foster “administrative...

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