Opinion
23-cv-5955 (AS)
07-31-2024
THE NATIONAL RETIREMENT FUND et al., Plaintiffs, v. DOMESTIC LINEN CONTROL GROUP, Defendant.
OPINION AND ORDER
ARUN SUBRAMANIAN UNITED STATES DISTRICT JUDGE
Breakups are never easy-whether with a romantic partner or a multiemployer pension plan. The jilted party might want to stick it to the one who walked away. But while all may be fair in love and war, the same is not true when calculating how much a withdrawing employer must pay for leaving a multiemployer pension plan. Rather, the plan must use an interest rate that reflects the plan's projected investment returns. The plan didn't do that here. For that reason, the arbitrator's decision rejecting the plan's calculations will be affirmed, with a remand solely on the question of remedy.
BACKGROUND
The National Retirement Fund and the Board of Trustees (collectively, NRF) administer the Legacy Plan of the National Retirement Fund (the Plan). Dkt. 30 ¶ 2. Domestic Linen is an employer that participated in the Plan. ¶ 4. But in 2017, it partially withdrew, and two years later, it withdrew completely. ¶¶ 6, 8. For both withdrawals, Domestic Linen incurred withdrawal liability, meaning it would have to pay the Plan its share of the Plan's unfunded vested benefits. ¶ 9.
When calculating Domestic Linen's withdrawal liability, Horizon, the Plan's actuary, used a 1.98% interest rate for the partial withdrawal and a 2.84% interest rate for the complete withdrawal. ¶ 27. These rates were significantly lower than the 7.3% interest rate Horizon used for calculating the Plan's minimum-funding requirements, which are used to determine how much participating employers must contribute. ¶ 30. Using these lower rates yielded a total withdrawal liability of $2,156,547. Dkt. 9-1 at 6. If Horizon had used the 7.3% rate, Domestic Linen's liability would have been much lower. Dkt. 31 ¶ 24.
The rates Horizon chose came from rates prescribed by the Pension Benefit Guaranty Corporation (PBGC) for calculating withdrawal liability when there is a mass withdrawal from a plan. Dkt. 31-2 at 2; Dkt. 34 at 2. The PBGC rates are calculated based on certain risk-free annuities, benefits, and assets because “[w]hen a plan undergoes a mass withdrawal, the plan must purchase annuities to cover the promised benefits unless the plan assets can be distributed ‘in full satisfaction' of all covered benefits.” Sofco Erectors, Inc. v. Trustees of Ohio Operating Engineers Pension Fund, 15 F.4th 407, 421 (6th Cir. 2021) (quoting 29 U.S.C. § 1341a(c)(2)); Dkt. 34 at 2. Here, there was no mass withdrawal. And Horizon says that it chose the PBGC rates not because the Plan invested in risk-free assets, but instead because there was a chance that the Plan could underperform in the future. Dkt. 35 at 15-16.
Domestic Linen challenged the interest-rate assumptions, and, pursuant to the Multiemployer Pension Plan Amendments Act (MPPAA), the dispute was submitted to arbitration. Both parties moved for summary judgment and agreed that there were no factual disputes. Dkt. 9-1 at 2. In the arbitration, Domestic Linen raised two arguments challenging the withdrawal assessment: first, the interest-rate assumptions were “markedly different from (and materially lower than) the [interest-rate] assumption that the Fund uses to compute its minimum funding obligations.” Id. And second, the interest-rate assumptions “admittedly [did] not take into account the Fund's investment experience and ha[d] nothing to do with the Fund's anticipated investment experience.” Id.
The arbitrator agreed with Domestic Linen on both points, vacated the liability assessment, and ordered NRF to recalculate the assessment using the 7.3% interest rate that NRF uses for determining the Plan's funding levels. Id. at 31. NRF challenges that determination, asking the Court to vacate the arbitrator's award and reinstate NRF's liability assessment. Dkt. 9 at 10. The parties now cross-move for summary judgment. Dkts. 24, 28.
LEGAL STANDARDS
Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When cross motions for summary judgment are made, the standard is the same: the court “must consider each motion independently of the other and, when evaluating each, must weigh the facts in the light most favorable to the non-moving party.” Royal & Sun All. Ins., PLC v. E.C.M. Transp., Inc., 2015 WL 5098119, at *2 (S.D.N.Y. Aug. 31, 2015). But “where the motion and cross motion seek a determination of the same issue, the Court may address them together.” Id.
In an MPPAA withdrawal dispute, the arbitrator's legal determinations are reviewed de novo. Nat'l Ret. Fund On Behalf of Legacy Plan of Nat'l Ret. Fund v. Metz Culinary Mgmt., Inc., 946 F.3d 146, 149 (2d Cir. 2020). But “factual findings made by an arbitrator enjoy a presumption of correctness,” which is “rebuttable only by a clear preponderance of the evidence.” Id. (internal quotation marks omitted); 29 U.S.C. § 1401(c).
DISCUSSION
The Employee Retirement Income Security Act of 1974 (ERISA) regulates employee retirement plans. Its purpose, in part, was “to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans.” Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 214 (1986) (citation omitted). Congress enacted the MPPAA “in response to concerns that ERISA failed to adequately protect multiemployer pension plans from the adverse consequences of employer withdrawals, which threatened to result in the collapse of numerous multiemployer plans, forcing [the] PBGC to assume obligations in excess of its capacity.” Nat'l Ret. Fund v. Ruprecht Co., 2023 WL 4106672, at *6 (S.D.N.Y. June 21, 2023) (internal quotation marks omitted). The MPPAA “requires an employer that withdraws from a multiemployer plan to pay its proportionate share of the pension plan's unfunded vested benefits, known as withdrawal liability.” Id. (citation omitted).
Withdrawal liability is “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). In making that calculation, the plan must 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). “The assumptions must cover such matters as mortality of covered employees, likelihood of benefits vesting, and, importantly, future interest rates,” which are at the center of this dispute. See Concrete Pipe & Prod. of California, Inc. v. Constr. Laborers Pension Tr. for S. California, 508 U.S. 602, 610 (1993). The interest rate is needed to discount the liability for future benefit payments to its present value. Nat'l Ret. Fund, 946 F.3d at 148. “Because the interest rate assumption governs the estimate of a plan's growth from investments ..., increasing the interest rate assumption decreases an employer's withdrawal liability, and vice versa.” Id.
NRF draws a distinction between an “interest rate,” used to calculate the future value of present cash flows, and a “discount rate,” used to calculate the present value of future cash flows. In the minimumfunding and withdrawal-liability contexts, the terms have been used interchangeably. See, e.g., GCIU-Emp. Ret. Fund v. MNG Enterprises, Inc., 51 F.4th 1092, 1099-1100 (9th Cir. 2022); Employees' Ret. Plan of Nat'l Educ. Ass'n v. Clark Cnty. Educ. Ass'n, 664 F.Supp.3d 24, 28 (D.D.C. 2023); see also Concrete Pipe & Prod. of California, Inc. v. Constr. Laborers Pension Tr. for S. California, 508 U.S. 602, 633 (1993) (using “interest rate” to refer to the rate used in both the withdrawal and minimum-funding calculations). Indeed, the Plan's own actuaries refer to the relevant rate as the “interest rate.” Dkt. 31-1 at 1. For ease of discussion, this opinion uses “interest rate” to discuss the rate used in both the withdrawal and minimumfunding calculations.
If a withdrawing employer objects to the liability calculated by the plan, the dispute must first be referred to arbitration. Concrete Pipe, 508 U.S. at 611 (citing § 1401(a)(1)). There, two presumptions apply. Id. First, “any determination made by a plan sponsor . is presumed correct unless the party contesting the determination shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous.” 29 U.S.C. § 1401(a)(3)(A). Second, the liability calculation:
is presumed correct unless a party contesting the determination shows by a preponderance of evidence that-
(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.§ 1401(a)(3)(B). The MPPAA “provides for judicial review of the arbitrator's decision by an action in the district court to enforce, vacate, or modify the award.” Concrete Pipe, 508 U.S. at 611 (citing § 1401(b)(2)).
The arbitrator here determined that the liability calculation was flawed because it used an interest rate that did not reflect the Plan's projected investment returns and was dissimilar to the interest rate used to calculate minimum funding. Dkt. 9-1 at 26-27, 30. NRF says both grounds are mistaken. The parties cross-move for summary judgment.
The Court, reviewing the arbitrator's decision de novo and considering both statutory text and binding precedent, holds that vacatur of the Plan's calculation was correct. The Court will, however, remand to the arbitrator to determine the proper remedy in light of this opinion.
The parties dispute what the appropriate standard of review to apply here is. But the Court need not settle that dispute because NRF loses even if the Court applies the de novo standard that it asks for.
I. The interest rate must reflect the Plan's projected investment returns.
NRF says that the arbitrator incorrectly concluded that the interest rate used to calculate withdrawal liability must reflect the Plan's projected investment returns. Dkt. 29 at 20-21; Dkt. 35 at 13-14. NRF stresses that the MPPAA nowhere expressly requires the use of investment returns, which it could have easily done. Dkt. 29 at 20-21. Instead, in NRF's view, a plan's actuary has broad discretion to determine how much a withdrawing employer should pay. For example, the actuary can choose to palm off the risk that the plan underperforms to the withdrawing employer. Id. at 22. Or, if the plan is in bad shape, the actuary can choose to make the withdrawing employer pay more than it otherwise would. Id. at 22-23.
That position is untenable, as several circuit courts have already held. United Mine Workers of Am. 1974 Pension Plan v. Energy W. Mining Co., 39 F.4th 730, 740 (D.C. Cir. 2022); GCIU-Emp. Ret. Fund v. MNG Enterprises, Inc., 51 F.4th 1092, 1099 (9th Cir. 2022); Sofco Erectors, Inc. v. Trustees of Ohio Operating Engineers Pension Fund, 15 F.4th 407, 421 (6th Cir. 2021); see also Pension, Hospitalization & Benefit Plan of the Elec. Indus. v. ConvergeOne Dedicates Servs., LLC, 2024 WL 1676176, at *5 (S.D.N.Y. Apr. 16, 2024); New York Times Co. v. Newspaper & Mail Deliverers'-Publishers' Pension Fund, 303 F.Supp.3d 236, 255 (S.D.N.Y. 2018). First, although the MPPAA doesn't expressly require the use of projected investment returns, that requirement flows unmistakably from its text. Withdrawal liability is determined as the employer's proportionate share of the plan's “unfunded vested benefits.” 29 U.S.C. § 1381(b)(1). To determine the plan's unfunded vested benefits, the actuary must calculate “the difference between the present value of vested benefits and the current value of the plan's assets.” Pension Benefit Guar. Corp., 467 U.S. at 725 (citing 29 U.S.C. §§ 1381, 1391). Calculating the “present value of vested benefits” requires an actuary to account for the time value of money, or the fact that money today is worth more than money tomorrow. See Metz v. United Techs. Corp., 754 F.2d 63, 67 (2d Cir. 1985) (explaining that the need to discount future obligations comes from the “time value of money”). To do so, the actuary must select an interest rate, which determines just how much more today's money is worth.
And the actuary cannot, contrary to NRF's position, pull an interest rate out of thin air. The MPPAA requires that the assumptions used to calculate unfunded vested benefits “in combination, offer the actuary's best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393(a)(1). The interest rate is the “most impactful” assumption. United Mine Workers, 39 F.4th at 738-39; see Concrete Pipe, 508 U.S. at 633 (calling the interest rate the “most important assumption”). So, absent some offsetting assumption, for the assumptions “in combination” to “offer the actuary's best estimate of anticipated experience under the plan,” the interest rate must itself do so. § 1393(a)(1); see United Mine Workers, 39 F.4th at 738-39. In other words, the interest rate must reflect the projected (or “anticipated”) growth rate of the assets of “the plan,” not of some hypothetical basket of assets that the plan doesn't own and has no intention of buying. § 1393(a)(1); see United Mine Workers, 39 F.4th at 738. Indeed, although the Second Circuit has never directly addressed this question, it has assumed that interest rates used to calculate withdrawal liability would reflect the projected growth of the plan's investments. See Nat'l Ret. Fund, 946 F.3d at 148 (“Because the interest rate assumption governs the estimate of a plan's growth from investments apart from employers' future contributions, increasing the interest rate assumption decreases an employer's withdrawal liability, and vice versa.” (emphasis added)).
Here, instead of selecting an interest rate that reflected the projected growth rate of the Plan's assets-or about 7%-the actuary used the interest rates published by the PBGC of about 2% and 3%. Those low rates are based on certain risk-free annuities, benefits, and assets that the Plan does not own and does not plan to buy. Dkt. 45 at 4; Dkt. 31 ¶¶ 14-15, 21. NRF does not contend that Horizon chose these rates because it expected the Plan's assets to grow so slowly. Nor does NRF argue that it made some offsetting assumption that meant that its assumptions nevertheless “in combination, offer[ed] the actuary's best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393(a)(1) (emphasis added).
In a supplemental letter to the Court, NRF stated that withdrawal liability excludes administrative costs while the minimum-funding calculation includes them. Dkt. 45 at 6. But NRF did not argue that the exclusion of administrative costs is the sort of offsetting assumption that could render the assumptions “in combination” a reflection of “the actuary's best estimate of anticipated experience under the plan” even though the interest rates, considered in isolation, were not. 29 U.S.C. § 1393(a)(1).
Instead, NRF argues that these rates are appropriate because they shift the risk that the Plan underperforms to withdrawing employers. (Conveniently, NRF ignores that withdrawing employers also don't benefit if the Plan overperforms.) That justification clashes with the MPPAA, which requires that the interest rate reflect “the actuary's best estimate of anticipated experience under the plan”-not the risk that the actuary's best estimate is wrong. 29 U.S.C. § 1393(a)(1). Interpreting a similar statutory provision, the Second Circuit observed that “factoring in a discount for conservatism after an actuary has arrived at his or her best estimate of anticipated experience would be contrary to the statutory mandate.” Wachtell, Lipton, Rosen & Katz v. Comm'r, 26 F.3d 291, 296 (2d Cir. 1994).
Further, as the D.C. Circuit has pointed out, the MPPAA does sometimes explicitly require the use of interest rates derived from risk-free assets. See United Mine Workers, 39 F.4th at 738 (citing 29 U.S.C. § 1341a(a)(2)). And “[w]hen calculations need not account for plan experience, ERISA is clear.” GCIU-Emp. Ret. Fund, 51 F.4th at 1100. For example, another provision explicitly states that an interest rate “shall be ... determined without taking into account the experience of the plan.” Id. (quoting 29 U.S.C. § 1084(c)(6)(E)(iii)(I)). This supports the conclusion that the interest rate used to calculate withdrawal liability is supposed to be based on the plan's projected investment returns rather than risk-free assets that the plan doesn't own.
NRF insists that transferring risk to the withdrawing employer is particularly sensible here because the Plan is in critical condition. Dkt. 45 at 5 (“The NRF's argument is that the Plan's sensitivity to, and dependence on, investment returns due to the specific characteristics of the Plan (including the Plan's cashflow) exacerbates the impact the transfer of risk has on the Plan.”). Because the Plan “does not have enough employer contributions to pay benefits and its expenses,” it is particularly dependent on investment returns and will fall apart if those returns fall short. Dkt. 29 at 19; Dkt. 35 at 15; Dkt. 45 at 5. But once again, the statutory text requires the assumptions to reflect the “best estimate of anticipated experience under the plan,” 29 U.S.C. § 1393(a)(1); it does not give actuaries discretion to “factor[] in a discount for conservatism after [arriving] at his or her best estimate,” Wachtell, 25 F.3d at 296.
Allowing actuaries such broad discretion not only conflicts with the statutory text; it's also constitutionally suspect. In Concrete Pipe, the Supreme Court considered, among other things, a procedural-due-process challenge to the MPPAA. Concrete Pipe, a withdrawing employer, argued that the MPPAA deprived it of its constitutional right to an impartial adjudicator by allowing the plan's trustees to determine its withdrawal liability and then requiring the arbitrator to treat the trustees' determination as presumptively correct. Concrete Pipe, 508 U.S. at 615. Concrete Pipe noted that trustees had obvious incentives to jack up withdrawal liability. Id. at 616. And because their determination must be treated as presumptively correct, Concrete Pipe contended that those biases would infect the entire review process. Id. at 620.
The Supreme Court rejected Concrete Pipe's challenge-but not because it was unbothered by the potential for trustees to extract exorbitant payments from withdrawing employers. The Court acknowledged that allowing a plan to determine how much a withdrawing employer owes and then treating that calculation as presumptively correct on review could violate the employer's constitutional right to an impartial adjudicator were it not for the MPPAA's checks on the trustees' discretion. Id. at 616-21. One of those checks, as NRF points out, is that the “assumptions and methods used in calculating withdrawal liability are selected in the first instance not by the trustees, but by the plan actuary” who is a “trained professional[] subject to regulatory standards.” Id. at 632. But contrary to NRF's position, the Court did not suggest that a plan has free rein to determine withdrawal liability so long as that decision is made in the first instance by the plan's actuary. Instead, the Court emphasized that the MPPAA's text imposes requirements that “as a practical matter limit the opportunity an actuary might otherwise have to act unfairly toward the withdrawing employer.” Id.; see also id. at 633 (explaining that Concrete Pipe “has not shown that any method or assumption unique to the calculation of withdrawal liability is so manipulable as to create a significant opportunity for bias to operate”).
In fact, a recent Second Circuit case illustrates the problem with relying on the independence and professional judgment of a plan's actuaries. Coincidentally (or perhaps not), that case, like this one, involved NRF's calculation of an employer's withdrawal liability. Nat'l Ret. Fund, 946 F.3d at 147-49. It also involved the same actuary: there, as here, NRF had used Horizon. Id. at 148. In concluding that Horizon selected an impermissible interest rate, the court rejected the notion that a plan's actuaries have unbridled discretion. Id. at 151. The court observed that if they did, “[n]othing would prevent trustees from attempting to pressure actuaries to assess greater withdrawal liability on recently withdrawn employers.” Id. “Actuaries unwilling to yield to trustees' preferred interest rate assumptions can be replaced by others less reticent.” Id. Indeed, when that case was decided, NRF had recently switched from its previous actuary to the actuary involved in this case, Horizon. This confirms that, contrary to NRF's suggestion, the MPPAA is not a mere procedural requirement; it regulates not only who decides what assumptions to use but also what those assumptions are. See United Mine Workers, 39 F.4th at 738 (interpreting the bestestimate requirement “to lay down both a procedural rule that the assumptions be made by the actuary and a substantive rule that the assumptions reflect the characteristics of the plan”).
NRF also suggests that it was acceptable for Horizon to use the PBGC rates because doing so accords with professional standards. Dkt. 29 at 21. NRF cites Actuarial Standard of Practice (ASOP) No. 27, which states that an actuary “may use a discount rate that reflects the anticipated investment return from the pension fund” or “may use discount rates appropriate for ... settlement,” which is what the PBGC rates reflect. ASOP 27 § 3.7(a). But professional standards do not trump statutory requirements, as the professional standards themselves acknowledge. See United Mine Workers, 39 F.4th at 740 (citing ASOP 27 § 1.2).
NRF also points to proposed and final PBGC regulations allowing for the use of the PBGC rates. But the final regulation is not applicable here, as NRF concedes. And the proposed regulation does not suggest that NRF's interpretation of 29 U.S.C. § 1393(a)(1) is correct. For one thing, the regulation hasn't even been enacted. For another, the regulation invokes the PBGC's authority under § 1393(a)(2), which allows the corporation to prescribe regulations setting forth alternative assumptions and methods to be used in calculating withdrawal liability. GCIU-Emp. Ret. Fund, 51 F.4th at 1098 n.2. The MPPAA requires withdrawal liability to be calculated in accordance with either § 1393(a)(1) “or” § 1393(a)(2), indicating that these are separate paths. So the proposed regulation doesn't shed light on what the limitations set out in § 1393(a)(1) mean.
In sum, the MPPAA requires that a plan utilize “actuarial assumptions and methods” that in combination “offer the actuary's best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393(a)(1). The interest rate is the “most impactful assumption” in the calculation. United Mine Workers, 39 F.4th at 738-39. So absent an unusual situation where the overall combination of factors reflects the actuary's best estimate of the plan's experience even though the interest rate itself does not, the rate must itself reflect the plan's projected investment returns. Here, NRF does not dispute that the rates it used did not do so. Nor does NRF suggest offsetting assumptions or methods that “in combination” with the rates it used reflect the actuary's “best estimate of anticipated experience under the plan.” § 1393(a)(1). Instead, the Plan's actuary simply discarded its best estimate to impose greater liability on Domestic Linen, employing interest rates dramatically lower than the rate used for other purposes and based on assets that the Plan never held and did not plan to own. The withdrawal-liability calculation was therefore unreasonable, as several circuit courts have held under analogous circumstances, and the arbitrator was correct to vacate it. Cf. United Mine Workers, 39 F.4th at 740-41 (holding that arbitral award upholding use of “risk-free PBGC rates based on the theory that . the withdrawn employer no longer bears risk” must be vacated); GCIU-Emp. Ret. Fund, 51 F.4th at 1101 (holding that district court “correctly held ... that [plan] erred in using the PBGC rate”).
II. The interest rates used for withdrawal liability and minimum funding need not be the same.
Although the arbitrator himself held that the interest rates used for minimum funding and withdrawal liability must only be similar, Domestic Linen argues that they must be the same and that the arbitrator's award ordering the Plan to recalculate withdrawal liability using the 7.3% rate must be affirmed because that was the rate used to calculate minimum funding. The Court disagrees that the rates must be identical.
As discussed above, Concrete Pipe rejected a procedural-due-process challenge to the MPPAA. In doing so, the Supreme Court stressed not only that withdrawal liability would be calculated, in the first instance, by independent actuaries, but also that the statutory scheme discouraged plans from imposing excessive withdrawal liability. The Court observed that the MPPAA used “identical” language to describe the assumptions used in calculating withdrawal liability as it did to describe those used in calculating minimum-funding requirements. Concrete Pipe, 508 U.S. at 632. The Court reasoned that this “tends to check the actuary's discretion” because “the use of assumptions (such as low interest rates) that would tend to increase the fund's unfunded vested liability for withdrawal liability purposes would also make it more difficult for the plan to meet the minimum funding requirements ..” Id. at 633 (citation omitted). The Court specifically emphasized that “arguably the most important assumption” in calculating withdrawal liability “is the critical interest rate assumption that must be usedfor other purposes as well.” Id. (emphasis added). At the same time, and contrary to Domestic Linen's contention, the Court stopped short of requiring identical interest rates, instead writing that different rates “could very well be attacked as presumptively unreasonable.” Id.
Since Concrete Pipe, every court to consider the issue has held that the interest rates used to calculate withdrawal liability and minimum funding must be similar though not necessarily identical. See United Mine Workers, 39 F.4th 730 at 741-43; see also ConvergeOne Dedicates Servs., 2024 WL 1676176, at *5; New York Times, 303 F.Supp.3d at 254. This conclusion is supported not only by a close reading of Concrete Pipe but also by the fact that the relevant statutory language has changed some since Concrete Pipe was decided. The language describing the withdrawal-liability and minimum-funding calculations, though still very similar, is no longer identical. United Mine Workers, 39 F.4th at 741-42. As it now stands, the assumptions used to calculate withdrawal liability must be reasonable “in the aggregate,” whereas “each” assumption used to calculate minimum funding must be reasonable. Compare 29 U.S.C. § 1393(a)(1) , with Id. § 1084(c)(3)(A). Accordingly, this Court agrees with every other court to consider the issue that the interest rates used for calculating withdrawal liability and minimum funding are not legally required to be identical.
III. A remand is required as to the arbitrator's remedy.
The parties disagree as to what the proper remedy is if the Court affirms the arbitrator's decision to vacate the liability calculation on the grounds that the interest rate must reflect the Plan's projected investment returns. Domestic Linen says that the proper remedy is to affirm the award ordering NRF to recalculate its withdrawal liability using the 7.3% interest rate because the Plan's actuary testified that 7.3% was his “best estimate of anticipated return under the fund.” Dkt. 46-1 at 7; Dkt. 31 ¶ 7. NRF, on the other hand, says that the Court should remand to the arbitrator “with instructions on how to determine the proper rate.” Dkt. 45 at 7. The Court agrees with NRF that a remand is proper.
An arbitrator's factual findings “enjoy a presumption of correctness.” Nat'l Ret. Fund, 946 F.3d at 146. Here, however, the arbitrator ordered NRF to recalculate liability using the 7.3% rate without ever stating why it was doing so. So a remand is in order. The key question on remand is what calculation complies with § 1393(a)(1)'s requirement for the Plan to determine withdrawal liability on the basis of “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,” in light of the holdings set forth in this opinion. Cf. Employees' Ret. Plan of Nat'l Educ. Ass'n v. Clark Cnty. Educ. Ass'n, 664 F.Supp.3d 24, 45 (D.D.C. 2023) (remanding to arbitrator where arbitrator did not make a specific factual finding as to the actuary's best estimate); New York Times, 303 F.Supp.3d at 256 (remanding to arbitrator with direction that liability should be recalculated using the 7.5% assumption testified to as the best estimate absent “additional evidence sufficient to support a different rate”).
Of course, given NRF's (i) concession that the Plan's actuary testified that his best estimate of anticipated returns was 7.3% and (ii) inability to identify any offsetting assumption, the Court finds it difficult to see how any other rate could be used. However, because the arbitrator's basis for using 7.3% is not explained in the award, the Court will remand to the arbitrator for further consideration and to make his reasoning explicit.
CONCLUSION
In calculating withdrawal liability, a multiemployer pension plan must (absent some offsetting assumption) use an interest rate that reflects the actuary's best estimate of the plan's projected investment returns. The Court therefore affirms the arbitrator's decision to vacate the Plan's withdrawal-liability calculation. The Court vacates and remands solely as to the arbitrator's order for the Plan to “recalculate Domestic Linen's withdrawal liability based on the 7.3% interest rate that [it] uses for determining the Plans' funding levels.” Dkt. 9-1 at 32.
The Clerk of Court is directed to terminate Dkts. 24 and 28.
SO ORDERED.