The withdrawal liability case of the year came to an anticlimactic end on Monday, September 16, 2019, as the Second Circuit docket sheet of New York Times Company v. Newspaper and Mail Deliverers' Publishers' Pension Fund pinged to life with a stipulation withdrawing the case with prejudice.

The most-watched issue in the case was a challenge to the Segal Blend discount rate assumption used by many multiemployer pension plans to calculate employer withdrawal liability. The discount rate assumption can have a massive effect on an employer's withdrawal liability as even a small variation can dramatically increase a withdrawal calculation.

The New York Times Company (New York Times) challenged the Newspaper and Mail Deliverers' Publishers' Pension Fund’s (Fund’s) use of the Segal Company's eponymous Segal Blend method to calculate its withdrawal, claiming that the Segal Blend rate artificially inflated the calculation by not representing the actuary's best estimate of plan experience. Using identical language, ERISA requires actuaries to select a discount rate for withdrawal liability and an interest rate for minimum funding purposes that reflect the actuary's "best estimate of anticipated plan experience." The crux of the New York Times' argument was that, because the Fund's 7.5% interest rate reflected the actuary's best estimate, the 6.5% Segal Blend rate did not, and the Fund must employ a higher rate, thus decreasing the withdrawal liability.

At trial, the Southern District of New York reversed the arbitrator (who upheld the Segal Blend), finding that the Segal Blend runs afoul of the statutory requirement to use a discount rate that reflects the actuary's best estimate of anticipated plan experience. The court held that the discount rate assumption must represent the actuary's best estimate based on the likely returns of the plan, not the returns of a hypothetical portfolio as the Segal Blend does.

The dismissal of the case means that the Southern District of New York's opinion still stands. Although the opinion will not be binding authority for many employer withdrawals, it should provide helpful authority that will continue to assist employer challenges to withdrawal liability assessments that use the Segal Blend. Meanwhile, the District of New Jersey’s decision upholding the use of the Segal Blend in Manhattan Ford Lincoln, Inc. v. UAW Local 259 Pension Fund will assist funds defending their use of the Segal Blend. That case settled prior to being considered by the Third Circuit.

Although it may be disappointing to those in the pension world who were closely following the case, it is not a complete surprise that the case settled. During oral argument, the three appellate judges appeared to be unconvinced that the Segal Blend method could meet the standard of the statute where the actuary testified that it was not her best estimate. With the split in district court opinions, it is unlikely that this is the end of the road for such cases as challenges to actuarial discount rate assumptions continue to percolate up to the federal courts.