## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it

N o. 11

- 3034 C H I CA GO T RUCK D RIVERS, H EL PE R SAN D W AREHOUS E W O RKERS U NI ON (I NDE PE NDE NT ) P EN S I ON F UND , an d J ACK S TEW ART, Truste e, P laint if fs -App el lants , v.
CPC L OGI S T I CS, I NC ., D efend a nt-A pp ellee

.

A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 10 C2314

—Jam es B. Z agel, Judge

.
A RG UE D A PRI L 3, 2012

— D ECI DE D A UGUS T 20, 2012

Befo re B AUER, P OSNER, a nd K ANN E , C ircu it Judges . P O S NER, Cir cu i tJudg e . T hi s a pp e a l fr o m a de c i si on upho l di nga n a rbi tr at o r ’ s awar d i s ab o utwhatha ppen s w hen an e m p loy erwithdraws fro m a m ult i em plo yer d efin ed -b en efit s p en sio n p lan , as t h e a p p ell e e , C P C , d id i n 200 5.2 N o. 11

- 3034 M ul ti empl o y erpe ns i o n pl an s

— w h ich ar e g ove rned, as single-em p loyer plans are, by ER I SA

— ar e cr eat ed by col l ecti ve bar gaini ng ag re em ents to provi de benefi ts to empl o y ee s o fmany di ffer en t fi r m s. T hu s the y a r e f o und i n i nd ustr i es such as const ructi on and t rucki n g in w hich w o r kers d o short-term , season al, or irr egu lar w ork f orm any di ffer ent e m plo yer s o verthei r w orkin g l i ves. 29 U .S.C . § 10 02 (37 )(A ); Joh n H . L an gb e i n e t a l., Pen s i on and Em pl oye eBe ne

f i tLa w 70

- 75 ( 5th e d. 2010 )

. W hen an em plo yerwithdraws fro m such a p l an, the pla n re m ai ns li abl e to the em plo yee s who have vest ed pensi on ri ghts, tho ugh i t no l onge r can l oo k t o the e m plo yer to contr ibute a dd i ti onalfund s t o cove r these o bl i gat i ons. I n a n e ff o r t to pr ev en t wi th dr awal s th atwi l l s hi ft th e bur deno ffundi ngthe pe ns i o n pl ant o the r emai ni ng em plo yer s a nd bydoi ng so m ay preci p ita te add i ti onal w ith d ra w a l s , pr ov isio n s a d d ed to E R ISA by th e M u ltie mpl o y e r P e ns i o n Pl a n Am e nd men t s Act o f1 9 8 0 , 2 9 U. S

. C. §§ 1381- 1461 , as ses s the em plo yerwith a n exi t pr i ce equa l t o i ts pr o r at a sh ar e o fthe pe ns ionpl an ’ s fundi ng sh or tfa ll. T h e s h or tfa ll (“u n fu n d ed v e s t ed be n efit s” ) is the di ffer ence between the prese nt va l ue of the pensi on fund ’ s a sse ts and the pre sent value o fi ts future obl i gat i o ns to empl o y e e s co v e r e d b y the p e ns i o n pl a n. 2 9 U. S

. C. § § 1 3 8 1 , 1 3 9 1. ( I fthe p r e s e ntv a l ue o fthe a s s e t s e xc e e ds th e pre sen t valu e o f th e plan ’s fut ure obli gations , there is n o s h or tfa ll.) E st im at ion of th e s h or tfa ll d ep en d s c rit i c ally on es timat i ngthe a mou ntb y wh i c h the fun d’ s c ur r e ntas set s ca n b e ex pec te d t o g r o w by the mir ac l e o fc o m po undN o. 11

- 3034 3 i nt er es t. The hi g he r the es ti m at ed r at e o fg r o wth, the l ess the em plo yer s m ust put i nto the fund to day to cover th e futur e entit l ement s o fthe pl an ’ s par ti ci pan ts a nd benefi ci ar i es. “[ F] ora typi cal p lan , a change ( up w ar d or downwa r d) o f 1 pe r c e nt i n the i nt e r e s t a s s umpt i o n ( e. g. an inc re ase fro m 6 to 7 per cent) al ter s the l ong- run co st es tim at e b y a b ou t 2 5 p er c en t.” D an M . M c G ill et a l., Fun dam e nt al s of

Pr i vat ePe ns i ons 61 2 ( 8th e d . 2 005); se e al so Art i s t i c Cart on v. Pape rIndu s t ry Union

-M anag e m e nt Pen s i on Fun d, 971 F.2d 134 6, 1348 ( 7th Cir. 1992). I n a ddi ti o n t o e st i m at i ngthe s i ze o f th e pla n’ s fundi ng shor tf al l, the pensi on pl an m ust a pp or tion re sponsibi l i ty for th e s h or tfa ll am on g t h e e m p loy er s p ar tic ip at in g in th e pl an . Ea che m pl o y ermustpa yhi s sh ar e to the fund i f a n d wh e n h e wi th d r a ws , s o th a t th e p l a n c a n p a y t he em plo yer ’ s s hare o fthe pla n’s unfunded vested benefi ts as thos e be nefi ts com e d ue i n the future. A n em plo yer who ha s j us t j o i ne d the p lan m aywor r y abo uti nhe r i ting w i thd ra w al l i abi l i ty because the exi sting m em ber s f ai l ed to fund the pla n adequ at ely i n pri orye ar s. To a l l evi ate thi s worr y, ERIS A cr eat es d efa u l t r ule s ( that i s, r ule s that gov er n unle ss the pl an pro vi des o ther w i se) f or as s i g n in g e ac h p ar tic ip at in g e m p loy er a sh ar e o f on ly so m uch of the pla n’s fund i ng shor tf al l as oc curr ed whi l e the e mpl o y e r wa s p a r t i c i pa t i ngi n the pl a n. 29 U. S

. C. §§ 13 91 (b )(2) -(4) ; 29 C .F.R . § 42 11 .32 ; Cen Tra, Inc . v. Ce nt r al St at e s , So ut he as t& So ut hwe s tAr e as Pe ns i on Fund, 57 8 F. 3d 592, 599- 600 and n. 7 ( 7th Cir

. 20 09) ; I sr aelGol dow i tz & R alp h L. Landy, “S peci alRule s f orM ult i em plo yer Pl an s, ” i n ER I SA Li t igat i on 12 92 -95 (Jay n e E . Za n gle in etal. eds. , 4th ed. 20 11)

. The pl an i n thi s ca se u se d these r ule s4 N o. 11

- 3034
to calcu l ate the pro ra ta shar e o fthe fund i ng sho rt f al l to b e b o r ne b y the wi thd r a wi nge mpl o y e r, a pp e l l e e CP C. The r ul es ca l cul at e wi th dr awall i ab i l i tyi n s te ps. The fi rs t i s t o deter m i ne annu al“poo l s” ofl i abi l i ty, ea ch re prese nti ng the change ( w hi ch m i ght b e a n i ncre ase o r a dec r ea se ) i n th e pl an ’ s to ta l fundi ng sh o r tf al l f rom o ne y ea r to th e ne xt
. The pr ev i o us po o l s ( th ati s, the pr ev i o us annual changes i n unfunded ve ste d benefits ) ar e then disc ounted b y 5 p er cent a y ear( so, f orexam ple , a pool f ro m se ven y ear s e ar l i erwould be disc ou n te d by 35 perce nt)

. A s a r es u lt, afte r 20 yea rs a poolno l onge r affects withdrawal l i abi l i ty. The r ati onal e fordi scounti ng i s that w i th the passa ge ofye ar s, fund ed benefi ts ar e m or e l i kel y t o have been pai d and so no l onge r be owing. N ex t, e ac h di sc o unt ed poo l i s appo r ti o ne d a m o ngthe em p loy er s p ar tic ip at in g in th e p lan on th e b as is of t h eir contr ibuti ons to the pe n sio n fund i n the poolye ar and the f our yea rs pre cedi ng. The fi ve- yea r w i nd ow m ea su r es th e si ze o f an empl o y er ’ s co nt r ibut i o ns to the fu n d r e l a t i v e to th e o th e r e mp l o y e r s i n th e s h o r tt e r m, on the the or y, r el ate d to the 2 0-ye ar dis counti ng, that re cent experi ence has g re ate r predi cti ve si gni fi cance. The w i nd ow is fiv e years r atherthan j ust o ne i n or der to sm oo th tr ends i n contr ibuti on, so that a y earo fano m alou s co ntributi ons doesn’ t dra sti cal l y a l terthe al l oca ti o n s ha r es a m o nge m pl o y er s. ( Thus an e m pl o y erwho contr ibuted a l ot i n 200 4 but al m ostnothi ng fr om 20 00 to 2 00 3 woul d no t be a ss es se d a l ar g e ch un k of the 2004 l i abi l i ty pool

— the b ri ef spi ke w oul d be s m oo thed byN o. 11

- 3034 5 th e inclusion of th e pr e c ed ing years.) A n em p loyer’ s w i thdrawal l i abi l i ty i s the sum o fhi s fra cti onalsha re, ca l cul at ed o n the bas i s o fhi s l as t fi ve y ea r s’ c o nt r ibuti ons, o fthe 20 pool s. The t a b l e b e l o w pr e s e nt s a s l i g ht l y s i mpl i fi e d v e r si on o fho w CPC’ s wi th dr awall i ab il ity w as de te r m i ne d. The an n u al p oo l is ca lcu lat ed first . (N ot ice th at for ye ar s in w h ich th e p lan ’s fu n d in g s hor tf al ldecr eas ed

— fo r exam ple , 1985

- 1986 and 19 95-19 98

— the poo l s a re nega ti ve. Each em plo yer ’ s s hare o fnega ti ve pool s r e duces hi s wi th

dr awall i ab i l i ty
. ) The po o l s ar e di sc o unt ed at5 pe r ce nt pery ea r . T he di sc o unt ed po o l s ar e th endi vi ded among th e empl o y er s o n the b as i s o f th eir r el at i ve c o nt r ibut i o ns i n the p o o l y e a r a nd the f o urp r i o r y e a r s ( CP C ma de 3. 67 pe r c e nt o f a l l c o nt r ib ut i o ns t o the fun d f r o m 2 0 0 0 t o 2004 and 1. 42 perce nt o fal l co ntrib u tio n s f ro m 19 85 to 19 89
. ) I ts wi th dr awall i ab i l i ty( ex i t pr i ce ) was thu s the su m o f its shar es ofea ch ofthe disc ounted pool s fro m 1985 to 20 04.6 N o. 11

- 3034

Year Pool 100% Mi nusDisco unt Rate Disco unt ed Pool CP C’ s

Relative Co ntributi on CP C’ s

Share of E achPoo l 2004 $56,171,305 x 100% = $56,171,305 x 3.67% = $2,061,487 2003 $39,092,526 x 95% = $37,137,900 x 2.75% = $1,021,292 2002 $8,587,297 x 90% = $7,728,567 x 1.65% = $127,521 2001 $7,960,547 x 85% = $6,766,465 x 1.44% = $97,437 2000 $2,768,374 x 80% = $2,214,699 x 1.26% = $27,905 1999 $6,044,832 x 75% = $4,533,624 x 1.28% = $58,030 1998 -$14,106, 445 x 70% = -$9,874, 512 x 1.06% = -$104,670 1997 -$2,854, 709 x 65% = -$1,855, 561 x 0.82% = -$15,216 1996 -$3,878, 390 x 60% = -$2,327, 034 x 0.56% = -$13,031 1995 -$7,226, 847 x 55% = -$3,974, 766 x 0.49% = -$19,476 1994 $13,469,192 x 50% = $6,734,596 x 0.46% = $30,979 1993 $9,433,992 x 45% = $4,245,296 x 0.59% = $25,047 1992 $3,155,707 x 40% = $1,262,283 x 0.78% = $9,846 1991 $6,080,864 x 35% = $2,128,302 x 1.04% = $22,134 1990 $2,031,775 x 30% = $609,533 x 1.23% = $7,497 1989 $7,118,643 x 25% = $1,779,661 x 1.42% = $25,271 1988 $9,804,517 x 20% = $1,960,903 x 1.59% = $31,178 1987 $22,647,445 x 15% = $3,397,117 x 1.66% = $56,392 1986 -$13,247, 195 x 10% = -1,324, 720 x 1.61% = -$21,328 1985 -$381,233 x 5% = -$19,062 x 1.49% = -$284 CP C’ s Wi thdraw al L iabi li ty: $3,428,01 3
Disputes o verwithdrawal l i abi l i ty ar e r eso l ve d by arb itr at ion , 29 U .S.C . § 14 0 1 ( a)(1 ); Chic ago Tru ckD r i ve rs v.N o. 11

- 3034 7 El Paso C G P Co. , 52 5 F

. 3d 591, 59 5 ( 7th Ci r. 20 08) , subj ect ho we v e r t o j ud i c i a l r e v i e w s i mi l a r i n s c o pe t o a pp e l l ate re vie w of d ist ric t c ou rtd ec isio n s. C entra l Sta tes, S o u t h east & So uth w est A reas P ensio n F un d v . M i d w e st M o to r E xp ress, Inc. , 181 F.3d 79 9 , 8 0 4 -05 (7t h C ir. 19 99 ); B o a rd o f Trustees, Sh eet M etal Wo rkers N a tio na l P ensio n F un d v . B E S S ervic es, Inc. , 469 F.3d 36 9, 37 5 (4 th C ir. 20 06 ). Th e a rb itr at or in the pr ese nt cas e r ule d that the pensi on pl an’ s t rust ees had o ver ass ess ed CP C’s w i thdrawal l i abi l i ty by $1, 093, 000 ( al m o sta thi r d o fi ts t o ta l a ss es sment

— the $ 3. 4 m i l l i on fi gure i n the tabl e)

. The di str i ct j ud ge up hel d the arbi tr ato r ’ s r ul i ng, a nd the pl ana nd on e o f i ts t r us te es ( but w e c an ign or e h im ) ap p ea l. A p p ella te rev iew of th e d ist ric t c ou rt ’s d ec is i o n is pl en ar y, i n th e s e n s e th a tth e c o u r to fa p p e a l s l i k e the dist ri ct c ourti s r ev iewing the a rbi tr ato r’ s deci si on, se e Cen Tra, Inc . v . Ce nt r al St at e s , So ut he as t& So ut hwe s tAr e as Pen s i on Fun d, sup ra , 578 F.3d at60 2; Jos eph Sc hl i tz Br e win g Co. v. M i l wauke eBr e wery Worke rs ’Pe ns i on Plan , 3 F. 3d 994, 10 00 (7t h C ir. 19 93 ) , affirm ed , 513 U .S. 41 4 (1 99 5); Cen t r al St at e s , So ut he ast & Southwe s tAr e as He al t h & We l f areFu nd v. C ullu m C o s. , 9 73 F. 2d 13 33 , 1 33 5 ( 7th Ci r . 1 99 2) , a nd th u s n o t d e f e rrin g t o t h e d ist ric t c ou rt ’s ru lin g. T h is is the s am e patt er n that i s obser ved w hen a c ou rto f appeal s rev iews a deci si on bya dist ri ct c ourtto wh i ch an adm i ni str ati ve l aw j ud ge’ s deci sion d enyi ng so ci al se c u rit y d isa b ility be n efit s h as be en ap p ea led

. M c K inz ey v. As t r ue, 641 F .3 d 8 84 , 889 (7t h C ir. 20 11 ); O ’C o nn o rSpi nne rv. As t r ue, 627F.3d 61 4, 61 8 (7 t h C ir. 20 10 ). I t is the a rbi tr ato r’s deci si on, l i ke the a dm i ni str ati ve l aw8 N o. 11

- 3034 j udg e’ s, tha t r ec ei ve s j udi ci alde fe r en ce , fr o m b o ththe dist ri ct c ourtand the cour t o fappeal s. H id eo u s c om p lex itie s lu rk in t h e b rie fs in th is a p p ea l. M an y ap p ell ate law yers w rite bri efs and m ake oral argu m en ts th at a ss u m e t h at j u d ge s a re kn ow led ge ab le about eve ryfi el d of l aw , howeverspeci al i zed. The as

sum pti on i s i ncor re ct. Feder al j ud ges ar e g ener al i sts
. I nd ivi d ua l j ud ges often h ave sp eciali zed know led ge of a few fi el ds o fl aw, mos t co m m o nl y c r i m i na l law an d sente nci ng, ci vi l and cr i m i nal pro cedure, and federa l j uri sdic ti on, bec ause these fi el ds gene ra te i ssues that fre q u en tly re c u r, bu t s om et im es of ot h er field s a s w ell depend i ng o n the j ud ge’ s ca re erbefor e he becam e a j u dge o r on s peci ali nter est s deve l oped by hi m since. Bu t the appel l ate advoca te m ust no t co unt on a pp el l ate j udg es ’ b eingi nt i m at e wi th his p ar ti cul arl ega l noo k

— w i th i t s s p e c i a l j a r g o n, i t s an a l y t i c a l i n t r i c a c i e s , i t s c o mm er c ial set ti ng, i ts m yst er i es. I t’ s di ffi cul t forspeci al i sts to w ri te othe r than i n j ar go n, and w hen theydon’t r eal i ze th e di ffi cul ty thi s pos es f orge nera l i st j ud ges nei ther do theyr eal i ze the ne ed to wri te differ entl y. Feder alpensi on l aw i s a hi gh l y s peci al i zed fi el d that j ud ges en cou nt er only i nt erm ittently. Y et th e law y e rs in th is c as e m ad e n o a llo w an c e fo r ou r lac kin g t h eir spe ci al i ze d kno wl edg e. Co ns i derthi s ex tr act f r o m the state m en t of facts in the ap p e lla nt ’s open ing brief (record citations an d f ootn otes om itted ): M o stmu lti empl o y erpe ns i o n pl an s r et ain o ne plan actuary, and aski t t o provi de cal cul ati ons f or two pur po se s: ( 1) c al cul at i o ns whi chERI SA a nd theN o. 11

- 3034 9 I nt erna l Re ve nue Co de ( th e “Co de” ) r equi r e th e act u ar y to cer ti fy o n Sche du l e B to the pla n’s annual re port; and ( 2) cal cul ati ons the pl an c an use as the f ou nd a t i on f or deter m i ni ng withdrawal l i a b i l i t y . . . . T h e F u n d ’ s a c t u a r y, th e S e g a l C o mpa ny ( “Se gal ”),

. . . cal cul ate d U VB f orwithdrawal l i abi l i ty p u rpos es usi ng a ser i es ofst eps r atherthan si m p ly us ing the U V B from i ts Sch ed u le B rep ort. Segal’s approach, kno w n as the “ Se ga l Bl end, ” i s t o com bi ne the int erestr ate fro m i ts Schedul e B fund i ng r epor t with the aver age i nter estr ate s then curr ent forannui ti es . Over the ye ar s S ega l thus pr ovi ded th e F und wi tho ne U VB f o r fundi nga nd an ot h er for w ith d ra w al liab ility

. I n 199 3 .

. . the Suprem e Cour t issued a deci si on th atpro m pte d Se g alto i ss ue a g ui dan ce mem o r an dum to i ts a ctuarie s dat ed M ar ch2 9, 1 99 4. The mem o r an du m advi sed S ega l actuar i es that the Cour t’ s deci si on i n C o nc rete P ipe a nd P rod s. v. C o nstru ctio n L a bo rers P ensio n Tr ust, 50 8 U.S

. 60 2 ( 1993 ) , r ai sed the questi on w hether i t w as perm i ssibl e f or an actuar y to have differ ent num ber s f orth e U VB i n the w i thdrawal l i abi l i ty re portand the Schedul e B r epor t. The m em ora nd um sugg est ed that cl i ent pl an tr ustee s be as ked to m ake a deci si on t el l i ng Seg al w h at to do and attached t em pla tes f orm em or anda to be pr ovi ded to cl i en t tr us te es a nd pl anc o uns eland a “ Que st i o ns a nd A nsw er s ” s e c t i o n f o r a c t ua r i e s t o u s e i n a dvi singthe i r c l i en ts o n the de ci si o n. The gi sto fthe tem pla tes w as to advi se cl i ent pl ans that S ega l ’ s use ofdi fferen t a ssum pti ons i n the tw o re port s m ay10 N o. 11

- 3034

cr ea te l i ti g at i o n r i skf o r the cl i en ts
. Two so l ut i o ns w er e pr op ose d fo r consi derat i on. Fi rs t, the tr ustee s coul d direc t Se galto co nti nue to use the S ega l Ble nd approa ch f orwithd ra w all i abi l i ty, wh i ch w ou ld con tinu e to prod uc e tw o di ff eren t nu m bers for th e p lan’s un fun d ed vest ed ben efi ts ea c h year, o ne f o rthe fundi ngr epo rt a nd o ne f o r the wi th

d ra w al liab ility rep or t. Se c on d , th e t ru st ee s c ou ld di r ec t S eg alt o modi fy the s teps u se d t o de te r m i ne th e UVB f o r wi th dr awall i abi li ty : fi r stc al cul at e th e U V B using the B lend assu m p tions, and then de term i ne the UVB u s i ngthe fun di nga s s umpt i o ns , wi th th e l at te r s et tinga n up p er li m i t f o r the UVB. Usi ng the l ower num berf orthe U V B e ach ye ar, S ega l r easo n ed , would e l i m i nate the r i sk that an em plo yer w ou ld co m p lain th at th e U V B w as to o h igh

. . . . [ The t r us t e e s c ho s e the l a t t e r o pt i o n, pa s s i ng a resolution] th at th e U V B w ou ld con tinu e to be d eterm i ned base d up on th e Se galBl end (“ bestes ti m ate ”) approach, subj ect to the di re cti ve that the UV B not be hi g he r tha n the UVB r epo r te d b y Se galt o the IR S in Sc h ed u le B for t h at ye ar . A s i t happened, CPC ’ s withd ra w all i abi l i ty ass ess m en twa s s i g ni fi c a nt l y i mpa c t e d b y t wo f a c t o rs . Fi rs t, in 2004 the F und r epeal ed the 1997r eso l uti on adopti ng the “ca p” on the S ega l Bl end m etho d, re tu rning to al w ays u sing th e Seg a l B lend to det erm in e U VB , r esul ti ng i n the re capture o funfunded ve st ed be n efitliab ilitie s o f th e F u n d n otp re vio u sly r e c o g n i z e d d u e t o th e o p e r at i o n o fth e c a p . AtN o. 11

- 3034 11 p re ci se l y the s ame t i m e, CPC’ s sh ar e o fthe F und ’s tot alcon tr ibuti on ba se i ncre ase d dram ati cal l y, fro m 1. 26% i n 200 0 t o 3. 67% i n 200 4. The co m bi nati on o f th es e t w o fa c to rs se rv ed to cr ea te sign ifica n tly hi gherliabi l i ty f orCPC than i fi t had happened to w ith d ra w in a d iffer en t y ea r . . . . H er e is a p ar alle l d isc u ss ion in t h e a p p elle e’s br ief (a ga in w e om it r ecord citations an d f ootn otes): I n a m em or andu m dated W ednesday, A pri l 4, 19 97, th e Cl i e n tR e l a t i o n s h i p Ma n a g e r f r o m th e S e g a l C o mp an y to the Fu nd

. . . d iscus sed the Su p r e m e C ou rt’s 19 93 de ci si o n in C oncre te P ipe and Product o f C a liforni a Inc . v. C o nstru ctio n L a bo rers P ensio n Trust fo r So uth ern C alif ornia , 5 08 U. S

. 6 02 ( 19 93)

. The m emor an dum ad vised that th e Segal Blend rem ained the ac tu ary’s be s t e s t i mat e f o r the i nt e r e s t a s s umpt i o n t o b e used i n the cal cul ati on o f t he Fund’s U VB s f orwithdrawal l i ab i l i typur po se s, a nd s ug g ested tha t th e F und co ns ul t wi thl eg alc o uns elo n the i m pac t o fthe c o ntin u ed u se of th e S e g a l B len d

. . . . [Th e m an ag er te st ifi ed] that the m em or andu m pro vi ded the tr ustee s “w ith an op tio n to ca p th e u n fu n d ed liab ility .” . .

. . A s a resul t
. . . the tru stees requ ired th e actu ary to a ppl y a “ ca p” to th e U V B s us ed to c al cul at e th e wi th d r a wa l l i a b i l i t y p o o l s f r o m 1 9 9 6 u n t i l 2 0 0 4

. As i nd i cate d i n Se gal ’ s withd ra w all i abi l i ty re port s du ring the ye ar s that the cap ap p lied , the cap l i m i ted U V B s “ to be n o g r ea te r th an th e v es te d liab ility ca lcu lat ed usi ng the sa m e invest m ent r etur n used f or fundi ngl es s th e ac tu ar i alv al ue o fa ss ets.” Thu s, the12 N o. 11

- 3034 fund i ng i nter estas sum pti on was used to cal cul ate th e U V B s tha t w ere the basis [of ] th e po ol in allyears when i t pr o duce d l o werUVBs tha n the Seg alBl en d in te re st as su m p tio n . . . . Evidence at the arbi tr ati on hea ring co nfi rm ed that the t rust ees capped U VB s f orthe del iberate pu rpos e o fl oweri ng withdraw al l i abi l i ty i n or der t o attrac t em p loyers to the Fu nd

. Segal C hief A ctu ary Tho m as Le vyt es ti fi ed S egal came u p wi ththe Concre t ePip eo pti on i n 199 6 be cause em plo yer s had c om e t o Se ga l w ith c on c er n s t h at “c h an gin g e c on om ic ci r cumst an ce s” woul d “ se ve r ely a dve r se l y a ffec t th e w i l l i ngness” o fem plo yer s t o supp or t th eir pl ans, because i t r esul ted i n hi gh er w i thdrawal l i abi l i ty ass ess m ents
. . . . [P lan ] Trust ee W i l l i am Carpente r conceded thatthe re aso n f oradoptin g the ca p w as to l o werwi th dr awal l i ab i l i tydue t o c o nc erns a t th e tim e tha t highe r w ithd raw al l iabil ity w ou ld p ut off empl o y er s an d pr o spe ct i ve e m pl o y er s who m i g ht c o me i nt o the F un d. The t r us tee’ s ca p was r emov ed i n the 2 00 4 wi th

d ra w all i abi l i ty re port
. . . . [ T]he tr ustee s deci ded to re m ov e th e ca p i n or der t o ra i se w i thdrawal l i abi l i ty f or departi ng em plo yer s and e nhance th e v i abi l i ty o fthe F und a t a ti m e when th e F und was e xpe r i en cing d ec lin in g a ss et s a n d d ec lin in g m em b er sh ip
. The s el ec ti ve d eci si o ns t o c ap an d the n un ca p the U V B s had a si gni fi cant i m pact o n CPC ’ s a sse sse d w i thdrawal l i abi l i ty. W hen the tr ustee s uncapped U VB s in 200 4, the U VB s nea rl y doubl ed fro mN o. 11

- 3034 13 $6 7 m i l l i o n in 2 00 3 to $ 11 7 m i l l i o n i n 2 00 4. W i th o ut th e c ap , p o r t i on s o f th is in c re as e in th e U V B s w ou ld h av e b e e n in c lu d ed in s ev er al of t h e e ar lier p oo ls ( and w ou ld have b een s ubj ect to the s tatutor y 5 % per yea r re du cti on)

. A l so si gni fi can tly f orCPC , m uch of the c hange att ributed t o 2004 would have been al l ocate d to pri orye ar s when C PC ’ s r el ati ve perce ntage o fc o nt r ib ut i o ns wa s l o wer. Empl o y e r s , s uc h a s CP C, w ho had a lar gerper centag e o fthe 2004 poolthan th eyha d dur i ngpr ev i o us y ears , wer e di spr o po r ti o nat ely a ffec te d b y the 2 00 4 po o l

. S pec i fi ca l l y, the c o ncom i tant re sul t o fth e c ap on the i nter estas sum pti on i n pri orye ar s a nd subse quent rem ov al o fthe cap i n 2 00 4 was tha t th e “s um a l l o cabl e” to CPC fo r the 2004 p ool was $2. 075 m i l l i on, co m pared to $1

. 45 mi l l i o n f o r a l l o fthe 1 9 p r e v i ous poo l s c o mbi ne d. Bec au se CPC was a l arger co nt r ibut o r t o the F und i n 2004 than i t had b een i n pri or yea rs , i fth e t rustees h ad u se d Seg al’s be st es tim at e a ss u m p tio n s fo r all ye ar s, C P C ’s alloc ab le sh ar e of th e 200 4 p o o l w ou ld have been onl y $ 353, 452, r esul ti ng i n a r educti on o f $1. 093 m i l l i on i n CPC ’ s o ver al l as ses sm ent. A l l thi s was te rr ibl y o paqu e t o us bec ause the par ties f ai l ed to pr o vi de co nt ex t

— fa iled to ex p lain w h at ex ac tly th e po o l s ar e, why i nt er es t r at es a r e i m po r ta ntt o wi th

dr awal li ab i l i ty, whatthe “ fundi ngi nt er es t as su m pti o n” i s, a nd why whatthe y c o nfus i ng l y calla “ ca p” o n the Segal Blen d ed Rat e (confu singly becau se in m ost years th e “cap ” requ ired as w e’l l s e e the sub stitut ion of a hi g he r r at e th anthe Bl end ed R at e) c au se d a l o ss t o CPC whe n the “ c a p” wa s r e mov e d.14 N o. 11

- 3034 A n d so atth e o ra l arg u m en t o n e o f th e jud ge s fe lt c o mpe l l e d t o a s ko ne o fthe l a wy e r s , p l e a di ng l y, wh ether sh e co ul d e xpl ain in wo r ds of one s y l l ab l e whatthe case was abo ut. S he was a g oo d l aw yeran d tri ed, but, pe r ha ps s ur pr i s e d b y the que s t i o n, f a i l e d. W e hav e had to fal l back on a re m ar k b y J usti ce Hol m es: “Il ong have sai d ther e i s no such thi ng as a hard cas e. Iam f r i g ht en ed wee k l y b uta l way s when y o u wal kup to the lion an d lay h old th e h id e c om es off an d th e sa m e o ld donkey of a questi on of l aw i s underneath. ” H olm es -Po ll ock Le t t e rs : TheCor r e s pond e nc eof M r . Jus t i ceH o l m e s an d Si rFre de r i ckPol l oc k, 18 74- 1932 , v ol

. 1 , p . 1 5 6 ( M a r kDe W olfe H ow e ed

. 1941) (l etter to P o ll ock of Dec

. 11, 1909 ). W e h av e a p p lied ou rs elv es to t u g gin g t h e h id e o ff th is l i o n i n s e a r ch oft h e d o n k e y u n d e r n e a th

. We th i n kwe have f ound the donkey

. W e s ai d ear l i erthates ti m ating the i nter estr ate at w h ich th e p en sio n fu n d ’s a ss et s a re likely t o gr ow is re quir ed f ordeter m i ni ng withdrawal l i abi l i ty. Consi der a p l an thathas $1 m i l l i on i n ass ets and expects to have a $5 m i l l i on be nefi t oblig atio n 20 yea rs fro m now. I fi ts ass ets are assum ed to gr ow overthi s per i od at an an n u al ra te of 6 p er c en t, its fu n d in g s h or tfa ll

— th e d ifference, di sco unted to prese nt va l ue, betw ee n the $5 m i l l i on i t wi l l ow e a nd the a ss et s i t wi l l ha ve a s a r es ul t o fthe com pound i ng o fthe 6 per cent i nter est

— w ill b e $ 50 5,9 71 . I f the pl an’ s a sse ts and benefi t obl i gat i on a re unchanged at yea r’ s e nd , i ts fund i ng s h or tf al l wil l have gr own to $5 99 ,09 9, the i ncre ase being at tr ibutabl e t o the f act that th e be ne fi t wi l l b e o ne y ear closer t o f al l i ngdue

. TheN o. 11

- 3034 15 pl a n ’ s wi th d r a wa l l i a b i l i t y p o o l wi l l th u s b e $ 9 3 , 1 2 4, t he am ount bywh i ch the fund i ng sho rt f al l i ncre ased

. I fan 8 per cent i nter es t rate w er e a ssum ed i nstea d, the ini ti al shor tf al l would be onl y $ 9, 482, in c reasi ng to $9 3, 559 at yea r’ s e nd , creat i ng a w i thdrawal l i abi l i ty poolo f$8 4, 076. Esti m ati ng the gr ow th o fthe fund ’ s a sse ts i s r equi re d not onl y fordeter m i ni ng withdrawal l i abi l i ty but al so f ordeter m i ni ng wh ether em plo yer s a re co ntributi ng to th e fu n d th e m in im u m a m o u n t re q u ire d by E R ISA in or d er to red u c e th e p ro b ab ility th at th e P en sio n B en efit Guar an tyCo r po r at i o n may ha ve t o make up f o r the fund’ s not b eingabl e to pa y v es te d b en efi ts ; f o r the C or p or at ion is th e in su re r of t h os e b en efit s, t h ou gh on ly to a l i m i ted extent. ( I n f act, the Corpor ati on has been he l pi ngthe fund in th i s c a s e r e mai n s o l v e nt
. S e e “ PB GC Divi des Chica go T ru ckerPensi on Pl an to Extend it s So l vency, ” M ay 26, 20 10, ww w . pbgc. gov/ne w s/ p re ss/ releases/p r10-35.htm l (visi ted A ug . 3, 2 012).) Em p loyers m ust pay a penal ty i n the f or m o fa ta x if th ey f ai l to contr ibute the r equi re d m i ni m um am ount. 26 U

. S. C. § 4 12, §§ 49 71 (a)( 2), (b )(2) ; L an gb ein etal., sup ra , at22 0- 35. The p lan i n ourcas e r eta i ned a pro m i nent pensi on ben efi ts actu arial f irm

— th e S eg al Co m pan y

— to det er m i ne whethe r the pl anmet i ts min i m um fundi ng re quir em ents f oravo i ding th e ta x penal ty and al so whatthe wi th dr aw al l i ab i l i tyo fe ac h o fi ts pa r ti ci pat i ng em plo yer s would be i fo ne o r m or e of t h em withdrew f ro m the pla n i n the com i ng y ear . Both fund i ng ca l cul ati ons depend ed c riti cal l y o n the i nter estr ate used to est i m ate the pla n’s abi l i ty to m eeti ts future obl i gat i ons.16 N o. 11

- 3034 Du ring the per i od r el evantto thi s ca se, ERIS A r equi re d th e p lan ac tu ar y, inca lcu lat in g in te re st rat e s a s in m ak i ngo th era ctu ar i alde te r m i na ti o ns ( su cha s ho w the p lan ’s lia b ilitie s w ou ld gro w in th e fu tu re , w h ich w ill depend o n the r ate atwh i ch em plo yee s with ves ted benefi ts re ti re and die as wellas o n the ra te at w hi ch fu t u r e em p loy ee s w ill w or k lon g e n ou gh for t h eir benefi ts to vest ) , to use ass um pti ons w hi c h , “ i n the agg r eg at e, a r e r eason ab l e” a nd “ whi ch, i n c o m bi na ti o n, o fferthe a ctua r y ’ s be ste st i m at e o fa ntici p at ed ex peri ence und erthe pla n. ” These r equi re m en ts applyto deter m i ni ng b oth adequacy o ffund i ng to avo i d the t ax pen al ty, 2 6 U. S

. C. § 4 12 ( c) ( 3) ( A)( ii ), ( B) ( r ev i se d b y the P en sio n Pro tect i on Act of20 06 i n re spects notm ate ri al t o thi s c a s e ) , a nd wi thd r a wa l l i a b i l i ty. 2 9 U. S

. C. § 1 39 3(a )(1)

. Despit e the i denti calst atuto ryte x t (the te xt we j ust quoted) f orbo th cal cul ati ons, the Se gal C om pany used di ffer en t f o r m ul as t o a r r i ve a t i ts “ be ste st i m ate ” o fthe tw o ra tes
. I t ca l l ed i ts best e st im ate o fthe i nter estr ate f o r t ax pu rp o se s th e “fundi ngi nt er es t as su m pti o n” and fo r w i thdrawal- l i abi l i ty pu rpos es the “ Se galB len ded Ra te
. ” W e’ l l ca l l th e fundi ng i nt er es t as su m pti o n the “F u n d in g R at e.” The differ ent m etho ds yi el ded di ffer en t inter estr ate s. The Bl e nd e d R a t e wa s b a s e d in pa r to n c ur r e ntr a t e s f or annuit i es ( and i n parto n the Funding Rate

— hence “blen d ed ”). T h e se rates w ere short er-term and m ore var i abl e than ra tes used fo r the F und i ng Rate bec ause they w er e use d to cal cul ate the em plo yer ’ s l i abi l i ty atN o. 11

- 3034 17

a spe ci fi c ti m e ( na m ely the c o m i ngy ea r )

. W ha t m i g ht ha ppen i n l at er y ea r s to affec t th e fund’ s as sets and l i abi l i ti es

— cr i ti ca l co ns i der at i o ns in d eterm ini ng w heth er the pensi on pl an was suffi ci entl y fund ed to avo i d the penal ty tax

— w as i rr el evant
. I fthe sh or t-t er m r ate s use d i n cal cul ati ng the Bl ended Rate exceeded the l ong- ter m i nter est ra tes used to cal cul ate the F u n d in g Rat e, m aking the S ega l Bl ended Rate hi gher than the Fund in g Rat e, the effect w oul d be t o re du ce w i thdrawal l i abi l i ty, bec ause the hi gh er the ass um ed i nter estr ate i n cal cul ati ng withdrawal l i abi l i ty the f ast er th e funds ’ a ssets woul d b e es ti m at ed to g r o w and so the l ower i ts future l i abi l i ti es w oul d be proj ecte d to be. W hen devel oped ( i n the 1980 s, sh or tl y a fterthe M ult i em plo yer Pe ns i o n Plan Am en dm en ts Actwas pa ss ed) , a n e r a g en er al l y o fhigh i nter estr ate s, the Se galBl ended Rate usual l y didge nera te a hi gheri nter est
- ra te est i m at e than th e Fun d ing Ra te, m aking t h e estim ate of the p lan’s shor tf al l sm al l erf orwithdrawal

- l i abi l i ty pu rpos es than f or penal ty- tax pu rp oses. M i ni m i zi ng withdrawal l i abi l i ty w as att ra ctive f orS ega l ’ s m ult i em plo yer - pla n c l i e n t s b e c a u s e i t m a d e i t e a s i e r f o r th e m t o i n d u c e e mplo yer s to j oi n such a pla n

— ea si er be ca us e th eyc o ul d e xp e c tt o b e c h a r g e d a l o we r e x i tp r i c e i fth e y l a t e r wi th d r e w. Butthe t wo r at es ha d r ev er se d b y the mid- 19 90 s. The S eg alBl en ded Ra te was no w l o w er than the F undi ng Rate, r esul ti ng i n hi gherwithdrawal

- l i abi l i ty est i m ate s than ifthe Funding Rate had been use d. Rem em berthat th e lo werthe i nt er es t r at e us ed to c al cul at e th e future gr o wt h o ffun d a s s e t s , the l o we r the e s t i mat e o fwh at18 N o. 11

- 3034 thos e a sse ts w i l l be w or th in the future, j ust a s the sl ower a chi l d gro w s e ach y ear, the shor terhe wil l be as an adul t. I n 199 7 Seg alto l d the pensi on pl an’ s t rust ees thatthey coul d i ftheywanted d i re ct S ega l to ig n or e the S ega l Ble nd ed Rate and i nstea d use the FundingRate

— w hi ch now a s we s a i d e xc e e de d the S e g a l Bl e nd e d R ate

— to ca l cul at e wi th d raw al l i ab i l i ty
. S eg aldi dn’ t sa ythe Funding Rate w as as goo d an est i m ate as S ega l ’ s o w n “bes t est i m ate ” f orwithdrawal

- l i abi l i ty pu rpos es; i t s tuck to i ts bestes ti m at e; i t j ust s ai d that the pensi on pl an c o u l d c h o o s e b e t we e n th e t wo r a t e s i n ca l c u l a t i n ge mp l o y e r s ’ w i th d r a wa l l i a b i l i t y . L a n g ua g e i n th e S u p r e me C o u r t ’ s d e c i si o n i n Concre t ePip e& Pr oduc t s of Cal i f or ni a, Inc . v. Co nstru ctio n L a bo rers P ensio n Trust, 50 8 U.S

. 60 2, 63 2- 33 (1993), cou ld be r ead to su ggest that having tw o d iffer en t i nt er es t- r at e as sum p ti o ns

— one f orwithdrawal l i abi l i ty and one foravo i ding the t ax penal ty

— m i g ht m ake a pla n vul nerabl e t o cl ai m s th at e i thero r both we r e “ un r e a s o nab l e ” wi thin the me a ningo f2 9 U. S

. C. § 1 393( a) ( 1)

. The dangerwas re m ote ; the Courthad i ndi ca te d tha t “s uppl ement al ” as su m pti o ns tha t m i g ht cause the ra tes to dive rg e w er e perm i ssibl e. 508 U

. S. at 633. N eve rthel ess S ega l was w or ri ed, and at i ts sugges ti on the pl an’ s t rust ee s di re cted S ega l to cal cul ate both the S eg alBl en ded Ra te a nd the F undi ngRa te a nd th en u se th e h igh er of th e tw o (w h ich rem em b er w ou ld g en er at e a l o werwi th dr awall i ab i l i ty ) ea ch y ea r . The Funding Rate w as h igh er i n eve ryye arfro m 19 96 to 2004 exce pt 200 0 when the S ega l Bl ended Rate was h igh er an d h en c e w as u se d by th e p lan ins te ad

.N o. 11

- 3034 19 T he trust ees’ de cis ion w as q ue stionab le. ER I SA re quir es that the c om pu tat i on o fwithdrawal l i abi l i ty be base d on “the a ct u ary’s b es t es ti m at e o fa nt i ci pat ed ex p erience
. ” 29 U

. S. C

. § 1393(a)(1) ( em p ha sis add ed ); cf. C itrus V a lley E stat es, Inc . v . Co m m ission er, 49 F. 3d 1410 , 14 14 ( 9th Ci r. 19 95); R ho a des, M cK ee & B o er v. U nited Sta tes , 43 F.3d 10 71 , 107 5 (6 t h C ir. 19 95 ); Wa ch tell, Lipto n, R o sen & Ka tz v. C o m m ission er, 2 6 F

. 3d 29 1, 29 6 ( 2d Ci r . 1 99 4)

. The ac tu ar y i s a pr o fes si o na l, a ss um ed to b e ne ut r ala nd disinter est ed; a pla n’s tr ustee s, i n contr ast, m ay, wh ether f o r s ho r t
- t e r m r e a s o ns , p r e s s ur e s fr o m e mpl o y e r s o r u n ion s, o r l ac k of re lev an t e x p er tis e, w an t u n re as on ab ly high o r unreas onabl y l ow int er est
- ra te ass um pti ons, co nt r ar y t o 2 9 U. S

. C. § 1 39 3( a) ( 1)

. On th e o ne ha nd, the h igh er th e in t e r e s t rat e a ss u m ed , th e fa st er th e fu n d w ill be pr edi ct ed to g r o w and so the sm all er w i l l b e th e l i abi l i ty ofwithd ra w i ng em plo yer s; thi s in turn m ay encour age em plo yer s t o j oi n the pla n. On the o ther hand , the l ower the i nter estr ate as su m ed , the gr eat er the fund i ng sho rt f al l, enabl i ng the pl an to i m pose g r e a t e r w i th d r a wa l l i a b i l i t y o n a n y w i th d r a win ge mp loy er . T h at w ill d isc ou ra ge w ith d ra w als , an d als o a llev iat e cur r en t fundi ngs ho r tf al l s byr epl en i sh i ngthe fund wi thl ar g e wi th dr awal pay m en ts by th o se e m pl o y er s who d o w ith d ra w . I n 2 00 4 th e pl an’s trust ee s di r ec te d the S eg alCo m pan y to re ver t t o usi ng the S ega l Bl en d ed R ate to cal c u lat e the pl an’ s unfund ed ves ted be nefi t poo l s f or w i thdrawal- l i abili ty pu rpos es. That r ate was l ower than the F und i ng Rate ( as i t had b een in eve ryye arsince 1996 exce pt 200 0) , but the pl an’ s pri or i ti es apparently20 N o. 11

- 3034 ha d c ha ng ed, fr o m a tt r act i ngmor e empl o y er s wi ththe p ro spect ofl ow w i thdrawal l i abi l i ty ( by ass um i ng a hi g h int er es t ra te a nd the r efo r e a r api d g r o wth in the fu n d ’ s a s s e t s ) t o e x t r a c t i n gh i g he r e x i tp r i c e s fr o m e mplo yer s w ho withd re w ( by ass um i ng a l ow int er estr ate an d i n c o ns eque nc e a slugg i shr at e o fa ss etg r o wth a nd so a l arger sh ortfall

. ). The re ver si on t o the S ega l Bl ended Rate i n 200 4 was a m aj orf actor in causing the pl an’ s unfund ed ves ted benefi ts to l ea p from $6 7 m i l l i on t o $117

. 2 m i l l i on that yea r. I t was the p lan’ s use o fthe hi gherFundingRate f r o m 1 99 6 to 2 00 3, c o upl ed wi ththe rev er si o n t o the low er Segal B lend ed Rat e the reafter, that i nc reased CP C ’s wi th draw al l i ab i l i tyb y $ 1, 09 3, 00 0 f r o m the a m o unt i t would have o w ed had the S ega l Blen d ed Rate bee n u se d th ro u gh ou t t h e p er iod

. For CP C h a d b e e n hi tb y a o ne - t wo p un c h. T he h i gher r at e i n 19 96

- 20 03 ha d, by sh r i nk i ng th e po o l s an d thus w i thdrawal l i abi lity, i nd uced a num bero fem plo yer s t o wi thd r a w, s o tha ti n 2 0 0 4 CP C fo un d i ts e l fa l l o c a t e d a hi ghershar e o fthe 2004 pool

. The change i n i nter est
r at e as su m pti o ns pa r ti cularl y di st o r te d the 1 99 6 an d 20 0 4 po o l s b e c a us e the fun di ng s ho r t f a l l s c a l c ul a t e d at the b e g i nn i ng a nd e nd o f tho s e y e a r s we r e b a s ed on differ ent inter estr ate s. S i nce the withd ra w all i abi l i ty po o l i s the g r o wt h o fthe fun di ngs ho r t f a l l, a mi d- y e ar change i n the ass um pti ons can have a dram ati c effect e v e n i f the pl a n’ s fi na nc i a l pe r f o r man c e i s unc ha ng e d. Recal l how i n ourea rl i erexam ple the const ant use o f an 8 per cent i n ter estr ate ge nera ted a w i thdrawal l i abi l i tyN o. 11

- 3034 21 poolo f$8 4, 076, wh i l e use o fa 6 per cent ra te gener ate d a poo l o f$9 3, 124. I fthathypothe ti calpl an cal cul ate d i ts i ni ti alfund i ng sho rtfall u si ng an 8 per cent i nter estr ate an d sw itche d to a 6 percen t int erest rate for i ts yearen d ca lcu lat ion , i t s w ith d ra w al liab ility p oo l w ou ld bal l oo n to $5 89, 617. H ad C P C w ith d ra w n from th e p lan be for e 2 00 4, it w oul d have be nefi ted from the f act that the poo l s had sh ru n k in th o s e y e a r s, w h en th e F u n d in g R at e h ad (in al l but 2000 ) be en used i n pla ce o fthe Se galBl ended Rate , si nce i t would have pai d l ess i n w i thdrawal l i a b i l i t y u po n l e a v i ngthe fun d. Bu ti th a d s t uc ka r o un d, and the e ar l i ershr i nkage had caused the 20 04 poolto soa r i n si ze i n or der t o com pensate. Fo i sting a l ar ger s h a r e o fth e l a r g e r 20 0 4 p o o l o n C P C i n c r e a s e d th e c o mp an y’s w ithd raw al l iabil ity sti llfurt he r. ER I SA requi re s the pl an’ s t rust ees to bas e i ts c alc u l atio n o fwithdrawal l i abi l i ty on the actuary ’ s “ bestes tim at e. ” 29 U. S

. C. § 1 39 3( a) ( 1)

. Seg al mai nt ains , a nd the pla n does not dispute, thatthe Se galBl ended Rate, not th e F u n d i n gR a t e , wa s i t s b e s te s t i ma t e o fth e r i g ht i nt er es t r at e to us e to c al cul at e wi th dr aw al l i ab i l i ty
. The arb itr at or th er efo re se n sib ly c on c lu d ed th at th e p oo ls had not be en cal cul ated “o n the basi s o f

. . . actuari al as su m pti o ns . . . whi ch, i n c o m bi na ti o n, o fferthe a ctuar y’ s be st est i m ate o fanti ci pated experi ence und er the pl an” in y ea rs w hen the Funding Rate w as used i n l i eu o fa l ower S ega l Bl ended Rate. There i s no ev i dence ei therthatthe offero fa choi ce w as m ade f orany re ason other than S ega l ’ s a nxie ty ab ou t h av in g c a l c u lat ed tw o in te re st rat es or th at it22 N o. 11

- 3034

w as accepte d fo r any r ea so n o therthan the t rust ees ’ des i r e to a tt r ac t empl o y er s to the fund b y mani pul at i ng wi th dr awall i ab il ity. H en ce the r e i s no b as i s f o r the p lan’s i nv ocat ion of Com b s v. Cl as s ic C o al Corp. , 93 1 F

. 2d 96 ( D.C. Cir

. 1991 ) , w hi ch re ver sed an arbi tr ato r’s rej ecti o n o fa wi th dr awal

- l i ab i l i tyc al cu l at i o n b ec au se he had c onsi dered onl y the re aso nabl eness of the inter est ra te, i gnor i ng the pl an’ s a rgu m en t that i ts cal cul ati on o f th e wi th dr awall i ab i l i tywas s ti l l “ r ea so nabl e . . . i n the ag g r eg at e,” 29 U. S

. C. § 1 39 3( a) ( 1) , b ec au se o fo ff se tt i ng actuar i alas sum pti ons. N othi ng i n the prese nt cas e o ff se ts the mal i g n c o ns eq ue nc es o fthe t r us te es ’ di r ec ting Se galto use the F und i ng Rate instead ofthe Se gal Ble nd ed Rate, wh en the l att erwas the a ctuar y’ s be st est i m ate o fthe ra te to use. The pla n ci tes 29 U

. S. C . § 1 393(b) ( 1) , wh i ch st ate s th at“ th e p la n a ctua r y may r ely [ i n c al cul at i ng w i thdrawal l i abi l i ty] o n th e m ostr ecentco m ple te actuar i alvaluati on use d fo r pu rpos es of” 2 6 U.S .C

. § 412, th e section of th e tax cod e govern ing calcu la t io n of a pensi on pl an ’ s m i ni m um fund i ng r equi re m ents

— a c alcul ati on ba sed o n the Funding Ra te . T h e pl an ar gues that the pr ovi si on cr eat es a s afe harbor, i nsul ati ng i ts use o fthe Funding Rate f orcal cul ati on o fwithdrawal l i abi l i ty fro m chal l enge. But the provi si on w e quot ed do es no t o ve r ride th e st atut o r y r equi r ement s th atthe cal cul ati on o fwithdrawal l i abi l i ty be b ase d on r eason able actu arialassu m p t ions an d the p lan actu ary’s b es t e st im at e. M as ters, M at e s & Pil ot s Pe ns i on Plan v. U SX Corp. , 90 0 F

. 2d 727, 73 1- 32 ( 4th Ci r. 19 90) ; se e G old ow itz & L an d y, sup ra , a t 12 94. The FundingRateN o. 11

- 3034 23 couldbe appropri ate f oruse i n cal cul ati ng withdrawal l i abi l i ty, but w as not i n the ci rcum sta nces ofthi s ca se. M or eov er, the pla n’s r eso l uti on di re cting Sega l to sw i tch fro m o ne m etho d ofes ti m ating the inter estr ate to a no the r a nd b a c k a g a i n c o mpo un de d the da mag e t o CP C, and also vi ol ate d the “b estes ti m ate ” r equi re m ent, w hich exists to m aint a in the actu ary’s i nd ep en d en ce. Cf. C itrus V a lley E stat es, Inc . v. Co m m ission er, sup ra , 49 F. 3d at 14 14 ; Rhoade s , M cKe e & Boer v. U ni t ed S ta tes , sup ra , 43 F.3 d a t 1 07 5; Wa ch tell, Lip to n, R o sen & Ka tz v. C o m m ission er, s upra , 26 F

. 3d at2 96

. The f ac t th atS eg alpr o po se d the sw i tch fro m the Se galBl ended Rate di dn ’ t m ean that the F und i ng Rate had b ecom e i ts bestes ti m ate ; S ega l w as expli ci t that i t was noti ts best es ti m ate
. I t was a r e s u l te i th e r o fi t s h a v i n gb e e n c o n fu s e d b y th e S u p r e me Court’ s deci si on i n the Concre t ePip e case or ofp ressu re f r o m the pe ns i o n pl an . F i na l l y, the pl ana r g ue s th ati ts c al cul at i o n o fwi th

dr awal li abil i tyi s sh i el ded bythe l i m i te d s co pe o fthe arbi tr ato r’ s r evi ew o fdeter m i na ti ons by a pl an’ s t rust ees . Bu tthe t r us t e e s we r e n o te nt i t l ed t o di s r e g a r d a sta tutor y di re cti ve, speci fi cal l y the di re cti ve i n sec ti on 1393 (a) ( 1) thattheybas e thei r est i m ate o fwithdrawal l i ab i l i tyo n the a ctua r y ’ s “b es t es ti m at e” o ffutur e fund pe r f o r man c e . An a c t ua r i a l de t e r mi na t i o n tha tv i o l a tes ER I SA by not being ba sed o n the actuar y’ s be st est i m ate is un reason able, he nc e reversible by the arbitrator. 29 U .S.C . § 14 01 (a)( 3)(B )(i); Concre t ePip e& Pr o duc t s of C a lifo rnia , Inc. v. C o nstru ctio n L a bo rers P ensio n Trust, sup ra , 508 U

. S. at63 4- 36.24 N o. 11

- 3034 T he d istri ct court’s j ud gm en t up hold ing the arbitrator’s deci si on i s A FFI RMED .

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