Court Opinion

ID: 8939891
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:50:51.314761+00
Date Added: 2024-06-11T17:09:42.463594
License: Public Domain

SEITZ, Circuit Judge,
dissenting in part.
I disagree with the majority’s important conclusion in Part V that the presumption of correctness accorded the plan trustees’ determination of withdrawal liability in arbitration proceedings under 29 U.S.C. § 1401(l)(a)(3)(A) violates due process. The majority’s decision, in my view, does unwarranted violence to Congressional intent and is an open invitation to proliferated and expanded arbitration proceedings. Because of my position, I need not reach the question of severability discussed in Part VI of the majority opinion.
The majority opinion fails to differentiate among the types of decisions the plan sponsors are called upon to make. First, the majority’s doctrinal approach is inapplicable to the choice of method for calculating withdrawal liability, see 29 U.S.C. § 1391, a choice that merely involves the selection of generally applicable rules of plan governance. Second, with respect to actuarial assumptions used by plan sponsors, the majority overstates the amount of discretion sponsors enjoy. What limited discretion they do have, coupled with the availability of arbitration and judicial review, is *145in my view well within the constitutional power of Congress to grant. Finally, although the majority mentions the sponsors’ responsibility to determine the applicability of a statutory exemption, I consider that a separate issue and would not reach it in this case.
The majority’s most serious error is to misread the nature of the trustees’ power to choose the actuarial method for calculating the withdrawing employer’s share of unfunded vested liabilities. 29 U.S.C. § 1391. The majority treats this decision as one to be made only when the first employer withdraws. As I read the statute, however, this is not an adjudicative function at all, but rather a matter of establishing general rules for the plan’s administration prior to any withdrawals. Unless the plan is amended pursuant to 29 U.S.C. § 1391(c), the trustees are required to employ the presumptive method described in § 1391(b). Any amendment must apply uniformly to all withdrawing employers. Id. § 1394(b). The majority recognizes this uniformity requirement, but fails to appreciate the significance of section 1394(a), which specifies that “[n]o plan rule or amendment ... under section ... 1391(c) of this title may be applied without the employer’s consent with respect to liability for a withdrawal ... which occurred before the date on which the rule or amendment was adopted.”1 Thus, when Yahn withdrew from the pension plan, the trustees simply had no choice about which method to employ: either the method specified by amendment, or — if the plan was never amended — the presumptive method.
I do not think that the trustees are disabled by their position from performing this sort of legislative, as opposed to adjudicative, function. The Supreme Court has stated that “due process demands impartiality on the part of those who function in judicial or quasi-judicial capacities.” Schweiker v. McClure, 456 U.S. 188, 102 S.Ct. 1665, 72 L.Ed.2d 1 (1982) (emphasis added). And the cases cited by the majority involved persons in judicial roles. I find it difficult to understand the majority’s apparent conclusion that fiduciaries of the pension fund should be held incompetent to establish general plan rules for calculating withdrawal liability.
The trustees’ choice of actuarial assumptions (including interest rates, mortality rates, turnover rates, and the like) presents a somewhat different problem, since admittedly some if not all of these assumptions will tend to vary with time. However, whatever discretion the trustees may have in this regard does not seem to me to create constitutional difficulties.
It is worth noting initially that the fiduciary duty of the trustees to the fund beneficiaries does not entail a duty to assess the largest reasonable liability against a withdrawing employer. Under the Act, trustees must employ either actuarial assumptions promulgated by the PBGC, or assumptions “which, in the aggregate, are reasonable ... and which, in combination, offer the actuary’s best estimate of anticipated experience under the plan.” 29 U.S.C. § 1393 (emphasis added). There is nothing in the Act to suggest that trustees are expected to select actuarial assumptions with an eye to maximizing withdrawal liability, rather than those that will best reflect the plan’s experience.2
*146Moreover, the trustees’ discretion to make actuarial assumptions is far more limited than the majority suggests. First, the statutory language makes clear that an actuary must be employed in setting actuarial assumptions. Indeed, the requirement that the assumptions reflect “the actuary’s best estimate of anticipated experience under the plan” suggests that the trustees are not generally free to reject the actuary’s estimates. This interpretation is buttressed by the legislative history of 29 U.S.C. § 1082(c)(3), the ERISA section, enacted in 1974, concerning actuarial assumptions to be used in determining if minimum funding standards have been met. That section contains language identical to that in § 1393 requiring assumptions that “in the aggregate, are reasonable,” and that reflect the actuary’s “best estimate” of anticipated plan experience.
The legislative history of section 1082 indicates Congress’ belief that such assumptions must be “independently determined by an actuary,” and that “it is inappropriate for an employer to substitute his judgment for that of a qualified actuary” with respect to them. S.Rep. No. 383, 93rd Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Ad.News 4639, 4890, 4954. Thus, withdrawal liability calculated on the basis of actuarial assumptions at odds with those recommended by the plan actuary could very well be considered presumptively unreasonable.3
I also read the statute to require the trustees, as far as possible, to use the same actuarial assumptions for calculating withdrawal liability that they use for all other purposes.4 Both sections 1082(c)(3) and 1393 of title 29 require, in identical words, the use 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.” See also H.R.Conf. Rep. No. 1280, 93rd Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad. News 5038, 5065 (“The conferees intend that under this provision [section 1082(c)(3) ] a single set of actuarial assumptions will be required for all purposes (e.g., for the minimum funding standards, reporting to the Department of Labor and to participants and beneficiaries, financial reporting to stockholders, etc.)”; emphasis added). Although section 1082 was enacted in 1974, prior to MPPAA, I cannot believe that Congress could have intended to permit the trustees to use different assumptions under section 1393 when it used precisely the same words as those in the earlier section. Using different assumptions could very well be attacked as presumptively unreasonable both in arbitration and on judicial review.
My view that the trustees are required to act in a reasonably consistent manner greatly limits their discretion, because the use of assumptions overly favorable to the fund in one context will tend to have offsetting unfavorable consequences in other contexts. For example, the use of assump*147tions (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 of § 1082. My reading of the cases cited by the majority does not convince me that whatever residual discretion the trustees enjoy is inconsistent with due process.
Finally, the majority relies on the fact that the trustees are responsible in the first instance for determining whether a withdrawing employer falls within a statutory exemption to liability. Maj. op., at 140. Since there is no challenge in this case on that ground, and since the precise scope of arbitral and judicial review in this area is far from clear,5 I would leave for another day the question whether the trustees’ decision with respect to a statutory exemption is entitled to a presumption of correctness, on either factual or legal grounds.
The majority’s concerns for fairness to the employer are not entirely unwarranted, but the result it reaches — erasing from the statute the presumption of correctness accorded the trustees’ determination of liability in arbitration proceedings — promises to frustrate severely the congressional enforcement scheme. Without the presumption the plan may well, as Congress feared, “be helpless to resist dilatory tactics by a withdrawing employer — tactics that could, and could be intended to, result in prohibitive collection costs to the plan.” Sen. Comm, on Labor and Human Resources, 96th Cong., 2d Sess., § 1076, The Multiemployer Pension Plan Amendments Act of 1980: Summary and Analysis of Consideration 21 (1980), quoted in Keith Fulton, 762 F.2d at 1143 n. 7.
Accordingly, I dissent from the judgment of the majority as to Parts V and VI.

. The accompanying House Committee report explains:
In order to protect an employer from retroactive changes in a plan’s withdrawal liability rules the bill would restrict the application of plan rules or amendments relating to an employer’s withdrawal liability with respect to a withdrawal occurring before its date of adoption, unless the employer in question consents to its retroactive application.
H. R.Rep. (Educ. and Lab.Comm.) No. 869 — Part I, 96th Cong., 2d Sess. 85, reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2953. See abo H. R.Rep. (Ways and Means Comm.) No. 869— Part II, 96th Cong., 2d Sess. 30, reprinted in 1980 U.S.Code Cong. & Ad.News 2992, 3019 (same).

. The majority relies on legislative history to support its view that "Congress expected the trustees to exercise wide discretion.” Maj. op., typescript at 30 (citing H.R.Rep. No. 869 — Part I, 1980 U.S.Code Cong. & Ad.News at 2935). But the majority's undifferentiated view of the discretion exercised by the trustees leads it to misread the passage it quotes. Read in context, the passage clearly refers to the trustees’ discre*146tion to adopt plan rules, such as the method for calculating withdrawal liability and for determining whether the so-called de minimis exemption, 29 U.S.C. § 1389, applies. As noted, however, such plan rules and amendments must operate uniformly as to all employers and may not operate retroactively, id. § 1384. Thus, the majority’s due process analysis is therefore inapt. The passage does not suggest that the trustees' case-by-case determinations of withdrawal liability — to which that analysis would properly apply — are subject to similarly wide discretion.

. The First Circuit has cited one case in which the trustees rejected the actuary's assumptions and the arbitrator found the trustees' assumptions unreasonable. Keith Fulton & Sons, Inc. v. New England Teamsters and Trucking Indus. Pension Fund, 762 F.2d 1137, 1141 n. 3 (1st Cir.1985) (in banc) (citing Woodward Sand Co. and Operating Engineers’ Pension Trust, 3 E.B.C. (BNA) 2351 (1982) (Kaufman, Arb.)).

. Title 29 U.S.C. § 1023 requires an annual filing with the Secretary of Labor, including, inter alia, a statement of actuarial assumptions used by the plan. Id. § 1023(d)(6). The report must be prepared and signed by a qualified actuary. See also 26 U.S.C. § 412(c) (requiring similar determinations for income tax purposes). The actuarial assumptions are used to determine whether minimum funding standards, a key requirement of ERISA, have been met.

. I am aware of no case discussing this issue. In Republic Industries v. Teamsters Joint Council, 718 F.2d 628, 641 (4th Cir.1983), cert. denied, 467 U.S. 1259, 104 S.Ct. 3553, 82 L.Ed.2d 855 (1984), the court indicated that the arbitrator's legal rulings are subject to judicial review, but did not discuss the scope of that review or the degree of deference commanded by the arbitrator.