Perfection Bakeries Inc v. Retail Wholesale and Department Store International Union and Industry Pension Fund

Perfection Bakeries Inc., a contributing employer to the Retail Wholesale and Department Store International Union and Industry Pension Fund, ceased operations and withdrew from the multiemployer pension plan. The fund assessed approximately $1.6 million in withdrawal liability. Perfection Bakeries challenged this assessment in arbitration and federal district court, arguing that the fund’s use of a 7% interest rate assumption to calculate the liability was arbitrary and capricious under ERISA. The district court granted summary judgment in favor of the pension fund. On appeal, the United States Court of Appeals for the Second Circuit affirmed the decision on July 7, 2023, holding that the fund’s actuarial assumptions fell within the broad discretion granted to plan trustees and did not violate ERISA.

The Second Circuit affirmed the district court’s summary judgment in favor of the pension fund, ruling that the actuarial assumption was not arbitrary and capricious and that the fund acted within its discretion under ERISA.

Whether the pension fund’s use of a 7% interest rate assumption to calculate Perfection Bakeries’ withdrawal liability was arbitrary and capricious in violation of the Employee Retirement Income Security Act (ERISA).

The ruling reinforces the broad deference granted to multiemployer pension plan trustees in selecting actuarial assumptions, making it significantly more difficult for withdrawing employers to challenge withdrawal liability assessments. It provides important protections for the financial stability of union-affiliated pension funds while underscoring the substantial burden on employers to prove that fund actions are unreasonable.